Plaintiff Co., Ltd. (Law Firm Law Firm, Attorneys Kim Jong-pon et al., Counsel for the plaintiff-appellant)

Defendant corporation

February 26, 2008

Seoul Western District Court Decision 2006Da22251 Decided August 24, 2007

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance shall be revoked. The defendant shall pay to the plaintiff an amount calculated by applying 53,00,000 won per annum from November 11, 2004 to April 4, 2006, and 20% per annum from the next day to the day of full payment.

1. The plaintiff's assertion

A. ① The Plaintiff entered into a subcontract with the Defendant for the construction of the electric sector among the remodeling works of the main engineering plant (hereinafter “main engineering”). ② The Plaintiff was subcontracted by Nonparty 1 who represented for the Defendant. ② Even if the Defendant did not grant Nonparty 1 the right to enter into the said subcontract, Nonparty 1 had the name of Nonparty 1, who was the Defendant’s corporate seal impression at the time of the conclusion of the said subcontract, and the name of Nonparty 1, who was named “ Nonparty 1” in the name of the Defendant, and affixed the Defendant’s corporate seal impression at the time of the conclusion of the said subcontract. In light of the fact that part of the construction price was remitted to the Plaintiff’s deposit account, the Plaintiff believed that Nonparty 1 was authorized to enter into the said subcontract on behalf of the Defendant. ④ The Defendant confirmed the act of non-party 1 by filing a value-added tax return along with the tax invoice issued by the Plaintiff.

Therefore, the defendant is obligated to pay the plaintiff the balance of the construction work under the above subcontract and the delay damages for the amount of KRW 53,000,000.

B. The defendant allowed the non-party 1 to use the name of the head of the defendant headquarters, etc., and the plaintiff entered into a subcontract with the non-party 1 with the knowledge that the subcontractor is the defendant. As such, the defendant is obligated to pay the construction cost not paid by the plaintiff under Article 24 of the Commercial Act as the name truster, and the non-party 1, who was permitted to use the name, is liable to compensate the plaintiff for damages caused to the plaintiff by intention or negligence in performing his duties.

C. The Defendant, in violation of Article 21 of the Framework Act on the Construction Industry, lent a construction business license to Nonparty 1, and managed his passbook and seal affixedly. Accordingly, the Plaintiff, who entered into a subcontract with Nonparty 1, is liable to compensate for the damages therefrom as a tort under Article 750 of the Civil Act.

2. Determination

(a) Facts of recognition;

1) Around August 2004, Nonparty 2 introduced to the Defendant the main testing plant remodeling project (hereinafter “instant remodeling project”) located in Geumcheon-gu Seoul Metropolitan Government (hereinafter “instant remodeling project”) under the name of Nonparty 3 as the head of the technical department of Nonparty 3 Company.

2) Around September 3, 2004, the Defendant delegated Nonparty 2 with the authority to conclude the instant remodeling project contract on behalf of the Defendant, and issued two copies of the corporate seals and passbooks [Account Number: omitted) under the name of the Defendant, and the new bank passbook (Account Number: Account Number omitted).

3) Upon receipt of the above power of representation from the Defendant, Nonparty 2 prepared and delivered to the Defendant an “written agreement” (Evidence 1) with the following content.

A) Nonparty 3 Company is awarded a subcontract at the 92% line of the cost of the instant remodeling construction work, and the mid-to-date stamp work is to be directly executed by the Defendant.

B) Nonparty 3 Co., Ltd. shall submit to the Defendant a contract performance guarantee certificate at an amount equivalent to 105% of the subcontract amount.

C) Nonparty 2 shall take over the seal impression and transaction passbook necessary for the Defendant to enter into the instant remodeling project contract, and after the contract, Nonparty 2 submitted the subcontract agreement of Nonparty 3 corporation to the main body, and is recognized as a periodical subcontract. The Defendant’s seal impression and transaction passbook should not be used for other purposes.

