[1] Whether a guarantor may terminate a guarantee agreement (affirmative in principle), and the standard for determining whether there exists a justifiable reason to terminate a guarantee agreement where there exists a justifiable reason, such as the guarantor’s failure to trust to the principal debtor in a continuous guarantee (affirmative)

[2] In a case where an executive officer or employee of the company, who has been jointly and severally guaranteed the company's obligations arising from continuous transactions between the company and a third party, retires from the company and leaves the company as an executive officer or employee, whether the contract for joint and several liability can be unilaterally terminated (affirmative in principle), and whether the same applies to a case where the company, which is the policyholder, guarantees the insurer with uncertain indemnity obligations pursuant to the guarantee

[3] In a case where a guarantor of the obligation for indemnity terminates a guarantee agreement before the obligation under a guarantee insurance contract becomes final and conclusive, whether the guarantor of the obligation for indemnity terminates the guarantee agreement and is exempted from the liability for the guarantor of the obligation for indemnity as the termination of the guarantee agreement before the specific obligation arises (affirmative)

[1] Since continuing guarantee is unreasonable in light of the good faith principle to maintain and maintain a guarantee agreement as it is for the guarantor to guarantee an uncertain obligation arising from a continuous transaction, and where there exist justifiable reasons, such as the reliance on the guarantor’s trust in the principal debtor, barring any special circumstance, the guarantor may terminate the guarantee agreement. Whether there exists a justifiable reason to terminate the guarantee agreement should be determined by comprehensively taking into account various circumstances, including the background leading up to the guarantee, the relationship between the principal debtor and the guarantor, the terms and period of the guarantee agreement, the specific progress and scale of the increase in obligations, the degree and degree of the increase in obligations, the status of the guarantor, the change in the status of the guarantor and the interests of the guarantor, the status of the

[2] In a case where a joint and several surety who has continuously conducted a continuous transaction between a company and a third party retires from the company and leaves the position of an officer or employee, it is unreasonable in social norms to have the company continue to maintain the status of the joint and several surety by significantly changing the circumstances constituting the basis of the joint and several surety contract. In such a case, the joint and several surety should be deemed to have unilaterally terminated the joint and several surety contract, barring any special circumstances.

Where an insurer concludes a guarantee agreement with a policyholder to provide guarantee and guarantee limit for a guarantee insurance contract to be entered into the present or future, and pays insurance proceeds due to an insured event, such as the policyholder’s default on obligations, etc., a person who guarantees an uncertain indemnity liability to be borne by the insurer shall be deemed to have the right to terminate the contract in the same manner as above.

[3] If a guarantor of the obligation for indemnity terminates the guarantee contract lawfully before the obligation under the guarantee insurance contract becomes final and conclusive, the relationship of guarantee contract is terminated before the specific obligation arises. Therefore, even if the insurer’s obligation to pay the insurer’s insurance amount is determined as a result of the occurrence of an insured event thereafter, the guarantor of the obligation for indemnity is not liable for the guarantee.

[1] Articles 2(1), 428-3, and 543 of the Civil Act / [2] Articles 2(1), 428-3, 441, and 543 of the Civil Act; Articles 726-5 and 726-7 of the Commercial Act / [3] Articles 428-3, 441, and 543 of the Civil Act; Articles 726-5 and 726-7 of the Commercial Act

[1] Supreme Court Decision 200Da37937 Decided January 24, 2003 (Gong2003Sang, 691) / [2] Supreme Court Decision 98Da11826 Decided June 26, 1998 (Gong1998Ha, 1990) / [2] Supreme Court Decision 92Da2332 Decided May 26, 1992 (Gong192, 2011), Supreme Court Decision 99Da61750 Decided March 10, 200 (Gong2000Sang, 939) / [3] Supreme Court Decision 201Da53171 decided April 10, 2014 (Gong2014Sang, 1014Sang

Seoul Guarantee Insurance Co., Ltd. (Law Firm Barun, Attorneys Kang Won-seok et al., Counsel for the defendant-appellant)

Republic of Korea (Jurisdiction: Air Force Headquarters)

Defendant 1 and three others (Law Firm LLC, Attorneys Kim Yong-sik et al., Counsel for the defendant-appellant)

Suwon District Court Decision 2014Na12291 decided January 8, 2015

All appeals are dismissed. The costs of appeal are assessed against the Plaintiff’s Intervenor, and the remainder are assessed against the Plaintiff.

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

1. Continuing to guarantee an uncertain obligation arising from a continuous transaction and where there exist justifiable grounds, such as the reliance on the principal obligor’s trust in the principal obligor, it is unfair for the guarantor to maintain and continue the guarantee agreement as it is. Therefore, barring special circumstances, the guarantor may terminate the guarantee agreement, barring any special circumstance. Whether there exists a justifiable reason to terminate the guarantee agreement shall be determined by comprehensively taking into account various circumstances, including the circumstances leading up to the guarantee, the relationship between the principal obligor and the guarantor, the terms and period of the guarantee agreement, the specific progress and scale of the increase in obligations, the details and degree of the increase in obligations, the degree and degree of the loss of trust of the principal obligor, changes in the status of the guarantor and the guarantor,

If a person who has been jointly and severally guaranteed a company's obligation arising from a continuous transaction between the company and a third party retires from the company and leaves the position of an officer or employee, it is unreasonable in light of social norms to have him/her continue to maintain the position of a joint and several sureties by substantially changing the circumstances constituting the basis of the joint and several sureties contract. In such cases, the joint and several sureties can unilaterally terminate the joint and several sureties contract unless there are special circumstances (see, e.g., Supreme Court Decisions 92Da2332, May 26, 1992; 9Da61750, Mar. 10, 2000).

