[1] The legislative purpose of Article 37-3 (1) of the former Mutual Savings and Finance Company Act that imposes joint repayment liability on the officers and oligopolistic stockholders for the obligations related to the deposit in a mutual savings and finance company and the scope of officers who assume such responsibility

[2] Whether the business judgment rule applies to cases where a director causes loss to the company due to a violation of the law (negative)

[3] The scope of joint repayment liability to an officer responsible for poor management of a credit cooperative pursuant to Article 37-3 (1) of the former Mutual Savings and Finance Company Act

[4] The case where a substitute loan can be deemed as having caused a new damage to a financial institution

[5] Where an officer first performed the liability under Article 399(1) of the Commercial Act for the damage incurred to a mutual savings and finance company, the scope of joint repayment liability to the deposit account holder under Article 37-3(1) of the former Mutual Savings and Finance Company Act due to the same act of neglect of duties

[6] The meaning of "a case where an oligopolistic shareholder is liable for joint repayment pursuant to Article 37-3 (1) of the former Mutual Savings and Finance Company Act," which is "a case where an oligopolistic shareholder has caused a bad result by exercising influence on management"

[1] Article 37-3(1) of the former Mutual Savings and Finance Company Act (amended by Act No. 6429, Mar. 28, 2001) provides that "executive officers (excluding auditors) and oligopolistic stockholders (referring to oligopolistic stockholders under Article 39(2) of the Framework Act on National Taxes) of the mutual savings and finance company shall be jointly and severally liable with the mutual savings and finance company for the obligations related to the deposits, etc. of the mutual savings and finance company." This means that the executive officers and oligopolistic stockholders responsible for the management of the mutual savings and finance company shall be jointly and severally liable for the obligations of the mutual savings and finance company to the officers and oligopolistic stockholders in the public interest request for the protection of customers and the maintenance of credit order. The above legislative purpose is to realize the liability management of the mutual savings and finance company, prevent insolvency management, and protect creditors of the mutual savings and finance company, such as deposit holders. Therefore, the "executive officers of the mutual savings and finance company" under the above provision should be interpreted as limited to "executive officers responsible for the insolvency of the mutual savings and finance company."

[2] Article 399 of the Commercial Act provides that a director shall be liable for damages to a company when he/she commits an act in violation of the statutes. When a director commits an act in violation of the statutes as above while performing his/her duties, such act itself constitutes a default on the company, and thus, barring special circumstances, liability for damages to the company is not exempted, and in principle, the business judgment rule does not apply to an

[3] The officers responsible for the insolvent management of a mutual savings and finance company shall, pursuant to Article 37-3 (1) of the former Mutual Savings and Finance Company Act (amended by Act No. 6429 of Mar. 28, 2001), be jointly and severally liable with the mutual savings and finance company for the obligations related to the deposits, etc. of the mutual savings and finance company within the scope of damages suffered by the mutual savings and finance company due to their acts.

[4] In the case of the so-called large-scale loan that a financial institution provides a new loan only formally without actually receiving a loan, thereby practically extending the term of loan, it may collect all the loans from an obligor at the time of extension, but if the term is extended, it can only be deemed that a new damage has occurred due to an extension of the term, only if the extended term is extended with the knowledge that the financial situation of an obligor would make the loan worse to the extent that it is impossible to recover the loan, and it cannot be readily concluded that a new damage has occurred to the company as to the amount equivalent to the amount of the unpaid loan out of the large-scale loan, unless such circumstance is revealed.

[5] The liability for the repayment of deposits by officers under Article 37-3 (1) of the former Mutual Savings and Finance Act (amended by the Mutual Savings and Finance Company Act No. 6429 of March 28, 2001) is particularly recognized pursuant to the provisions of the Act, since the liability for damages under Article 399 (1) of the Commercial Act or the liability for damages under Article 401 (1) of the Commercial Act, which is to be borne by a mutual savings and finance company to a third party cannot sufficiently protect the interest of deposit principle in case where a director of the mutual savings and finance company neglects his duties and causes property damage to the mutual savings and finance company. Thus, the right under Article 37-3 (1) of the former Mutual Savings and Finance Company Act is an inherent right granted to the deposit owner, etc. separate from the right for damages to an officer under Article 399 of the Commercial Act. Thus, even if an officer first performed the liability under Article 399 (1) of the Commercial Act to a mutual savings and finance company for damages arising from the same duties, the amount of deposit is not extinguished to the extent.

