Whether a shareholder of a company against which bankruptcy proceedings are pending may file a representative suit against the director or auditor of the company (negative)

Pursuant to Articles 399 and 414 of the Commercial Act, if a company is declared bankrupt as to the company's property relation lawsuit for the reason that the company did not fulfill its duty of care as a good manager against the directors or auditors, the trustee in bankruptcy shall be deemed eligible (Article 152 of the Bankruptcy Act). In bankruptcy proceedings, the right to manage and dispose of the company's property belongs to the trustee in bankruptcy (Article 7 of the Bankruptcy Act). If the trustee in bankruptcy bears the duty of care as a good manager under the court's supervision and neglects such care, the person in bankruptcy shall be held liable to the interested party (Article 154 of the Bankruptcy Act). Thus, the issue of whether a lawsuit is filed against the director or auditor shall be interpreted as delegated to the judgment of the trustee in bankruptcy. Accordingly, even if the company has anticipated to be negligent in taking responsibility against the director or auditor, even if the shareholder refuses to enforce the liability against the director or auditor, the company shall not be held liable to the company based on Article 403 of the Commercial Act, Article 415 of the Commercial Act.

Articles 399, 403, 414, and 415 of the Commercial Act; Articles 7, 152, and 154 of the Bankruptcy Act; Article 48 of the former Civil Procedure Act (amended by Act No. 6626 of Jan. 26, 2002) (see Article 52 of the current Act)

Plaintiff 1 and 18 others

Co-litigants 1 and 3 others (Law Firm Daegu, Attorneys Sung-hee et al., Counsel for the plaintiff-appellant)

Defendant 1 and nine others (Attorney Kim Sung-sung, Counsel for the defendant-appellant)

Daegu High Court Decision 2000Na2994 delivered on December 15, 2000

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs and the intervenors of co-litigation.

We examine the grounds of appeal.

Pursuant to Articles 399 and 414 of the Commercial Act, a lawsuit seeking liability for damages on the ground that the company did not fulfill its duty of care as a good manager against a director or auditor is a lawsuit concerning the company's property relation and thus the trustee in bankruptcy is deemed eligible (Article 152 of the Bankruptcy Act). In bankruptcy proceedings, the right to manage and dispose of the company's property belongs to the trustee in bankruptcy (Article 7 of the Bankruptcy Act). If the trustee in bankruptcy bears the duty of care as a good manager under the supervision of the court, and the trustee in bankruptcy bears the duty of care for the company's director or auditor (Article 154 of the Bankruptcy Act). Thus, in a lawsuit seeking liability against a director or auditor, it shall be interpreted that the decision of the trustee in bankruptcy is delegated to the company. Accordingly, even if the shareholder claims against the director or auditor, even if the shareholder refuses to enforce the liability against the director or auditor, it shall not be deemed that Article 4031 of the Commercial Act is a representative lawsuit against the company.

According to the reasoning of the judgment below, the court below held that, on October 23, 1998, Daedong Bank Co., Ltd. (hereinafter referred to as the "Seodong Bank") was declared bankrupt at the Daegu District Court on 10:00 on October 23, 1998 and the bankruptcy trustee was appointed, and that the plaintiffs and co-litigants who were shareholders of the non-party bank were the directors or auditors of the non-party bank against the defendants who were the directors or auditors of the non-party bank, who were the non-party bank, through the resolution of the board of directors, conducted loans worth KRW 7.7 billion in total without a clear debt preservation plan for the non-party Samsan Construction Co., Ltd., Samsan Housing Co., Ltd., Ltd., Taesan Housing Co., Ltd., Ltd., claim company, and claim industrial development, etc., and thereafter, the court below rejected the above loans due to the non-party bank's bankruptcy and did not err in the misapprehension of legal principles as to the plaintiffs and the parties concerned.

Therefore, all appeals are 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 on the bench.

Justices Lee Jae-in (Presiding Justice)