Law Firm LLC (Attorneys Kim Dong-dong et al., Counsel for the plaintiff-appellant)

Law Firm Sejong (LLC et al., Counsel for the defendant-appellant)

1. Case history

According to the reasoning of the judgment below and the records, the following facts are revealed.

A. Defendant Substitute Asset Management Co., Ltd. (hereinafter referred to as “Defendant Substitute”) shall invest in the development project for the establishment of guest rooms and consortiums with the U.S. S. Plubya Round in the development project (hereinafter referred to as “development project in this case”) which establishes a guest room and contact center in the Raya Round area. < Amended by Act No. 8078, Dec. 2, 2007>

7. On December 27, 2007, the ○○○○○○○○ Fund in the amount of KRW 10 billion and on December 27, 2007, an investment trust property of KRW 8.5 billion were created, respectively. Institutional investors, such as the Construction Workers’ Mutual Aid Association, purchased beneficiary certificates of KRW 100,000,00 of the equity shares of a limited liability company, instead of a company established for a development project. Instead, each of the above fund assets were used to acquire KRW 100,00 of the equity shares of the limited liability company of the United States, the limited liability company acquired KRW 100,000,000,000 in KRW 10,000,000,000 in KRW 10,000.

B. On May 16, 2008, the Defendant created ○○○○○○○○○○ Fund in the size of KRW 19 billion in investment trust property 3 and 4 billion in the amount of KRW 4 billion in investment trust property. The property of each of the above funds was owned by U.S. companies that are controlled by the Defendant, instead of the Defendant, ○○○○○○ Fund in the size of KRW 19 billion in investment trust property, and ○○○○○ Fund in the size of KRW 4 billion in investment trust property. The property of each of the above funds

The equity (10%) of the Company was used as the acquisition fund and the loan to the Company, and instead, Liber 2 acquired 13% of the equity interest of Liber 13%.

C. In its original plan to plan ○○○○○○ Fund 3 and 4 as a total of KRW 32 billion, and around May 2008, the Plaintiff recommended the Plaintiff to purchase KRW 9 billion of the said Fund’s beneficiary certificates, and explained about the instant development project and issued the investment prospectus. Although the Plaintiff intended to purchase the said Fund’s beneficiary certificates, it was prohibited from purchasing the beneficiary certificates of a special asset investment trust under the Credit Unions Act, and thus, the Plaintiff’s investment was impossible. For this reason, the total amount of KRW 3 and KRW 4 was reduced to KRW 23 billion.

D. When it became impossible for the Plaintiff to purchase the beneficiary certificates of an OOO fund as seen above, the Plaintiff agreed to make an investment in Mad Asset Management Co., Ltd. (former trade name: Ehyd Asset Management Co., Ltd.; hereinafter “Defendant Ehyd Co., Ltd”) by Defendant Myd Co., Ltd. after consultation with the responsible parties, etc., to purchase the beneficiary certificates. Defendant Myd Co, Ltd issued an investment prospectus stating “△△△△△△△△△△△ Investment Trust” to the Plaintiff around that time, and issued the investment prospectus stating that the investment prospectus issued by Defendant Myd Co., Ltd., which solicited the investment of ○○○○ Fund, contains the same content as to the profit structure and risk factors of the investment prospectus and the fund that the investment prospectus issued by Defendant Myd Co., Ltd., unlike the investment prospectus issued by Defendant Myd Co., Ltd., which had no contingent remuneration agreement with the asset management company, and that the investment trust shares were equally divided into the U.S. special purpose-based fund’s equity interest with ○○ investment trust.

E. According to the above agreement, the Plaintiff purchased 8 billion won of beneficiary certificates of a real estate fund established by Defendant Myasset (hereinafter “instant investment trust”) and paid Defendant Myasset an operating fee equivalent to 0.94% of the investment trust fund every year, and Defendant Myasset actually received operating fees from the Plaintiff. Defendant Myasset established an texck Investment Company (hereinafter “Tex”) which is a domestic special purpose company for real estate development business, which is a domestic company for the purpose of real estate development business, and loaned the instant investment trust property to tex. The instant investment trust property was partially financed by tex 2 shares, and tex loaned funds to tex 2.

F. Finally, ○○○○○○○○ and 3 and 4 obtained 72% of the equity interest of Alternative Capital 2, texco, and 28% of the equity interest of Texco, instead of texco, and Alternative Capital 2 acquired 13% of the equity interest of Tex.

G. However, the instant development project failed ultimately, such as the construction loan originally planned was nonexistent, and the construction project was not commenced until June 16, 201, which is the expiration date of the instant investment trust.

2. The judgment of the court below

For reasons indicated in its holding, the lower court dismissed the Plaintiff’s claim on the following grounds as to whether the Defendants, as an asset management company of the instant investment trust, violated the duty to protect investors at the time of soliciting investment trust, and breached the duty of due care as a good manager

A. Defendant Substitute is not an asset management company of the instant investment trust.

B. Defendant Myasset, an asset management company of the instant investment trust, agreed with the Plaintiff that the instant investment trust property is not actually managed and deposited into the account of Defendant Myasset 2, which is controlled by the Defendant, instead of managing the instant investment trust property.

C. Therefore, all the Defendants do not bear the duty to explain the instant investment trust to the Plaintiff, the duty to protect investors, and the duty of due care as a good manager.

3. Judgment of the Supreme Court

A. According to Articles 4(2) and 56(1) and (4) of the former Indirect Investment Asset Management Business Act (amended by Act No. 8635, Aug. 3, 2007; hereinafter “former Indirect Investment Act”), an asset management company is a person who creates an investment trust and manages the investment trust property, and is in the position to produce and distribute information first on the investment trust. An investor is also aware that the investment information provided by an asset management company is correct with the trust’s professional knowledge and experience. For this reason, an asset management company is obligated to provide correct information on the investment trust and, in the event of insufficient information on the profit structure and risk factors of the investment trust, inform investors of such circumstances. This does not change because it actually led the creation of the investment trust (see, e.g., Supreme Court Decision 2010Da1630, Apr. 16, 2015).