[6] Where an oligopolistic stockholder under Article 39(2) of the Framework Act on National Taxes has exercised influence over the management of a mutual savings and finance company and has caused fraudulent results, it shall be jointly and severally liable with the mutual savings and finance company for the obligations related to the deposit, etc. of a mutual savings and finance company under Article 37-3(1) of the former Mutual Savings and Finance Company Act (amended by Act No. 6429 of Mar. 28, 2001). "Where an oligopolistic stockholder has caused fraudulent results by exercising influence over the management of a mutual savings and finance company" means the case where an oligopolistic stockholder holds a large number of stocks exceeding the exercise of his/her shareholder's right, thereby controlling the general meeting of stockholders by holding a large number of stocks, and the case where the oligopolistic stockholder directly and indirectly exercises influence over the management of a mutual savings and finance company through the appointed director, or directions or demands the executives using such influence, etc. to participate directly and indirectly in the insolvent management of a mutual savings and

[1] Article 37-3 (1) of the former Mutual Savings and Finance Company Act (amended by the Mutual Savings Banks Act, Act No. 6429 of March 28, 2001) / [2] Article 399 of the Commercial Act / [3] Article 37-3 (1) of the former Mutual Savings and Finance Company Act (amended by the Mutual Savings Banks Act, Act No. 6429 of March 28, 2001) / [4] Article 399 of the Commercial Act / [5] Article 37-3 (1) of the former Mutual Savings and Finance Company Act (amended by the Mutual Savings Banks Act, Act No. 6429 of March 28, 2001), Article 39 (1) of the Commercial Act / [6] Article 37-3 (1) of the former Mutual Savings and Finance Company Act (amended by the Mutual Savings Banks Act, Act No. 6429 of March 28, 2001)

[1] [3] Supreme Court Decision 2003Da65568 Decided September 29, 2005 (Gong2005Ha, 1685) / [1] Constitutional Court Decision 2000Hun-Ga5, 6, 2001Hun-Ba26, 2000Hun-Ba34, 202Hun-Ba37, 7, 9, 12 en banc Decision (Hun-72, 710) / [2] Supreme Court Decision 2003Da69638 Decided October 28, 2005 (Gong2005Ha, 1847) / [1] Supreme Court Decision 2006Da33609 decided July 26, 2007 (Gong2007Ha, 20436, 205) / [36, 206Da654675 decided July 26, 2007]

Seoul High Court Decision 200Na14488 delivered on August 1, 2001

Defendant 1

Defendant 2 (Law Firm Mad Co., Ltd., Counsel for the defendant-appellant-appellee)

Seoul High Court Decision 2003Na69623 delivered on November 4, 2004

All appeals are dismissed. The costs of appeal are assessed against each party.

We examine the grounds of appeal.

1. Plaintiff’s ground of appeal and Defendant 2’s ground of appeal

A. Interpretation of “executive officers liable for the repayment of deposits” under the former Mutual Savings and Finance Act

Article 37-3(1) of the former Mutual Savings and Finance Company Act (amended by Act No. 6429, Mar. 28, 2001; hereinafter the same) provides that “An officer (excluding auditors) of a mutual savings and finance company and an oligopolistic stockholder (referring to an oligopolistic stockholder as provided for in Article 39(2) of the Framework Act on National Taxes) shall be jointly and severally liable with the mutual savings and finance company for the obligations related to the deposits, etc. of the mutual savings and finance company.” This provision provides that the officer responsible for the management of the mutual savings and finance company and oligopolistic stockholders shall be jointly and severally liable for the obligations of the mutual savings and finance company to the officers and oligopolistic stockholders in the public interest request for the protection of customers and the maintenance of credit order. The above legislative purpose is to realize the liability management of the mutual savings and finance company and to protect creditors of the mutual savings and finance company such as deposit holders by preventing the poor management (see, e.g., Constitutional Court en banc Decision 200Hun-Ga6, Aug. 29, 2002).

