Bank Employee Involved in Fraud... Supreme Court Rules "Bank Must Compensate Damages"

1st and 2nd Trials: "No Exercise of Rights Within Statute of Limitations... Not Due to Employee's Illegal Acts"
Supreme Court: "If No Illegal Acts Occurred, Statute of Limitations Completion Would Not Have Happened"

[Asia Economy Reporter Heo Kyung-jun] The Supreme Court has ruled that if a bank employee is involved in a fraud crime that causes a depositor to lose money entrusted to a financial institution, the financial institution must compensate for the damages even if the statute of limitations for the deposit claim has expired.

The Supreme Court's Second Division (Presiding Justice Lee Dong-won) announced on the 16th that it overturned the lower court ruling which found no liability on the part of financial institution B in the appeal trial of hospital director Mr. A's lawsuit against B for the return of deposited funds, and remanded the case to the Gwangju High Court.

Employee Mr. C, who worked at Mr. A's hospital, withdrew or transferred about 4.7 billion KRW out of the approximately 5.7 billion KRW deposit by reissuing bankbooks arbitrarily with the tacit consent and collusion of financial institution employees in 2011. Mr. C, who was charged with fraud, and the financial institution employees accused of aiding the fraud, were convicted.

Subsequently, in April 2018, Mr. A filed a lawsuit against B seeking the return of the 5.7 billion KRW deposit and interest. He also claimed damages from B for the illegal acts committed by Mr. C.

The first and second trials ruled that Mr. A could not recover the deposit. Since Mr. A's deposit claim arose from commercial transactions, it was subject to a five-year statute of limitations under the Commercial Act. Therefore, the courts only accepted the claim for the return of about 40 million KRW in interest for which the statute of limitations had not expired.

Furthermore, the courts held that the expiration of the statute of limitations on the deposit claim was solely due to the depositor's failure to exercise rights within the limitation period, not because of the illegal acts of the financial institution employees, and thus did not recognize B's liability for damages.

However, the Supreme Court found B liable for damages. It reasoned that if there had been no illegal acts such as aiding fraud by employees like Mr. C, the statute of limitations on Mr. A's deposit claim would not have been completed.

Additionally, the Supreme Court pointed out that Mr. A's failure to take separate measures to preserve rights, such as interrupting the statute of limitations, is a matter of 'negligence' when calculating the damages payable by the financial institution, but it is not a reason to completely deny the institution's liability.

This content was produced with the assistance of AI translation services.