[1] The meaning of major facts subject to a civil trial

[2] Limitation of free evaluation of evidence

[3] The case holding that, in a case where Party A and Party B traded money by account transfer over 160 times with a loan at one time for about six years, and Party B entered a contract on transfer of clothing stores it operated to Party B during the above period to Party B, and subsequent to the change of the name of Party B’s business registration, the bank account in the name of Party B was used for the above store; thereafter, Party B was again transferred to Party B and the communal living relationship with Party B was decided to pay the remaining money after the settlement of accounts at the time of the communal living relationship with Party B, and it was difficult to conclude that Party B had control over the above store’s operation with Party B’s account at the time of transfer of money to Party B, and it was difficult to conclude that Party B was obligated to pay the remaining money from the bank account under the premise that Party B’s ownership was transferred to Party B, such as the money transferred from the bank account under the name of Party B until the settlement of accounts with Party B’s remaining money transfer to Party B, etc., in view of the circumstances where Party B’s remaining money transfer to Party B’s account.

[1] Article 203 of the Civil Procedure Act / [2] Articles 202 and 432 of the Civil Procedure Act / [3] Article 202 of the Civil Procedure Act

[1] Supreme Court en banc Decision 83Meu1489 Decided December 13, 1983 (Gong1984, 168) / [2] Supreme Court Decision 82Meu317 Decided August 24, 1982 (Gong1982, 877), Supreme Court Decision 2010Da79190 Decided May 26, 201

Plaintiff (Counterclaim Defendant) (Bae & Yang LLC, Attorneys Yellow-ju et al., Counsel for the plaintiff-appellant)

Defendant-Counterclaim (LLC, Kim & Lee LLC, Attorneys Han-soo et al., Counsel for the defendant-Counterclaim plaintiff-appellant)

Daegu High Court Decision 2014Na4874, 4881 decided September 8, 2015

The part of the lower judgment against the Defendant (Counterclaim Plaintiff) regarding the main lawsuit is reversed, and that part of the case is remanded to the Daegu High Court. The remainder of the appeal is dismissed.

1. As to the main claim

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

A. The term “principal facts” refers to facts constituting the constituent elements under the substantive law which have legal effect (see Supreme Court en banc Decision 83Meu1489, Dec. 13, 1983). The court determines whether the facts alleged in accordance with logical and empirical rules based on the principle of logic and experience, based on the principle of equity and social justice, free conviction by taking into account the overall purport of the pleadings and the results of the examination of evidence, based on the evidence submitted until the closing of arguments at the court of fact-finding proceedings (Article 202 of the Civil Procedure Act). The facts duly established by the court of fact-finding are binding on the court of final appeal (Article 432 of the Civil Procedure Act). As such, the principle of free evaluation of evidence declared in Article 202 of the Civil Procedure Act refers to only formal and legal evidence rules, but it does not allow a judge’s arbitrary judgment. Thus, the fact-finding court should determine the truth in accordance with the principle of logic and experience, based on legitimate evidence admissible by the examination of evidence.

B. As to the legal relationship between the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) and the Defendant (Counterclaim Plaintiff; hereinafter “Defendant”), the lower court recognized and determined the following facts based on the evidence, etc. as stated in its reasoning.

1) During the period from April 2006 to May 2012, when the Plaintiff and the Defendant were close to a middle school post-ship, they were living together with Nonparty 1, who is the Plaintiff’s father, in the economic and living community, and were living together with Nonparty 1, who was the Plaintiff’s father, while operating the clothing store. The Plaintiff and the Defendant used money transaction between the Plaintiff and the Defendant by account transfer, etc. over about 160 times from February 11, 2003 to October 11, 2012.

2) From March 29, 1996, the Plaintiff operated the clothing store (hereinafter “○○○○○○○○○○○○○○○○○○○○○○○○○○○”). On July 1, 2006, the name of the business operator of the said store was changed to the Defendant, and thereafter, the Nonghyup Bank account (Account Number 1 omitted) and the national bank account account (Account Number 2 omitted) was used in the operation of the said store.

3) Unlike the above external appearance, the Plaintiff asserts that the actual manager of ○○○-dong store is the Plaintiff himself, while the Defendant asserts that the Defendant, while, by paying the Plaintiff’s 20 million won out of the KRW 280 million, transferred the Plaintiff’s △△-dong store to Nonparty 2, 200 million, the Defendant himself paid the Plaintiff the KRW 220 million to the Plaintiff, and by taking over the △△-dong store from the Plaintiff, the Defendant himself as the owner of the management right. However, in light of the following circumstances, it is reasonable to deem that the △△-dong store had the control over the Plaintiff up to

A) On June 28, 2006, the Plaintiff prepared a contract for the transfer and acquisition of the above store with the Defendant on June 28, 2006, while operating ○○ Dong △△△○ store. The transfer and acquisition value of the store is set at KRW 44,897,879. However, on January 2010, the above transfer and acquisition contract cannot be deemed to have been actually made, in light of the fact that △△ Sports Burial was transferred to KRW 320 million between Nonparty 3 and Nonparty 3.

