Korea Deposit Insurance Corporation (Law Firm, Attorneys Lee Han-soo et al., Counsel for the plaintiff-appellant)

National Agricultural Cooperative Federation (Attorney Kim Jong-hwan et al., Counsel for the plaintiff-appellant)

August 23, 2016

Seoul Central District Court Decision 2015Gahap510 Decided November 6, 2015

1. All appeals filed by the plaintiff and the defendant are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

The defendant shall pay to the plaintiff 136,717,584,814 won with 5% interest per annum from September 11, 2014 to the service date of a duplicate of the complaint of this case, and 20% interest per annum from the next day to the day of complete payment.

2. Purport of appeal

A. The plaintiff

Of the judgment of the court of first instance, the part against the plaintiff falling under the order to pay is revoked. The defendant shall pay to the plaintiff 2,371,584,814 won with 5% interest per annum from September 11, 2014 to the service date of a duplicate of the complaint of this case, and 15% interest per annum from the next day to the day of full payment.

B. Defendant

The part against the defendant in the judgment of the first instance is revoked, and the plaintiff's claim corresponding to the revocation is dismissed.

1. Quotation of the first instance judgment

The reasoning of this court is that the reasoning of the judgment of the court of first instance is identical to that of the judgment of the court of first instance, except for any modification or addition as follows, and thus, it is acceptable in accordance with the main sentence of Article

2. A corrected or added portion;

○ Heading No. 12 and No. 7 of the first instance court’s 12 and No. 6 of the evidence No. 18 are deleted.

○ On the 13th page of the first instance judgment, the following is added.

“(6) The Defendant asserts that, by a resolution of the instant case, the transfer amount was transferred from the mutual aid fund account to the credit business account by applying the legitimate accounting settlement method retroactively, the transfer amount was transferred from the mutual aid fund account to the credit business account, as it is necessary to change the existing accounting method due to the change of management environment. The changed accounting policy according to the general corporate accounting standards is retroactively applied.

According to each description of the evidence Nos. 18, 18, and 28-1 of the evidence No. 28, the general corporate accounting standards may modify the accounting policy in cases where the financial statements that reflect the change of accounting policy require the change of accounting policy or provide reliable and more objective information about the impact of transactions, other cases or circumstances on financial performance or cash flows (Chapter 5.9), and the changed new accounting policy shall be applied retroactively (Chapter 5.11 of the same Chapter). The defendant's accounting rules may also change the accounting policy in cases where the usefulness of accounting information can be increased due to significant changes in the management environment, reasonable acceptance of industry, etc., or where the accounting standards are enacted or amended (Paragraph 1 of the same paragraph), and the cumulative effect of the change of the accounting policy shall be reflected in the earned surplus (Paragraph 2 of the same paragraph).

However, in light of the following circumstances that can be recognized by comprehensively taking account of the overall purport of evidence Nos. 1-2, 3-1, 3-2, 1, 1, and 6, it is difficult to deem that the transfer amount from the mutual aid fund account to the credit business account is illegal since it is against the purpose of Article 16 (3) of the former Act on the Structural Improvement of Agricultural Cooperatives, which declares the principle of separation of accounts, and Article 58 (1) of the Mutual Finance Depositor Protection Fund Regulations, to transfer the amount of transfer from the mutual aid fund account to the credit business account is illegal to transfer it from the mutual aid fund account as it is unlawful to transfer it to the credit business account.

① Article 16(3) of the former Act on the Structural Improvement of Agricultural Cooperatives provides that the credit business sector and the mutual aid business sector shall be divided into separate accounts. Article 3(1)15 of the same Act provides that “transaction between accounts” refers to a transaction between a credit business account under Article 16(4) of the former Act on the Structural Improvement of Agricultural Cooperatives and a mutual aid business account. Article 58(1) of the same Act provides that transactions between accounts shall be limited to transactions between accounts so that the insolvency of a specific account does not transfer to other accounts. Article 58(2) of the same Act provides that transactions between accounts shall be limited to comprehensive transfer of assets and liabilities, loan, securities transaction, and other methods determined by the head of agency. In other words, the above provisions of the former Agricultural Cooperatives Improvement Act and the Mutual Aid Fund Act strictly limit transactions between accounts by providing that transactions between accounts shall be conducted by means of collective transfer of assets and liabilities, loan, sale of securities, and other methods determined by the head of agency.

② From around 2002 to May 2008, the bad faith in the mutual aid sector has been supported by the credit business account. Around May 2008, the Defendant decided that the bad faith in the credit and economic sector should be borne by the credit business account from the credit business account; and the bad faith in the mutual aid sector from September 30, 2008 to May 2008, the Defendant himself/herself accounts for 7,028,000,000 won in the mutual aid sector supported by the credit business account from September 30, 2008 to the credit business account.

