[1] The method of determining whether an executive officer of a financial institution has fulfilled his/her duty of care or duty of loyalty in a loan decision

[2] Whether a director of a corporation is liable for damages suffered by the company in a case where the director of another director's office in charge of business neglects his/her duties despite the grounds for suspecting illegality (affirmative)

[3] The case holding that where a financial institution was subject to audit and inspection by the Insurance Supervisory Board that additional collateral is needed for a loan to a credit loan, and instead, it did not actually verify whether an affiliate's capability to provide collateral and repayment ability, whether a credit loan transition is a reasonable method to correct audit and cadastral issues of the Insurance Supervisory Board, and whether an enterprise evaluation of an affiliate is appropriate through objective data, etc. in light of the credit loan regulations and the standards for preparation of an enterprise comprehensive evaluation table, etc., it cannot be readily concluded that an officer of the financial period involved in the above credit loan conversion did not neglect his duty of care or duty of loyalty

[4] The meaning of "act in violation of the Acts and subordinate statutes" under Article 399 of the Commercial Act, and whether the business judgment rule can be applied in cases where a director causes damage to a company due to "act in violation of the Acts and subordinate statutes"

[5] The case rejecting liability for damages to an executive officer of a financial institution on the ground that a financial institution's purchase and sale of beneficiary certificates constitutes an act of offering special benefits prohibited under Article 156 (1) 4 of the former Insurance Business Act, which is substantially the same as the act of actually discounting insurance premiums to a policyholder, and thus constitutes an act of offering such special benefits, and thus, it can be acknowledged that the executive officer's default on the company

[1] Articles 382(2) and 399 of the Commercial Act, Article 681 of the Civil Act / [2] Article 399 of the Commercial Act / [3] Articles 382(2) and 399 of the Commercial Act, Article 681 of the Civil Act / [4] Article 399 of the Commercial Act / [5] Article 399 of the Commercial Act, Article 156(1)4 of the former Insurance Business Act (amended by Act No. 5375 of Aug. 28, 1997) (see current Article 98)

[1] Supreme Court Decision 200Da9086 decided Mar. 15, 2002 (Gong2002Sang, 864), Supreme Court Decision 2001Da52407 decided Jun. 14, 2002 (Gong2002Ha, 1650) / [2] Supreme Court Decision 84Da1954 decided Jun. 25, 1985 (Gong1985, 1049), Supreme Court Decision 2002Da60467, 60474 decided Dec. 10, 2004 (Gong2005Da34929 decided Jul. 15, 2005) / [4] Supreme Court Decision 2004Da34929 decided Oct. 28, 2005; 2003Da68475 decided Dec. 38, 2005

Korea Deposit Insurance Corporation (Attorneys Noh Jeong-ho et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other (Attorney Young-hun, Counsel for the defendant-appellant)

Seoul High Court Decision 2003Na29540 delivered on December 29, 2003

The part of the judgment below against the Plaintiff regarding the claim for damages due to the conversion of credit loans to the Defendants is reversed, and that part of the case is remanded to the Seoul High Court. The Plaintiff’s remaining appeal against Defendant 1 is dismissed.

We examine the grounds of appeal.

1. As to the claim for damages caused by the conversion of credit loans to the Defendants

An officer of a financial institution has the duty of due care as a good manager to a financial institution to which he belongs, and thus, he/she shall be deemed to have fulfilled his/her duty of due care as an officer. However, in cases where a financial institution is liable for damages due to nonperformance against an officer on the ground of his/her duty of care related to a loan, even if the loan made by an officer was caused as a result of difficult recovery or impossible recovery, it cannot be concluded that the judgment of the officer who issued the loan decision is in breach of the duty of due care or duty of due care as a good manager. If an officer of a financial institution conducts a loan examination in good faith for the maximum interest of the company according to appropriate procedures with reasonable information, unless there is any significant unreasonable in the decision making process, the officer's business judgment is within the permissible discretion and the officer's duty of due care or duty of due care is deemed to have fulfilled the duty of due care as a good manager of the company. However, in light of the ordinary loan officer's contents and condition of the loan and its repayment plan (see Supreme Court Decision 2014Da2014.

In addition, a director of a stock company, as a member of the board of directors, is not limited to expressing his/her intent on a bill presented to the board of directors, and has a duty to comprehensively monitor the duties of another director in charge of duties as well as the duties of another director in charge. Thus, a director of a stock company neglected his/her duty of care or supervision required for the director when he/she neglects the other director's duties despite the existence of any grounds to suspect that the duties of another director in charge of duties are illegal, and thus, he/she cannot be exempted from liability for damages suffered by the company (see Supreme Court Decision 2002Da60467, 6047, Dec.

