Judgments of the Supreme Court

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2019 (Ju) 558

Date of the judgment (decision)

2020.09.03

Case Number

2019 (Ju) 558

Reporter

Minshu Vol. 74, No. 6

Title

Judgment concerning a case in which the Court examined an action seeking revocation of an election to elect directors of a business cooperative and determined whether there is an interest in filing such action if the action is combined with another action filed to dispute the validity of the subsequent elections that were held to elect replacing directors and auditors on the grounds that the preceding election should be revoked

Case name

Case seeking a declaratory judgment of the invalidity of the resolution of the general assembly meeting

Result

Judgment of the First Petty Bench, quashed and remanded

Court of the Prior Instance

Hiroshima High Court, Judgment of December 11, 2018

Summary of the judgment (decision)

In the case where the Court examined an action seeking revocation of the election to elect directors of a business cooperative, if the action is combined with another action filed to dispute the validity of the subsequent elections that were held to elect replacing directors and auditors on the grounds that the preceding election should be revoked, an interest in filing such action to seek revocation of the preceding election would not cease to exist unless there are special circumstances such as the case where the subsequent election was held at a general assembly meeting of a 100% attendance rate.

References

Article 54 of the Small and Medium-Sized Enterprise Cooperatives Act, Article 831 of the Companies Act, Part II, Chapter I (Actions) of the Code of Civil Procedure



Small and Medium-Sized Enterprise Cooperatives Act

(Action for Declaratory Judgment on Nonexistence or Invalidity of or Action for Rescission of a Resolution of the General Meeting)

Article 54

With regard to an action for a declaratory judgment on the nonexistence or invalidity of or an action for rescission of a resolution of the general meeting, Article 830, Article 831, Article 834 (limited to the portions pertaining to item (xvi) and item (xvii)), Article 835, paragraph (1), Article 836, paragraph (1) and paragraph (3), Article 837, Article 838, and Article 846 (Action for Declaratory Judgment on Nonexistence or Invalidity of or Action for Rescission of a Resolution of a Shareholders Meeting) (excluding the portions pertaining to company auditors in the case of a cooperative limiting the audit authority) of the Companies Act shall apply mutatis mutandis.



Companies Act

(Action Seeking Revocation of a Resolution at a Shareholders Meeting)

Article 831

(1) In the cases listed in the following items, a Shareholder, etc. (or, in cases where the Shareholders Meeting, etc. set forth respectively in each such item is an Organizational Meeting or an Organizational Meeting of Class Shareholders, a Shareholder, etc., a Shareholder at Incorporation, a Director at Incorporation or a Company Auditor at Incorporation) may, within three months from the day of resolution at the Shareholders Meeting, etc., claim revocation of the resolution by filing an action. The same applies to a person who becomes a shareholder (or, in cases where that resolution is the resolution at an Organizational Meeting, Shareholders at Incorporation) or director (or, in cases of a Company with an Audit and Supervisory Committee, directors who are Audit and Supervisory Committee Members or other directors; hereinafter the same applies in this paragraph), company auditor or liquidator (or, in cases where such resolution is a resolution at a shareholders meeting or General Meeting of Class Shareholders, it includes a person who has the rights and obligations of a director, company auditor or liquidator pursuant to the provisions of Article 346, paragraph (1) (including cases where it is applied mutatis mutandis pursuant to Article 479, paragraph (4)), and in cases where such resolution is a resolution at an Organizational Meeting or Organizational Meeting of Class Shareholders, a Director at Incorporation (in cases where a Stock Company to be incorporated is a Company with an Audit and Supervisory Committee, Directors at Incorporation who are Audit and Supervisory Committee Members at Incorporation or other Directors at Incorporation)) or Company Auditor at Incorporation) by rescission of such resolution:

(i) when the calling procedures or the methods of a resolution at the Shareholders Meeting, etc. violate laws and regulations or the articles of incorporation or are grossly improper;

(ii) when the contents of the resolution at the Shareholders Meeting, etc. violate the articles of incorporation; or

(iii) when a grossly improper resolution is passed as a result of a person with a special interest in the resolution at the Shareholders Meeting, etc. exercising a voting right.

