[1] In a case where a provisional disposition is rendered to suspend the performance of duties of a director or auditor and appoint an acting director, whether the term of office of the director, etc. is naturally suspended or the period of existence of the provisional disposition order is extended (negative in principle)

[2] The case where the previous legal relations can be the subject of legal action for confirmation

[3] The case holding that the court below dismissed Eul's claim on the ground that there was no benefit of confirmation solely on the ground that the request for confirmation of the former audit status was sought for confirmation of the past legal relations, in case where Gap company's shareholders were appointed as Eul at the shareholders' general shareholders' general shareholders' general shareholders' general shareholders' general shareholders' general shareholders' shareholders' general shareholders' general shareholders' general shareholders' shareholders' shareholders' general shareholders' shareholders' general shareholders' shareholders' general shareholders' shareholders' general shareholders' meeting rejected Eul's conclusion of the audit contract, and Eul filed a lawsuit against Eul for confirmation of the audit status, and at the time the Supreme Court rendered a judgment of remanding the case to the effect that Eul's general shareholders' general shareholders' general

[1] In the case of a provisional disposition in which a director or an auditor of a corporation as the respondent suspends the performance of his duties and an acting director is appointed, the provisional disposition decision does not only suspend the performance of duties such as the director, but it does not deprive him of his status or qualification. Thus, barring any special circumstance, the period of office of the director, etc. is naturally suspended due to the provisional disposition decision, or the period of existence of the provisional disposition decision cannot be extended as much as the period during which the director, etc. exists. Furthermore, the provisional disposition decision as above is effective not only between the parties, but also between the third parties,

[2] Generally, the past legal relations cannot be subject to legal action for confirmation. However, in a case where seeking confirmation of the past legal relations can be a valid and appropriate means to resolve the dispute in a single way, the benefit of confirmation is exceptionally recognized.

[3] In a case where the shareholders of Gap corporation were appointed as Eul at a general meeting of shareholders after obtaining permission from the court, and Gap corporation refused to conclude the audit contract, Eul filed a lawsuit against Eul corporation seeking confirmation of its audit status, and Eul corporation had a term of office as Eul's auditor at the time of filing the lawsuit and at the time of the Supreme Court's remanding judgment to the effect that Eul was requested by Eul, but Eul had a term of office at the time when Eul was remanded. After the remand, the court held that although Eul's request for confirmation of Eul's audit status was sought confirmation of the past legal relationship upon the expiration of its term of office, although Eul's request for confirmation was made upon the appointment of the auditor after the expiration of its term of office, even if it had an impact on the present rights or legal status even in the past legal relationship, and it is deemed as valid and appropriate means to seek confirmation, the court below erred in the misapprehension of legal principles as to the previous legal relationship, and thus, it did not have any interest in seeking confirmation or alteration of its claim for confirmation of the status of Eul, etc.

[1] Articles 383, 407, 410, and 415 of the Commercial Act / [2] Article 250 of the Civil Procedure Act / [3] Articles 136 and 250 of the Civil Procedure Act, Article 410 of the Commercial Act

[1] Supreme Court Decision 87Do145 Decided August 18, 1987 (Gong1987, 1484), Supreme Court Decision 2013Da39551 Decided March 27, 2014 (Gong2014Sang, 936) / [2] Supreme Court Decision 94Meu147 Decided March 28, 1995 (Gong195Sang, 1751), Supreme Court Decision 95Meu694 Decided November 14, 195 (Gong196Sang, 54)

Plaintiff

New Industry Co., Ltd. (Bae & Yang LLC, Attorneys Lee Han-hoon et al., Counsel for the defendant-appellant)

Supreme Court en banc Decision 2016Da251215 Decided March 23, 2017

Seoul High Court Decision 2017Na2019232 decided June 7, 2018

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

1. Judgment on the grounds of appeal

A. In the event of a provisional disposition in which a director or an auditor of a stock company as the respondent suspends the performance of duties and an acting director is appointed, the provisional disposition decision does not only suspend the performance of duties of director, etc. but do not deprive him of his status or qualification (see, e.g., Supreme Court Decision 87Do145, Aug. 18, 1987). Barring any special circumstance, the period of office of director, etc. is naturally suspended due to the provisional disposition decision or the period during which the provisional disposition order remains in existence cannot be extended to the extent that the provisional disposition order remains in existence. Furthermore, such provisional disposition decision is effective not only between the parties, but also for a third party (see, e.g., Supreme Court Decision 2013Da39551, Mar. 27, 2014). Thus, it does not affect the progress of the term

B. According to the lower judgment and the record, the following facts are revealed.

1) The Plaintiff was appointed as the Defendant’s auditor on December 1, 2014 at the temporary general meeting of shareholders held on December 1, 2014, by Nonparty 1, etc., the Defendant’s shareholder, with the court’s permission to convene a temporary general meeting of shareholders.

