April 10, 2018

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the court of first instance is revoked. The defendant 1 shall pay to the plaintiff each interest calculated at the rate of 9,980,000 won, 66,660,000 won, and 33,320,000 won to the defendant 3,320,000 won, and 15% per annum from June 8, 2010 to the service date of a duplicate of the complaint of this case, and 15% per annum from the following day to the day of full payment.

(a) Status of parties and persons concerned;

1) On March 23, 2010, the Plaintiff (formerly: hereinafter “instant capital increase”) offered capital increase with the purpose of developing, manufacturing, and selling bio-mar medicine with the third party’s principal business, and offered capital increase with the third party’s allocation for the purpose of clinical expenses, etc. (hereinafter “instant capital increase”) on March 24, 2010, to procure KRW 23,154,920,740. The Defendants participated in capital increase with the instant capital increase.

2) Meanwhile, around 2010, Nonparty 1, along with the Plaintiff, took place as the president of the so-called “○○ Group” under the control of secret interest through the borrowed name shares. Nonparty 3 is a person who exercises overall control over the affairs of the ○○○○ Group, known as the head office of the ○○ Group, under the direction of Nonparty 1. Nonparty 2 was the representative director of the Plaintiff, but actually performed duties upon Nonparty 1 and Nonparty 3’s order.

B. Conclusion of an investment contract between the Plaintiff and the Defendants

1) On March 23, 2010, the Defendants: “Defendant 1,49,99,300 won; Defendant 2, Defendant 499,99,990 won; and Defendant 3, respectively, invested in the Plaintiff, respectively, to use the said investment amount as the price for subscription to new capital increase; and the Plaintiff shall return the said investment amount to the Plaintiff until April 22, 2010; the Plaintiff shall provide a notarized bill of commitment, issued shares, and cash assets equivalent to 30% of the investment principal; and if investment profits accrue from disposing of the secured stocks before the maturity, the Defendants and the Plaintiff shall be distributed to 4:6” (hereinafter “instant investment contract”); and Nonparty 2 jointly and severally guaranteed the Plaintiff’s obligation.

2) According to the instant investment contract, the Defendants received the future deposit account (Account Number omitted) in the Plaintiff’s name on March 23, 2010, which is equivalent to KRW 900 million, and the return on guarantee under the instant investment contract did not specify the return on guarantee. However, the Defendants received KRW 150 million on May 25, 2010, and KRW 50 million on June 8, 2010 as profits.

C. Determination of conviction against Nonparty 2 and Nonparty 1

The crime of embezzlement of part of the subscription price for new shares in this case using it for other than its original purpose; ① on August 1, 2012, the non-party 2 was sentenced to imprisonment for two years and six months with labor at the Daejeon District Court's Branch Branch of the Daejeon District Court's Incheon District Court's Branch, and the appeal against the above decision became final and conclusive around February 2013; ② on June 10, 2015, non-party 1 was convicted of seven years of imprisonment with labor at the Seocheon Branch of the Daejeon District Court's Branch of the Daejeon District Court's Incheon District Court's Branch of the District Court's Incheon District Court's 2014 high court, 104 high court, 217, 259, 279, 2015 high court 6, 215 high court and 2015 high court before its reversal and transmission (the Daejeon High Court's 2015No372) and the appellate court's appeal was dismissed from the Daejeon High Court's High Court's 20161819.

[Reasons for Recognition] The testimony was made to the effect that there is no dispute, Gap's evidence Nos. 1, 2, 4, 5, 10, 11, 19 through 21, Gap's evidence Nos. 3-1 through 3, and Gap's evidence Nos. 6-1 through 5 (the witness No. 2 of the court of first instance bears the plaintiff's seal impression No. 6-1, and there is no fact that the plaintiff's seal impression or his own seal impression is affixed, and there is no fact that he delegated it." Meanwhile, he testified to the effect that "the non-party No. 2 has handled the work with the instructions of the non-party No. 1 and 3, and the matters related to the fund was handled entirely at the head office, and the plaintiff or his seal impression or his own seal impression certificate was delivered at the request of the head office. Thus, it is reasonable to view that the above testimony was delegated to the plaintiff or his own seal imprint on the side of the head office. Thus, it is admissible evidence as evidence.

2. Determination as to Defendant 2’s assertion on the delegation of litigation in the first instance trial and the instant investment contract, etc.

A. The defendant 2's assertion

1) Defendant 2 did not delegate the case to the Law Firm Cheongpo, by failing to prepare a letter of delegation with the Law Firm Cheongpo, etc. In the first instance court, Defendant 2’s litigation act by the Law Firm Cheongpo, who represented Defendant 2 at the first instance court, has no effect as to Defendant 2.

2) Defendant 2 did not prepare a subscription note for shares, conclude the instant investment contract with the Plaintiff, or receive profits from the Plaintiff regarding the issue of subscription for new shares.

