[1] The meaning of "where an act constitutes grounds for disqualification" under Article 40 (2) 2 of the Installment Transactions Act

[2] Where an officer or a controlling shareholder of a prepaid installment business company is an officer or a controlling shareholder of another prepaid installment business company at the time the registration of the prepaid installment business company is revoked, whether the administrative agency should revoke the registration of the prepaid installment business (affirmative in principle), and whether the revocation of the grounds for disqualification should be viewed differently (negative)

[1] The phrase “case of falling under disqualification” under Article 40(2)2 of the Installment Transactions Act generally refers to a natural interpretation in accordance with the language and text that considers “case of falling under disqualifications” to mean “case of having occurred.” Unlike this, deeming that an administrative agency’s grounds for disqualification ought to be maintained even at the time of revocation of registration does not coincide with the language and text of the said provision. In addition, if a company falling under disqualifications immediately before revocation of registration is temporarily supplemented, the legislative purpose with which the provision on revocation of registration is established cannot be realized.

[2] In light of the language, content, structure, and legislative intent, etc. of Articles 20 subparag. 4 and 40(2)2 of the Installment Transactions Act, where an officer or a controlling shareholder at the time of cancellation of the registration of prepaid installment trading business is an officer or a controlling shareholder of another prepaid installment trading company, in principle, the administrative agency should revoke the registration of prepaid installment trading business of this company, and it does not change even if the relevant executive officer at issue was dismissed prior to the revocation of registration due to reasons such as resignation.

However, even in a case where a prepaid installment trading company falls under disqualifications as seen above, it shall not be deemed that the registration of revocation may not be revoked even in a case where there is a circumstance where it is difficult to expect the party to avoid the occurrence of disqualifications in light of the principle of liability, or where there is a justifiable reason for not being able to criticize the violation of legal obligations. Such interpretation aims at avoiding harsh results arising from the strict application of the above provision and preventing the said provision from essentially impairing the freedom of occupation or the freedom of business

[1] Article 40 (2) 2 of the Installment Transactions Act / [2] Article 20 subparagraph 4 of the Installment Transactions Act and Article 40 (2) subparagraph 2 of the Installment Transactions Act

[2] Supreme Court Decision 75Nu255 Decided September 14, 1976 (Gong1976, 9371) Supreme Court Decision 2013Du505 Decided October 15, 2014 (Gong2014Ha, 2192)

Lee & Lee, Inc. and three others

Future Commercial 119, Inc.

The Seoul Special Metropolitan City Mayor (Attorney Lee Jae-soo, Counsel for defendant)

Seoul High Court Decision 2015Nu48527 decided June 24, 2016

Of the judgment below, the part of the judgment of the court below is reversed, and this part of the case is remanded to the Seoul High Court. The appeal by the plaintiff future-119 is dismissed. The costs of appeal by the plaintiff future-19 are assessed against the plaintiff future-119. The costs of appeal by the plaintiff future-19 are assessed against the plaintiff future-119.

The grounds of appeal are examined.

1. The defendant's first ground for appeal

A. On March 17, 2010, the Act on Installment Transactions clearly included the scope of application of this Act in relation to prepaid installment transactions, such as funeral and marriage, which are a kind of services for coming-of-age, marriage, funeral and funeral, and funeral service, and made institutional regulations clear. In light of the specific contents, unlike ordinary installment business operators, the Act has newly established public law regulations, such as providing for business registration for prepaid installment business operators (Article 18), providing for the minimum amount of capital (Articles 19), investigation and supervision by administrative agencies (Articles 35 through 37), and corrective recommendations and corrective measures (Articles 38 through 42) (Article 27), and introduced the obligation to enter into consumer damage compensation insurance contract (Article 18, 19, 27, and 40, 200, 200, 205, 200, 200, etc., 205, etc., 200, etc., 2015).