B) In operating ○○ Dong-dong △△△ store, the Plaintiff: (a) on April 3, 1996, registered the establishment of the first-class neighboring mortgage on the land of 137 square meters owned by the Plaintiff’s father and Nonparty 4 as security for the Plaintiff’s father’s performance of the obligation, including the cost of selling goods to the Plaintiff’s △△△ Korea Co., Ltd.; (b) on December 16, 1998, the registration of the establishment of the establishment of the first-class neighboring mortgage on the land of 137 square meters owned by the Plaintiff’s father; (c) on December 16, 1998, the registration of the establishment of the establishment of the first-class neighboring neighboring mortgage on the land of 137 square meters; and (d) on the registration of the establishment of the establishment of the establishment of the second-class neighboring neighboring neighboring mortgage Korea Co.,

C) On the other hand, the Defendant, while operating △△dong store, filed a guarantee insurance contract concluded with the Seoul Guarantee Insurance on July 10, 2006, on the part of the Plaintiff’s mother, on July 15, 2005, on the whole part of Nonparty 5’s shares, including the sales goods price, etc. for the Defendant’s △△△ Korea Co., Ltd., as a security for the performance of the obligation. However, on the other hand, the Defendant, on July 10, 2006, revoked the registration of the establishment of a neighboring mortgage on July 10, 206, immediately after the Plaintiff’s business registration was transferred to Nonparty 2. Nonparty 2 submitted the guarantee insurance contract concluded with the Defendant under the joint and several surety

D) As of August 12, 2006, the Defendant prepared a sales contract stating that “○○-dong sales store shall be sold to the Plaintiff for KRW 400 million, but the down payment of KRW 50 million shall be paid at the time of the contract and the remainder of KRW 350 million shall be paid on December 17, 2006,” and issued it to the Plaintiff. On December 27, 2006, the Defendant entered the purchaser as the Plaintiff on the certificate of personal seal impression for real estate sales issued by the Plaintiff and delivered it to the Plaintiff.

E) According to the draft plan on May 29, 2006, which is the internal document of the head office △△ Korea Co., Ltd., the reason for changing the change of the business entity of ○○dong △△△△△△△△△△△, stating that “the name of the Defendant (the actual owner: the Plaintiff) is changed due to various tax issues, such as the Plaintiff’s wage and salary income, business income, etc., of the present owner.”

F) Even after the change of ○○○-dong store in the name of the Defendant, the Plaintiff paid monthly rent to Nonparty 7, the owner of the building, and received such receipts, and the Plaintiff mainly handled remittance business for the head office, payment of value-added tax, and public charges.

G) From around 2002, the ○○dong store was divided into △△△ Sports Burial and △△△△△△○ Burial, and was operated. However, around January 2009, the △△△△△△△○ store was changed into a golf store, and at the time of changing the store into the △△△△△△△△○ store, Nonparty 8, the Plaintiff, who was the Plaintiff, was using Nonparty 8, instead of excluding the Defendant, who was the business operator of △△△△△△△△△△△△△○ store. The Plaintiff and Nonparty 8 paid KRW 20 million each to the head office of △△△△

H) On January 12, 2009, the Plaintiff borrowed KRW 164,66,610,000 from the Posib Credit Cooperative, and deposited all the remaining amount of KRW 164,66,610, excluding various taxes and public charges, into the national bank account (Account No. 2 omitted) with the Defendant’s name used to operate ○○○○○dong △△△△△△○ store, and used it as the interior cost of △△△ golf store and the operating fund of ○○ Dong △△△△△△

I) On May 24, 2006, the Defendant entered into a contract with the non-party 2, who is the Plaintiff’s partner, to transfer the △△△△ branch operated by the Defendant to KRW 280 million, and on June 8, 2006, transferred KRW 230 million out of the purchase price from the non-party 2 on June 8, 2006 to the non-party 2, and deposited KRW 220 million out of the purchase price as a check. However, on June 9, 2006, only one copy of the deposited check was deposited into the account of the Defendant’s Nonghyup Bank (Account No. 1 omitted) in the name of the Defendant, which was used to operate the store in ○○dong-dong, △△△△△△△ branch on August 28, 2006, and there is no objective evidence to deem otherwise that the said money was paid to the Plaintiff.

4) In light of the fact that the Plaintiff and the Defendant were living in Han-dong and operated a community by using the account in the name of the Defendant and running ○○dong store, etc., and that money transactions had been conducted more than 160 times between the Plaintiff and the Defendant, the Plaintiff and the Defendant did not set the timing or interest rate for the return of the borrowed amount or prepare the borrowed certificate, etc., the Plaintiff and the Defendant would have carried out monetary transactions with each other by settling the money transferred to each other, but if the life as a community is completed, it would have been expected that they would have carried out monetary transactions by settling the money transferred to each other as the principal for the loan.