The court below, in accordance with such legal principles, interpreted the meaning of an officer responsible for the repayment of deposits under the former Mutual Savings and Finance Company Act as above. This interpretation has reduced the scope of officers under the above provision in accordance with the authority to interpret and apply Acts and subordinate statutes, which are the authority of the court, in consideration of the legislative intent of the above provision and the purport of the above provision that the responsibility of officers is excessive in accordance with the above provision. Thus, the court did not recognize the binding effect of the Constitutional Court's decision of limited unconstitutionality and it did not interpret it accordingly. Thus, the

In addition, Article 399 of the Commercial Act provides that a director shall be liable for damages to a company when he/she commits an act in violation of the laws and regulations. When a director performs his/her duties, such act itself constitutes nonperformance against the company. Thus, unless there are special circumstances, liability for damages to the company due to the act in violation of the laws and regulations shall not be exempted, and in principle, the principle of business judgment shall not apply to an act in violation of the laws and regulations (see Supreme Court Decision 2006Da33609, Jul. 26, 2007). Upon considering the evidence adopted in the judgment, the court below acknowledged facts as stated in its decision, and the judgment below is just in its determination that Defendant 2’s act in violation of Article 37 subparag. 1 of the former Mutual Saving and Finance Act, as the representative director of the Daewon Mutual Savings and Finance Company (hereinafter “Seoul Mutual Savings and Finance Company”), an officer who acquired 10% of the total issued and outstanding shares of the Hanwon Mutual Savings and Finance Company, and thus, it cannot be accepted the above portion of the grounds for appeal.

(b) Scope of officers' responsibility for deposit repayment; and

Officers who are responsible for insolvent management of a mutual savings and finance company shall be deemed to be jointly and severally liable with the mutual savings and finance company for the liabilities related to the deposits, etc. of the mutual savings and finance company within the scope of damages suffered by the mutual savings and finance company due to their acts pursuant to Article 37-3 (1) of the former Mutual Savings and Finance Company Act (see Supreme Court Decision 2003Da6568, Sept. 29, 2005).

In the same purport, the court below is just in holding that Defendant 2 was liable to repay the deposit to the Plaintiff who is the transferee of the deposit claim within its scope, and there is no error in the misapprehension of legal principles as to the scope of the officer's deposit liability. The plaintiff's ground of appeal on this part is not acceptable.

C. The burden of proving that the liability for bad management due to the substitution has occurred and that the loss has occurred due to the increased loan

In the case of the so-called repayment loan that a financial institution provides a new loan only formally without the actual receipt of a loan and thereby causes repayment of an existing debt, it may recover all loans from an obligor at the time of extension of the term, but if the term is extended, it can only be deemed that a new damage has occurred due to an extension of the term, only when the extension of the term is extended with the knowledge of the debtor's financial situation that the loan will be aggravated to the extent that the financial institution would not recover the loan, and it cannot be concluded that a new damage has occurred to the company equivalent to the amount of the unpaid loan out of the loan in question, unless such circumstance is revealed (see Supreme Court Decision 2005Da38492, Feb. 24, 2006).

The court below, after compiling the evidence adopted in its decision, found facts as stated in its decision, and found out that the amount of loans extended four times to the Young Tourism as the representative director of the National Treasury of the National Treasury of Korea was repaid to the Hanwon, and all of the loans were made without actual financing. Thus, even if the collection of the above loans is impossible, it cannot be said that damage was caused to the National Treasury of Korea. Further, the court below rejected the plaintiff's claim for the payment of deposits on the premise that there was no evidence supporting that some of the loans extended in the name of the actual borrower or the third party over the loans extended in the name of the non-party as the representative director of the National Treasury of the National Treasury of Korea and it is clear that the loans were exchanged to the actual borrower or the third party in excess of the credit limit of the National Treasury of the National Treasury of Korea, and there is no evidence supporting that the loans were actually paid to the borrower. In light of the legal principles as to the payment of deposits and the records, the court below's judgment is justified and acceptable.

