[1] Whether the Korea Deposit Insurance Corporation’s discretionary decision to provide financial support to a person who acquires or merges an insolvent financial institution is whether the said person’s obligation to provide financial support is converted into a continuous and specific obligation (affirmative)

[2] Whether the Korea Deposit Insurance Corporation is obligated to contribute more funds than those to be invested in the liquidation and bankruptcy of an insolvent financial institution on behalf of a third party (negative)

[3] Whether the Korea Deposit Insurance Corporation may decide or enter into an agreement on the small amount of financial assistance contrary to the good faith principle merely because the financial assistance funds of the insolvent financial institution subject to acquisition are anticipated to be insufficient compared to the difference between the total debts and total assets of the insolvent financial institution (negative)

[1] In light of Articles 37, 38(1), and 38(2) of the former Depositor Protection Act (amended by Act No. 6323, Dec. 30, 200), matters concerning whether the Korea Deposit Insurance Corporation with respect to the person who has acquired or merged insolvent financial institutions can decide at the discretion of the Korea Deposit Insurance Corporation as to whether to provide funds or the timing and method of financial assistance to the person who has acquired or merged insolvent financial institutions can, in principle, be decided to the extent necessary to promote restructuring of insolvent financial institutions. The Korea Deposit Insurance Corporation’s duty to provide funds to the person who has acquired or merged insolvent financial institutions is converted into a binding, specific duty only by mediating a separate private contract, etc. such as a contribution agreement concluded between the person who has acquired or merged insolvent financial institutions and

[2] In order for the Financial Supervisory Commission to make a decision for contract transfer, it shall obtain prior consent from the board of directors of the acquiring financial institution pursuant to Article 14(5) of the former Act on the Structural Improvement of the Financial Industry (amended by Act No. 6274 of Oct. 23, 200). The acquiring financial institution, which intends to take over an insolvent financial institution through a decision for contract transfer, shall examine in advance the difference between the assets and liabilities of the insolvent financial institution subject to acquisition through consultation, etc. with the property real company and the Korea Deposit Insurance Corporation, estimated profit after the takeover of the insolvent financial institution, the amount of funds which the insolvent financial institution can receive from the Korea Deposit Insurance Corporation at the time of the takeover of the insolvent financial institution, and it is required to make a decision on whether to take over the insolvent financial institution under its own responsibility. On the other hand, from the perspective of the Korea Deposit Insurance Corporation which has invested public funds, the method of liquidation of the insolvent financial institution is a method of liquidation, bankruptcy, etc. other than the method of a decision for contract transfer, and

[3] The underwriting financial institution consented to the takeover of insolvent financial institution under its own responsibility, and entered into a funding agreement based on the liquidation loss amount to be borne by the Korea Deposit Insurance Corporation at the time of liquidation and bankruptcy of insolvent financial institution through a decision for contract transfer made by the Financial Supervisory Commission, and negotiation with the Korea Deposit Insurance Corporation. Even if the amount of funds supported by the Korea Deposit Insurance Corporation is less than the difference between the total liabilities and total assets of insolvent financial institution subject to takeover, it cannot be deemed that the Korea Deposit Insurance Corporation did not make a decision to provide financial assistance or enter into a funding agreement contrary to

[1] Articles 37 and 38 of the former Depositor Protection Act (amended by Act No. 6323 of Dec. 30, 200), Article 105 of the Civil Act / [2] Articles 37 and 38 of the former Depositor Protection Act (amended by Act No. 6323 of Dec. 30, 200), Article 14 (5) of the former Act on the Structural Improvement of the Financial Industry (amended by Act No. 6274 of Oct. 23, 200) / [3] Articles 37 and 38 of the former Depositor Protection Act (amended by Act No. 6323 of Dec. 30, 200), Article 14 (5) of the former Act on the Structural Improvement of the Financial Industry (amended by Act No. 6274 of Oct. 23, 200), Article 5 (2) of the Civil Act

[1] Supreme Court Decision 2005Da63481 Decided February 23, 2007

A mutual savings bank (Attorney Park Dong-dong et al., Counsel for the plaintiff-appellant)

Korea Deposit Insurance Corporation

Seoul High Court Decision 2004Na52981, 52998 delivered on October 10, 2006

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Article 37 of the former Depositor Protection Act (amended by Act No. 6323, Dec. 30, 200) provides that "any person who intends to acquire or merge any insolvent financial institution or any insolvent financial institution or any person who intends to take over or take over any business thereof may apply to the Corporation for financial assistance." Article 38 (1) of the same Act provides that "the Corporation may, if there is an application for financial assistance under Article 37 or it is deemed necessary to facilitate a merger of insolvent financial institutions, provide financial assistance according to a resolution of the Committee." Meanwhile, Article 38 (2) of the same Act provides that "the standards, methods, and conditions of financial assistance under the provisions of paragraph (1) and other necessary matters shall be determined by the Committee." In light of each of the above provisions, the defendant's decision on whether to provide financial assistance or the timing and method of financial assistance can be decided at discretion by the defendant to the extent necessary to facilitate the restructuring of insolvent financial institutions, and the obligation of the defendant to take over or merge any insolvent financial institution, etc. as a separate agreement between the defendant and the two parties.