5) Therefore, since the Plaintiff’s money transferred from the above national bank account, the Nong Bank account, etc. in the name of the Defendant used for the operation of △△△△ store to another account in the name of the Defendant, and the money transferred to the Defendant out of the transfer proceeds of the above store to the Defendant with the intent of lending, etc., the Defendant is obligated to pay the Plaintiff the amount remaining after settling the Defendant’s loan to the Plaintiff and paying damages for delay.

C. However, it is difficult to accept the judgment of the court below on the evidence and factual assertion as above and the judgment on legal relations based thereon, for the following reasons, exceeding the bounds of the principle of free evaluation of evidence against the law of logic and experience.

1) First of all, as seen in the above B. 3(i), the lower court determined that there was no objective evidence to deem that the Defendant paid money to the Plaintiff except for one copy of the KRW 10 million check, out of the KRW 220 million deposited by Nonparty 2 as a part of the transfer price. However, according to the result of the lower court’s response to the order to submit financial transaction information to Osung Mutual Savings Bank, the Defendant deposited KRW 70 million out of the check money received from Nonparty 2 on June 9, 2006 into the said regular bank account in the name of the Plaintiff, and KRW 140 million was used for the repayment of the Plaintiff’s loan to the said bank.

At the first instance court and the lower court, the Defendant asserted that the Plaintiff acquired ○○○dong store’s KRW 440,897,879,000,000 including the premium, which is not KRW 220,000,000,000 as indicated in the transfer contract, and paid the price in full from the transfer proceeds of △△△dong store. This accords with the allegation. Furthermore, around January 2010, there is sufficient room to view that the Plaintiff and the Defendant received the premium as alleged by the Defendant since the title of the contract in relation to the transfer of △△△△○ store’s store was “ facility cost and premium contract for real estate lease” as the Defendant’s argument. Furthermore, according to the evidence duly adopted, around January 2010, ○○dong store received KRW 320,000,000 from Nonparty 3, and Nonparty 3 received KRW 520,0000,000,000,000 from Nonparty 1’s account.

2) As seen in the above B-D, the lower court is also based on the determination that the Defendant prepared and delivered a sales contract, etc. to sell ○○dong store to the Plaintiff for KRW 400 million. However, it is only deemed that the said contract is a document prepared with a content different from the substance in order to conceal the substance of the contract, as it does not have any content consistent with the actual content.

3) In relation to the above B. 3 (g) and (h) and the evidence duly adopted, as to the building owned by the Defendant on January 13, 2009, around the time when the name of the proprietor of the △△ golf store was changed to Nonparty 8, the debtor was Nonparty 8, the maximum debt amount was KRW 50 million, and the mortgagee was registered as the △△ Korea Co., Ltd. In addition, on January 12, 2009, the loan of KRW 180,000,000,000, which was financed from the ○○○○dong △dong △△△△○○○○ branch, was repaid from Nonparty 3 as the money for transfer. Accordingly, this is consistent with the Defendant’s assertion that the management right of the △△△dong △△ branch was transferred to Nonparty 3.

4) In the case of the remaining circumstances cited by the lower court by the lower court that had been the Plaintiff of the control right before the ○○dong store was transferred to Nonparty 3, there is sufficient room to regard that the actual operation of ○○○○○ store in the economic and living community of the Plaintiff and the Defendant, unlike the location of the control right, was primarily caused by the Plaintiff.

5) In light of the above circumstances, it is not easy for the lower court to readily conclude that ○○○-dong △△○○○○○○○○○○○○ was the Plaintiff before the transfer to Nonparty 3.

6) If so, it is doubtful whether the amount remitted to the Defendant’s other account in the national bank account and the NongHyup Bank account, etc. used for the operation of the above store, or the amount remitted to the Defendant among the transfer proceeds of the above store to the Defendant, as determined by the lower court, can be readily concluded that the ownership was transferred from the Plaintiff to the Defendant. Furthermore, in light of the period and frequency of the remittance, the amount of the remittance, the amount of the interest, the existence of the return act, the nature of the money transaction in the economic and living community, etc., it is questionable whether the money remittance that was made over several times between the Plaintiff and the Defendant planned to be a loan after settlement

D. Although the lower court should closely examine the above circumstances, on the ground that the Defendant did not pay the Plaintiff the purchase price of △△dong store to the Plaintiff and did not actually have the substance of transfer, the lower court determined that the control over the store still existed in the Plaintiff, thereby concluding that the Plaintiff’s money, etc. in the account used for the operation of the store was transferred to the Defendant and that there was a mutual agreement between the two parties on the loan. In so doing, the lower court erred by failing to exhaust all necessary deliberations by misapprehending the legal doctrine on the recognition of facts, and by misapprehending the bounds of the principle of free evaluation of evidence against logical and empirical rules, thereby adversely recognizing facts beyond the bounds of the principle of free evaluation of evidence. The allegation in the grounds of appeal assigning this error is with merit.

2. As to the counterclaim

Although the defendant filed an appeal on a counterclaim, he did not submit a statement of grounds for appeal within the statutory period, and the petition of appeal does not contain any information in the grounds for appeal.

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the part against the Defendant regarding the principal lawsuit is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The remaining grounds of appeal are dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench

Justices Cho Jae-chul (Presiding Justice)