Court Rules Loan Given Expecting Prostitution Earnings at Room Salon Is Null and Void

A court has ruled that a debt repaid on behalf of a hostess at an entertainment establishment by a private lender is invalid, as the lender expected the debt to be repaid with money earned through prostitution.

The Busan District Court announced on October 19 that Judge Jung Soon-yeol of Civil Division 6 ruled in favor of the plaintiff in a lawsuit filed by A, an entertainment establishment employee, against private lender B to contest the claims.

The court deemed that the financial transaction between the two was premised on prostitution and disallowed compulsory enforcement based on the notarial deed they had drawn up.

According to the ruling, A, who worked at an underground room salon in Gangnam, Seoul, was introduced to private lender B in February 2017 by a manager who managed hostesses.

A, who previously owed 52 million won in advance payments to another lender, agreed to pay B an annual interest rate of 27.9% on the condition that B pay off the existing debt on A's behalf.

A subsequently worked at the room salon to pay back the principal and interest, and in April 2018, entered into a new contract regarding the remaining principal and interest of 47 million won, setting the interest rate at 24% per annum.

The Act on the Punishment of Acts of Arranging Sexual Traffic stipulates that any claims held by persons related to prostitution in connection with prostitution are null and void, regardless of the contract format or designation.

The Civil Act also dictates that legal acts contrary to good morals and social order are void, and as a rule, the return of money provided for illegal causes cannot be claimed.

Judge Jung stated, "The defendant was aware that the room salon in this case was an establishment where prostitution takes place, and appears to have entered into this contract expecting the plaintiff to repay the principal and interest with high revenues generated through prostitution."

The judge pointed out, "Despite the advance payment debt being a massive sum reaching 52 million won, the defendant settled the debt on the plaintiff's behalf without conducting a credit check or receiving any collateral."

Judge Jung explained, "Given that the principal was a large sum and the interest rate was extremely high, the plaintiff appears to have been placed in a situation where they realistically had no choice but to engage in prostitution to repay it. Beyond merely being aware of this, the defendant appears to have made the subrogated repayment expecting repayments to be made through such means."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.