A licensed real estate broker who drew up a jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) contract without conducting any actual mediation can be held liable for damages for aiding a scheme to swindle loan funds, the Supreme Court has ruled.
The First Division of the Supreme Court, with Justice Suh Kyung-hwan as presiding judge, recently overturned a lower court ruling that had dismissed the plaintiff's claim, and remanded the case to the Ulsan District Court. The case involved a lending firm, referred to as Company A, that had filed a damages suit against a licensed broker, referred to as B.
Individuals including a person referred to as C were convicted of fraud and related charges after forging jeonse contracts using sham tenants to obtain deposit-collateral loans from financial institutions and swindle the loan funds. Company A sought damages, arguing that B had drawn up a jeonse contract without any actual mediation, relying solely on the word of C, who posed as a dual agent, thereby causing the firm losses equivalent to the loan amount.
The trial and appellate courts sided with B. They ruled that there was insufficient evidence to recognize B's negligence in the brokerage or a causal link between the negligence and the losses. The courts reasoned that B also appeared to have been deceived by the organized scheme, and that the responsibility to examine whether the loan collateral was false lay fundamentally with the lending firm.
The Supreme Court's judgment, however, was different. The court said, "Under civil law, aiding through negligence is also possible, and in this case, negligence means a breach of the duty of care not to assist in a tortious act." The court found that B had violated the duty of care under the Licensed Real Estate Agents Act by drawing up and delivering the jeonse contract without meeting the landlord and tenant in person and without taking sufficient measures to verify the power of representation, relying solely on the word of C.
The court further noted, "A practicing licensed broker must prepare and deliver transaction contracts and the like only when the mediation has been completed, and must not carelessly draw up a contract when no mediation has taken place." It pointed out, "When one prepares and delivers a contract even though no agreement was concluded through one's own mediation, one can sufficiently foresee the possibility that a third party will believe it to be genuine and enter into a transaction."
The court added, however, "While the defendant also appears to have drawn up the jeonse contract after being deceived by the organized and premeditated scheme of C's group, it is difficult to conclude, on these grounds alone, that the defendant was not negligent." It said, "This may, however, be considered as a ground for limiting the defendant's liability for damages."
The Supreme Court explained, "The lower court ruling misunderstood the legal principles concerning a broker's duty of care and joint tort liability arising from aiding through negligence, which affected the judgment."
