[1] In a case where a creditor claims several damage claims, the time and cause of occurrence, etc. for the same debtor, whether the amount of the claim shall be specified for each damage claim (affirmative), and whether the court shall specify the amount of the award by each damage claim (affirmative)

[2] In a case where a member of the audit committee of a stock company neglects his/her duties by intention or negligence, whether he/she is liable to compensate for damages incurred by the company (affirmative)

[3] Standard for determining whether a financial institution’s audit committee member neglected its duties in breach of good manager’s duty

[4] In a case where Gap bank sought damages from illegal or unjust loans to Byung corporation, etc. against Eul who was a full-time audit committee member, the case holding that the judgment below erred by misapprehending the legal principles, even though it is sufficiently probable to deem Eul violated Eul's duty of care as a member of the audit committee

[1] Even if a creditor has multiple damage claims against the same debtor, so long as the damage claims are separate claims arising from different causes and causes different from each other, they constitute separate subject matter of lawsuit. Since the initial date of extinctive prescription and defenses asserted by the debtor may vary, the creditor who claims for this lawsuit must specify the claim amount by each damage claim, and the court shall specify the amount to be granted by each damage claim. This legal principle also applies where the creditor claims only a part of several damage claims. In addition, in civil litigation, the content and scope of the claim should be clearly identified so that it can be clearly identified. Whether it is specific or not, the court shall ex officio order correction and dismiss the lawsuit, regardless of the defendant's objection, where the purport of the claim is not specified.

[2] The Audit Committee of a stock company shall audit the performance of duties by a director, and if a director commits or is likely to commit an act in violation of Acts and subordinate statutes or the articles of incorporation, it shall be reported to the board of directors, and if a director commits an act in violation of Acts and subordinate statutes or the articles of incorporation and thus causes irreparable damage to the company, he/she shall be subject to the duty of demanding maintenance of such act (Articles 415-2(7), 412(1), 391-2, and 402 of the Commercial Act). Members of the Audit Committee shall perform the said duty under the Commercial Act, or other duties under other Acts and subordinate statutes or the articles of incorporation, with the duty of due care as a good manager, and if a director neglects his/her duties by intention or negligence, he/she shall be liable to compensate for damage suffered by the company (Articles 415-2(7), 414(1), and 382(2) of the Commercial

[3] An executive officer of a financial institution has fulfilled his/her duty of care as a good manager with respect to the financial institution under his/her control. Whether a financial institution’s audit committee member neglected his/her duty of care with due care as a good manager should be determined comprehensively in light of various matters, such as compliance with all relevant regulations, terms and conditions of the loan, details and scale of the loan, repayment plan, existence and content of the loan, debtor’s property and management status, possibility of growth, etc. in auditing individual loans.

[4] In a case where Gap bank claimed damages from Eul, who was a full-time audit committee member, against Byung corporation, etc., due to illegal or unjust loans to Byung, the case holding that the judgment below erred by misapprehending the legal principles, although it is sufficiently enough to deem that Eul bank had a duty to investigate whether loans to Byung company, etc. were illegal or unjust through the submission of relevant documents, or to report the above fact to the board of directors through the audit committee, and to demand correction of illegal or unjust acts, although it did not perform such duty, since Eul could have easily known that loans to Byung company, etc. were conducted without a good manager’s duty of care, even if Eul reviewed only the draft of examination on loans and loan examination data signed by Eul, which was conducted without sufficient

[1] Articles 216, 249, and 254 of the Civil Procedure Act / [2] Articles 382(2), 391-2, 402, 412(1), 414(1), and 415-2(7) of the Commercial Act; Article 681 of the Civil Act / [3] Articles 382(2), 412(1), 414(1), and 415-2(7) of the Commercial Act; Article 681 of the Civil Act / [4] Articles 382(2), 391-2, 402, 412(1), 414(1), and 415-2(7) of the Commercial Act; Article 681 of the Civil Act

[1] Supreme Court Decision 2007Da53785 Decided November 12, 2009 / [2] Supreme Court Decision 2005Da58830 Decided November 16, 2007 / [3] Supreme Court Decision 2006Da33609 Decided July 26, 2007 (Gong2007Ha, 1346)

Korea Deposit Insurance Corporation (Law Firm Grandmark, Attorneys Yoon-chul et al., Counsel for the plaintiff-appellant)

Defendant 1-A and two others (Attorney Kim Jae-jin et al., Counsel for the defendant-appellant) who is the litigation taking over by the deceased Nonparty 1 and the deceased Nonparty 2

Defendant 2 (Law Firm Sol, Attorneys Oh Jeong-won, Counsel for defendant-appellant)

Seoul High Court Decision 2016Na2018577 decided June 9, 2017

1. Of the lower judgment’s part on Defendant 1-A, Defendant 1-B, and Defendant 1-C and the part on Defendant 2’s claim against the Plaintiff, the part on the claim against Defendant 2 related to Susung Co., Ltd., Youngbu SSB, Nonparty 3, and Nonparty 4 is reversed, and that part of the case is remanded to the Seoul High Court.