According to the records, Korea Life Insurance Co., Ltd. (hereinafter referred to as "Korea Life Insurance Co., Ltd.") granted 90 million won to non-party 1, 60,000,000 won to non-party 9 (hereinafter referred to as "non-party 1,60,000,000,000 won for non-party 1,000 won for non-party 7,000 won for non-party 9,000 won for non-party 1,000,000 won for non-party 9,000 won for non-party 1,000,000 won for non-party 9,000 won for non-party 1,000,000 won for non-party 9,000 won for non-party 2,000 won for non-party 1,000 won for non-party 1,000 won for non-party 1,000 won for financial statements.

Examining these circumstances in light of the aforementioned legal principles, even if Defendant 1 obtained additional collateral from a mining concession loan as representative director in accordance with the audit and cadastral records of the Insurance Supervisory Board, and if it is impossible, he did not take such measures despite being repaid, and rather did not take an unfair measure to extend the period of loan while converting it into a credit loan differently from the audit and cadastral records, and even if it was converted into a credit loan, it is highly likely that he instructed a business evaluation to achieve the conclusion that he/she is qualified for a credit loan even though he/she is disqualified for a credit loan, or that he/she did not know that it was distorted for a business evaluation, and even if he/she did not implement such business evaluation, he/she did not have any reasonable duty of care to determine whether it is unlawful in light of the business regulations of the Insurance Supervisory Board, even if he/she did not perform such duty of care as a good-faith loan, and thus, he/she did not have any reasonable reason to determine whether it is in violation of the business regulations of the Insurance Supervisory Board's duty of care and change of credit loan.

Nevertheless, in light of the ability to secure collateral and to repay loans, whether a credit loan transition is an ordinary way to correct audit and cadastral issues of the Insurance Supervisory Board, whether it is possible to convert credit loans in light of the provisions on credit loans and the standards for the preparation of an enterprise evaluation table, whether the corporate evaluation of the same mining concession loan is appropriate, and whether the agreement was reached in light of the agreement of 2 billion won converted into a credit loan, not 10.5% per annum of interest applied to the secured financial institution's claims against the 2 billion won converted into a credit loan from the procedure for the composition of the same mining concession, not 10.5% per annum of interest applied to the secured financial institution's claims, but 2 billion won, not 10.5% per annum of interest applied to the secured financial institution's claims, and 5.32.2% of interest at the time of the conversion into the credit loan, the court below did not err by misapprehending the legal principles as to the plaintiff's claim for damages due to the fact that the directors' credit loan transition was in violation of the rules.

2. As to the claim for damages caused by termination of the right to collateral security against Defendant 1

According to the records, as of November 22, 1997, when an affiliate president, such as Nonparty 4 and Defendant 1, etc., who were the chairperson of affiliate companies due to liquidity shortage in dynamics, consideration trade, etc., around 12, 1997, set up a relatively safe life insurance among affiliates to protect the creditors from the enforcement of the creditors' existing obligations with respect to the luminous medication and consideration trade property. Considering that the documents for termination of the right to collateral security are prepared in advance and kept by Nonparty 4, and the life insurance was unilaterally set up on December 22, 1997 with respect to the 17 real estate located in Jung-gu Seoul Special Metropolitan City, Jungdong-gu and Pyeongtaek-si, 1997, the 7.106.5 billion won of the maximum debt amount of the right to collateral security (hereinafter "the right to collateral security"), the 9.5 billion won of the right to collateral security was unilaterally set up by the 106.5 billion won of the right to collateral security at the time of termination.

In light of these circumstances, the instant right to collateral security is not realized from the source of securing loan claims against the same mineral deposit, but was established from the source of securing group property according to the agreement of the affiliate president, and from the beginning, the right to terminate the instant right to collateral security was granted to Nonparty 4 or the same mineral deposit. Thus, even if Defendant 1 delivered the termination document to Nonparty 4, it cannot be deemed that he neglected the duty of due care as a good manager in securing and maintaining the security of loan claims against the same mineral deposit, and it is difficult to view that he caused damage to the life insurance in consideration.

