[1] Whether a company is deemed as a merchant and thus the representative director, who is the institution, is recognized as a merchant (negative), and in a case where a representative director borrows money or received an investment in order to use money for the company's operating funds, whether such act constitutes a commercial activity (negative) / Whether a merchant's act of investing money in his/her individual qualification regardless of business can be deemed as a supplementary commercial activity for the company's existing business (negative)

[2] In a case where certain facts are attached to the repayment of the obligation, whether the period for performance should be deemed to have arrived even when the occurrence of the fact becomes impossible (affirmative in principle), and in a case where the realization of the fact, as prescribed by the subsidiary, mainly depends on the sex or effort of the person who mainly performs the obligation and the creditor is unable to influence the realization of the fact, whether the period for performance of the obligation should be deemed to have arrived even when the fact does not occur within a reasonable period (affirmative)

[3] The method of “approval” and the standard for determining whether there was an implied indication of the approval, which is the ground for interrupting extinctive prescription

[1] A merchant is the subject of rights and obligations arising from a commercial activity. It is natural that the merchant himself/herself acquires the qualification as a merchant in order to obtain the application of the Commercial Act as an auxiliary commercial activity.

Even if a company is deemed a merchant under the Commercial Act, the representative director, who is an institution of the company, is not a merchant. Even if a representative director borrows money or receives investment in order to use it as a company’s operating fund, it does not constitute a commercial activity.

In addition, a merchant's act of investing money in his/her individual qualification regardless of business can not be considered as an ancillary commercial activity for the existing business of the merchant.

[2] In a case where a certain fact is attached to the repayment of a debt, barring any special circumstance, it shall be deemed that the period for the performance of the debt comes due not only when the occurrence of the fact has occurred, but also when the occurrence of the fact becomes impossible. Furthermore, the realization of the fact determined by the subsidiary is determined by the sex or effort of the person who mainly pays the debt, and where the creditor is unable to affect the realization of the fact, it shall be deemed that the period for the performance of the debt arrives even if the fact does not occur within a reasonable period, as well as when the fact is not determined as impossible

[3] Approval, which is a ground for interrupting extinctive prescription, is established by indicating that an obligor who is a party to the benefit of prescription, is aware of the existence of rights to the obligor or his/her agent, by the completion of the extinctive prescription period. The method of indication does not require any form, but does not appear explicitly or implicitly. It is sufficient to indicate implied approval in a way that the obligor is able to conceal the obligor by way of indicating that the obligor is aware of the existence and amount of the obligation.

[1] Articles 4, 5(2), and 47 of the Commercial Act / [2] Articles 105, 147, and 152 of the Civil Act / [3] Article 168 subparag. 3 of the Civil Act

[1] Supreme Court Decision 92Da7948 Decided November 10, 1992 (Gong1993Sang, 74), Supreme Court Decision 201Da43594 Decided July 26, 2012 (Gong2012Ha, 1491) / [2] Supreme Court Decision 88Da10579 Decided June 27, 1989 (Gong1989, 1147) (Gong147), Supreme Court Decision 2009Da1643 Decided May 14, 2009 (Gong209Sang, 842) / [3] Supreme Court Decision 92Da947 (Gong192, 1595) Decided April 14, 1992 (Gong1992, 1595)

Plaintiff 1 and two others (Attorneys Park Jong-chul et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm Won, Attorneys Park Young-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2016Na2039604 decided December 22, 2016

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Whether the plaintiffs' claims against the defendant are commercial claims (ground of appeal No. 1)

A. A merchant is the subject of rights and obligations arising from a commercial activity. It is natural that the merchant himself/herself acquires the qualification of the merchant in order to be subject to the Commercial Act as an auxiliary commercial activity.

Even if a company is deemed a merchant under the Commercial Act, the representative director, who is an institution of the company, is not a merchant. Even if a representative director borrows money or receives investment in the company’s operating fund, it does not constitute commercial activities (see, e.g., Supreme Court Decisions 92Da7948, Nov. 10, 1992; 201Da43594, Jul. 26, 2012).

In addition, a merchant's act of investing money in his/her individual capacity regardless of his/her business can not be considered as an ancillary commercial activity for the existing business of the merchant.

B. According to the reasoning of the lower judgment, the following facts are revealed.

(1) The Defendant was the representative director of the Taesung Construction Co., Ltd. (hereinafter “Seoul Construction”), and the Nonparty was a “○○○○○○○○○○○○○○○○○○○○○○” in the name of the Nonparty.

