1990.04.17

1985 (O) 1529

Minshu Vol. 44, No. 3

Judgment concerning the case where a resolution at a shareholders meeting appointing a director does not exist and the effect of a subsequent resolution at a shareholders meeting appointing a director

Case seeking a declaration of a position, etc.

Judgment of the Third Petty Bench, partially quashed and remanded, partially dismissed with prejudice on the merits, and partially dismissed without prejudice

Nagoya High Court, Judgment of September 11, 1985

Where a resolution at a shareholders meeting appointing a person as a director does not exist, if a resolution appointing a director is made subsequently at a shareholders meeting that is called by the representative director, who was appointed by the board of directors that includes said person as a member, based on the board of directors' decision of calling, the aforementioned subsequent resolution does not exist unless there are special circumstances, such as where the resolution was made at a shareholders meeting which was held with unanimous approval of all the shareholders.

Article 231, Article 254, paragraph (1), and Article 258, paragraph (1) of the Commercial Code and Article 252 of the Commercial Code (prior to amendment by Act No. 74 of 1981)

Commercial Code

Article 231 The board of directors is to make a decision to call a shareholders meeting unless otherwise provided for in the Act.

Article 252 (prior to amendment by Act No. 74 of 1981) The provisions of Article 88, Article 105, paragraphs (3) and (4), Article 109, Article 249, and Article 250 apply mutatis mutandis to an action for declaratory judgment on the invalidity of a resolution on the grounds that the content of the resolution at a shareholders meeting is in violation of the applicable laws and regulations or the articles of incorporation.

Article 254, paragraph (1)
(1) A director is to be appointed at a shareholders meeting.

Article 258, paragraph (1)
(1) Where the number of directors comes to be less than the number of directors provided for in law or the articles of incorporation, a director who retires from the position due to the expiration of the term of office or resignation is to have the rights and obligations of a director until a newly appointed director assumes the position.

1. Of the judgment in prior instance, the part relating to the claim to seek a declaration that the appellee of final appeal is in the position of the representative director of the appellant of final appeal and a declaration that D is not in the position of the appellant's representative director, is quashed, and this case is remanded to the Nagoya High Court with respect to the aforementioned part.

2. The final appeal is dismissed with prejudice on the merits with respect to the part of the judgment in prior instance which relates to the claim to seek a declaration that the appellee is in the position of the appellant's director.

3. Other parts of the final appeal are dismissed without prejudice.

4. The costs of the final appeal concerning the preceding two paragraphs shall be borne by the appellant.

I. Concerning Reasons I and II for a final appeal stated by the counsel for final appeal

1. The facts determined by the court of prior instance are as follows.

(1) The total number of the appellant's issued shares is 4,000, of which the appellee and D hold 2,000, respectively.

(2) As of June 30, 1974, four persons, specifically, the appellee, D, E and F, had the position of being the appellant's director, respectively, and the appellee had the position of being its representative director.

(3) There is a notification of resignation to the effect that the appellee resigned from the director on July 1, 1974, as well as the minutes stating that a resolution appointing G as the successor director of the appellee was made at the appellant's extraordinary shareholders meeting on July 1, 1974, and the minutes stating that a resolution appointing D as the representative director was made at the appellant's board of directors meeting on July 1, 1974. On July 5, 1974, the following content was registered in the appellant's commercial register: "On July 1, 1974, the appellee resigned from the positions of director and representative director, and G assumed the position of director and D assumed the position of representative director." However, in fact, there was no fact of the appellee's resignation from the post of director. In addition, neither the aforementioned shareholders meeting nor board of directors meeting was held, and it thus cannot be said that the aforementioned resolutions exist.

(4) The following content was registered in the appellant's commercial registry: On January 31, 1984, three persons, D, F, and G, assumed the position of director, respectively, and D assumed the position of representative director.

(5) With the aim of dismissing the appellee from the representative director and appointing a new representative director by newly holding a board of directors meeting with the attendance of those who had been appointed as the appellant's directors as of June 30, 1974, in preparation for the case where the appellee's arguments: that there is no fact of the appellee's resignation from the appellant's director as of July 1, 1974, and that the aforementioned resolutions at the extraordinary shareholders meeting and the board of directors meeting on July 1, 1974, do not exist, are accepted in this action, D and F demanded that the appellee call a board of directors meeting to discuss this issue. In response, the appellee accepted the demand and issued to D and F a notice of calling a board of directors meeting on January 24, 1985.

(6) Based on the aforementioned notice, the appellant's board of directors meeting was held with attendance of D, F, and the appellee on January 30, 1985, and the board of directors made a resolution dismissing the appellee from the appellant's representative director and appointing D as the representative director.

2. The appellant argued as follows: Even if there is no fact of the appellee's resignation from the appellant's director and the aforementioned resolutions dated July 1, 1974, do not exist, there is no ground for the claim to seek a declaration that the appellee is in the position of the appellant's representative director and a declaration that D is not in the position of the appellant's representative director, among the appellee's claims in this case, because a resolution dismissing the appellee from the representative director and appointing D as the representative director was made at the board of directors meeting held on January 30, 1985.

3. Based on the aforementioned facts, the court of prior instance determined that the board of directors meeting argued by the appellant as having been held on January 30, 1985, cannot be considered as the appellant's board of directors meeting and that the resolution at this board of directors meeting should be considered not to exist, on the grounds that the appellant's directors as of January 30, 1985, were the three persons who were registered in the commercial registry, D, F, and G. Based on this determination, the court of prior instance cast aside the appellant's aforementioned arguments and upheld the aforementioned appellee's claim.

