[1] In a case where three directors including an open director are vacant in the number of open directors as stipulated in Article 14(1) of the former Private School Act due to the expiration of their term of office, and the director Eul, etc. of the school foundation Gap et al. held a board of directors and passed a resolution on the "non-Confidence case of president Eul" for president Byung of the corporation Gap, and Byung applied for the suspension of validity by the board of directors resolution, the case affirming the judgment below holding that the organization of the board of directors is not unlawful merely because

[2] In a case where a corporation can conduct its normal activities with another director whose term of office has not expired, whether the director whose term of office has expired is recognized as the right to perform his/her normal activities (negative), and in such a case, the standard time to determine whether the corporation can conduct normal activities

[3] Whether a corporation may dismiss a director without good cause (affirmative), and in such a case, whether the other party is liable for damages (affirmative with qualification)

[1] In a case where three directors, including an open director, have expired and a vacancy in the number of open directors as prescribed by Article 14(1) of the former Private School Act (amended by Act No. 11690, Mar. 23, 2013; hereinafter “former Private School Act”), and where Gap’s director Eul, etc., upon approval from the head of the educational and technical science department, made a notice of convening the board of directors to the officers with the approval of the competent agency, and held a board of directors and made a resolution to suspend the effect of the board of directors’ resolution against Byung’s president Byung, the case affirming the judgment below holding that in light of relevant provisions, such as Article 24 of the former Private School Act, even if there are vacancies in open directors at the time of the board of directors resolution, the composition of the board of directors cannot be deemed unlawful.

[2] The purpose of the right to perform duties of a director whose term of office expires is to prevent a situation in which the corporation is unable to perform its normal activities because there is a vacancy in the office of the director. Thus, if another director whose term of office has yet to expire but is able to perform his normal activities, it is not necessary to have the expired director exercise his duties as a director. In such a case, it is not necessary to have the expired director exercise his duties as a director. In such a case, the director naturally retires from his office at the expiration of the term

[3] The legal relationship between a corporation and a director is a similar delegation relationship based on trust. A delegation contract is recognized as the freedom of termination at any time by both parties without justifiable grounds. However, only if the contract is terminated at an unfavorable time without any inevitable reason, the other party is liable for damages arising therefrom.

[1] Articles 14(1) and (3), 20(2), 20-2(1), and 24 of the former Private School Act (Amended by Act No. 11690, Mar. 23, 2013); Article 2 of the Addenda (Amended by Presidential Decree No. 24423, Jul. 27, 2007); Article 7-2(1) of the Enforcement Decree of the former Private School Act (Amended by Presidential Decree No. 24423, Mar. 23, 2013) / [2] Articles 57, 58, 68, and 691 of the Civil Act / [3] Articles 57, 58, 680, and 689 of the Civil Act

[2] Supreme Court Decision 83Meu938 delivered on September 27, 1983 (Gong1983, 1584) Supreme Court Order 95Ma1504 delivered on April 15, 1996 / [3] Supreme Court Decision 98Da47108 delivered on April 25, 200 (Gong200Sang, 1254) (Gong2000Sang, 1254) Supreme Court Decision 207Da17109 delivered on September 25, 2008 (Gong2008Ha, 1438), etc.

Creditor (Law Firm, Kim & Lee LLC, Attorneys Noh Young-soo et al., Counsel for the plaintiff-appellant)

School Foundation Sung- New School (Law Firm LLC, Attorneys Park Song-Ha et al., Counsel for the defendant-appellant)

Seoul High Court Order 2013Ra656 dated September 9, 2013

The reappeal shall be dismissed. The costs of reappeal shall be borne by the obligee.

The grounds of reappeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the first ground for reappeal

A school foundation shall have not less than seven directors [Article 14 (1) of the former Private School Act (amended by Act No. 11690, Mar. 23, 2013; hereinafter referred to as the "Private School Act"); an educational foundation shall appoint directors equivalent to 1/4 of the fixed number of directors (hereinafter referred to as "open directors") from among the persons who recommended two times the Open Director Recommendation Committee at the Open Director Recommendation Committee (Article 14 (3) of the same Act); where an educational foundation intends to appoint open directors, it shall request the Recommendation Committee of Open Directors within 15 days from the date on which the reason for appointment arises (three months before the expiration of the term of office in case of re-permanent directors) (Article 7-2 (1) of the Enforcement Decree of the Private School Act). Where an executive such as a director violates the provisions of Article 20 (2) of the Private School Act; and where an executive such as director fails to comply with an order, the competent agency may revoke his/her appointment (Article 20-2 (1) of the Private School Act).

