[1] In a case where a third party is grossly negligent in believing that he/she has the right to represent the company, whether he/she is liable to the third party of the company (negative)

[2] The standard for determining whether a director who uses the name of an expression representative director has the right to represent the company in bad faith or gross negligence

[3] The case holding that a financial institution's executive officers and employees are not responsible for a financial institution on behalf of the listed company on the ground that there is gross negligence in believing that they are entitled to endorsement on blank bills on behalf of the listed company

[1] In order to establish the liability of a corporation due to the act of an apparent representative director under Article 395 of the Commercial Act, it does not require any negligence other than that of a third party who is the other party to the juristic act. However, the purport of the provision is to protect the third party in good faith and safety of commercial transaction by using a name which is recognizable as having the power of representation in appearance of a company, and in cases where there are reasons attributable to the company for the occurrence of such appearance, and by protecting the third party in good faith who is believed to be responsible for the occurrence of such appearance, and even if the third party believed that he/she has the authority to represent the company in performing the transaction, the company shall not be liable for such third party if there is gross negligence.

[2] Article 395 of the Commercial Code stipulates the name of expressed representative director as the name of the president, vice president, managing director, managing director, and managing director as the name of expressed representative director. It is necessary to determine whether such name falls under the name of expressed representative director according to the general principles of trade. The Commercial Code does not recognize the power of representation of all the directors, and only the representative director selected at the board of directors or the general meeting of shareholders recognized the power of representation of the company. This system has been continuously implemented for a considerable period after the enforcement of the Commercial Code. Since the general education level of the people has improved and the general number of general people have considerable opportunity to deal with the company system and the representative director system, it is better for the general public to understand the system of the company's representative director as well as the company's name such as the company's organization, vice president, managing director, and managing director's position as the representative director's general director's general director's representative director's representative director's general director's position or representative director's general director's general director's general director's general director's non-permanent.

[3] The case denying the company's liability for financial institutions on behalf of the executive director / the president of the Korea Housing Corporation on behalf of the listed company on the ground that there is gross negligence in believing that the executive director of the financial institution has a right to endorsement on

[1] Article 395 of the Commercial Act / [2] Article 395 of the Commercial Act / [3] Article 395 of the Commercial Act

[1] Supreme Court Decision 72Da1907 delivered on February 28, 197 (Gong21-1, 111), Supreme Court Decision 86Da2936 delivered on October 11, 198 (Gong198, 1396), Supreme Court Decision 91Da35816 delivered on July 28, 1992 (Gong192, 2547), Supreme Court Decision 94Da7591 delivered on December 2, 1994 (Gong195, 428), Supreme Court Decision 94Da50908 delivered on November 21, 195 (Gong196, 422)

Industrial Crossing Co., Ltd. (Attorney Kim Jae-gu, Counsel for the defendant-appellant)

Seoul High Court Decision 201Na1448 decided May 1, 201

Seoul High Court Decision 97Na47523 delivered on March 2, 1999

The part of the lower judgment against the Defendant is reversed and remanded to the Seoul High Court. The Plaintiff’s supplementary appeal is dismissed.

1. The defendant's ground of appeal Nos. 1 and 2

(a) recognised facts;

Comprehensively considering the evidence adopted by the court below, the facts and records duly admitted are as follows.

(1) On March 29, 1994, the Plaintiff entered into a siren agreement with Co-Defendant 1 Co-Defendant 2, Ltd., Ltd. (hereinafter referred to as the “Dongba industry”) with the content of lending KRW 2,525,342,60 in the form of a siren, which was purchased by the Dongba industry (hereinafter referred to as the “Dongba contract”).

(2) From February 1994, the Plaintiff and the East Industry agreed to enter into the instant siren contract with a view to ensuring the performance of the obligations under the instant siren contract that the East Industry will bear to the Plaintiff, the East Industry agreed to set up a collateral security of KRW 1,150,000 with respect to the site in the Seo-gu, Gwangju, Seo-gu, Seoul ( Address 1 omitted), and the collateral security of KRW 3,440,000 with respect to the site in the Gangnam-gu, Seoul ( Address 2 omitted), which is owned by Nonparty 2, respectively, and set up a joint and several surety.

However, as at the time, it is difficult for Nonparty 2 to set up a collateral in line with the conclusion of the instant siren agreement with Nonparty 2 in a foreign country, the Plaintiff and the same industry agreed to provide the listed company with blank bills endorsed by the Defendant Company as collateral on their behalf until the ○○dong site owned by Nonparty 2 was offered as collateral.