(d) In case where its officers have paid liability for damages to mutual savings and finance companies, whether such liability is extinguished under the former Mutual Savings and Finance Company Act;

The responsibility for the repayment of deposits by officers under Article 37-3 (1) of the former Mutual Savings and Finance Company Act, in cases where a director of a mutual savings and finance company neglects his/her duties and causes property damage to a mutual savings and finance company, the liability for damages under Article 399 (1) of the Commercial Act or liability for damages under Article 401 (1) of the Commercial Act, which is borne by a third party, cannot be enough to protect the interests of the deposit principle. Thus, the right under Article 37-3 (1) of the former Mutual Savings and Finance Company Act is an inherent right recognized to the deposit owner, etc. separate from the right to claim damages against an officer by a mutual savings and finance company pursuant to Article 399 of the Commercial Act. Therefore, even if an officer first performed the liability under Article 399 (1) of the Commercial Act for damages incurred to a mutual savings and finance company, the liability for the repayment of deposits to the deposit owner due to the same act of breach of his/her duties is extinguished within the extent of the actual amount paid by the deposit owner.

However, as seen earlier, an officer liable for the repayment of deposit pursuant to the above provision is jointly and severally liable with a mutual savings and finance company for the liability related to the deposit of the mutual savings and finance company within the scope of damages suffered by the officer due to his own act (see Supreme Court Decision 2003Da65568, Sept. 29, 2005). Thus, in a case where an officer bears the liability for damages under Article 399(1) of the Commercial Act to the mutual savings and finance company so that the damages of the mutual savings and finance company can be recovered and the deposit owner can be paid, there is room to limit the officer’s liability for the repayment of deposit in consideration of such circumstances in the principle of fairness, but in such a case, whether the officer is to limit the officer’s liability for the repayment of deposit shall be respected as a matter of fact-finding authority unless it is deemed considerably unreasonable in view of the officer’s circumstance of the performance of the liability for damages to the mutual savings and finance company, the amount paid by the officer to

According to the records, with respect to loans of the above KRW 4.90 million to the flag tourism of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company of the company, the court of the company of the company of the company of the company of the

In addition, in light of the amount paid by Defendant 2 to Defendant 2 as compensation for damages to Defendant 2, the lower court’s failure to consider these circumstances in determining the scope of Defendant 2’s deposit repayment liability does not seem to be remarkably unreasonable in light of the principle of equity.

In the same purport, the court below's rejection of the above defendant's assertion that the liability for the repayment of deposit under the former Mutual Savings and Finance Act is extinguished as long as defendant 2 paid the liability for damages to a large savings depository pursuant to Article 399 (1) of the Commercial Act to the large savings depository, is justified in conclusion, and there is no error of law such as misunderstanding of legal principles as to the extinction of the liability for the repayment of deposit under the former Mutual Savings and Finance Act,

2. As to Defendant 1’s ground of appeal

Where an oligopolistic stockholder under Article 39(2) of the Framework Act on National Taxes has exercised influence over the management of a mutual savings and finance company and has caused insolvency, he/she shall be jointly and severally liable with the mutual savings and finance company for the obligations related to the deposit of a mutual savings and finance company under Article 37-3(1) of the former Mutual Savings and Finance Company Act. The term "where an oligopolistic stockholder has caused insolvency by exercising his/her influence over the management of a mutual savings and finance company." The term "where an oligopolistic stockholder has caused insolvency by exercising his/her influence over the management," means cases where an oligopolistic stockholder controls the general meeting of stockholders by holding a large number of stocks exceeding the exercise of his/her shareholder's right, directly and indirectly, through the appointed directors such as the exercise of influence over the management of the mutual savings and finance company, or orders or demands the executives to conduct business by using such influence, etc., and thereby the insolvency of the mutual savings and finance company has been caused (see Supreme Court Decision 2003Da

The court below, after compiling the evidence adopted in its judgment, found facts as stated in its judgment, and judged that Defendant 1 exercised influence over the management of the mutual savings bank as an oligopolistic shareholder of the mutual savings bank, such as ordering or demanding its executives to conduct business, and caused the insolvency of the mutual savings bank. In light of the records, the above fact-finding and judgment of the court below are just and acceptable, and there is no error in the misapprehension of legal principles as to the interpretation of the " oligopolistic shareholder who caused the insolvency" or in the violation of the rules of evidence, or in the incomplete trial. The grounds for appeal by Defendant 1 cannot be accepted.

3. Conclusion

Therefore, all appeals are dismissed. The costs of appeal are assessed against each party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)