2) On March 13, 2015, the Plaintiff filed the instant lawsuit against the Defendant, etc., who denies his/her status as auditor, to verify that the Plaintiff was in the Defendant’s audit status (the Plaintiff, while pending the first instance trial, added the “request for confirmation of the audit status” to the primary claim), and on April 1, 2015, demanded the Defendant to enter into an audit appointment contract according to the resolution of the general meeting of shareholders in writing.

3) Prior to remand, the lower court dismissed the Plaintiff’s claim for confirmation of the status of auditor, deeming that the Plaintiff was unable to acquire the status of auditor even if the general meeting of shareholders of this case resolved to appoint the Plaintiff as auditor, since no appointment contract was concluded between the Plaintiff and the Defendant pursuant to the previous Supreme Court precedents. The Plaintiff appealed on this point.

4) On March 23, 2017, the Supreme Court changed the previous Supreme Court precedents by deeming that the Plaintiff acquired the status of director or auditor regardless of whether a resolution of appointment at a general meeting of shareholders was concluded with the consent of the person to be appointed, by unanimous opinion, regardless of whether a separate appointment contract was concluded. Accordingly, the instant general meeting of shareholders was subject to a resolution of appointment for the Plaintiff, and the Plaintiff consented to the appointment of the auditor by requesting the Defendant to conclude an appointment contract, and thus, the Plaintiff’s appeal should be deemed to have acquired the status of auditor. Accordingly, the lower court

5) On June 7, 2018, even if the Plaintiff acquired the Defendant’s audit status from April 1, 2015, for which the Plaintiff demanded the conclusion of the audit contract, the lower court dismissed the Plaintiff’s primary claim part of the instant lawsuit on the ground that the Plaintiff’s request for confirmation of the Plaintiff’s audit status was merely seeking confirmation of the past legal relations, and thus, the Plaintiff’s primary claim was dismissed on the ground that there was no benefit of confirmation, since the Plaintiff’s ordinary shareholders’ meeting was terminated on March 23, 2018 regarding the last period for settlement of accounts within three years, and the latter auditor was appointed at the said ordinary shareholders’ meeting.

6) On the other hand, on February 4, 2015, the court rendered a decision to suspend the performance of duties against Nonparty 2, who was the Defendant’s previous auditor, and rendered a decision to appoint an auditor’s acting director on the 12th of the same month (hereinafter “instant provisional disposition order”), and subsequently revoked the instant provisional disposition order ex officio in consideration of the purport of the judgment on remanding the case on June 7, 2017.

C. We examine the above facts in light of the legal principles as seen earlier.

Even if the Plaintiff was unable to perform his duties as an auditor due to the instant provisional disposition order while the acting auditor was appointed, it cannot be said that the Plaintiff’s term of office is suspended, or that the period during which the instant provisional disposition order remains in existence is extended as much as the period. The Defendant’s articles of incorporation stipulate the fixed number of auditors as one. It cannot be deemed any different from that of the Defendant’s articles of incorporation. The Defendant’s assertion of expiration of the Plaintiff’s term of office against the good faith

Therefore, the lower court did not err by misapprehending the legal doctrine as to suspension of performance of duties and the effect of a provisional disposition on appointment of acting directors, violation of the regulations on the number of auditors under the Commercial Act and the articles of incorporation, and violation of the good faith principle, contrary to what is alleged in the grounds of appeal, in so determining, that the Plaintiff’s term of office had expired since April 1, 2015 and the Defendant’s regular shareholders’ meeting

2. Ex officio determination

A. The existence of the court’s duty of explanation on the interest of confirmation in the instant case

At the time of the Plaintiff’s filing of the instant lawsuit, the term of office as an auditor remains sufficiently at the time of rendering a judgment on remanding to the effect that the Supreme Court accepts the Plaintiff’s claim for confirmation of the Plaintiff’s audit status. However, the Plaintiff’s claim for confirmation of the audit status had been sought upon the expiration of the Plaintiff’s term of office during the hearing of the lower court, which led to the appointment of an auditor after the expiration of the Plaintiff’s term of office. However, even if it was a past legal relationship, there is a benefit to seek confirmation in a case where it is deemed valid and appropriate to exercise current rights or legal status and obtain a judgment on confirmation of the said legal relationship to eliminate risks or apprehensions. In such a case, the lower court did not immediately dismiss the claim for confirmation of the previous audit status solely on the ground that it was seeking confirmation of the past legal relationship, but rather did not immediately dismiss it immediately due to the fact that it was seeking confirmation of the risks or apprehensions regarding the current rights or legal status, and should give the Plaintiff

1) In general, the past legal relations cannot be subject to confirmation, but in cases where seeking confirmation of the past legal relations becomes the premise of present or potential disputes between interested parties and can be a valid and appropriate means to resolve the disputes in a single way, benefits of confirmation are exceptionally recognized (see, e.g., Supreme Court Decisions 94Meu147, Mar. 28, 1995; 95Meu694, Nov. 14, 1995).