(2) On February 8, 1999, the Defendant received KRW 450,000 from the Nonparty to use it as the fund for the establishment of factory of Thae Engineering Co., Ltd. (hereinafter “Taeaeae Engineering”) (However, the confirmation document prepared by the Defendant is indicated as around January 2, 200). Thereafter, the Defendant assumed office as the representative director of Tha Engineering on November 18, 199 and completed the above factory.

(3) The Nonparty died on July 21, 2003, and the Nonparty’s inheritor was the Nonparty’s wife, and there were Plaintiff 1, the Nonparty’s wife and Plaintiff 2 and Plaintiff 3, the Nonparty’s wife.

(4) On December 29, 2004, the Defendant drafted a written confirmation with the following contents to the Plaintiffs.

“The Defendant received 450 million won from the Nonparty in relation to the establishment of a factory, but the Nonparty died and thus both contracts have been lost, the above 450 million won shall be paid 1/3 of the amount received by the △△△ in relation to the Jeju Complex Corporation located in △dong-dong, Si-si on May 31, 2005, and the shortage shall be paid at the time of the Defendant’s business restructuring.”

(5) On behalf of the Plaintiffs, on February 27, 2015, Plaintiff 1 urged the Defendant to return the said money with content certification, and filed the instant lawsuit on August 21, 2015.

C. The court below held that since both the defendant and the non-party were paid KRW 450,000 from the non-party to use as the establishment fund of the Taecheon Engineering Factory, the non-party’s payment of the above investment money to the defendant constitutes a subsidiary commercial activity for the business of the defendant and the non-party, the court below held that the plaintiffs’ claim for the return of the investment money is a commercial claim, and the period of extinctive prescription of five

D. However, we cannot accept the judgment of the court below for the following reasons.

(1) According to the evidence duly admitted by the lower judgment and the lower court, the Defendant is aware that the Defendant received money from the Nonparty in personal capacity, not the representative director of Taesung Construction or Taesung Engineering. Even if the name of the Defendant received an investment from the Nonparty in order to raise funds for the construction of Taesung Engineering Factory, such circumstance alone cannot be deemed as a merchant.

(2) Even though the non-party was a merchant who was engaged in the manufacture, sale, or lending of containers, the non-party may be deemed to have invested or paid funds to the defendant in his/her individual qualification, and thus, it cannot be deemed as an auxiliary commercial activity.

(A) The Nonparty was unable to have a friendly relationship with the Defendant on the basis of a high-speed line and a post-age relationship.

(B) The Defendant established an solar engineering plant with the money received from the Nonparty, and the solar engineering is not related to the manufacturing, selling, and leasing business of the Nonparty, as a company aimed at manufacturing and selling machinery manufactured solid fuels using inflammable garbage and manufacturing and selling chemical fuels, etc.

(C) There is no specific agreement regarding the payment of the Nonparty’s funds, including matters regarding the establishment of an investment agreement, allocation of profits or losses arising from investment in funds, and the return of investment funds.

(3) Therefore, the Nonparty’s payment of KRW 450 million to the Defendant cannot be deemed to have caused either the Defendant’s commercial activity or the Nonparty’s ancillary commercial activity. Ultimately, the Plaintiffs’ claim against the Defendant ought to be deemed to have been subject to the ten-year extinctive prescription as a civil claim.

Nevertheless, the lower court determined that the five-year extinctive prescription of commercial claims shall apply to the payment of KRW 450 million to the Defendant by deeming the Nonparty’s payment of KRW 450 million to the Nonparty and the Defendant’s commercial activities for business purposes. In so determining, the lower court erred by misapprehending the legal doctrine on merchant and commercial activities, and thereby adversely affecting the conclusion of the judgment

2. Omission of all necessary deliberations and misapprehension of legal principles on the interpretation of the father-general (ground of appeal No. 3)

A. In a case where a certain fact is attached to the repayment of a debt, barring any special circumstance, it shall be deemed that the period for the performance of the debt arrives when not only the occurrence of the fact but also when the occurrence of the fact becomes impossible (see Supreme Court Decision 88Da10579, Jun. 27, 1989, etc.). Furthermore, the realization of the fact determined by the additional officer depends mainly on the sex or effort of the person who mainly performs the debt, and even if the creditor is unable to exercise an influence on the realization of the fact, it shall be deemed that the period for the performance of the debt arrives even if the fact does not occur within a reasonable period, as well as when the fact is not confirmed to be impossible (see Supreme Court Decision 2009Da1643, May 14, 2009).