4) On September 3, 2004, Nonparty 2 entered into a subcontract on behalf of the Defendant (including value-added tax) with the payment for the instant remodelling work as KRW 156,163,636 ( Nonparty 1 asserts that the instant remodelling work is KRW 210,00,000) and the construction period as from October 5, 2004 to October 19, 2004, Nonparty 2 entered into a subcontract to receive a subcontract on behalf of the Defendant. However, the contract amount as stated in the contract is KRW 395,850,000 (including value-added tax) at the request of the main body.

5) Afterwards, Nonparty 2 re-subcontracted the instant remodeling project to Nonparty 1 without the Defendant’s consent, and issued one corporate identification book and one head of Tong under the Defendant’s name. Nonparty 1 entered into a subcontract with multiple construction business operators using the Defendant’s corporate identification book, etc.

6) On September 21, 2004, the Plaintiff signed a contract (hereinafter “instant contract for electrical construction”) with the Defendant as the contractor to receive a subcontract for the electrical construction cost of KRW 73,000,000 among the instant remodeling works (hereinafter “instant contract”). The Defendant’s seal affixed to the contract was Nonparty 1.

[Reasons for Recognition] Unsatisfy, Gap evidence 1-1, 2 (Evidence 14-1 of Eul), Eul evidence 4, Eul evidence 1, Eul evidence 3, 4, 5, Eul evidence 6 (Evidence 16 of Eul), Eul evidence 8, 9, 10, Eul evidence 15-1 through 8 of evidence 15, part of non-party 4 witness of the first instance trial, the purport of the whole pleadings.

B. Determination

1) Whether the Defendant is liable for the payment of the construction price under the instant contract for electrical construction

A) First of all, we examine the Defendant’s assertion that the instant contract for electrical construction was directly concluded by the Defendant. According to the above facts, it can be known that the Defendant’s seal affixed to the document No. 1-2 (Electric Construction Standard Contract) was affixed by Nonparty 1, not the Defendant, and there is no evidence to prove that Nonparty 1 had the right to affix the Defendant’s seal to the above document. Thus, the evidence No. 1-2 and No. 2 cannot be used as evidence as to the facts alleged above. There is no other evidence that the Defendant directly concluded the said contract.

B) We examine whether the Defendant conferred the authority to conclude the instant contract for electrical construction on behalf of the Defendant on behalf of the Defendant. It is insufficient to recognize that the Defendant granted the right to conclude the said contract to Nonparty 1 on the sole basis of the entries in subparagraphs 7-1 and 3 as well as the testimony of Nonparty 4 as witnesses of the first instance trial, and there is no other evidence to recognize otherwise (the Plaintiff, on behalf of the Defendant, conferred the Defendant the right to conclude the instant subcontract on behalf of the Defendant to execute the instant remodeling project on behalf of the Defendant, and Nonparty 2 re-contracted the said authority to Nonparty 1. However, as recognized earlier, Nonparty 2 was granted the authority to conclude the instant remodeling project on behalf of the Defendant and subcontract part of the said remodeling project to Nonparty 3 Co., Ltd. without the Defendant’s consent, and thus, it cannot be deemed that Nonparty 1 was legally granted the right of representation).

C) We examine the allegation that Nonparty 1’s act of representation constitutes an expression representation under Article 126 of the Civil Act.

In order to establish an expression agency pursuant to Article 126 of the Civil Act, Nonparty 1, an agent, first of all, shall be recognized as having been granted a certain basic power of representation from the Defendant. However, there is no evidence to acknowledge that Nonparty 1 had been granted a basic power of representation from the Defendant.