(2) In cases where an action set forth in the preceding paragraph is filed, even if the calling procedures or the methods of a resolution at the Shareholders Meeting, etc. are in violation of laws and regulations or the articles of incorporation, the court may dismiss the claim prescribed in that paragraph if it finds that the facts in violation are not serious and will not affect the resolution.

Main text of the judgment (decision)

The judgment in prior instance is quashed.

This case is remanded to the Hiroshima High Court.

Reasons

Concerning the reason for a petition for acceptance of final appeal stated by the counsel for final appeal, YOKOYA Soichiro

1. The appellee of final appeal is a business cooperative established under the Small and Medium-Sized Enterprise Cooperatives Act, while the appellant of final appeal is a member of the appellee. This is a case where the appellant (1) requested the appellee to revoke the election to elect officers held in May 16, 2016 under Article 831, paragraph (1), item (i) of the Companies Act applied mutatis mutandis pursuant to Article 54 of the Small and Medium-Sized Enterprise Cooperatives Act and (2) sought a declaratory judgment to declare the nonexistence of the election to elect officers of the appellee held in May 28, 2018 on the condition that a judgment to revoke the relevant part of the election mentioned above that is related to the election of directors would become final and binding.

2. The outline of facts determined by the court of prior instance is as follows.

(1) In the appellee's ordinary general assembly meeting held on May 16, 2016, the election stated in 1 of the election list attached to the judgment in prior instance to elect directors ("Election 1") and an election stated in 2 of the same election list to elect auditors ("Election 2") were held.

(2) Based on a decision to convene a meeting made by the board of directors consisting of directors elected by Election 1, the administrative director, who was the representative director elected by said board of directors, convened an ordinary general assembly meeting of the appellee on May 28, 2018. Because all of the directors and auditors elected in Election 1 and Election 2 stepped down from their positions due to the expiration of their terms, in the general assembly meeting, the election stated in 3 of the election list attached to the judgment in prior instance to elect directors ("Election 3") and an election stated in 4 of the same election list to elect auditors ("Election 4") were held.

(3) On August 12, 2016, the appellant filed an action to seek revocation of Election 1 and Election 2 (the requests made in this action shall be hereinafter referred to as the "Requests for Revocation"). On July 26, 2018, the appellant added requests to seek a declaratory judgment to declare the nonexistence of Election 3 and Election 4 on the grounds that Election 1 should be revoked (the "Requests for a Declaratory Judgment to Declare Nonexistence").

3. The court of prior instance determined as summarized below and dismissed the action concerning the Requests for Revocation and the Requests for a Declaratory Judgment to Declare Nonexistence.

During the pendency of the action concerning the Requests for Revocation, all of the directors and auditors elected in Election 1 and Election 2 stepped down from their positions due to the expiration of their terms. Then, in Election 3 and Election 4, which were held subsequently, new directors and auditors were elected. For this reason, unless there are special circumstances, the interest in filing an action would cease to exist with regard to the Requests for Revocation. While the Requests for a Declaratory Judgment to Declare Nonexistence was added in this case, in view of the fact that Election 1 remains valid until a judgment to accept the Requests for Revocation becomes final and binding and the fact that, regardless of whether Election 1 should be revoked or not, Election 3 and Election 4 were lawful as of the time of the completion of the oral argument in the fact-finding proceedings, it cannot be said that there is an interest in filing an action to seek revocation of Election 1. Furthermore, since there are no such special circumstances as mentioned above, an action concerning the Requests for Revocation lacks an interest in filing an action and is therefore unlawful. Also, an action concerning the Requests for a Declaratory Judgment to Declare Nonexistence can be considered to be an action seeking a declaratory judgment about the nonexistence of past legal relationships with a condition precedent and should therefore be considered to be unlawful.