(3) Accordingly, Nonparty 3, the representative director of the Dong bank industry, left in blank the face value, issue date, and payment date of the Dong bank industry, prepared a promissory note (hereinafter “the Promissory note”) signed and sealed by Nonparty 3 Co., Ltd. (hereinafter “the Promissory note”), which was operated separately by the issuer, under the name of Dong bank industry, and endorsed it under the name of Dong bank industry. After again, Nonparty 3, the representative director of the Dong bank industry, as Nonparty 3, explained the contents of the Dong bank agreement of this case scheduled to enter into in the future for the Dong bank industry, and the circumstances mentioned in the above paragraph (2) above, and requested Nonparty 4, who was the managing director of the defendant company, to make an endorsement on the Promissory bank industry’s obligations under the Dong bank industry, until the ○ Dong bank site owned by Nonparty 2 was offered as a security.

(4) Nonparty 4 rejected Nonparty 4’s request on the grounds that his position is the head of the Housing Business Headquarters and is not involved in the business of funding such as endorsement of bills. However, at the end, Nonparty 3’s request was rejected, and at that time, Nonparty 6’s representative director, a representative director of the Seodaemun Industrial Co., Ltd. (hereinafter referred to as “Seoseo Industrial Co., Ltd.”) (hereinafter referred to as “Seomun Industrial Co., Ltd.”) made endorsement under the name of the Defendant Co., Ltd. as the trade name before the change of the Defendant Co., Ltd., Ltd., “Seoseo Industrial Co., Ltd.,

(5) Upon the conclusion of the instant siren contract, Nonparty 3 and Nonparty 1 jointly and severally guaranteed the Plaintiff Company’s obligation under the instant siren agreement to the Dong Industry. On the same day, Nonparty 1 had the Plaintiff Company registered the establishment of a neighboring mortgage with respect to the site owned by the Plaintiff Company, in the same manner as the said paragraph (2).

In addition, Nonparty 3 issued to the Plaintiff Company a certificate of granting the right to supplement the blank bill in the name of Green Planning Co., Ltd. along with the instant bill.

Nonparty 5, the director of the division in charge of the Plaintiff Company, was ordered by Nonparty 3 to Nonparty 4, who was named in the office of managing director of the Defendant Company, and was asked to Nonparty 4 to verify the authenticity of the endorsement of the Promissory Notes, and confirmed that the endorsement by the Defendant Company was authentic by calls to Nonparty 4 (the said site owned by Nonparty 2 was not offered as security of the instant siren contract).

(6) On the same day, the Plaintiff Company delivered the sirens to the East Industry according to the instant sirens contract, and thereafter, the East Industry did not pay a sirens under the instant sirens contract from April 1995. The Plaintiff Company terminated the instant sirens contract around May 31 of the same year.

B. The judgment of the court below on the establishment and scope of the defendant company's apparent representative director's liability

Based on the above facts, the lower court determined as follows.

(1) Formation of Apparent representative director's liability

In addition to cases where a director who has used a name that can be recognized as having the authority to represent the company, such as president, vice president, managing director, managing director, or any other name, performs a legal act under his/her own name, and even where a director who uses such name acts using the name of another representative director, the legal doctrine of the expressed representative director under Article 395 of the Commercial Act applies. According to the above facts established, the defendant company is obliged to endorsement the bill of this case by Nonparty 4, a managing director, using the name of the representative director of the defendant company, and bear the obligation following the endorsement

As to this, the defendant delivered the bill of this case to the non-party 5, and the non-party 4 told that the non-party 5 signed and sealed the bill of this case in a non-official manner even without the right to endorsement on the bill of this case. The non-party 5 knew that the non-party 4 did not have the right to represent the defendant with respect to the above endorsement. Thus, the non-party 4 knew that the non-party 4 did not have the right to represent the defendant with respect to the above endorsement, and therefore, the defendant company argued that the non-party 5 did not assume the responsibility in accordance with the legal principles of the representative director, but even with all evidences of the defendant, it is insufficient to accept the defendant's above assertion.

The defendant argues that even though the non-party 4 was unaware of the fact that he did not have the authority to represent the defendant company, the plaintiff company, which is a financial institution, bears a large amount of obligation. Thus, although the defendant company has a duty to verify whether the defendant company made a normal endorsement on the bill of this case, the plaintiff company's negligence and received the bill of this case which was endorsed without legitimate authority, so the defendant company did not assume the responsibility for the representative director's liability in accordance with the legal principles. However, the defendant's above assertion is insufficient to accept even if it is based on all evidences of the defendant.

The defendant asserts that the defendant company does not assume the responsibility in accordance with the legal principles of the representative representing the plaintiff company because the non-party 4 endorsementd the bill of this case without the resolution of the board of directors, even though the affairs of important debt guarantee, etc. require the resolution of the board of directors of the defendant company, and because the plaintiff company knew or could have known the circumstances, the defendant company does not assume the responsibility in accordance with the legal principles of the representative representing the plaintiff company

(2) Details of the defendant company's obligations

According to evidence, the defendant company's obligation to the plaintiff company by means of endorsement of the bill of this case cannot be deemed as a joint and several surety obligation for the whole performance of the bank industry under the rental contract of this case. It is reasonable to view that the defendant company's obligation to pay to the plaintiff company by means of endorsement of the bill of this case is a collateral obligation with the content of establishing the right to collateral

(3) Partial exemption from obligation

According to the facts admitted by evidence, it is reasonable to view that the warranty liability of the Plaintiff Company in the bill of this case against the Plaintiff Company was exempted within the limit of KRW 1,300,000,000 in total until October 16, 1996.