Furthermore, Article 20 of the Installment Transactions Act provides for the grounds for disqualification for registration of prepaid installment business and the grounds for revocation of registration. First of all, Article 20 of the Installment Transactions Act provides that “No person who falls under any of the following subparagraphs shall make a registration pursuant to Article 18,” and subparagraph 4 provides that “a person who is or was an executive officer or controlling shareholder at the time of revocation of registration pursuant to Article 40 refers to a company that is an executive officer or controlling shareholder at the time of revocation of registration.” This provision strictly provides for the grounds for disqualification that cannot be an executive officer or controlling shareholder of the prepaid installment transaction company without requiring particular physical requirements in addition to the minimum amount of capital.

Next, Article 40(2) of the Installment Transactions Act provides that “Where a prepaid installment business operator falls under any of the following subparagraphs, the Mayor/Do Governor may revoke his/her registration: Provided, That where a prepaid installment business operator falls under subparagraphs 1 and 2, his/her registration shall be revoked.” In subparagraph 2 of the same Article, “where he/she falls under any of the grounds for disqualification provided for in each subparagraph of Article 20” stipulates that “where a prepaid installment business operator falls under any of the subparagraphs of Article 20” is essential grounds for revocation of registration. This strongly regulates human elements of the prepaid installment business by linking the grounds for revocation of registration.

In our reality, where a prepaid installment business entity, including a superior company, and a prepaid installment business entity, do not perform services promised to dishonor, discontinue business, etc., thereby causing damage to consumers, and such business entity or controlling shareholder abused the corporation system and actually continues to engage in business operations. Accordingly, the Installment Transactions Act strictly regulates the grounds for disqualification for registration of prepaid installment business and the grounds for revocation of registration, thereby strictly restricting the freedom of occupation or freedom of business of the prepaid installment business entity, thereby enhancing the soundness of the prepaid installment business entity by restricting the freedom of occupation or freedom of business of the prepaid installment business entity. This would contribute to protecting the rights and interests of consumers by fairly engaging in transactions based on prepaid installment contracts and enhancing market confidence, thereby contributing to achieving the legislative purpose (Article 1 of the Installment Transactions Act) to contribute to the sound development of the national economy. Meanwhile, the Installment Transactions Act provides for the purpose of protecting the interests of the prepaid installment business entity by allowing the company to be registered again (Article 20 subparagraph 3 of the Installment Transactions Act).

B. Considering that “a case falling under disqualification” as prescribed by Article 40(2)2 of the Installment Transactions Act generally refers to a natural interpretation in accordance with the language and text to regard “a case where a cause for disqualification occurred” as “a case where a cause for disqualification occurs.” Unlike this, deeming that an administrative agency’s grounds for disqualification ought to be maintained even at the time of the revocation of registration does not coincide with the language and text of the above provision. In addition, if a company falling under disqualification temporarily supplements grounds for disqualification immediately before the revocation of registration, the legislative purpose with which the provision for revocation of registration is included

In light of the language, content, structure, and legislative intent of the above provision, where a person who was an officer or a controlling shareholder at the time of cancellation of the registration of prepaid installment trading business of a prepaid installment trading company is an officer or a controlling shareholder of another prepaid installment trading company, the administrative agency should, in principle, revoke the registration of prepaid installment trading business of the company, and it does not change even if the relevant officer was removed prior to the cancellation of registration due to reasons such as resignation.

However, even in a case where a prepaid installment transaction company falls under disqualifications as seen above, it shall not be deemed that the revocation of registration may not be possible even in a case where there is a circumstance where it is difficult to expect the party to avoid the occurrence of disqualifications in light of the principle of liability, or where there is a justifiable reason for not being able to criticize the violation of legal obligations (see, e.g., Supreme Court Decisions 75Nu255, Sept. 14, 1976; 2013Du505, Oct. 15, 2014). Such interpretation is to avoid harsh results arising from the strict application of the above provision and to prevent the said provision from essentially impairing the freedom of occupation or the freedom of business under the Constitution.