4. However, the aforementioned determination in the judgment in prior instance cannot be upheld for the following reasons.

(1) During the pendency of the action to seek revocation of the election to elect directors of a business cooperative, even in the case where new directors and auditors were elected in subsequent elections, if a judgment to the effect that the preceding election to elect directors is revoked becomes final and binding, the preceding election would be considered to be invalid retroactively. Thus, unless there are special circumstances such as the case where the subsequent elections were held at a general assembly meeting of a 100% attendance rate, it has to be said that there is a defect in the subsequent elections to elect new directors and auditors held in the general assembly meeting convened by the representative director elected by the board of directors based on a decision to convene the meeting made by the board of directors elected in the election that could be considered to be invalid retroactively (1985 (O) No. 1529, judgment of the Third Petty Bench of the Supreme Court of April 17, 1990, Minshu Vol. 44, No. 3, at 526, 1998 (O) No. 1183, judgment of the First Petty Bench of the Supreme Court of March 25, 1999, Minshu Vol. 53, No. 3, at 580). Furthermore, in the case of such action as the one mentioned above that is filed to seek revocation of an election, an interest in filing such action could cease to exist because the practical benefit in seeking revocation disappears as a result of a change in the situation after the filing of the action. However, in the case of the action combined with the aforementioned action to seek revocation, if it is alleged that the subsequent elections have such defect as mentioned above, a determination as to whether the subsequent elections are valid or not can be made only after a decision is made as to whether the preceding election to elect directors should be revoked or not. Since such decision is indispensable, it should be found that there is a practical benefit in seeking revocation of the preceding election.

On these grounds, it is reasonable to interpret that, in the case where an action is filed to seek revocation of an election to elect directors of a business cooperative, if this action is combined with an action to dispute the validity of the subsequent elections to elect replacing directors and auditors on the grounds that the preceding election should be revoked, an interest in filing an action to seek revocation of the preceding election would not cease to exist unless there are such special circumstances as described above.

(2) If this case is examined from this perspective, this is a case where the action to seek revocation of Election 1 is combined with an action concerning Requests for a Declaratory Judgment to Declare Nonexistence on the grounds that Election 1 should be revoked. Such special circumstances as mentioned above cannot be found. Even though the combined action concerning the Requests for a Declaratory Judgment to Declare Nonexistence was filed on the condition that the judgment to the effect that Election 1 should be revoked would become final and binding, the combined action cannot be considered to be unlawful. On these grounds, an interest in filing an action to seek revocation of Election 1 cannot be considered to have ceased to exist. In the case where a judgment to the effect that Election 1 should be revoked becomes final and binding, and if Election 4 is found to have a defect, the auditors elected in Election 2 could be considered to still retain the rights and obligations as auditors (Article 36-2 of the Small and Medium-Sized Enterprise Cooperatives Act). For this reason, there is still a practical benefit in seeking revocation of Election 2. Therefore, as of the time when a determination has not been made as to whether Election 4 has a defect or not, it cannot be said that an interest in filing an action to seek revocation of Election 2 has ceased to exist.

5. The determination of the court of prior instance, which is different from the interpretation described above, contains a clear legal violation of laws and regulations that obviously affects the judgment. To this effect, the counsels' arguments are well-grounded. Thus, the judgment of prior instance should inevitably be quashed. This case is remanded to the court of prior instance to be further examined in relation to the question of whether the reason for revocation of Election 1 exists or not.

Thus, the Court unanimously decides as set forth in the main text.

Presiding Judge

Justice KOIKE Hiroshi

Justice IKEGAMI Masayuki

Justice KIZAWA Katsuyuki

Justice YAMAGUCHI Atsushi

Justice MIYAMA Takuya

(This translation is provisional and subject to revision.)