(4) the scope of obligations of the bank industry;

On May 31, 1995, the date of termination of the instant siren contract, the obligation under the instant siren contract owed to the Plaintiff as of May 31, 1995 is KRW 2,332,494,466, including the amount of KRW 2,301,118,00 and the remaining amount of KRW 31,376,46.

(5) The scope of the defendant's debts

Therefore, upon the Plaintiff’s primary claim, the Defendant is obligated to pay to the Plaintiff the amount of KRW 1,032,494,466 (=2,32,494,466 of the instant sirens obligation owed by the same industry to the Plaintiff, i.e., the amount of KRW 1,300,000,000 for which the Plaintiff exempted the Plaintiff from the obligation) and the damages for delay from the date following the date of termination of the said contract to the date of full payment.

C. Judgment of the Supreme Court

In order to establish the liability of a company due to the act of an apparent representative under Article 395 of the Commercial Act, no negligence other than that of a third party, which is the other party to a juristic act, is required (see, e.g., Supreme Court Decision 72Da1907, Feb. 28, 1973). However, the purport of the provision on the liability of an apparent representative director under Article 395 of the Commercial Act is to conduct a transaction by using a name that may be recognized as having the power of representation of the company, in appearance, a director who is not the representative director of the company, and to protect a third party in cases where the external appearance is attributable to the company, thereby promoting the trust and safety of commercial transactions by protecting the third party acting in good faith (see, e.g., Supreme Court Decisions 86Da2936, Oct. 11, 198; 94Da50908, Nov. 21, 1995). 198.

Article 395 of the Commercial Act represents the name of Apparent representative director, and includes the president, vice president, managing director, managing director, managing director, etc. As such, the name of president, managing director, managing director, managing director, etc. is an example of positions that can be the name of Apparent representative director, and it is necessary to determine whether such name falls under the name of Apparent representative director according to the trade common sense of society.

However, the Commercial Act does not recognize the representative authority of all directors, and recognizes the representative authority of the company only to the directors selected by the board of directors or the general meeting of shareholders (Article 389(1) of the Commercial Act). Such a system has been continuously implemented for a considerable period since the enforcement of the Commercial Act on January 1, 1963, and has increased the level of education for the general public, and there have been considerable opportunities for the general public to access the company system and the representative director system, so the general public also understand the representative director system of the Commercial Act more well, and at least in the case of a corporation with a position such as the president, vice president, managing director, and managing director, etc. under the Commercial Act, the representative director of the Commercial Act shall use the name of the representative director separately from the position of the president, and shall not use the name of a director who is not the representative director of the Commercial Act, and in case of a large scale of a corporation, a director who has a position of the president under the organization of the representative director is not a representative director under the organization or the general director.

Therefore, even if Article 395 of the Commercial Act is an example of the name of expressed representative director with the name of president, vice president, managing director, managing director, and managing director, the degree of trust held by a third party in accordance with the transaction norms cannot be said to be equal, and therefore, it shall be determined individually and specifically in light of the transaction norms whether a third party has believed that a director who has used the above name has the right to represent the company, and whether there is gross negligence in trust or not. In particular, if a third party uses the name of "general director" or "executive director" in a large scale of a company without using the name of "general director" or "executive director", in case of a director who uses the name of "general director" or "executive director", it is necessary to carefully examine the parties to the transaction in question and the contents of the transaction in question, and it shall not be rejected without delay.

In this case, according to the facts and records acknowledged by the court below, the defendant company is a major construction company with the amount of 32,379,945,00 won capital, and 60th order of domestic contract, and its articles of incorporation stipulate that the representative director may appoint one chairperson, one representative director, one vice-chairperson, one representative director, one president, one vice-chairperson, the managing director, the managing director, and one managing director, and the managing director shall assist the representative director, and the managing director shall take partial charge of the affairs of the defendant company as prescribed by the board of directors. In addition, under the organization of the defendant company, the defendant company has the representative director under the representative director under the supervision of the president, the representative director in charge of management and the vice-president in charge of technology, the housing business headquarters is established under the vice-president in charge of technology, and the head

In addition, the same industry is a small-scale enterprise with capital of KRW 300,000,000, and the goods that the same industry intended to use through the instant siren contract was a computer test necessary for the manufacture of electric air conditioners for automobiles. The Defendant Company, as a construction enterprise, did not have any transaction relation with the same industry, and did not have any relation with the object of the instant siren contract. The contract amount of the instant siren contract is a large amount of KRW 2,525,342,60.