2. The plaintiff's remaining appeal is dismissed.

1. As to the part on Defendant 1-A, Defendant 1-B, and Defendant 1-C in the lower judgment

Judgment ex officio is made.

A. Even if a creditor has multiple damage claims against the same debtor, so long as the damage claims are separate claims that differ from the time of occurrence and the cause of occurrence, they constitute separate subject-matter of lawsuit. Since the initial date of extinctive prescription and the defense that the debtor may assert, respectively, the damage claims fall under separate subject-matter of lawsuit, the creditor who files a lawsuit must specify the claim amount by each damage claim, and the court must accordingly specify the amount to be granted by each damage claim. This legal principle also applies to cases where the creditor claims only part of several damage claims. In addition, in civil litigation, the content and scope of the claim should be clearly identified so that it can be clearly identified. Whether the claim is specific or not is specified, the court shall ex officio order correction regardless of the defendant's objection, and shall dismiss the lawsuit if the claim is not complied with (see Supreme Court Decision 2007Da53785, Nov. 12, 2009, etc.).

B. According to the records, the Plaintiff’s claim against Defendant 1-A, Defendant 1-B, and Defendant 1-C by dividing the total amount of KRW 7.1 billion out of the damages amount of multiple damage claims exceeding KRW 20.37 billion according to each of the above Defendants’ respective shares in inheritance. In such cases, the lower court should order the Plaintiff to specify the claim amount by each damage claim, thereby specifying the amount granted by each damage claim, and accordingly, specify the amount granted by each damage claim, and have dismissed the lawsuit in the event the Plaintiff did not comply with the order of correction. Nevertheless, without taking such measures, the lower court comprehensively set the amount granted by each damage claim against the said Defendants without specifying the amount granted by each damage claim.

Therefore, the part against Defendant 1-A, Defendant 1-B, and Defendant 1-C of the lower judgment is erroneous by misapprehending the legal doctrine on the specification of the purport of the claim, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment.

2. As to the part on Defendant 2 among the judgment below

The grounds of appeal Nos. 4 and 5 are examined.

A. The Audit Committee of a stock company shall audit the performance of duties by a director, and if a director commits or is likely to commit an act in violation of Acts and subordinate statutes or the articles of incorporation, it shall be reported to the board of directors, and if a director commits an act in violation of Acts and subordinate statutes or the articles of incorporation and such act is likely to cause irreparable damage to the company, he/she shall be subject to the duty of demanding maintenance of such act (Articles 415-2(7), 412(1), 391-2, and 402 of the Commercial Act). Members of the Audit Committee shall perform the above duties under the Commercial Act, or other duties under other Acts and subordinate statutes or the articles of incorporation, with the duty of due care as a good manager, and if a director neglects his/her duties due to intention or negligence, he/she shall be liable to compensate for damage suffered by the company (see Articles 415-2(7), 414(1), 382(2), and 205Da5830, Nov. 16, 2007).

Meanwhile, an executive officer of a financial institution has fulfilled his/her duty as a good manager with respect to the financial institution under his/her control. Whether a financial institution’s audit committee member neglected his/her duty in breach of the said good manager’s duty should be comprehensively determined in light of various matters such as compliance with all the regulations, terms and conditions of the loan, contents and scale of the loan, repayment plan, security and contents, debtor’s property and management status, possibility of growth (see Supreme Court Decision 2006Da33609, Jul. 26, 2007, etc.).

B. The lower court rejected all the Plaintiff’s claim for damages against Defendant 2 on the ground that Defendant 2, who was a full-time audit committee member of Seoul Mutual Savings Bank (hereinafter “Seoul Mutual Savings Bank”), was in violation of the duty of care as an audit committee member in the course of lending the title industry to Sweak, Inc. (hereinafter “Seoul Mutual Savings Bank”), and that there was no evidence to prove that the loans to Nonparty 3 and Nonparty 4 were illegal or unjust loans, or that they were merely illegal or unjust loans on the documents related to each of the above loans, and that there was no evidence to prove that such care was significantly neglected.

C. Examining in light of the aforementioned legal principles, the part of the lower judgment that determined that the audit committee member was liable for damages only when he was remarkably negligent in performing its duties stipulated in the statutes or the articles of incorporation is inappropriate. However, examining the reasoning of the lower judgment in light of the aforementioned legal principles and the record, it is difficult to view that Defendant 2 neglected his duties by violating the duty of care required by the audit committee member in relation to loans to the cream industry, Singra, Singro Energy, Singro Energy, Singrocon, and Taesungex. Accordingly, the lower judgment rejecting the Plaintiff’s claim for damages related thereto is justifiable. In so doing, it did not err

D. However, it is difficult to accept the lower court’s rejection of the claim for damages related to the lending to the parties (hereinafter referred to as “each of the instant loans”) on the above grounds.

(1) The record reveals the following facts.

① Defendant 2 served as a full-time auditor of Seoul Mutual Savings Bank from November 26, 199 to August 20, 2002, and as a director and a full-time audit committee of Seoul Mutual Savings Bank from August 20, 2002 to August 25, 2005.

