KRW 210M loan claim lost at first instance, won on appeal

Background

Our client lent money to a company and its joint guarantor and obtained a notarized deed. After KRW 150 million was repaid, the remaining KRW 210 million went unpaid. Our client sued, but the claim was not accepted at first instance.

The issue

Whether the parties had agreed to apply about KRW 213.1 million that the borrower had overpaid on supply invoices to another business our client effectively ran toward repayment of the loan.

Our approach

Our client argued that the overpayments had been settled against separate unpaid rent under a lease, not the loan, and relied on text messages between the parties and other evidence to show there was no agreement to offset the loan.

The court's reasoning

The appeal court accepted that overpayments were made and were close in amount to the loan. But it found that the parties also had rent obligations, that there was no evidence the rent had been paid, that the borrower's account had changed between the first instance and the appeal, and that, from an accounting standpoint, settling the rent was the more natural explanation. Messages exchanged just before the lawsuit were also inconsistent with an agreement to settle the loan.

Outcome

The appeal court set aside the part of the first-instance judgment our client had lost and ordered the company and guarantor, jointly, to pay KRW 210 million plus late-payment interest. The other side was ordered to bear two-thirds of the total costs.

What this case means

When several debts run between the same parties, which debt was settled is judged from the whole course of dealing. A first-instance result can change on appeal.

This is the outcome of an individual case and does not guarantee the same result in similar matters. Some facts have been generalized to protect the parties involved.