KRW 300M guarantee claim defeated by proving a forged undertaking

Background

Our two clients were nominal directors of a corporation run by a relative. A creditor that had lent the corporation KRW 300 million claimed against them under a guarantee bearing their seals, seeking payment and damages. The corporation later entered rehabilitation proceedings.

The issue

Whether the guarantee was genuinely made with our clients' consent, and whether an admission of its authenticity made by previous counsel at first instance could be withdrawn on appeal.

Our approach

Newly retained for the appeal, our clients' side argued that the corporation's actual operator had stamped the guarantee without their knowledge, using seals and seal certificates the operator had obtained by saying they were needed for board minutes. The first-instance admission was withdrawn as untrue and made by mistake, and our clients filed a criminal complaint against the operator for forging a private document.

The court's reasoning

The appeal court relied on the operator's own testimony, the operator's indictment after the complaint, the fact that only others signed repayment confirmations after rehabilitation began, and the fact that our clients were unpaid, nominal directors. It found the guarantee was likely sealed against our clients' will and held the withdrawal of the admission valid. With the guarantee inadmissible, both the guarantee and damages claims failed.

Outcome

The appeal court dismissed the creditor's appeal and the tort claim it added on appeal, and ordered the creditor to bear the costs after the appeal.

What this case means

Even a document bearing one's seal can be challenged if it is proven that it was sealed against one's will. An unfavorable statement made at first instance can be corrected on appeal when the legal requirements are met.

This is the outcome of an individual case and does not guarantee the same result in similar matters. Some facts have been generalized to protect the parties involved.