[1] Whether the interruption of prescription due to the participation in the company reorganization procedure also affects the guaranteed liability (affirmative), and the point at which the extinctive prescription of the guaranteed liability interrupted due to the participation in the company reorganization procedure

[2] In case where the interest rate on the principal obligation is reduced by the reorganization plan under the former Company Reorganization Act, whether the interest rate on the principal obligation or the interest rate on delay damages to be borne by the guarantor is reduced (negative)

[3] Whether the change in the amount or maturity of reorganization claims under the reorganization plan under the former Company Reorganization Act affects the guarantor's guarantee liability (negative)

[1] The interruption of prescription under Article 5 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) due to participation in the company reorganization procedure shall be effective to a surety obligation whose principal obligation is a reorganization company's obligation, and its effect shall remain in force as long as the exercise of the right to participate in the company reorganization procedure continues. Thus, where all or part of the principal obligation is exempted or reduced by the reorganization plan, if the principal obligation is extinguished at the time when the decision to approve the reorganization plan becomes final and conclusive, the extinctive prescription of the surety obligation corresponding to that part is terminated after the obligee's exercise of right in the reorganization procedure becomes final and conclusive. However, if the principal obligation remains in existence by the reorganization plan, the interruption of prescription by participation in the reorganization procedure remains effective, and if the exercise of right is terminated after the decision to abolish or terminate the reorganization procedure becomes final and conclusive, the extinctive prescription of the guaranteed obligation which was interrupted from the time of interruption.

[2] In a case where the principal obligation is maintained due to the interruption of extinctive prescription, it is reasonable to maintain the interest obligation or damages for delay, which is the subordinate obligation. In this case, even if the interest rate on the principal obligation was reduced due to the company reorganization plan, the interest or damages for delay to be borne by the guarantor shall be based on the original agreed interest rate prior to the reduction of the rate, which is stipulated under Article 240 (2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005).

[3] Under Article 240 (2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), reorganization creditors, regardless of the reorganization plan, may claim and execute the original claim against the guarantor at any time. Thus, even if the amount or maturity of the reorganization claim is changed according to the reorganization plan, it does not affect the guarantor's guarantee liability.

[1] Article 5 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), Article 240 (2) (see current Article 250 (2) of the Debtor Rehabilitation and Bankruptcy Act), Article 440 of the Civil Act / [2] Article 240 (2) of the former Company Reorganization Act (repealed by Article 250 (2) of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), Article 430 of the Civil Act / [3] Article 240 (2) of the former Company Reorganization Act (repealed by Article 240 (2) of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005, Article 240 (2) of the Addenda to the Debtor Rehabilitation and Bankruptcy Act)

[1] [3] Supreme Court Decision 87Da2055 delivered on February 23, 198 (Gong1988, 588), Supreme Court Decision 98Da42141 delivered on November 10, 1998 (Gong1998Ha, 2848) / [1] Supreme Court Decision 93Da47431 delivered on January 14, 1994 (Gong1994Sang, 719) Supreme Court Decision 94Da13893 delivered on May 26, 1995 (Gong195Ha, 2248), Supreme Court Decision 94Da5941 delivered on November 21, 1995 (Gong196Sang, 45) / [3] Supreme Court Decision 93Da239639 delivered on August 23, 1993

A joint trustee in bankruptcy of a foreign comprehensive financial corporation of the bankrupt country and one other

Defendant (Law Firm Lee & Lee, Attorneys Cho Jae-soo et al., Counsel for the defendant-appellant)

Korea Oil Industry Co., Ltd. (Law Firm two Co., Ltd., Attorneys Cho Jong-tae et al., Counsel for the plaintiff

Seoul High Court Decision 2006Na65516 decided January 18, 2007

All appeals are dismissed. The costs of appeal are assessed against the defendant.

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

1. Article 240(2) of the former Company Reorganization Act (amended by Act No. 7428, Mar. 31, 2005; hereinafter “Company Reorganization Act”) provides that the scope of validity of the company’s reorganization plan shall not affect the guaranteed obligation. However, this provision provides that the reorganization plan does not affect the guarantor because it differs between the reorganization company and the guarantor with respect to the validity of the reorganization plan. Meanwhile, Article 40 of the Civil Act provides that the effect of the interruption of prescription against the guarantor shall not change from the nature of the guaranteed obligation, and it is a policy provision to prevent the extinction of prescription separately for the protection of the obligee, so the above provision is not applicable to the guaranteed obligation and the guaranteed obligation under Article 440 of the Civil Act. Thus, the effect of the interruption of prescription under Article 5 of the Company Reorganization Act, which shall have been decided upon by the Supreme Court’s decision to reduce the prescription period, shall also become effective even after the expiration of the period of extinctive prescription period which shall have been decided by the said decision 940, as it becomes final and conclusive.

2. In full view of the evidence of its employment, the court below concluded a bill transaction agreement with Dongi Investment Finance Co., Ltd. (hereinafter referred to as "Nai Funds") on Oct. 15, 1992 between the Kansung Industries Co., Ltd. (hereinafter referred to as "Kansung"), which entered into a bill transaction agreement with 19,90,000 won, due date, and with 14 Oct. 193, 1993. The defendant has jointly and severally guaranteed all obligations based on the above bill transaction agreement with the Kansung at the time of the above bill transaction agreement. The court below affirmed the decision to suspend the reorganization procedure with respect to the subsequent payment of the principal obligation with respect to the payment of the bill debt equivalent to the above limit on Mar. 20, 195, which continued to be repaid in installments for 10 years after the due date for payment of ten,00,0000 won, which became final and conclusive by the court below's decision to reduce the extinctive prescription period from 195% to 7.7.85% of the above reorganization plan.

3. However, the court below held that, as in this case, where the period of payment of the principal obligation is extended under the reorganization plan as in this case, the extinctive prescription of the guaranteed obligation is suspended pursuant to Article 40 of the Civil Code, and such interpretation is erroneous. This is because a reorganization creditor can claim and execute the principal obligation at any time against the guarantor regardless of the reorganization plan, regardless of the reorganization plan. Thus, even if the amount or the period of payment of the reorganization claim is changed under the reorganization plan, the court below's decision is just as it does not affect any effect on the guarantor's guarantee liability (see Supreme Court Decisions 87Da2055 delivered on February 23, 198, 93Da25363 delivered on August 24, 1993, and 98Da42141 delivered on November 10, 1998, the court below's decision that the extinctive prescription of the principal obligation is suspended under this part of the domestic obligation as in this case.

4. Ultimately, in this case, the effect of the interruption of prescription against the principal obligation arising from the obligee's participation in the reorganization proceedings and the repayment of the principal obligation after the decision to terminate the reorganization proceedings is effective as to all the guaranteed obligation, and the corresponding Defendant's guaranteed obligation continues to exist without the extinction of prescription until the principal obligation is fully paid in installments. Accordingly, damages for delay by 19% per annum has been continuously incurred. Thus, the court below rejected the Defendant's defense of extinction of prescription, which was completed five years after the expiration of the period from March 20, 1995, which was the date when the decision to approve the reorganization plan became final, or from July 30, 1998, which was the date when the decision to terminate the reorganization proceedings became final and conclusive, separately from the principal obligation, is consistent with the above legal principles. In so doing, there is no error of law by misapprehending the legal principles as asserted in the grounds of appeal, or by misapprehending the legal principles as to the extension of prescription against the principal obligation, regardless of whether the period of prescription has been reduced or exempted from the date of the reorganization plan.

5. 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 Jeon Soo-ahn (Presiding Justice)