B. Determination

1) Determination as to whether a lawsuit was delegated in the first instance trial

A) The duplicate of the instant complaint was served on Defendant 2 on February 3, 2016, and thereafter, was submitted to the first instance court on February 23, 2016. The fact that Defendant 2’s attorney and the sub-agent of lawsuit were present at the court on the date of pleading in the first instance court, and that Defendant 2 did not attend the court on February 3, 2016 is significant in this court.

B) In light of the above-mentioned facts and the fact that there is no evidence to acknowledge that the delegation of the above lawsuit between Defendant 2 and Defendant 2 were forged, the part of Defendant 2’s assertion that Defendant 2 did not delegate the case to the Law Firm Cheongdong in the first instance trial cannot be accepted.

2) Determination as to whether to conclude the instant investment contract

A) Defendant 2’s attorney at the first instance court made a statement to the effect that he/she had entered into the instant investment contract and received earnings at the first instance court. Defendant 2’s attorney at the first instance court also acknowledged Defendant 2’s assertion to the above purport in the first instance court. It is reasonable to view that Defendant 2 made a statement to the same purport in the first instance court is a confession of the fact that he/she received earnings, etc.

B) However, it should be deemed that Defendant 2’s reversal of the confession by asserting that “the Plaintiff did not conclude the instant investment contract with the Plaintiff or receive any profit from the Plaintiff,” as above, when it comes to the trial, constitutes revocation of confession.

C) Meanwhile, the party who revoked a confession should prove that the confession was caused by mistake, in addition to that that the confession contradicts the truth (see, e.g., Supreme Court Decision 2012Da86048, Jun. 27, 2013).

D) In light of the above legal principles, Defendant 2’s revocation of the confession in the first instance court as to the instant investment contract and the receipt of the Plaintiff’s profits cannot be accepted without any proof as to the fact that the confession in the first instance court is contrary to the truth and due to mistake.

E) In addition, according to the items of evidence Nos. 3-2 and 6-1 of the evidence Nos. 3-2 and the purport of the whole pleadings, etc., Defendant 2’s subscription form (Evidence No. 3-2 of the evidence No. 3-2) was prepared in accordance with the terms and conditions of participation in capital increase with the investment contract of this case, and Defendant 2’s seal is affixed to the above subscription form, and the copy of Defendant 2’s resident registration certificate is attached to the above subscription form. In light of this, the part of Defendant 2’s assertion to the effect that

3. Summary of the parties' assertion on the validity, etc. of the instant investment contract

A. The plaintiff's assertion 3) Summary

1) In a case where a stock company, in issuing new shares, agreed to guarantee compensation for investment loss, namely, recovery of principal, or to guarantee a certain amount of investment profit, the agreement is null and void in violation of the principle of shareholder equality, which has the nature of mandatory law, and thus, is null and void. Accordingly, if the purchaser of new shares, in accordance with the invalidation agreement, has the principal and profit compensated by a method other than the disposal of the relevant shares, such agreement shall be returned to the new shares issuance company

2) The new shares acquisition contract between the Defendants who participated in the issue of new shares and the Plaintiff that participated in the issue of new shares is deemed to have been concluded in a valid manner. As a result, all the subscribers who participated in the issue of new shares issued through the issue of new shares became to have the Plaintiff’s shareholder status through the issue of new shares issued through the issue of this case. However, the Defendants, who came to have the Plaintiff’s shareholder status through the issue of new shares issued through the issue of this case, received not only the redemption guarantee of the purchase price of the new shares (investment) but also the security for repayment. Although the text of the investment agreement did not state specific values in the form of the investment agreement, they concluded the investment contract of this case with the content that is guaranteed a mutually agreed profit even though they were not stated in the specific values, this is against

3) Therefore, the Defendants are liable to return the profits received from the Plaintiff according to the instant investment contract that is null and void as unjust enrichment.

B. Summary of the defendants' assertion

1) The instant investment contract is a separate contract concluded independently from the capital increase with the capital increase with the instant subscription, and the said Defendants merely received earnings in the status of investors pursuant to the instant investment contract, and cannot be deemed as either receiving earnings from the position of an underwriter of new shares or making an agreement to compensate for losses arising from the issuance of new shares. Therefore, the Defendants’ receipt of earnings does not violate the principle of

2) The investment contract of this case does not include the return of the amount of money invested, and it does not violate the principle of capital adequacy, since the said Defendants received the money from the Plaintiff, the said Defendants did not receive the money paid by the said Defendants.

3) Even if the Plaintiff’s claim for return of unjust enrichment is accepted, this is a claim arising out of a commercial activity, and the extinctive prescription has expired at the time when five years have elapsed from June 8, 2010, on which the relevant receipt was made.

4) Even if it is assumed that the Plaintiff paid the Defendants earnings pursuant to an invalid agreement contrary to the principle of shareholder equality, this constitutes a non-payment of debt under Article 742 of the Civil Act, and thus, cannot be claimed for the return thereof.

