2017Da269152 Action to confirm the invalidity of a resolution of the board of directors

Plaintiff 1 and one other

Law Firm LLC (LLC)

[Defendant-Appellee]

Kenya Korea in a social welfare foundation

Attorney Han-il et al., Counsel for the defendant-appellant

Seoul High Court Decision 2017Na2005431 Decided August 23, 2017

October 29, 2020

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. Whether the status of the previous temporary director is extinguished due to a report on the appointment and dismissal of the regular directors by the competent administrative agency on acceptance (ground of appeal No. 1)

A. The key issue is whether the status and authority of the former temporary director can be deemed to have been extinguished finally in the situation where the head of Gangnam-gu, on February 18, 2009, the head of Gangnam-gu, only issued a report on the appointment and acceptance of a regular director to the defendant and did not explicitly take a measure to dismiss the previous temporary director.

B. (1) The former Social Welfare Services Act (amended by Act No. 10997, Aug. 4, 201; hereinafter “former Social Welfare Services Act”) provides for the supplementation of executives and employees of a social welfare foundation as follows: A social welfare foundation shall have at least five directors, including the representative director, and at least two auditors (Article 18(1)); where a social welfare foundation appoints or dismisses executives, it shall report the appointment or dismissal to the Minister of Health and Welfare without delay as prescribed by Ordinance of the Ministry of Health and Welfare (Article 18(5)) (Article 18(5)). If a vacancy occurs in the office of directors or auditors, it shall be filled within two months (Article 20(1)); where a social welfare foundation fails to fill the vacancy within the prescribed period, it shall appoint temporary directors upon the request of interested parties or ex officio (Article 20(2)).

The former Enforcement Rule of the Social Welfare Services Act (amended by Ordinance of the Ministry of Health and Welfare No. 147, Aug. 3, 2012; hereinafter referred to as the "former Enforcement Rule of the Social Welfare Services Act") provides that when a social welfare foundation intends to report the appointment and dismissal of executive officers, it shall submit to the competent authority with a copy of the meeting minutes of the board of directors' meeting where the appointment or dismissal of the relevant executive officer is decided in accordance with attached Form 10, a written acceptance of appointment or dismissal of executive officers, a resume, and a written statement proving that the relationship between executive officers does not conflict with Article 18(2)

(2) As can be seen, the former Social Welfare Services Act only determines the grounds for and procedures for appointing temporary directors (Article 20(2) and (3) and does not stipulate the scope of duties, term of office, dismissal procedures, etc. However, as the competent administrative agency has the authority to appoint temporary directors, it shall be deemed that temporary directors may be dismissed at any time when it is determined that the grounds for appointing temporary directors are eliminated or that it is inappropriate to allow the pertinent temporary directors to continue to perform their duties.

An act of selection and appointment of a provisional director by a competent administrative agency under the former Social Welfare Services Act constitutes an administrative disposition. Therefore, even if a defect exists in the appointment of a provisional director, it shall not be deemed as null and void as a matter of course unless such defect is serious and unclear (see, e.g., Supreme Court Decision 2012Da40332, Jun. 13, 2013). The status of a provisional director remains effective until a temporary director is dismissed (see, e.g., Supreme Court Decision 90Nu5313, May 28, 191).

(3) According to Article 20(2) of the former Social Welfare Services Act, a temporary director of a social welfare foundation is an institution that is appointed to fill a vacancy in the event that the normal operation of the foundation is difficult due to the vacancy of the director, so in principle, he/she shall hold office only until the regular director is appointed. However, in order to clarify the temporary director’s term of office, the competent administrative agency may select and appoint a temporary director for a period of one year or two years, for example, a fixed term of office. However, a provisional director’s term of office may be determined until the regular director is appointed. However, it is only a so-called “legal officer,” which states, as a matter of course, matters derived from the interpretation of the underlying law, and cannot be deemed as an additional officer of the original meaning attached according to the intention of the administrative agency (see Supreme Court Decision 92Nu1728, Mar. 8, 1994). After the regular director’s term of office expires automatically and the effect of the temporary director’s status is lost, and only an administrative disposition has been dismissed.