③ From March 2, 2012, the amended Agricultural Cooperatives Act unilaterally separate the Defendant’s mutual-aid business from the Defendant’s insurance to take charge of it, and Article 2(1) of the Addenda to the Act on the Structural Improvement of Agricultural Cooperatives (amended by March 11, 2014) provides that the amount deposited in the account of mutual-aid business should be transferred to the Plaintiff by March 2, 2012. In light of the above, the Defendant was obligated to preserve and manage the amount deposited in the account of mutual-aid business as well as the credit business account as of December 21, 2010, which was the date of the resolution of the instant case, to the Plaintiff at KRW 1,295,200,000, the amount deposited in the account of KRW 16,700,000, the amount deposited in the account of KRW 200,000, the amount deposited in the account of the instant mutual-aid business was 00,000,0000,008.

④ The circumstance alleged by the Defendant alone does not necessarily mean that there was a “major change in the business environment” in which the economic business sector should share the defective amount of money in the mutual aid account at the time of the instant resolution, or that the transaction, financial performance, or other circumstances affect the financial status, or cash flow, provided more reliable and objective information. It is difficult to deem that sharing the poor amount of money in the mutual aid business sector in the mutual aid business account was established as a business practice.

⑤ The Defendant asserts to the effect that, in the event of a lawful change in accounting policies, the cumulative effects should be reflected by retroactively applying accounting policies that have been changed according to accounting principles, so long as the Defendant’s above accounting accounts are deemed illegal, the Defendant’s above assertion derived from the premise that this case’s resolution and its accounts are deemed illegal, is groundless.

○ The theory of the 13th judgment in the first instance court's 13th judgment "(B) theory" is "C) theory."

○ The following is added to the 6th page of the first instance judgment.

【Judgment on the Defendant’s argument

The defendant asserts that since the plaintiff received KRW 161,764,490,757, which was not included in the transfer amount of this case, as a reserve for transfer without reservation, the plaintiff recognized the validity of the resolution of this case and the transfer of accounts accordingly, the plaintiff cannot seek payment of the transfer amount of this case against the defendant.

According to the evidence No. 4-1 and No. 7, the plaintiff can be recognized as having received KRW 161,764,490,757, which was not included in the transfer amount of this case on September 5, 2014 as the reserve subject to transfer. However, according to the evidence No. 12 and No. 14, it is improper that the plaintiff did not include the transfer amount in the reserve subject to transfer on July 16, 2014 and September 3, 2014, it can be acknowledged that the plaintiff requested the defendant to clarify its opinion. In light of the above, the facts acknowledged above cannot be viewed as having recognized the validity of the resolution of this case and the transfer of accounts accordingly, and there is no other evidence to acknowledge this, the defendant's above assertion is without merit.

○ On the 16th page of the first instance judgment, the following is added.

c) Determination on the Plaintiff’s assertion

Article 2 (2) of the Addenda to the Act on the Structural Improvement of Agricultural Cooperatives delegates only detailed procedural matters necessary to evaluate assets, rights and obligations subject to transfer in accounting to the transfer criteria of this case, which are subordinate statutes, and Articles 6 and 7 of the transfer criteria of this case provide that the amount subject to the operation expenses of the mutual aid account and the amount subject to additional settlement of accounts for unit associations shall be excluded from the reserve subject to transfer, and therefore, they claim that the transfer criteria of this case is null and void as illegal

In light of the following circumstances, even if the Defendant’s mutual aid project division was abolished on March 2, 2012 due to the enforcement of the Agricultural Cooperatives Act, i.e., the following circumstances, and Article 2(1) of the Addenda to the Act on the Structural Improvement of Agricultural Cooperatives (amended, Mar. 11, 2014) and Article 2(1) of the Transfer Criteria, the Plaintiff’s deposit protection fund was decided to transfer the amount of money of the mutual aid project account accumulated before the preceding day as of March 2, 2012 as of March 2, 2014, to the Plaintiff by September 5, 2014, the Plaintiff’s deposit protection fund was at least two years and six months long until the reserve funds in the mutual aid account were actually transferred to the Plaintiff. Therefore, the Plaintiff’s assertion that the Plaintiff’s management of the above account will take considerable expenses from March 2, 2012 to September 5, 2014, which is the date of abolition of the Mutual Aid Fund account, cannot be seen as the transfer provision of Article 2(7).

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit. The judgment of the court of first instance is just in conclusion, and all appeals of the plaintiff and the defendant are dismissed. It is so decided as per Disposition.

Judges Park Jung-hwa (Presiding Judge)