② According to the rules on duties of the audit committee of Seoul Mutual Savings Bank, standing audit committee members shall audit loans of at least KRW 100 million in advance or ex post, and if necessary, by means of a daily audit. The loan regulations of Seoul Mutual Savings Bank stipulate, “When dealing with loans, it shall acquire a security, utilize a guarantee agency’s payment guarantee letter, etc., or establish one or more joint and several sureties: Provided, That this shall not apply to any person who is deemed not to interfere with recovery of claims by comprehensively examining the debtor’s business feasibility, profitability, assets, credit standing, etc., and comprehensively examining the debtor’s business feasibility, profitability, credit standing, etc.” (Article 8(1)), and “The credit investigation may be omitted for the debtor and guarantor in the prescribed form: Provided, That where the board of directors determines, the above investigation shall be conducted directly on-site (Article 27(1)).

③ Seoul Mutual Savings Bank extended a total of KRW 6.2 billion on May 18, 2005 and June 20, 2005 on two occasions; KRW 8. billion on three occasions from May 23, 2005 to August 1, 2005; KRW 3.2 billion on eight occasions; KRW 3.2 billion on August 11, 2005 and KRW 1.5 billion on March 17, 2006 to Nonparty 4; and KRW 3.5 billion on Nov. 4, 2004. Defendant 2 examined each of the above loans and signed it as a member of the audit committee.

④ The examination proposal on each of the loans of this case is written as a credit loan with no physical collateral. Nevertheless, the credit investigation on the principal debtor and the joint and several sureties, which have a decisive impact on whether to recover claims, was conducted, or even if not, was submitted by the person subject to credit investigation. In particular, the credit investigation document prepared by an individual who is not a juristic person, stated that most of the persons subject to credit investigation did not have any property, and there is no document attached to verify the amount of income, etc. recorded therein. In the case of the loans extended to Nonparty 3, each of the joint and several sureties was not put up.

⑤ Seoul Mutual Savings Bank shall have the applicant prepare a written request for credit investigation at the time of filing a loan application and attach financial statements, settlement reports, tax settlement statements, total sum sheets at the end of the last three months, total sum sheets of income tax collection, total sum sheets of income tax collection, management curriculum, business plan, etc. However, in relation to each of the loans in this case, most of the above documents were not submitted.

(6) The LAB and Youngbu SBB are companies that have no particular business performance of approximately KRW 300 million in assets and capital size, and each of the estimated net income for the pertinent year stated in the estimated net income statement submitted by each of the above companies was unable to pay interest for 10% per annum. Nevertheless, each of the examination proposals on the LAB and Youngbu SB loan-related loan-related LASB-related loan-related examination proposals are clearly written by the lending source in a way that the lending source is prohibited from using the “building development project funds,” “funds securing funds for construction contracts,” and “project funds,” and there is no detailed business plan or materials on the repayment of principal and interest. There is no evidence in the loan application documents.

7) The Seoul Mutual Savings Bank, which was the Seoul Mutual Savings Bank, with a total of KRW 4.7 billion and KRW 3.5 billion in equity capital of KRW 50 billion, did not have any description or data showing the business performance or ability to repay in each application document even though it was a considerable amount of loan. Rather, according to the certificate of value-added tax base attached when Nonparty 3 applied for a loan, the annual sales from January 1, 2003 to June 30, 2004 are merely KRW 1.7 billion in each year from KRW 170 million to KRW 3.5 billion in each year, and the profits accrued from the loan was not enough to pay interest of KRW 10% in each year. Nevertheless, Defendant 2 approved the loan from Nonparty 3 as a raw material purchase fund without any additional confirmation.

(2) In full view of the above facts and records, and the status of Defendant 2 and the period of service as a full-time auditor or a full-time audit committee member in Seoul Mutual Savings Bank, Defendant 2 could easily be seen that each of the instant loans was made without adequate credit preservation measures through only formal credit investigation, even if the review was conducted with the duty of due care of a good manager only with respect to the draft review report and loan review data signed by himself, so there is sufficient room to deem that Defendant 2 failed to perform such duty even though he/she was obligated to investigate whether the loans were illegal or unreasonable through the request for submission of relevant documents, etc., or to report the above facts to the board

Nevertheless, the lower court rejected all of the Plaintiff’s claims for damages related to each of the instant loans against Defendant 2 solely on the ground that there is no evidence to prove that Defendant 2 had been remarkably negligent in exercising the duty required in connection with each of the instant loans. In so determining, the lower court erred by misapprehending the legal doctrine on liability for damages arising from breach of the duty of care by the audit committee of a financial institution, thereby failing

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal and the incidental grounds of appeal, the part on Defendant 1-A, Defendant 1-B, and Defendant 1-C among the judgment of the court below and the part on the claim related to Defendant 2 against the Plaintiff among the part on Defendant 1-C and the part against the Plaintiff, is reversed, and this part of the case is remanded to the Seoul High Court. The remaining appeal by the Plaintiff is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ko Young-han (Presiding Justice)