[1] Whether rights and duties arising in relation to a person who loses the status of a member of a specialized construction mutual aid association under the former Specialized Construction Mutual Aid Association Act shall be succeeded to a mutual aid association by type of business (negative)

[2] Whether a member of a specialized construction mutual aid association under the former Specialized Construction Mutual Aid Association Act loses his/her status as a member even when a member provided an investment certificate to a specialized construction mutual aid association as security and the entire amount of the investment certificate was transferred to the association or a third

[1] The former Specialized Construction Mutual Aid Association (repealed by Article 2 of the Addenda to the Framework Act on the Construction Industry, Act No. 5230, Dec. 30, 1996) is separated from and established by a specialized construction mutual aid association, and the status of the association members and their investments are deemed to have been transferred from the specialized construction mutual aid association by type of business to the specialized construction mutual aid association by type of business on the basis of the starting date of the business. Based on this, the purport that the specialized construction mutual aid association intends to have the rights and obligations of the association members succeeded to the mutual aid association by type of business as well as the rights and obligations of the association members, in light of the purport that the person who has lost the status of the specialized construction mutual aid association at the time when the business operation of

[2] In light of the provisions of Articles 7(1)5, 11(1), 12(1)2, and 13 of the former Specialized Construction Mutual Aid Association Act (repealed by Article 2 of the Addenda of the Framework Act on the Construction Industry, Act No. 5230, Dec. 30, 1996), the purport of Article 12(2) of the Articles of the Specialized Construction Mutual Aid Association provides that "when a partner transfers a whole of a contribution certificate to a partner" is "when a partner transfers a contribution certificate to a partner," the transfer of a contribution certificate, as a ground for a member's status, will result in the failure of the member to perform his/her basic duty of contribution, and the rights and obligations of a member recognized according to a contribution share, on the grounds that the association is not entitled to raise an objection on the part of the member, and thus, it is reasonable to provide the member to lose his/her status as a member without the need to go through the procedure. Therefore, where a member's contribution certificate is transferred in full, it constitutes a security right.

[1] Article 2 subparagraph 1, Article 6 (1), and Article 8-2 of the former Specialized Construction Mutual Aid Association Act (repealed by Article 2 of the Addenda to the Framework Act on the Construction Industry, Act No. 5230, Dec. 30, 1996) / [2] Article 7 (1) 5, Article 11 (1), Article 12 (1) 2, and Article 13 of the former Specialized Construction Mutual Aid Association Act (repealed by Article 2 of Addenda to the Framework Act on the Construction Industry, Act No. 5230, Dec. 30, 1996)

[2] Supreme Court Decision 98Da36474 delivered on February 25, 2000

Large Construction Co., Ltd.

Korea Equipment Construction Financial Cooperative (Attorney Jeon Jong-gu et al., Counsel for the plaintiff-appellant)

Specialized Construction Financial Cooperative (Law Firm Dongsung, Attorneys Kim Sun-ray et al., Counsel for the defendant-appellant)

Seoul High Court Decision 97Na54347 delivered on October 29, 1998

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

The grounds of appeal are examined.

Members of the Specialized Construction Mutual Aid Association Act (amended by Act No. 5106, Dec. 29, 1995; hereinafter referred to as the "Act") shall mean constructors who have obtained a specialized construction business license under the Construction Business Act and have invested in specialized construction mutual aid associations or mutual aid associations by industry (hereinafter referred to as "each association"), investments in each association shall be the total face value of investments made by members (Article 2 subparagraph 1); where a specialized construction mutual aid association is established, investments in each association shall be the total face value of investments made by members (Article 6 (1)); where a specialized construction mutual aid association is established, investments in the mutual aid association by industry paid to the specialized construction mutual aid association shall be regarded as investments in the mutual aid association by industry (Article 8-2 (1)); and in this case, matters concerning the criteria for calculating equity shares and methods of transferring it shall be determined by Presidential Decree (Article 8-2 (2)); rights and obligations which specialized construction mutual aid associations have in relation with those who become members of the mutual aid association by industry by industry shall be succeeded by the relevant mutual aid association (4).