4. However, the aforementioned determination of the court of prior instance cannot be upheld for the following reasons.

According to the appellant's articles of incorporation in the case record, the term of office of the appellant's directors is provided as two years, and the number of directors is provided as being not more than five. In addition, according to the appellant's commercial registry, all of those who were in the position of being the appellant's director or representative director as of June 30, 1974, appears to be those who were appointed (reappointed) on December 25, 1972. Based on the aforementioned facts, as there is allegedly no fact of the appellee's resignation from the appellant's director, the appellee should be considered to have held the position of the appellant's director until December 25, 1974, on which the appellee's term of office expired. However, it is presumed that the appellant came to lack the number of directors provided in Article 255 of the Commercial Code because the terms of office expired not only for the appellee but also for D, E and F upon the passage of December 25, 1974. Consequently, under Article 258, paragraph (1) of the same Code, the aforementioned four persons must be considered to continue to have held the rights and obligations as the appellant's directors until newly appointed directors assumed the positions. In addition, under Article 261, paragraph (3) and Article 258, paragraph (1) of the same Code, the appellee must be considered to continue to have held the rights and obligations as the representative director in the same manner.

However, the court of prior instance determined that appointment of three persons, D, F, and G, as new directors on January 31, 1984, had been registered in the appellant's commercial registry, and according to the appellant's commercial registry in the case records, it appears that appointment of new directors was registered before then, on May 25, 1978, and January 31, 1981. However, as mentioned above, a resolution at the shareholders meeting on July 1, 1974, appointing G as a director cannot be said to exist. In such case where a resolution at a shareholders meeting appointing a director cannot be said to exist, the board of directors including the relevant director cannot be considered as the legitimate board of directors, and the representative director appointed by said board of directors is also not considered as a legitimately appointed one (incidentally, in this case, the court of prior instance determined that the resolution at the appellant's board of directors meeting on July 1, 1974, appointing D as the representative director does not exist) who has the authority to call a shareholders meeting. Therefore, even if a resolution appointing a new director is made at a shareholders meeting called by such representative director based on a decision of calling made by such board of directors, the resolution must be considered not to legally exist unless there are special circumstances, such as where the resolution was made at a shareholders meeting which was held with unanimous approval of all the shareholders (see 1983 (O) No. 1567, the judgment of the Second Petty Bench of the Supreme Court of December 20, 1985, Minshu Vol. 39, No. 8, at 1869). Therefore, it is considered impossible to appoint a new director at a subsequent shareholders meeting as long as this defect continues to exist. Additionally, no such special circumstances have been argued or proven in this case.

On that basis, as of January 30, 1985, four persons, the appellee, D, F, and E, had the rights and obligations as the appellant's directors under Article 258, paragraph (1) of the Commercial Code, and the aforementioned resolution at the board of directors meeting held by the three of them, the appellee, D, and F, on January 30, 1985, which was to dismiss the appellee from the appellant's representative director and to appoint D as the representative director, should be considered valid if there are special circumstances based on which it should be found that attendance of E, who did not receive the notice of calling, does not affect the result of the resolution (see 1968 (O) No. 1144, the judgment of the Third Petty Bench of the Supreme Court of December 2, 1969, Minshu Vol. 23, No. 12, at 2396). Therefore, in this case, it must be said that the appellee still had the rights and obligations as the appellant's director, but that the appellee's rights and obligations as the representative director extinguished and D obtained the position as the representative director. Consequently, the judgement in prior instance to the effect that the aforementioned resolution at the board of directors meeting held on January 30, 1985, does not exist on the grounds that four persons, the appellee, D, E, and F, cannot be considered to be the appellant's directors as of January 30, 1985, and that the appellee's claim to seek a declaration that the appellee is in the position of the appellant's representative director and a declaration that D is not in the position of the appellant's representative director should be upheld should be considered to contain illegality of the erroneous interpretation and application of laws and regulations and furthermore illegality of insufficient examination. The aforementioned illegalities obviously affect the judgment. The counsel's arguments are well-grounded as those alleging the same effect, and out of the judgment in prior instance, the part relating to the aforementioned claim should inevitably be quashed. This case should be remanded to the court of prior instance with respect to the aforementioned part because this case needs to be further examined in relation to the effect of the resolution at the board of directors meeting held on January 30, 1985.

II. Concerning Reason III for a final appeal stated by the same counsel for final appeal

As indicated above, the appellee is considered to continue to have held the rights and obligations as a director even after the expiration of the term of office under Article 258, paragraph (1) of the Commercial Code. According to the case records, it is obvious that the appellee filed this action that includes the claim to seek a declaration that the appellee is in the position of the appellant's director after the expiration of the aforementioned term of office. In such case, it is reasonable to consider that the aforementioned claim is to seek a declaration of being in the position as a person who has the rights and obligations of a director under the same paragraph. Therefore, the measure of the court of prior instance contains no illegality in that the court of prior instance did not demand clarification regarding whether the appellee retired from the director due to the expiration of the term of office. The counsel's arguments are not acceptable.

III. Incidentally, the appellant does not submit any document stating reasons for a final appeal in relation to the part relating to other claims in the judgment in prior instance.

IV. Accordingly, in accordance with Article 407, paragraph (1) and Articles 396, 384, 399, 399-3, 95, and 89 of the Code of Civil Procedure, the Court unanimously decides as set forth in the main text.

Justice TEIKA Katsumi

Justice YASUOKA Mitsuhiko

Justice SAKAUE Toshio

Justice SONOBE Itsuo