In the instant case, on the ground that the term of office of the Plaintiff was terminated and the auditor was appointed after the termination of the term of office of the Plaintiff, it cannot be deemed that there is no dispute between the parties as to the Plaintiff’s rights or legal relations, or there is no legal apprehension or risk. This is because the Plaintiff brought the instant lawsuit by denying the status of the auditor from the Defendant, and the Defendant continued to dispute the instant lawsuit up to the final appeal. If it is impossible to make a judgment on the merits because there is no benefit of confirmation at all times, it may result in a court’s refusal of a trial even if there is a substantial dispute between the parties. Practically, there may arise side effects, such as intentional delay of the other party’s

Furthermore, in this case, whether the Plaintiff was in the position of audit and inspection of the Defendant, a stock company, may affect the Plaintiff’s other rights or legal status premised on such position. Since the auditor has a right to claim remuneration against the company pursuant to Articles 388 and 415 of the Commercial Act (see, e.g., Supreme Court Decision 2015Da214202, Aug. 27, 2015), the Plaintiff may seek damages against the Defendant for failure to receive remuneration during his/her term of office as an auditor (see, e.g., Supreme Court Decision 2015Da214202, Aug. 27, 2015). In addition, if the Plaintiff’s damage was caused by the Defendant’s intent or gross negligence, the representative director is jointly and severally liable with the Defendant pursuant to Article 401 of the Commercial Act. Accordingly, even if the previous legal relationship was in the past, obtaining a judgment of res judicata effect on the existence

Whether the Plaintiff is in the position of audit and inspection of the Defendant is a preliminary question in a subsequent lawsuit seeking monetary payment and may be deliberated and determined. However, such circumstance is not a reason to completely deny the benefits of confirmation as to the primary claim of this case. In the relevant dispute, it is inconsistent with the economy of litigation to ensure that the same issue is proved by the parties, and that it is subject to the court’s deliberation and judgment on the same issue is inconsistent with the economy of litigation.

2) Article 136(4) of the Civil Procedure Act provides, “The court shall give the parties an opportunity to state their opinions regarding the legal matters which are deemed clearly excessive to the parties.” Therefore, in the event that the parties have a matter of law that is clearly unreasonable due to negligence or misunderstanding or that there is a legal inconsistency or uncertainty in the parties’ assertion, the court shall actively exercise its right of explanation and give the parties an opportunity to state their opinions, and in the event that they have neglected to state their opinions, the court is unlawful (see Supreme Court en banc Decision 94Da34265, Jul. 11, 1995; Supreme Court Decision 2009Da83599, Feb. 11, 2010, etc.).

As in the instant case, if the Plaintiff sought confirmation of the current status of audit and inspection even at the time of the judgment of remanding, as well as at the time of the judgment of remanding, that the term of office remains sufficiently at the time of the lawsuit, and there was a change in the circumstances that the termination of the term of office and the appointment of the auditor after the end of the trial of the lower court, the lower court should be asked to determine whether there exists any benefit or need to seek confirmation of the Defendant’s audit status for a certain period in the past, and give an opportunity to present opinions or modify the purport of the claim, and if the Plaintiff amends the purport of the claim in response to his/her name, the lower court should make a ruling accordingly to resolve the dispute. This is because, in light of the progress of the instant lawsuit, it is reasonable to view that the Plaintiff as the Plaintiff has an intention to have the right to confirm the current status of audit and inspection, which may affect the current right or legal status, rather than to obtain a judgment of rejection as it is, and thus, it cannot be deemed that the Defendant could be objectively anticipated within the extent.

3) The benefit of confirmation is a special legal interest in a lawsuit seeking confirmation, which is the principle of controlling the use of an influent litigation system, from a national and public interest point of view. However, given that the instant case had already been deliberated and judged on the merits from the first instance court to the final appeal, there is no practical benefit to control the use of a new litigation system and to reduce the burden by the court’s decision on the merits. Rather, in a case where a request for confirmation of the status of the previous auditor for which a substantive judgment on the merits was made through a judgment of remand of the final appeal is dismissed on the ground that there is no benefit of confirmation, the litigation procedure is concluded in a state where it is unclear what is the final judgment of the court on the relevant subject matter of lawsuit. This contradicts the function and role of the main judicial procedure to resolve the final and uniform legal dispute.

4) Ultimately, in this case, the lower court should have ordered the Plaintiff to seek confirmation of the Defendant’s audit status for a certain period of time, and should have given the Plaintiff an opportunity to either state his/her opinion or modify the purport of the claim.

B. Sub-determination

The lower court rejected the Plaintiff’s primary claim on the ground that the previous claim seeking confirmation of the current audit status was about the past legal relationship due to the expiration of the term of office, etc., on the ground that the Plaintiff had an intention to seek confirmation of having been in the audit status for a certain period of time in the past, or without having given the Plaintiff an opportunity to state his opinion. In so determining, the lower court erred by misapprehending the legal doctrine on the interest in confirmation and the scope of the duty of explanation in the confirmation

3. Conclusion

Therefore, 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 on the bench.

Justices Lee Ki-taik (Presiding Justice)