A. According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its reasoning after compiling the adopted evidence. As to the Plaintiff’s acquisition of assets and liabilities of the new Chungcheong Savings and Finance Company (hereinafter “new Chungcheong Savings and Finance Company”) according to the FSC’s decision on the transfer of contracts, the court below concluded that, unlike the contents of the agreement on the grant of funds for the management normalization with the Plaintiff, the Defendant, which included the amount of KRW 31,052,89,482 and the amount of KRW 109,370,50,866, the difference between KRW 78,317,610,384 (hereinafter “this case’s contract transfer loss amount”) in the amount of KRW 80,000,000,000,000,000,000,000 won were 50,000,000,000,000 won as 19,000,000 won.

In light of the above legal principles and records, we affirm the above fact-finding and judgment of the court below as just, and there is no error in the misapprehension of legal principles as to the defendant's duty of financial assistance, violation of the rules of evidence, or incomplete hearing.

B. In the instant case where it is not recognized that the Defendant agreed to provide funds to the Plaintiff regarding KRW 41.5 billion of the instant loan, unlike the content of the instant agreement, the issue of whether the Credit Management Fund’s management committee, through the revision resolution April 4, 1998, returned the claim of KRW 41.5 billion of the instant loan, etc. to the deposit management business account, thereby excluding the Defendant from the fund management business account, which the Defendant comprehensively succeeds pursuant to Article 7 of the Addenda of the former Mutual Savings and Finance Company Act (amended by Act No. 5738 of February 1, 1999), is null and void, in view of such circumstances alone, the Defendant cannot be deemed to have an obligation to provide funds to KRW 41.5 billion of the instant loan as a matter of course, and thus, it is not necessary to further examine the conclusion of the instant case.

Although the court below stated its reasoning differently, it is just in its conclusion rejecting the plaintiff's assertion that the defendant is obligated to provide additional funds since the amendment resolution made on April 4, 1998 by the Steering Committee of the Credit Management Fund was null and void, and there is no error of law by misapprehending the legal principles on the validity of the decision made by the Steering Committee of the Credit Management Fund, or by failing to exhaust all

2. In order for the Financial Supervisory Commission to make a decision on contract transfer, it shall obtain prior consent from the board of directors of the acquiring financial institution pursuant to Article 14(5) of the former Act on the Structural Improvement of the Financial Industry (amended by Act No. 6274 of Oct. 23, 200). The acquiring financial institution, which intends to take over an insolvent financial institution through a decision on contract transfer, shall be required to make a decision on its own responsibility on the basis of a thorough examination of the difference between the assets and liabilities of the insolvent financial institution subject to acquisition through prior consultation, etc. between the company and the defendant, estimated profit after taking over the insolvent financial institution, and the amount of funds which can be provided by the defendant at the time of taking over the insolvent financial institution. On the other hand, the liquidation method of the insolvent financial institution by the method of liquidation of the insolvent financial institution is related to liquidation and bankruptcy other than the method of a decision on contract transfer, etc., and there is no reason for the insolvent financial institution to make a contribution to the acquiring financial institution more than the funds that the defendant would incur or bear through a decision on its own responsibility.

According to the reasoning of the judgment below and the records, the Plaintiff’s acquisition of the new North Korea treasury was made according to the Plaintiff’s voluntary will to acquire the new North Korea treasury designated as insolvent financial institution through a decision for contract transfer. The scope of contract transfer under the instant decision for contract transfer was determined as assets and liabilities confirmed by the Plaintiff and the new North Korea treasury through their joint property loss, based on which the Defendant calculated the principal of the funds to support management normalization. The instant agreement made between the Plaintiff and the Defendant calculated the Defendant’s funds based on 80% of the liquidation loss amount to be borne by the Defendant at the time of liquidation and bankruptcy of the new North Korea treasury. Accordingly, the Plaintiff would be able to receive funds only up to 48% of the instant loss amount to the Plaintiff’s 4.5 billion won of the instant loan out of the debt constituting the instant contract transfer amount, which is naturally lower than the rate of 41.5 billion won of the instant loan to be excluded from the relationship between the Defendant and the new North Korea treasury in calculating the principal of the loan to the Defendant, and the Korea Mutual Saving Bank, which finally recognized as the creditor of 41.

In light of the aforementioned legal principles and the aforementioned circumstances, solely on the ground that the amount that the Defendant subsidized to the Plaintiff under the instant contribution agreement is less than the loss amount of the contract transfer of this case, and that the Defendant did not provide financial support to the Plaintiff regarding the obligation amount of KRW 41.5 billion, the Defendant’s decision on the instant decision on contract transfer constitutes a violation of the principle of trust and good faith, or that the Defendant did not use the means of deception or coercion against the Plaintiff. The lower court’s decision to the same purport is justifiable, and there is no error in the misapprehension of legal principles as to the violation of the principle of trust and good faith as otherwise

3. Conclusion

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

Justices Kim Young-ran (Presiding Justice)