2) However, in order to become an asset management company engaged in the business of managing the indirect investment property under the former Indirect Investment Act, it shall meet certain requirements and obtain permission from the Financial Services Commission (Article 4(1)), and any person other than the asset management company shall be “asset management (Article 7(2))” in his/her trade name, and there is a difference between the asset management company and investors in the knowledge, experience, and ability of investment trust. In addition, as seen earlier, there is a difference between the asset management company and the investor in terms of the knowledge, experience, and ability of investment trust. In light of the general characteristics of indirect investment in which the collection and provision of investment data in the market, in principle, should be entrusted to the professional investment manager, even if the asset management company itself is not directly created or managed by the asset management company, if there are special circumstances to deem that the asset management company actually led to the establishment of the investment trust by substantially determining the main contents related to the profit structure or risk factors of the investment trust property, the asset management company is required to make recommendations to investors for the investment trust product.

B. Examining the factual relations of this case as seen earlier in light of the aforementioned legal principles, the lower judgment denying the Defendant’s liability is difficult to accept for the following reasons.

At the first time, the Plaintiff intended to purchase beneficiary certificates of ○○○○ Fund upon the Defendant’s solicitation. However, as a result of regulatory regulations under the Credit Unions Act, it was impossible to purchase the beneficiary certificates of OOO Fund, which is a special asset fund, the Plaintiff decided to purchase beneficiary certificates of the instant investment trust, which has the same profit structure in that it would make profits from investing in the instant development project instead of OOOO fund, in consultation with the Defendant, and obtain profits from such investment in the instant development project. The investment prospectus issued by ○○ Fund issued by ○○○ Fund and the investment prospectus issued by Mao Asset investment trust of this case by ○○○○ Fund, are distinguishable between the remuneration received by ○○○ Fund as each asset management company of this case and the investment structure of the instant investment trust between OOOO fund and Mao Asset, but since both are aimed at obtaining profits through the instant development project, the explanation about the profit structure and risk factors, etc. is practically the same.

In addition, the Defendant had already established ○○○○○ Fund 1 and 2 to sell the beneficiary certificates of OOO fund 3 and 4 when selling the beneficiary certificates, and the additional investment amount was necessarily required in any form for the success of the instant development project.

In light of the above, it is reasonable to view that the Plaintiff, who purchased the beneficiary certificates of the instant investment trust, actually led the establishment of the instant investment trust by determining the main contents related to the profit structure and risk factors of the instant investment trust on behalf of the Defendant.

Therefore, even if Defendant Alternative did not assume the fiduciary duty at the asset management stage, as it is not an asset management company of the instant investment trust, it is assumed that the Plaintiff is obliged to reasonably investigate profit structure and risk factors in the process of soliciting the purchase of beneficiary certificates of the instant investment trust and to provide correct information. Nevertheless, the lower court determined otherwise on the grounds stated in its reasoning, that Defendant Alternative did not assume the fiduciary duty against Plaintiff at the stage of soliciting investment insofar as it is not an asset management company of the instant investment trust. In so doing, the lower court erred by misapprehending the legal doctrine on the investor protection duty borne by the person who solicits investment trust products under the former Indirect Investment Act, thereby adversely affecting the conclusion of the judgment.

C. As to the claim against Defendant Myasset

Defendant Myasset is an asset management company of the instant investment trust, which entered into the instant investment trust agreement with the Plaintiff and received lawful remuneration from the Plaintiff. As can be explained in the investment prospectus issued by Defendant Myasset, the investment prospectus issued by Defendant Myasset to the Plaintiff also indicates that the instant investment trust property was invested in ○○○○ Fund through teco, a domestic special purpose company, and that there is a difference between the investment structure of the instant investment trust and the instant investment trust. Defendant Myasset stated in the investment prospectus that the instant investment trust property was paid to investors of the instant investment trust in addition to regular management fees. However, Defendant Myasset stated in the investment prospectus of the instant investment trust issued by Defendant Myasset that received contingent fees from investors of the instant investment trust, but it also stated that Defendant Myasset was paid only regular management fees of Defendant Myasset and did not receive contingent fees. In addition, Defendant Myasset continued to receive assets management from the Plaintiff even after deposit in the account of the Plaintiff Myasset 2 in lieu of the Plaintiff’s investment funds.

Considering such circumstances, Defendant Myasset bears the duty of care to protect the Plaintiff, an investor, at the stage of solicitation for the conclusion of an asset transport contract as an asset management company of the instant investment trust, and at the stage of asset management, it shall be deemed that it bears the duty of care to manage the Plaintiff’s assets, an investor, with the care of a good manager. This does not change on the ground that the third party, such as Defendant, took the initiative in establishing the instant investment trust.

Nevertheless, the lower court determined that Defendant Myasset did not bear the duty of protecting investors and the duty of due care of a good manager as an asset management company, notwithstanding the absence of reasonable grounds to acknowledge that there was a special circumstance to escape the duty of care to be borne by Defendant Myasset as an asset management company. The lower court erred by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, and by misapprehending the legal doctrine on the duty of an asset management company under the former Indirect Investment Act to

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part of the judgment below regarding KRW 2,682,56,346, which is the purport of the appeal, and damages for delay thereof, shall be reversed, and this part of the case shall be remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench

Justices Kwon Soon-il

Chief Justice Lee Ki-taik

Justices Park Jung-hwa