4. Determination

A. Whether the instant investment contract violates the principle of shareholder equality

1) The principle of the equality of shareholders means the principle that a stock company’s shareholder should be treated equally with respect to the rights and obligations that the shareholder has in the capacity of “shareholders.” In other words, such principle is limited to the legal relations that the company has in the capacity of shareholders, and the legal relations that arise from other legal requirements cannot be said to be subject to the above principle.

Meanwhile, in a case where a company, which absolutely guarantees the recovery of invested capital to a specific shareholder, grants a superior right not recognized to other shareholders to the relevant shareholder, and thus is deemed null and void due to a violation of the principle of shareholder equality (see, e.g., Supreme Court Decisions 2006Da38161, 38178, Jun. 28, 2007). However, just because a company entered into a contract between the shareholder and the relevant shareholder, thereby granting a certain right to the relevant shareholder, all of the above types of contracts cannot be deemed to violate the principle of shareholder equality solely on the ground that the consequence of granting a certain right arises between the company and the shareholder. For example, in a case where a company and the shareholder entered into a certain contract, there is no reasonable ground in the specific content of the individual contract, and further, where it can be deemed that a arbitrary discrimination has occurred against the remaining shareholders, other than the relevant shareholder, the court may render a judgment that violates the principle of shareholder equality (see, e.g., Supreme Court Decisions 2013Hun-Ba82, Jun. 18, 201010>

2) Examining the following circumstances revealed through the foregoing evidence in light of the aforementioned legal doctrine, it is reasonable to deem that the instant investment contract does not relate to the legal relationship with the company in the capacity of a shareholder, but rather to the legal relationship arising from other legal requirements.

A) The purpose of the instant investment contract is to determine the amount of investment and related investment returns while investing money in the Plaintiff as a financial investor, and to determine the rights and obligations arising between the Plaintiff and the Defendants (Article 1 of the instant investment contract).

B) The Defendants first concluded the instant investment contract with the Plaintiff, and, on the same day, prepared a subscription note with the content that the Defendants’ investment funds will be used for the third party’s capital increase with the Plaintiff’s capital increase issued.

C) In light of the instant investment contract, the Plaintiff and the Defendants agreed to the purport that “the Plaintiff shall provide the Defendants with the shares issued through capital increase with a security. The Defendants are unable to dispose of the said shares freely, and may dispose of them exceptionally only with the Plaintiff’s consent or with the clear decline in their collateral value. In the event that profits accrue from the disposal of the said shares, the Defendants and the Plaintiff shall divide the profits therefrom to 4:6.” The Defendants’ status appears to be an investor under the instant investment contract, and the said shares only play a role as a security to secure the return of the investment amount.

D) The profits that the Defendants received from the Plaintiff are also based on the instant investment contract, and the said profits are limited to an amount equivalent to a certain ratio of KRW 3 billion to the Defendants’ investments. The Defendants’ shares of KRW 2,189,780 (= Defendants 11,094,890 + Defendant 2729,927 + Defendant 2729,927 + Defendant 364,963 shares) do not seem to have been compensated for the share price decline.

3) Therefore, the Plaintiff’s assertion that the instant investment contract violates the principle of shareholder equality is without merit.

B. Whether the investment contract of this case violates the principle of capital adequacy

1) The principle of capital adequacy is a principle that requires a corporation to always hold assets equivalent to its capital at all times during the existence of a corporation. In the case of a corporation, the principle of limited liability of shareholders would pose a risk of infringing on the legal interests of creditors due to the principle of limited liability of shareholders, and in this regard, the principle of capital adequacy, which supports limited liability of shareholders, is the principle of 4 weeks

2) However, as seen earlier, the investment contract of this case was concluded by the Defendants to receive profits from the subscription to new shares, to dispose of the shares allocated to them, and to recover the investment amount, and to repay the amount not recovered pursuant to the principal guarantee agreement. In light of the overall circumstances and legal principles of this case, it cannot be deemed that the investment contract of this case contravenes the principle of capital adequacy under the Commercial Act.

3) The Plaintiff’s assertion on this part is without merit.

C. Sub-decision

Thus, the plaintiff's claim of this case based on the premise that the investment contract of this case is null and void because it violates the principle of shareholder equality and the principle of capital adequacy under the Commercial Act.

5. Conclusion

Therefore, the Plaintiff’s claim against the Defendants ought to be dismissed in its entirety due to the lack of justifiable grounds. Since the judgment of the court of first instance is justifiable in its conclusion, the Plaintiff’s appeal against the Defendants is dismissed in its entirety as it is without merit. It is so decided as per Disposition.

Judges Kim Jong-chul (Presiding Judge) Kim Jong-si official map

Note 1) See preparatory documents, etc., dated February 9, 2017

Note 2) See preparatory documents dated January 22, 2018

3) In addition to the following arguments, the Plaintiff withdrawn the existing argument that is inconsistent with this Opinion (see preparatory documents dated December 26, 2017).

4) As to the principle of capital adequacy, the Commercial Act provides for the investigation of investment in kind, etc. (Articles 299 and 310), the liability of promoters to acquire and pay shares at the time of incorporation (Article 321), and restrictions on issuance of shares below the par value (Article 330).