On the other hand, the opening director system was introduced on July 27, 2007 by Act No. 8545 of the Private School Act. Article 2 of the Addenda of the amended Act stipulates that the appointment of officers shall be made first on the recommendation of the opening director recommendation committee when there is a vacancy due to the expiration of the term of office after the enforcement of the Act.

Examining the reasoning of the order of the court below in light of the above relevant provisions and records, it is just that the court below held that the composition of the board of directors cannot be deemed unlawful even if there was a vacancy in the number of open directors at the time of the resolution of the board of directors of this case on the grounds of its stated reasoning. There is no violation of Article 14 (3) of the Private School Act and Article 7-2 of the Enforcement Decree of the Private School Act by violating the Supreme Court precedents as to the nature

2. As to the second ground for reappeal

Unless otherwise expressly provided in the articles of incorporation, the Private School Act provides that the majority of the registered directors of the school foundation shall constitute a quorum, and that the articles of incorporation shall adopt a resolution with the consent of a majority of the fixed number of directors (Article 18(1) of the Private School Act). The debtor’s articles of incorporation shall have 15 directors including one chairperson (Article 22 subparag. 1 of the Articles of incorporation), and the composition of the directors shall be 11 members recommended by the general meeting and 4 members (Article 22-

The purpose of the expiration director's right to perform duties is to prevent a situation in which the corporation is unable to perform its normal activities because there is a vacancy in the office of the director. Thus, if other directors whose term of office has not yet expired even if some of the directors have expired, they are able to perform their normal activities, it is not necessary to have the expiration director exercise their duties as the director. In such a case, it is ipso facto retired from office, and whether the corporation's normal activities are possible should be determined at the expiration of the term of office of the director (see Supreme Court Order 95Ma1504, Apr. 15, 1996, etc.).

The lower court determined that the right to continue to perform the previous duties could not be deemed to have been recognized until three directors, including the Nonparty, etc., were appointed, on the ground that 12 directors, except the Nonparty, etc., who were open directors, remain and were able to perform their normal duties as a juristic person at the time the term of office expires.

Examining the records in light of the relevant provisions and legal principles as seen earlier, the lower court’s aforementioned determination is just and acceptable. In so doing, contrary to what is alleged in the grounds of reappeal, the lower court did not err by violating Articles 14(3), 17, and 18 of the Private School Act by violating the Supreme Court precedents on the validity of the resolution of the board of directors of an educational foundation, which is defective in

3. As to the third ground for reappeal

One of the directors of a school foundation shall be the chief director as prescribed by the articles of incorporation (Article 14(2) of the Private School Act). The debtor’s articles of incorporation provides that a majority of persons who have received the registered directors at the board of directors among the directors shall be elected as the chief director (Article 26(1) of the articles of incorporation). The term of office of the chief director shall be four years and shall be the period during which he/she holds office as a director (Article 26(2) of the articles of incorporation). The board of directors of a school foundation shall deliberate and resolve on matters concerning appointment and dismissal

The lower court determined that the instant resolution by the board of directors cannot be deemed as any defect, on the ground that the instant board of directors passed a resolution on a non-Confidence case for creditors, who are not stipulated in the Private School Act and the articles of incorporation as matters to be resolved by the board of directors, on the grounds that the Private School Act and the articles of incorporation stipulate matters concerning the appointment and dismissal of executives

Examining the reasoning of the order of the court below in light of the above relevant provisions and records, such determination by the court below is just and there is no violation of Articles 14(2) and 16(1)4 of the Private School Act, contrary to the allegations in the grounds for reappeal.

4. As to the fourth ground for reappeal

The legal relationship between a corporation and a director is a similar delegation relationship based on trust (see Supreme Court Decision 2007Da17109, Sept. 25, 2008, etc.). A delegation contract is recognized as the freedom of termination at any time by both parties, and can be terminated at any time without justifiable grounds. However, only if the contract is terminated at an unfavorable time without any inevitable reason, the other party is liable for damages arising therefrom (see Supreme Court Decision 98Da47108, Apr. 25, 200, etc.).

The court below determined that the debtor's dismissal of the creditor from the board of directors through the resolution of the board of directors does not require any special reason, and on the grounds stated in its reasoning, it cannot be deemed that there is no justifiable reason for the

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court’s determination is justifiable. In so doing, contrary to what is alleged in the grounds of reappeal, the lower court did not err by violating Article 20 of the Private School Act by violating the Supreme Court precedents on the status and authority of

5. Conclusion

Therefore, the reappeal is dismissed, and the costs of reappeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim So-young (Presiding Justice)