B. As to the time when the Defendant paid KRW 450 million to the Plaintiffs, who are the Nonparty’s heir, the Nonparty paid the said KRW 450 million to the Nonparty, 1/3 of the receipt amount of the “if the amount to be received from △△△ in relation to the Jeju Complex Corporation located in △△-dong, Si-si, which was going to receive on May 31, 2005, is received from △△△ (hereinafter “the first subsidiary officer”),” and the Defendant promised to pay the remainder to the “the time of business re-making” (hereinafter “the second subsidiary officer”).

C. On May 31, 2005, the first assistant officer decided that the Defendant would receive the payment for the main complex construction in the △△-dong in the △△-dong in the △△-si in the △△-si. Here, “ May 31, 2005” appears to be the scheduled date for the Defendant to receive the money from the △△-dong, and it is difficult to view that the time is the basis for whether the occurrence of the instant event prescribed by the △-dong is determined otherwise. In other words, there is room to view that the first assistant officer set the term “the Defendant would receive the payment from the △-dong from the △△△-dong.”

The Second Sub-Section shall pay the remainder of the above payments to the Defendant’s “time of business restructuring.” This does not mean that when the Defendant does not resume the business, the Defendant does not pay the remainder of the payments, but rather, it shall be deemed that the payment period for the remainder of the payments will arrive only when the Defendant did not resume the business.

Therefore, the lower court needs to determine the Defendant’s repayment period for the Defendant’s monetary obligation to the Plaintiffs by further examining the following: (a) the Defendant’s money that the Defendant was to receive from △△△; (b) the amount of the money that the Defendant actually received from △△△; (c) the reason and time for the failure to receive the money that the Defendant was to receive from △△△; (d) the developments leading up to the indefinite period at the time of the agreement on December 29, 2004, and whether the Defendant’s status of the business or the preparation for the business restructuring at the time of the agreement; and (e) whether the business restructuring occurred.

D. Nevertheless, the lower court determined that, inasmuch as the Defendant failed to pay the amount scheduled to be paid by the △△△ on May 31, 2005, the period during which the obligation to pay the money under the instant agreement was due to the occurrence of the pertinent amount between the Plaintiffs and the Defendant, and that the said amount was confirmed to have not occurred.

The lower court did not exhaust all necessary deliberations and erred by misapprehending the legal doctrine on the interpretation of the deputy officer, thereby adversely affecting the conclusion of the judgment. The Plaintiffs’ ground of appeal assigning this error is with merit.

3. Violation of the principle of free evaluation of evidence regarding grounds for interruption of extinctive prescription (Ground of appeal No. 2)

A. Approval, which is a ground for interrupting extinctive prescription, is established by indicating that the debtor who is a party to the extinctive prescription benefit, is aware of the existence of rights to the person who will lose rights or his/her representative due to the completion of the extinctive prescription period. The method of indication does not require any form, explicitly or implicitly. It is sufficient that an implied recognition is made by means of allowing the other party to a contract by indicating that the debtor is aware of the existence and amount of the obligation, on the premise that the debtor is aware of the existence and amount of the obligation (see, e.g., Supreme Court Decisions 92Da947, Apr. 14, 1992; 2004Da5959, Feb. 17, 2005).

B. The Meetbook (Evidence A) prepared by Plaintiff 1 stated that the Defendant promised to visit Plaintiff 1 on January 2, 2007, and that Plaintiff 1 deposited KRW 10 million from the Defendant on January 5, 2007 to the National Bank. The copy of the Meetbook (Evidence A5) of the above Plaintiff’s national bank bank (Evidence A5) is confirmed to have deposited KRW 10 million on the same day. Furthermore, according to the record (Evidence A6) recording the contents of telephone calls with the Defendant on August 21, 2015, Plaintiff 1 received KRW 20 million from the Defendant’s initial period, but did not request the remainder of KRW 430 million,000,000,000 from the Defendant’s initial period, and the Defendant did not answer.

C. Examining the foregoing factual basis in light of the foregoing legal doctrine, there is room to deem that there existed “approval”, the cause for interruption of extinctive prescription, around that time, by recognizing that the Defendant partially repaid the Plaintiff’s debt to the Plaintiff 1 from January 5, 2007 to August 21, 2015, and that the said Plaintiff’s debt remains at KRW 430 million.

Nevertheless, the lower court determined that the evidence submitted by the Defendant alone insufficient to recognize that the Defendant approved the Defendant’s obligation, and that there was no other evidence to prove otherwise. In so doing, the lower court erred by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on the recognition as grounds for suspending extinctive

4. Conclusion

The Plaintiffs’ final appeal is with merit, and the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices

Justices Kim Chang-suk (Presiding Justice)