C. Review of the reasoning of the lower judgment and the record reveals the following facts.

(1) On November 2, 2012, the Ulsan Metropolitan City Mayor revoked the registration of the prepaid installment trading business with respect to the development of the CIM, which was registered as a controlling shareholder by the Nonparty (hereinafter “CIM development”).

(2) On October 22, 2014, the Defendant revoked, respectively, the registration of the prepaid installment business on the ground that the Nonparty, who was the controlling shareholder at the time of the revocation of registration of MMM development, was the company that was an executive officer at the time of the revocation of registration (hereinafter “instant disposition”) under Article 40(2)2 and subparagraph 4 of Article 20 of the Installment Transactions Act.

(3) On August 19, 2014, the Nonparty was appointed as an internal director of Plaintiff 1 and 2 on September 16, 2014, but resigned on November 20, 2014. However, on January 3, 2012, the Nonparty was appointed as an internal director of Plaintiff 3 on January 3, 2012, but resigned on April 22, 2013. ③ on July 26, 2012, the Nonparty was appointed as an internal director of Plaintiff 4 and resigned on November 30, 2012. However, on July 22, 2013, the Nonparty resigned on August 9, 2013.

(4) However, the Nonparty did not serve as the internal director or representative director of Plaintiff 1 or 4 at the time of the instant disposition.

D. In accordance with the systematic interpretation and constitutional interpretation of the Installment Trade Act, the court below held that the first disposition of this case revoking the registration of Plaintiff 1 or 4 was unlawful on the ground that the Nonparty was not an officer of Plaintiff 1 or 4 at the time of the first disposition, and the first disposition of this case was unlawful on the ground that the Nonparty was not an officer of Plaintiff 1 or 4 at the time of the first disposition.

E. However, the lower court’s determination is difficult to accept.

Examining the above facts in light of the legal principles as seen earlier, since the Nonparty, who was the controlling shareholder at the time of cancelling the registration of the CM development, served as the inside director of Plaintiff 1 or 4, Plaintiff 1 or 4 constitutes “company at the time of revocation of registration pursuant to Article 40, which is an officer or controlling shareholder at the time of revocation of registration pursuant to Article 20 subparag. 4 of the Installment Transactions Act.” This is a reason for cancellation of registration pursuant to Article 40(2) subparag. 2 of the Installment Transactions Act. Therefore, barring any special circumstance against Plaintiff 1 or 4, the disposition No. 1 of this case at the time of revocation of the registration of Plaintiff 1 or 4 is deemed lawful, and it cannot be deemed that the instant disposition is lawful, and it is consistent with the Constitution, as stated in the judgment of the court below, only if the registration can be revoked only when there is a reason for revocation of registration at the time of revocation of registration.”

Nevertheless, the lower court’s determination that the instant disposition was unlawful is erroneous. In so doing, it did not err by misapprehending the legal doctrine on the meaning of “where a person becomes disqualified under each subparagraph of Article 20” under Article 40(2)2 of the Installment Transactions Act, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point is with merit.

2. Determination as to the ground of appeal Nos. 1 and 2 by the Plaintiff, Future Trade Group 119 (hereinafter “Plaintiff 5”)

The lower court determined that the instant disposition was lawful on October 22, 2014, on the grounds that the Defendant’s revocation of the registration of prepaid installment trading business with Plaintiff 5 pursuant to Article 40(2)3 of the Installment Transactions Act (hereinafter “instant disposition”) was not a deviation or abuse of discretion, on the ground that the Defendant’s revocation of a mutual aid agreement with Plaintiff 5 on October 22, 2014.

In light of the relevant legal principles and records, such determination by the lower court is justifiable. In so determining, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on grounds for revocation of registration under the Installment Transactions Act, or by exceeding the bounds of the principle of free evaluation

3. Conclusion

Without further proceeding to decide on the remaining grounds of appeal by Plaintiff 1 through 4, the part of the judgment below against the Defendant is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The appeal by Plaintiff 5 is dismissed, and the costs of appeal by Plaintiff 5 are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)