Where an insurer concludes a guarantee agreement with a policyholder to provide guarantee and guarantee limit for a guarantee insurance contract to be entered into the present or future, and pays insurance proceeds due to an insured event, such as the policyholder’s default on obligations, etc., a person who guarantees an uncertain indemnity liability to be borne by the insurer shall be deemed to have the right to terminate the contract in the same manner as above.

On the other hand, if a guarantor of a liability for indemnity terminates a guarantee agreement lawfully before the obligation under a guarantee insurance contract becomes final and conclusive, the relationship of guarantee agreement is terminated prior to the occurrence of a specific guarantee obligation. Therefore, even if the insurer’s liability for payment of the insurance amount is determined as a result of an insured incident thereafter, even if the policyholder’s liability for reimbursement is determined as a result of the occurrence of an insured event, the guarantor of the liability for indemnity is not liable for the guarantee (see, e.g., Supreme Court Decisions 98Da11826, Jun. 26, 1998; 201Da53171, Apr. 10, 20

2. The lower court acknowledged the following facts.

A. On May 201, the Plaintiff entered into a guarantee insurance contract with the Codefendant, Ltd., Ltd., Ltd., Ltd. (hereinafter “Blueman”), which the Plaintiff entered into with the Plaintiff in the present or in the future, a guarantee insurance trading agreement with the limit amounting to KRW 6 billion, and the limit trading period from May 17, 201 to May 16, 2012. At that time, the Defendants jointly and severally guaranteed the liability for compensation against the Plaintiff as a director, auditor, or employee of Blue., under the said limit trading agreement.

B. Based on the foregoing limit trading agreement, on May 20, 201, the Plaintiff and Bluman concluded a guarantee insurance contract for performance (contract) with respect to “KF-16 gaseous components maintenance contract” entered into with the Plaintiff’s Intervenor (the head of the air force headquarters), setting the insurance coverage amount to KRW 6.10,00 won, and from May 20, 201 to September 30, 2012, with the termination or termination of the future main contract, with the period from May 20, 2011 to September 30, 2012. The Plaintiff entered into a guarantee insurance contract for performance (contract) with respect to the payment obligations equivalent to the contract deposit to be borne by Bluman against the Plaintiff’s Intervenor on four occasions in total by September 20, 2011.

C. Around January 31, 2012, the Defendants set out Bluos, and around February 2, 2012, notified the Plaintiff of the termination of joint and several sureties, and the said notification reached the Plaintiff on February 3, 2012.

D. On April 20, 2012, the Plaintiff’s Intervenor filed a claim with the Plaintiff for the payment of insurance proceeds on or around April 20, 2012, if an insured incident occurred due to the Plaintiff’s failure to perform his/her duty under the main contract, such as Bluos’ maintenance contract. On or around May 30, 2012, the Plaintiff paid KRW 5,484,000,000 to the Plaintiff’s Intervenor.

3. According to the above facts, the Defendants jointly and severally guaranteed an uncertain indemnity obligation to be borne by Bluman to the Plaintiff at the present or in the future based on the guarantee insurance contract concluded between Bluman and the Plaintiff based on the guarantee insurance contract, which was concluded in the present or in the future, within the limit of KRW 6 billion, which constitutes a guarantee for continuous transactions. Since the Defendants were in the position of a director, auditor, or employee of Bluu, they were inevitable and became joint and several sureties and lost the status of director, etc., the Defendants should be deemed to be able to terminate the joint and several surety contract by clearly changing the circumstances constituting the basis for the joint and several sureties

Meanwhile, it is difficult to view that there are special circumstances to recognize the existence of liability for guarantee, notwithstanding changes in circumstances that occur to the guarantor, such as the Plaintiff’s Intervenor’s notification of deferment of payment of remuneration or the content of Article 8(2) of the Guarantee Limit Agreement, which the Plaintiff, as the obligee, due to the termination of the Guarantee Agreement, suffers a very serious loss due to the termination of the Guarantee Agreement.

In addition, in light of the above facts and the record, it is difficult to deem that the Defendants’ obligation to pay the amount equivalent to the contract deposit to the Plaintiff’s Intervenor, which is the obligation guaranteed by the Plaintiff, to the principal contract, has become final and conclusive until the termination of the joint and several surety contract of the Defendants. The Defendants, a joint and several surety, as a joint and several surety, should not be held liable for the guarantee of the liability for the indemnity obligation as to the subsequent finalized obligation after the termination of the guarantee contract prior to the occurrence of specific guaranteed obligation. Accordingly, the allegation in the grounds of appeal premised on the assumption that the obligation already became final and conclusive at the

Supreme Court Decision 95Da31645 delivered on February 14, 1997 and Supreme Court Decision 2003Da21872 Delivered on November 14, 2003 are different from the case in which the guarantor of the obligation of indemnity has to guarantee the obligation of confirmation whose obligation and maturity are specified before the expiration of the term of guarantee, and the case is different.

Therefore, the lower court’s determination that the Defendants exempted the Defendants from the liability to guarantee the Plaintiff’s indemnity liability upon the termination of the joint and several surety contract is justifiable in conclusion. In so doing, the lower court did not err by misapprehending the legal doctrine on the occurrence of the termination right of the joint and several surety contract, the legal nature of the Plaintiff’s surety obligation, or the confirmation of

4. The Plaintiff’s appeal is dismissed in its entirety on the grounds that it is without merit. The costs of appeal are assessed against the Intervenor joining the Plaintiff, and the remainder are assessed against the Plaintiff. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)