As such, when a trade-based mutual aid association is separated or established, the status and contribution of the relevant mutual aid association by industry shall be deemed to be transferred from the specialized construction-related mutual aid association to the specialized construction-related mutual aid association on the basis of the starting date of the business, and based on this, the purport of the specialized construction-related mutual aid association to be succeeded to the mutual aid association by industry along with the rights and obligations of the relevant mutual aid association. In light of the purport that the specialized construction-related mutual aid association should be succeeded to the mutual aid association by industry at the time of commencing the business of the specialized construction-related

Meanwhile, Article 13 of the Act provides that when a license for a specialized construction business is revoked or invalidated, when a license for a specialized construction business is declared incompetent or bankrupt, when expulsion is made, the cause for partner's withdrawal shall be stipulated as the cause for partner's withdrawal, and Article 7 (1) 5 of the Act provides that matters concerning union members' admission, withdrawal, and expulsion shall be stipulated as the requisite entry in the articles of incorporation, Article 12 (2) of the Articles of the defendant association provides that "when a union member transfers all contribution certificates to another union member or a person who is a union member (Article 11 (1) of the Act)." In this regard, the law provides that a union member or a union member may transfer his/her contribution shares to another union member or a person who intends to be a union member (Article 12 (1) 2 of the Act).

In addition, in the event that a member of the Defendant Union holds a contribution certificate that falls short of the legal number of contribution units, the board of directors may suspend his eligibility for election and voting rights by the resolution of the board of directors, and suspend business transactions until he makes an investment in the shortage of contribution units by the resolution of the board of directors (Article 13), and the provisions governing the handling of contribution certificates enacted by delegation of the articles of association stipulate that when a member of the association provides the contribution certificate to the association, he shall affix his seal on the back of the contribution certificate, i.e., signature and seal on the back of the certificate, or prepare and submit it to the association (Article 11(2)). When the association acquires the shares of the union member in exercising a security right to the contribution certificate, he shall enter the transferee in the transfer certificate in the back of the contribution certificate, and when a third party disposes of the contribution certificate voluntarily, he shall enter the name of the transferee in the name of the transferee at the back of the certificate (Article 20).

In light of the above various provisions, it is reasonable to conclude that the articles of incorporation of the defendant union provide that "when a partner transfers all the contribution certificates to the partner" as the grounds for the rightful withdrawal of the entire contribution certificates should not only lead to the failure to perform all the basic obligation of contribution as a partner due to the transfer of the entire contribution certificates, but also to the rights and obligations of the member recognized based on the contribution shares. Thus, there is no room for a union to raise an objection against the union member by the rightful withdrawal of the member, and thus, it should not be required to go through any particular procedure to lose the status of the member.

Therefore, in a case where a member's investment certificate is transferred in whole, it constitutes a reason for the rightful withdrawal without asking on what the reason for the transfer is. Thus, not only the case where a member transferred all the investment certificate to another member, but also the case where a member provided the investment certificate to the association as a security and the whole the investment certificate is transferred to the association or a third party through the exercise of the security right, the member's status will be lost because it constitutes a reason

According to the records in this case, on February 26, 1996, prior to the occurrence of the guarantee accident of this case, the defendant union assessed 15,211,000 won as the total amount of investment shares by exercising the security right to the investment shares of the Hanjin Construction Co., Ltd. (hereinafter referred to as "the non-party company"), and appropriated as the evaluation amount the amount of 86,622,150 won as the loan obligation amount, and the amount of 60,846,000 won as the indemnity amount (which is related to other guaranteed obligations than this case). The non-party company becomes an enterprise which does not have the investment certificate (the non-party company). The intervenor union was established as a mutual aid association for each business type, which was separated from the defendant union on May 18, 1996 and started its business on July 1, 199. Accordingly, the non-party company did not lose the status of the intervenor union member as the intervenor union's member's member's member's member.

Nevertheless, the court below held that the non-party company lost its membership in the defendant union prior to the commencement date of the business of the defendant union by acquiring all shares through the exercise of the security interest of the defendant union, but the guaranteed debt of this case borne by the defendant union in relation to the non-party company was succeeded to the intervenor union regardless of the loss of membership in the non-party company as it is, by misapprehending the legal principles on the transfer of the status of union members at the time of establishment of the non-party company by industry and the succession of the rights and obligations arising therefrom, which affected the judgment. Thus, the ground of appeal pointing this out

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Jong-sik (Presiding Justice)