The Plaintiff asserts to the effect that, on behalf of the Defendant, Nonparty 2 had the basic authority to conclude the instant subcontract agreement on behalf of the Defendant, and Nonparty 1 had the authority to conclude the said subcontract on behalf of the Defendant. As such, Nonparty 1 also had the basic authority to represent the Defendant. However, Article 120 of the Civil Act provides that, in principle, the appointment of a sub-agent shall not be recognized, unless the consent is obtained from the principal or any inevitable reason exists, and it is exceptionally recognized only when the principal consents to the appointment of a sub-agent or there are inevitable reasons. The consent of the principal is exceptionally possible unless the principal expresses his intention to prohibit the sub-agent. However, in light of the nature of the legal act as an agent, it is difficult to recognize that Nonparty 2 consented to the appointment of a sub-agent if it is important for the principal, who is the subject of administrative affairs. In light of such legal principles, the Defendant’s act of signing the instant contract or the act of appointing the sub-agent to Nonparty 2 as the principal of the said contract cannot be seen as having an implied consent.

D) We examine the assertion that the act of representation by Nonparty 1 constitutes an expression agent under Article 125 of the Civil Act. The expression agent by the indication of the granting of the power of representation under Article 125 of the Civil Act is established in cases where a certain person, regardless of the nature of basic legal relations between the principal and the person who act as an agent, provided a third party with the indication that he/she granted the power of representation on behalf of the principal (see Supreme Court Decision 2007Da23425, Aug. 23, 2007). There is no evidence to prove that the Defendant granted the Plaintiff the right of representation for the execution of the instant electrical construction contract.

E) We examine the Defendant’s assertion that he ratified Nonparty 1’s act of non-party 1’s act of acting as an authorized representative. In full view of the purport of the entire pleadings as to the items in the evidence Nos. 2 and No. 6, the Plaintiff issued a tax invoice for KRW 10 million on September 30, 2004 with the Defendant as “the recipient” and delivered it to Nonparty 1. The Defendant, upon filing a value-added tax return on October 2004, submitted the above purchase tax invoice received from Nonparty 2. However, the above facts alone are difficult to deem that the Defendant ratified it with the knowledge that the act of non-party 1’s act of acting as an authorized representative, and there is no evidence to prove this otherwise.

2) Whether the Defendant is liable under Article 24 of the Commercial Act or liability under Article 756 of the Civil Act as the nominal lender

The written evidence Nos. 7-1, 3, 8, and 9 is insufficient to acknowledge that the Defendant permitted Nonparty 1 or Nonparty 2 to engage in business using the Defendant’s trade name in relation to the instant remodeling project. There is no other evidence to acknowledge it. The Plaintiff’s assertion that the Defendant is liable for the nominal name holder under Article 24 of the Commercial Act on the premise that the Defendant permitted the use of the name, and the Plaintiff’s assertion that is liable for the employer under Article 756 of the Civil Act is without merit.

3) Whether the Defendant is liable for tort due to the violation of Article 21 of the Framework Act on the Construction Industry

A) Since there is no evidence to support that the Defendant lent the Defendant’s construction business license to Nonparty 1 or Nonparty 2, the Defendant’s assertion of tort on the premise that there was a violation of the Framework Act on the Construction Industry

B) The Defendant delegated Nonparty 2 to conclude a contract for the instant remodeling project on behalf of the Defendant, and delivered the Defendant’s corporate seal and passbook to Nonparty 2 to handle the delegated affairs. However, the Plaintiff entered into the instant electrical construction subcontract with Nonparty 1, who acquired the Defendant’s seal impression from Nonparty 2, not Nonparty 2, and the Defendant’s seal impression. At the time of issuing the seal impression, etc. to Nonparty 2, the Defendant appears to have not been able to expect Nonparty 2 to deliver the Defendant’s seal impression to Nonparty 1, a third party, and to use it to commit a tort against others. The Plaintiff’s assertion on this part is without merit.

3. Conclusion

The plaintiff's claim of this case shall be dismissed on the ground that it is without merit. The judgment of the court of first instance is justifiable with this conclusion. The plaintiff's appeal is without merit, and it is dismissed.

Judges Kim Jong-dae (Presiding Judge)