[1] The validity of the act of a district fisheries cooperative to guarantee or pay a debt to a third party, other than a financial institution under Article 65(4) of the former Fisheries Cooperatives Act (i.e., invalid)

[2] In a case where the director of the mutual finance division of a fisheries cooperative by district agreed to pay a loan obligation of a third party, other than the State, public organizations, the National Federation, and other financial institutions, the case holding that the agreement cannot be deemed as an act within the scope of authority of the director of the mutual finance division since it goes beyond the scope of business ability and becomes null and void in violation of the former Fisheries Cooperatives Act

[1] Article 65 (4) (see current Article 60 (2)) of the former Fisheries Cooperatives Act (wholly amended by Act No. 731 of Dec. 31, 2004) / [2] Article 65 (4) (see current Article 60 (2)) of the former Fisheries Cooperatives Act (wholly amended by Act No. 7311 of Dec. 31, 2004)

[1] Supreme Court Decision 76Da911 delivered on June 8, 1976 (Gong1976, 9228) Supreme Court Decision 2004Da35410 Delivered on November 25, 2004

Daesungdo Co., Ltd. (Attorney Shin Sung-chul, Counsel for the defendant-appellant)

Dao Fisheries Cooperatives (Law Firm International, Attorney Kim Jin-soo, Counsel for defendant-appellant)

Defendant 2

Busan High Court Decision 2008Na18338 decided Nov. 17, 2009

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

We examine the grounds of appeal.

1. In full view of the evidence duly admitted, the lower court acknowledged that Defendant 2, as an expression manager of Defendant macro-Fisheries Fisheries Cooperatives (hereinafter “Defendant Suhyup Cooperatives”), or as a commercial employee with a partial comprehensive power of attorney, the instant payment agreement was made in that it guarantees the payment of a loan obligation to the Plaintiff of the brightness Development Co., Ltd., as indicated in its reasoning. However, the instant payment agreement rejected the Defendant’s claim for the instant agreement that was outside the scope of Defendant 2’s power of attorney, and thus, rejected the Plaintiff’s claim for the instant agreed amount.

2. However, according to Article 65(4) of the former Fisheries Cooperatives Act (amended by Act No. 7311 of Dec. 31, 2004), the district fisheries cooperatives may borrow funds only from the State, public organizations, the National Federation, and other financial institutions for the performance of their business, and it is prohibited from borrowing funds from other institutions or individuals. Thus, the act of guaranteeing payment or paying a payment for a third party's debt is a act of bearing debt obligations, which is subject to the loan, and is null and void as it is in violation of the compulsory law and the act of bearing debt obligations. This is also true even if the act of bearing debt obligations was performed by the managing director of the association, who is authorized to exercise all judicial or extra-judicial powers as a manager under the Commercial Act (see Supreme Court Decisions 76Da911, Jun. 8, 1976; 2004Da35410, Nov. 25, 2004, etc.).

As acknowledged by the court below, even if Defendant 2, the chief of the Defendant Suhyup Bank’s mutual financing division, holds the same authority as the Defendant Suhyup Bank manager or comprehensive power of attorney on the loan and deposit business of the Defendant Suhyup Bank’s head office, if Defendant 2 entered into the payment agreement in this case to the effect that the Defendant Suhyup guaranteed the loan obligations of the brightness Development Co., Ltd. for the Plaintiff, which is not the State, public organizations, the Federation, and other financial institutions, the payment agreement in this case goes beyond the scope of the business capacity of the Defendant Cooperatives, and is null and void in violation of the former Fisheries Cooperatives Act, and thus,

Nevertheless, the lower court accepted the Plaintiff’s claim for the instant agreed amount against the Defendant Suhyup on the premise that the instant payment agreement is valid as an act within the scope of Defendant 2’s power of attorney, who is a commercial employee. In so doing, the lower court erred by misapprehending the legal doctrine on Article 65 of the former Fisheries Cooperatives Act or the scope of Defendant 2’s power of attorney, thereby adversely affecting the conclusion of the judgment. Therefore, the allegation in

3. Therefore, without further proceeding to decide on the remainder of the grounds of appeal, the part of the judgment below regarding the claim against the defendant Suhyup is reversed, and since the lawsuit against the defendant 2 is a preliminary co-litigation and is subject to the judgment of the court by this court, the part concerning the conjunctive claim against the defendant 2 is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Nung-hwan (Presiding Justice)