(4) Article 24(1) of the Administrative Procedures Act provides that, when an administrative agency issues a disposition, it shall be done in writing, except as otherwise expressly provided for in other statutes or in minor cases. This is to ensure the clarity of the content of the disposition and to prevent disputes over the existence of the disposition, thereby protecting the rights and interests of the other party to the disposition. Therefore, if an administrative agency issues a disposition in writing, in principle, whether the disposition has been made in accordance with the language and text of the disposition. However, if the language and text of the disposition alone is unclear, it may be interpreted differently from the language and text of the disposition (see, e.g., Supreme Court Decision 2009Du18035, Feb. 11, 2010). In particular, even if an administrative agency did not explicitly state the intention that the administrative agency must necessarily involve as a matter of course, if it conforms to the abstract intent of the administrative agency and if it is possible for the other party to such disposition, it can be seen that the above declaration of intention is included in the administrative disposition (see, e.g.

(5) According to Article 18(5) of the former Social Welfare Services Act and Article 10 of the former Enforcement Rule of the Social Welfare Services Act, the competent administrative agency, upon receiving a report on the appointment of a regular director from a social welfare foundation, shall examine whether the relevant executive was appointed through a lawful resolution by the board of directors, based on the minutes, resumes, non-existence of a special relationship, etc. submitted by the relevant social welfare foundation, and shall take measures to repair the report after examining whether the relevant executive was in a special relationship with the contributor. In principle, in order to fill the vacancy of the director, the appointment of a regular director and the dismissal of the former temporary director must be conducted simultaneously. Therefore, barring any special circumstance where a new regular director and the former temporary director temporarily exist, the competent administrative agency’s order to dismiss the previous temporary director on the ground that the appointment of a regular director was resolved due to the removal of the vacancy of the director, namely, the temporary director’s dismissal should be deemed included.

C. According to the reasoning of the lower judgment, the following circumstances are revealed.

(1) On August 23, 199, the Defendant is a social welfare foundation established for the purpose of welfare projects for the elderly at home. The Defendant’s directors around June 2006, consisting of eight persons including Nonparty 1 and the Plaintiffs, who are directors. Of these, the Defendant dismissed the Plaintiffs and appointed five new directors. Accordingly, the Plaintiffs filed an application for a provisional disposition to suspend the performance of duties against the five new directors, and the Defendant was issued a provisional disposition citing the application.

(2) On June 29, 2007, the head of Gangseo-gu Seoul Special Metropolitan City (hereinafter referred to as the "head of Gangseo-gu") who is an administrative agency having jurisdiction over the defendant, appointed five provisional directors by setting the order of priority of the first, second, third, third, fourth, fifth and fifth, third, fifth and fifth, on the ground that the performance of duties by the defendant's five directors was suspended, and decided that temporary directors equivalent to the number of the directors to be returned from the junior, should be retired if the judgment on the merits of the provisional disposition became final and conclusive, and the provisional directors equivalent to the number of the directors to be returned are retired.

(3) In the case on the merits of the above provisional disposition, the decision confirming that each five new directors’ resolution by the board of directors is null and void was rendered on July 19, 2007, and became final and conclusive around that time, the Plaintiffs recovered their status as directors. Meanwhile, Nonparty 7, among the eight existing regular directors, died on November 15, 2006, and Nonparty 8 resigned on December 15, 2006, and Nonparty 8 was resigned on December 15, 2006, the Defendant’s regular directors were left only Nonparty 1 and the Plaintiff.

(4) On December 29, 2008 and January 29, 2009, the Defendant attended the meeting of Nonparty 1 and the temporary directors Nonparty 2, Nonparty 3, and Nonparty 4; Plaintiff 2 passed a resolution on the reappointment of directors; Plaintiff 1 passed a resolution on the reappointment of directors; Plaintiff 2, Nonparty 2, Nonparty 3, and Nonparty 4, who are temporary directors, are regular directors; Nonparty 9, Nonparty 10, and Nonparty 11, who are directors, are appointed as directors; and the representative director is reappointed to Nonparty 1.

On February 13, 2009, the Defendant reported to the head of Gangnambuk-gu, the appointment and dismissal of executive officers that consist of Nonparty 1, Nonparty 2, Nonparty 2, Nonparty 3, Nonparty 4, Nonparty 9, Nonparty 10, and Nonparty 118. The head of Gangnam-gu notified the Defendant on February 18, 2009 that he/she would accept the above report, and entrusted the registration of retirement of five temporary directors to the competent registry office on February 20, 2009.

(5) The Plaintiffs filed a lawsuit to nullify the appointment of a director against the Defendant on December 29, 2008 and January 29, 2009, and all of the above resolution of the board of directors was declared null and void due to the defect in the convocation procedure and confirmed on March 15, 2012. Accordingly, on November 26, 2012, the registration of the appointment of directors against Nonparty 2, Nonparty 3, Nonparty 9, Nonparty 10, and Nonparty 6 was cancelled, and the registration of the restoration of provisional directors was completed against Nonparty 2, Nonparty 3, Nonparty 5, and Nonparty 6 (the Nonparty 4 resigned before the judgment became final and conclusive).

