[edit] Supreme Court Decision 99Da71573 delivered on May 16, 2000 [Return of Deposit]

【Main Issues】

[1] When gross negligence is deemed to exist in acquiring the certificate of deposit and whether the transferee of the certificate of deposit has a duty of care to inquire the issuer or the previous holder of the certificate about the legal right of the transferor (negative)

[2] The case where there exists no gross negligence on the part of the transferee in not knowing the lack of authority of the transferor in acquiring the certificate of deposit

【Summary of Decision】

[1] If the transferee acquires the certificate of deposit without any reasonable investigation as to the authority of the transferor when there is doubt about the legal right of the transferor considering the transferor or the certificate of deposit itself in light of the normal standard of transaction, it shall be deemed that there exists gross negligence on the part of the transferee. However, because the certificate of deposit can be transferred merely by delivery of the instrument, the transferee of the certificate of deposit does not have the duty of care to inquire the issuer or the previous holder of the certificate of deposit about the legal right of the transferee when acquiring the certificate of deposit upon discount, unless there is a doubt that the certificate of deposit has defects or the transferor does not have the legal right.

[2] The case where it is deemed that gross negligence does not exist on the part of the transferee in acquiring the certificate of deposit without knowing the lack of authority of the transferor

【Reference Provisions】 [1] Article 523 of the Civil Code, Paragraph 2 of Article 16 of Bills of Exchange and Promissory Notes Act / [2] Article 523 of the Civil Code, Paragraph 2 of Article 16 of Bills of Exchange and Promissory Notes Act

Article 523 of the Civil Code (Form of Assignment of Bearer Security) A debt payable to bearer may be assigned by means of delivery of the instrument.

Bills of Exchange and Promissory Notes Act

Article 16 of the Civil Code (Effect of Endorsement Establishing Title and Bona Fide Acquisition) (1) <omitted>

(2) Where a person has been dispossessed of a bill of exchange, in any manner whatsoever, the holder who establishes his or her right thereto in the manner mentioned in the preceding paragraph shall not be bound to give up the bill unless he or she has acquired it in bad faith, or unless in acquiring it he or she has been guilty of gross negligence.

【Reference Cases】 [1] Supreme Court Decision 86Daka2079 delivered on June 9, 1987 (Gong1987, 1134), Supreme Court Decision 95Da19980 delivered on August 22, 1995 (Gong1955Ha, 3252), Supreme Court Decision 97Da7936 delivered on May 28, 1997 (Gong1997Ha, 1983)

【Plaintiff, Appellee】 Seoul Securities Co., Ltd. (Attorney Hahn Ho-hyung and 1 other, Counsel for plaintiff-appellee)

【Defendant】 Kookmin Bank

【Supplementary Intervenor to Defendant, Appellant】 Government Employees Pension Corporation (Attorney Lee Se-jak and 1 other, Counsel for intervenor-appellant)

【Court of First Instance】 Seoul District Court Judgment 98Gahap43071 delivered on April 9, 1999

【Court of Second Instance】 Seoul Hight Court Judgment 99Na25015 delivered on November 11, 1999

【Disposition】 The appeal shall be dismissed. All costs of appeal shall be assessed against the supplementary intervenor to defendant.

【Reasoning】 The grounds for appeal submitted by the counsel for the supplementary intervenor to the defendant (hereinafter referred to as the 'supplementary intervenor') are examined as follows:

1. Pursuant to the reasoning of the court below, the court below found, based on the accepted evidence, that: the certificate of deposit in this case was issued by the defendant to the supplementary intervenor; non-party A, the accounting staff of the Jeonju office of the supplementary intervenor, took advantage of keeping the certificate of deposit in his custody and sold it below par to the plaintiff's Jeonju branch without any authorization; the defendant delivered to the supplementary intervenor a certificate of issuance of the certificate of deposit which "confirm[ed] that the certificate of deposit in this case [had] been issued to the Jeonju office of the supplementary intervenor" at the time of issuance of the certificate of deposit; non-party Park Han-soo, the business team head of the plaintiff's Jeonju branch, paid the discounted purchase price of the certificate of deposit calculated by deducting the discounted amount at the normal interest rate after receiving the certificate of issuance from A and investigating the issuance of the certificate of deposit and any report on the loss or theft by telephone via the relevant teller at the plaintiff's Jeonju branch; A had conducted the discount of the certificates of deposit in an aggregate amount of 4 billion won over thirty times with the plaintiff's Jeonju branch, out of which all of the certificate of deposit except for the certificate of deposit at issue in this case had been settled without any problem. The court below rejected the evidence supporting the defendant's assertion that non-party Park Han-soo, the business team head of the plaintiff's Jeonju branch knew the lack of authority on the part of A at the time of the acquisition of the certificate of deposit of this case from A. Based on the records, the court below's findings of the facts are justified and there exist no reversible errors in matters of law as to insufficient trial, misinterpretation of the facts against the rules of evidence or omitting the Judgment.

2. If the transferee acquires the certificate of deposit without any reasonable investigation as to the authority of the transferor when there is a doubt as to the legal right of the transferor considering the transferor or the certificate of deposit itself in light of the normal standard of transaction, it shall be deemed that there exists gross negligence on the part of the transferee. (See Supreme Court Decision 95Da19980 delivered on August 22, 1995, Supreme Court Decision 97Da7936 delivered on May 28, 1997, etc.) However, because the certificate of deposit can be transferred merely be delivery of the instrument, the transferee of the certificate of deposit does not have the duty of care to inquire the issuer or the previous holder of the certificate of deposit about the legal right of the transferee when acquiring the certificate of deposit upon discount, unless there is a doubt that the certificate of deposit has defects or the transferor does not have the legal right. (See Supreme Court Decision 86Daka2079 delivered on June 9, 1987.)

Assuming that the facts determined by the court below are correct, it cannot be deemed that there existed gross negligence on the part of the plaintiff-appellee in not knowing the lack of the authority of A at the time of the acquisition of the certificate of deposit in this case from A, on the grounds that the plaintiff received the said certificate of issuance and investigated on the issuance of the certificate of deposit and any report on the loss or theft through the defendant at the time of the acquisition of the certificate of deposit from A, that the plaintiff had acquired the certificates of deposit in a large amount for a considerable period of time and such certificates of deposit except for the certificate of deposit in this case had been settled without any problem, that the plaintiff applied the normal discount rate in purchasing the certificate of deposit in this case, that the certificate of issuance intended to make it easier for the purchaser of the certificate of deposit to confirm the issuance and the report of loss or theft therefore in the case of a certificate of deposit in bearer form the description of the recipient on the certificate of deposit does not have any particular meaning, and that the certificate of deposit is often used by people who are reluctant to disclose the source of fund because it is transferable without registration, the rights thereon is presumed by the possession, and the holder will be presumed to be the owner. Thus, the judgment of the court below shall be justified and there is no reversible error in matters of law as to misinterpreting the legal principle as alleged by the appellant in the ground for appeal.

Therefore, the appeal shall be dismissed and all costs of appeal shall be assessed against the supplementary intervenor to defendant. This decision is delivered with the assent of all Justices who reviewed the appeal.

Justices Suh Sung (Presiding Justice)

Shin Seong-taek (Justice in charge)

Yoo Ji-dam

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