[1] In the case of so-called self-transaction without the approval of the board of directors, the meaning of "the effect on a bona fide third party with gross negligence" and "the burden of proof and gross negligence"

[2] The case holding that a bank specializing in credit such as bill discount, etc. was grossly negligent in acquiring promissory notes in the name of the representative director himself/herself in order to secure the representative director's personal joint and several liability, for which there was no approval of the board of directors for the issuance of the above bills, or

[1] The so-called self-transaction conducted without the approval of the board of directors is null and void between the company and the director. However, in order to claim against a third party that the above transaction was null and void due to a failure to obtain the approval of the board of directors, it should be proved that the third party was aware of the absence of the approval of the board of directors in addition to the failure to obtain the approval of the board of directors due to the necessity to protect the safety of the transaction and the third party acting in good faith. The same applies to the case of bad faith if the third party proves that he was gross negligence due to failure to know the fact even if he acted in good faith. In this case, the gross negligence refers to a situation where it is recognized that the third party was aware of the fact that the transaction was conducted between the director and the company and that the approval of the board of directors was necessary if he did not obtain the approval of the board of directors, and that the third party was not required to be neglected from the

[2] The case holding that a bank which professionally deals with credit, such as bill discount, was grossly negligent in acquiring promissory notes in the name of the representative director himself/herself, in order to secure the representative director's personal joint and several liability, when it knew or did not know that there was no approval of the board of directors for the

[1] Article 398 of the Commercial Act, Article 288 of the Civil Procedure Act / [2] Article 398 of the Commercial Act, Article 288 of the Civil Procedure Act

[1] Supreme Court Decision 84Da24626 delivered on December 11, 1984 (Gong1985, 165), Supreme Court Decision 94Da24626 delivered on October 11, 1994 (Gong1994Ha, 2963)

Industrial Bank of Korea (Law Firm Pule, Attorneys Soh-ho et al., Counsel for the defendant-appellant)

Co., Ltd. (Law Firm Chungcheong, Attorneys Shin Shin-soo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2002Na72493 delivered on November 7, 2003

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

1. The so-called self-transaction without the approval of the board of directors is null and void between the company and the director. However, in order for the company to claim against a third party that the above transaction was null and void due to the failure to obtain the approval of the board of directors, it must be proved that the third party did not obtain the approval of the board of directors in addition to the failure to obtain the approval of the board of directors as necessary to protect the safety of the transaction and the third party acting in good faith (see, e.g., Supreme Court Decisions 84Da1591, Dec. 11, 1984; 94Da24626, Oct. 11, 1994); although the third party acted in good faith, if it proves that there was gross negligence in failure to know it, it shall be the same as the case of bad faith if the third party did not obtain the approval of the board of directors, and it shall be deemed that there is no need to view that the third party violates the duty of fair care required in terms of trust and good faith.

2. According to the reasoning of the judgment of the court of first instance as cited by the court below, the above bank is a typical case between the non-party 3 directors and the non-party 4 company's representative director, who did not know that the non-party 3 company was an issuing company's credit affairs or legal affairs and teaching materials for business years. In order for the bank to have fulfilled its duty of care in its credit transactions, the bank must obtain approval from the board of directors and the certificate of personal seal impression signed and sealed by the board of directors. The non-party 1 and the non-party 2, who was an employee in charge of credit of the plaintiff bank, were not aware of the fact that the non-party 3 company's acquisition of the non-party 4 company's credit obligations and the non-party 3 company's acquisition of the non-party 4 company's credit affairs without the approval of the board of directors' board of directors' board of directors, and thus, the bank was not aware of the fact that the non-party 4 company's former representative director was an issuing company's credit and the non-party 4 company.

In the same purport, the court below is just in holding that the defendant company may oppose the plaintiff bank seeking payment of the bill of this case due to the invalidity of the issuance of the bill of this case, and there is no error in the misapprehension of legal principles as to the requirements of Article 398 of the Commercial Act, incomplete hearing, or violation of the rules of evidence

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition.

Justices Lee Yong-woo (Presiding Justice)