(6) On July 17, 2012, the Defendant made a resolution to appoint Nonparty 1, Nonparty 1, Nonparty 2, and Nonparty 3 as a director at the board of directors meeting (hereinafter referred to as “the first board of directors resolution”). On March 22, 2016, the Defendant made a resolution to appoint Nonparty 1 as a representative director, Nonparty 9, Nonparty 10, Nonparty 12, and Nonparty 14 as a director, with the consent of the above five persons present at the board of directors (hereinafter referred to as “the second board of directors resolution”). Examining these circumstances in light of the aforementioned legal principles, the following conclusion is derived.

(1) On December 29, 2008 and January 29, 2009, the Defendant, at the board of directors held eight directors, submitted the minutes of each board of directors’ meeting, the selection report of directors, the absence of special relation, and the resume to the head of Gangwon-do. On February 13, 2009, the head of Gangwon-do, upon receiving a report on the appointment and dismissal of officers, reported the appointment and dismissal of a regular director and decided on February 18, 2009 that the grounds for the appointment and dismissal of a provisional director were terminated, requested the competent registry office to accept a report on the appointment and dismissal of a provisional director. The head of Gangwon-do, upon appointing a temporary director on June 29, 2007, decided that the term of office would be “not later than the date the temporary director would be appointed.” The Defendant included the status of the regular director who reported the appointment in February 13, 2009, but it is difficult to concurrently present the status of the temporary director.

(2) Comprehensively taking account of the aforementioned circumstances, a report on the appointment of a regular director by the head of Gangnam-gu to the Defendant on February 18, 2009 and the repair disposition shall be deemed to include a declaration of intent to dismiss the temporary director appointed on June 29, 2007 (replacement disposition). Accordingly, the authority of the temporary directors including Nonparty 2 and Nonparty 3 shall be deemed to have been extinguished definitely.

Therefore, insofar as Nonparty 2 and Nonparty 3 attend a temporary director and appoint Nonparty 9, Nonparty 10, and Nonparty 12 as a director does not have the effect of the Defendant’s first resolution by the board of directors, and the first resolution by the board of directors is null and void, so long as the first resolution by the board of directors is null and void, the second resolution by the board of directors held by Nonparty 9, Nonparty 10, and Nonparty 12

E. The lower court, on the premise that the status of a provisional director automatically terminates even without a separate dismissal disposition if the grounds for the appointment of a provisional director cease to exist, on February 18, 2009, determined that the status and authority of a provisional director became final and conclusive, and accordingly, the first and second resolution by the board of directors was null and void.

The judgment of the court below was erroneous in the misapprehension of the legal principles on the temporary dismissal disposition of a social welfare foundation, but the conclusion that the North Korean head of Gangnam-gu, on February 18, 2009, issued a report on the appointment of a regular director to the defendant and accepted him/her on February 18, 2009 that the status and authority of a temporary director has extinguished

2. Where a resolution by the board of directors appointing regular directors is invalidated, whether the previous provisional directors’ authority is retroactively restored (ground of appeal Nos. 2 and 3)

A. The gist of this part of the grounds of appeal is as follows. When a resolution by the board of directors who appointed a regular director becomes null and void through a court decision, the previous provisional director’s authority extinguished by the appointment of a regular director is retroactively restored. The Seoul Special Metropolitan City Mayor, the current competent administrative agency, did not accept the Plaintiffs’ new request for the appointment of a temporary director for the same reason. On the other hand, the judgment that the former reasons for the appointment of a temporary director was annulled due to the appointment of a

The lower court, solely on the ground that the previous provisional director’s authority had been extinguished finally, was erroneous by misapprehending the legal doctrine on the retroactive effect of invalidation, or by putting more emphasis on the intention of the competent administrative agency at the time of 2009.

B. However, as seen above, inasmuch as the head of Gangwon-do deemed that the appointment report of a regular director to the Defendant on February 18, 2009 and the dismissal disposition on the appointed temporary director on June 29, 2007 was included in the repair disposition, this part of the ground of appeal on the premise that there was no valid provisional director dismissal disposition, is without merit, without further review.

3. Conclusion

The Defendant’s appeal is dismissed in entirety as it is without merit, 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.

The presiding Justice shall mobilization by the presiding Justice

Justices Kim Jae-sik in charge

Justices Min Min-young

Justices Noh Tae-ok