In this regard, the judgment of the court below that rejected the plaintiff's claim for damages due to termination of the right to collateral security is just and acceptable, and there is no error of law such as misconception of facts against the rules of evidence and misunderstanding of legal principles as to the director's liability for damages under Article 399 of the Commercial Act, as alleged in the

3. As to the claim for damages caused by the purchase and sale of beneficiary certificates against Defendant 1

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 law. Thus, a director's act in violation of the law constitutes a violation of the provisions of the Commercial Act and the provisions of the Commercial Act, which individually stipulate the duty to observe when he/she performs his/her duty as a director, and a director's act in violation of the above Acts and subordinate statutes shall not be exempted from liability for damages unless there are special circumstances, as long as the act in violation of the above Acts and subordinate statutes in the performance of his/her duty constitutes a default on the company, and as a result, damage to the company is caused to the company. With respect to an act in violation of the above Acts and subordinate statutes, there is no room to apply the business judgment rule that can be considered in cases where a director's act in violation of the above Acts and subordinate statutes is at issue due to his/her failure to perform his/her duty (see, e.g., Supreme Court Decisions 2004Da34929, Jul. 15, 2005).

Meanwhile, Article 156(1)4 of the former Insurance Business Act (amended by Act No. 5375 of Aug. 28, 1997) prohibits a person engaged in concluding or soliciting insurance contracts from promising to provide special benefits or offering premium discounts or other special benefits to policyholders or insured workers in connection with the conclusion or solicitation thereof. Article 218 Subparag. 5 of the same Act imposes a penalty on a person who violates the above provision.

As recognized by the court below, Defendant 1, who was the representative director of the life-based life insurance, purchased beneficiary certificates issued by a financial institution to attract and maintain employee retirement insurance contracts for meritorious and Hyundai Construction Co., Ltd. (hereinafter “former Construction”), and had a financial institution provide financial convenience to policyholders with the funds by means of lending them. On September 4, 1996, purchased beneficiary certificates of KRW 5 billion from a commercial bank at par value and sold at par value of KRW 5 billion on December 15, 1997, thereby causing loss of KRW 490,220,009, which is the interest rate up to maturity, which is equivalent to the interest rate of KRW 5 billion until maturity. The above act of offering beneficiary certificates of KRW 22 billion from one bank on February 2, 1998 at par value and selling KRW 18 billion at KRW 1.592,280,000,000 from the same date to the policyholder, and thus, there is no specific loss from the above act of offering the beneficiary certificates of KRW 1.36.85 billion.

Unlike this, the court below rejected the plaintiff's claim on this part because it did not neglect the duty of care by applying the business judgment rule to Defendant 1's above violation of the legal provisions, and it erred by misapprehending the legal principles on directors' liability for damages under Article 399 of the Commercial Act.

However, the liability for damages under Article 399 of the Commercial Act due to a director's act of violation of laws, articles of incorporation or neglect of duties is limited to the damage in proximate causal relation with the violation. Thus, if there is no proximate causal relation between the loss and the loss caused as a result, the liability for damages of the director shall not be established (see Supreme Court Decision 2005Da2820, Apr. 29, 2005).

According to the records, even if Defendant 1 purchased beneficiary certificates at par value as above, it cannot be deemed that damage was caused to life insurance by its own account, and in the situation where the liquidity shortage of life insurance due to the rapid termination of the insurance contract due to the increase in the number of the IMF foreign exchange crisis that occurred around that time, Hyundai Construction demanded the termination of employee retirement insurance (reserve 1.1 billion won) or the loans equivalent to twice as much as the reserve fund for employee retirement insurance in the middle of January 1998. In order to overcome this situation, the court below’s determination to dismiss the above damages caused to Defendant 1’s act, such as selling beneficiary certificates or selling beneficiary certificates at low price within a short time period after purchasing beneficiary certificates, was not possible to maintain employee retirement insurance contract for Hyundai Construction by taking into account the above loss caused to Defendant 1’s act, and thus, it cannot be readily concluded that the above loss was attributable to Defendant 1’s act, regardless of the above circumstances.

Therefore, the judgment of the court below shall not be deemed to have any error of law that affected the conclusion of the judgment due to misunderstanding of facts against the rules of evidence or misunderstanding of legal principles as to the director's liability for damages against the company.

4. Conclusion

Therefore, among the judgment below, the part against the plaintiff as to the claim for damages due to conversion of credit loans to the defendants is reversed, and that part of the case is remanded to the court below. The plaintiff's remaining appeal against the defendant 1 is dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Son Ji-yol (Presiding Justice)