[1] Requirements for an auditor of a credit union to be liable for damages against a credit union in relation to an illegal or unjust loan

[2] The case reversing the judgment below that there was no significant fault in neglecting the duties as an auditor, or that there was no proximate causal link between the breach of duty as an auditor and the loss of the credit union due to the breach of duty by the chief director of the union

[1] In order to hold an auditor of a credit union liable for damages against the union in relation to an illegal or unjust loan, if he knew that the loan was illegal or unjust, or he paid considerable attention to the union's account books or loan-related documents, that it could have been known if he knew that the loan was illegal or unjust, or it would have been obviously negligent in neglecting his duties as an auditor.

[2] The case reversing the judgment of the court below that there is no significant fault in neglecting the duties as an auditor, or that there is no proximate causal relation between the breach of duty as an auditor and the loss of the credit union due to the breach of duty by the president of the

[1] Articles 33 and 37 of the former Credit Unions Act (amended by Act No. 5739 of Feb. 1, 1999) / [2] Articles 33 and 37 of the former Credit Unions Act (amended by Act No. 5739 of Feb. 1, 199)

[1] Supreme Court Decision 2003Da18838 delivered on March 25, 2004

The Bankruptcy Trustee of the Bankrupt Credit Union

Seoul High Court Decision 201Na1448 delivered on August 2, 2012

Freeboard and one other

Daegu High Court Decision 2002Na4291 delivered on November 27, 2002

The judgment below is reversed, and the case is remanded to the Daegu High Court.

1. Summary of the judgment below

A. Nonparty 1 was established on November 2, 1995 and business suspension was ordered on December 17, 199 to Nonparty 10, Nonparty 1 and Nonparty 2, who were in charge of the loan, 00,000 won in the name of Nonparty 1 and 0,000 won in the name of 0,000 won, and 0,000 won in the name of 10,000 won in the name of 30,00 won in the name of 5,00 won in total, and 0,000 won in the name of 0,00 won in the name of 0,000 won in the name of 10,000 won in the name of 50,000 won in the name of 0,00 won in the name of 10,000 won in the name of 50,000 won in the name of 10,60,000 won in the name of 30,000 won in the above.

B. Nonparty 1,30, 100,00 won, the total amount of deposits of Nonparty 2 was about 3,100,000, and the person who actually established the mutual savings association was the president of the Daegu-si Federation and was appointed as the president of the mutual savings association upon Nonparty 3’s request, and Nonparty 1 did not know that Nonparty 2 had been able to engage in the Defendants’ business activities under the name of Nonparty 1’s non-party-Party-1’s financial statements or the auditor’s non-party-party-1’s non-party-2’s non-party-party-2’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-Appellant’s non-party-party-2’s non-party-party-party-party-Appellant’s non-party auditor’s non-indicted.

2. The judgment of this Court

We cannot agree with the above judgment of the court below.

As seen earlier, Article 54(2) of the New Consultation Articles at the time when an executive of a credit union, such as an auditor, committed an occupational breach of trust, provides that if an executive of the credit union, such as an auditor, causes damage to a union intentionally or by gross negligence in performing his/her duties, he/she shall individually or jointly compensate for such damage. The Credit Union Act, amended by Act No. 5506, Jan. 13, 1998, effective from April 1, 1998, provides for the duty of good faith of executive officers of the credit union under Article 33, provides that the executive officers shall be jointly and severally liable for damages to the union or any other person caused intentionally or by gross negligence in performing his/her duties. Article 37 provides that the auditor shall audit the status of the operation of the union, financial status, books and documents, etc. of the union at least once a quarter, and the quarterly audit report shall be submitted to the board of directors on a quarterly basis, and if so, it shall be deemed that it was an unlawful or negligent loan or other instrument of the credit union (hereinafter referred to the Act).

However, Article 42 of the Credit Unions Act prohibits loans exceeding the limit set by the National Federation Chairperson within 10/100 of its equity capital, except where the National Federation Chairperson approves the same union members (Article 32 of the former Credit Unions Act). According to the records, as of October 14, 1999, equity capital is 114,85,920 won and the amount of loans extended to the same person shall be 11,485,592 won, which is the amount of loans extended to the same person by Nonparty 1 and working-level members of the National Federation of Korea, and the Defendants did not know of the above facts that the loans were extended to Nonparty 3 et al., the total amount of loans extended to Nonparty 1 and the amount of loans extended to Nonparty 3 et al., who were actually the Chairperson of the New Agreement, to the extent that the Defendants did not know of the above facts of the loans extended to the same person by the National Federation of Korea and the amount of loans extended to Nonparty 1, etc., the total amount of loans extended to 197% or 196.

Nevertheless, the judgment of the court below that there is no gross negligence in neglecting the duties of the Defendants, or that there is no causation between the damage caused by the act of occupational breach of trust by the Defendants and the damage caused by the act of occupational breach of trust by Nonparty 1, etc., is erroneous in the misapprehension of legal principles as to the liability of the

3. Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-dam (Presiding Justice)