On the other hand, the non-party 5, who was a working-level employee of the plaintiff company, acquired the Promissory Notes through the non-party 3, and the non-party 4, who was ordered by the non-party 5, stated that the non-party 5, "General Director / Housing Business Director", and "Dep. Ha business, Busi/Mering" in English. The non-party 5 was aware of any transactional relationship between the Dongba industry and the defendant company, and the non-party 5 did not confirm whether the non-party 4 was entitled to endorsement the Promissory Notes under the name of the defendant company's representative director after receiving the Promissory Notes through the non-party 3, and did not confirm it to the accounting department, etc. of the defendant company, but did not confirm whether the non-party 4 was entitled to endorsement the Promissory Notes in the name of the defendant company.

Therefore, it is difficult to view that the executives and employees of financial institutions that continuously and repeatedly perform the duties, such as sirens of various kinds of goods as the Plaintiff company, as being the general representative authority, including the managing director of the Defendant company used by Nonparty 4, and the managing director of the housing business headquarters, as being the director or employee of the company. Rather, it is merely a name that can be recognized as having the authority to divide and execute the duties only for the housing projects of the company as a director or employee granted by the company, and it should be deemed that the non-party 4 did not have the authority to represent the Defendant company. However, although the non-party 5, who was in charge of entering into the instant sirens contract, was issued the above non-party 4's name, he did not have any transaction relation with the Defendant company, and only the non-party 3, the one who was the non-party 4's own fraud, is the representative director, and it is difficult to accept to view that the contract price in itself was in itself for the purpose of guaranteeing the obligation of the instant resort industry.

Even if Nonparty 5 believed it as above, it is difficult to believe that Nonparty 4 had the authority to endorsement the bill of this case on behalf of the defendant company. However, Nonparty 5 could have confirmed whether Nonparty 4 had the authority to endorsement the bill of this case on behalf of the defendant company in an easy way, such as perusal of the copy of the register of the defendant company, or questioning of the department in charge of the defendant company's accounting, etc., and without taking all measures, it is reasonable to deem that Nonparty 5 had the authority to endorsement the bill of this case on behalf of the defendant company. However, it is reasonable to deem that Nonparty 5 had gross negligence in reliance on the trust of the defendant company.

Nevertheless, the court below rejected the defendant's defense that the plaintiff was maliciously committed on the ground that the non-party 3 or non-party 4 could not be acknowledged that the non-party 4 did not have the power of representation as alleged by the defendant, and rejected the defendant's defense that the plaintiff was gross negligence without any particular deliberation on the above circumstances, which affected the conclusion of the judgment by misapprehending the legal principles as to Article 395 of the Commercial Act, failing to exhaust all necessary deliberation, or misunderstanding of facts due to the violation of the rules of evidence. The defendant's grounds of appeal Nos. 1 and 2 are with merit.

2. As to the Defendant’s remaining grounds of appeal

All the remaining grounds of appeal by the defendant are premised on the fact that the defendant's liability to guarantee the defendant company is recognized in accordance with the legal principles of the expressed representative director in this case. The Supreme Court does not decide on the remaining grounds of appeal by the defendant, since it is deemed that there was an error as seen earlier in the measures that recognized the establishment

3. As to the plaintiff's appeal as to the main claim

The Plaintiff’s ground of incidental appeal is also premised on the premise that the Defendant company’s liability for guarantee is recognized in accordance with the legal principles of the representative director in this case. Since the Supreme Court deems that there was an error as seen earlier in the measures that recognized the establishment of the liability of the representative director, the Plaintiff’s ground of incidental appeal is without merit.

4. As to the conjunctive claim

According to the reasoning of the judgment below, the court below ordered the payment of 1,032,494,466 won and damages for delay thereof upon the plaintiff's primary claim, and dismissed it after hearing only the remainder of 1,300,000 won excluding the amount cited upon the primary claim among the plaintiff's conjunctive claims, and the part against the defendant as to the primary claim is reversed and remanded to the court below, the part of the conjunctive claim which the court below did not determine is also remanded to the court below.

On the other hand, the plaintiff sought reversal of the part of the judgment below against the plaintiff, which is equivalent to KRW 1,055,150,000, among the part against the plaintiff, so it shall be deemed that the plaintiff is dissatisfied with the dismissal of the plaintiff's conjunctive claim among the judgment below. However, since the part of the judgment below did not submit any grounds of incidental appeal, the plaintiff's supplementary appeal as to that part is also without merit.

5. Therefore, the part against the Defendant regarding the primary claim among the judgment below is reversed, and that part of the case is remanded to the court below. The Plaintiff’s supplementary appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yoon Jae-sik (Presiding Justice)