The administrator of the claim of the reorganization company (Law Firm Taeyang, Attorneys Seo-sung et al., Counsel for the plaintiff-appellant)

Defendant 1 and six others (Attorneys Jeon Dong-dong et al., Counsel for the defendant-appellant)

May 30, 2006

1. Defendant 1 and 2 pay to the Plaintiff KRW 300,000 per annum from January 4, 2004 to December 5, 2003; Defendant 4, 5, 6, and 7 pay to the Plaintiff KRW 300,000,00 of the above money jointly with Defendant 1 and 2; Defendant 1 paid to the Plaintiff KRW 40,000 per annum from January 4, 2004; Defendant 2, Defendant 3, and Defendant 5 from December 4, 2003; Defendant 4 from December 5, 2003; Defendant 6 from December 30, 203; Defendant 7 from December 30, 2003 to December 30, 2003; and Defendant 7 from December 3, 2003 to complete payment.

2. The costs of lawsuit shall be borne by the defendants.

3. Paragraph 1 can be provisionally executed.

The same shall apply to the order.

1. Basic facts

The following facts are deemed to have been led to the confession of the above Defendants pursuant to Article 150(3) of the Civil Procedure Act between the Plaintiff and Defendant 1 and Defendant 7. There is no dispute between the parties, or can be acknowledged by considering the whole purport of the pleadings as a whole among the descriptions of evidence Nos. 1-3, No. 2-6, and No. 9-2, and each part of evidence Nos. 1-1 and No. 1-2 are not believed.

A. Status of the parties

The plaintiff is a corporation engaging in the comprehensive construction business, etc., and the defendant 1 was in general service as the chairperson of the so-called group of claims from February 5, 1973 to June 24, 1998. The defendant 2 was in general service as the representative director of the plaintiff and the vice-chairperson of the group from March 14, 1997 to June 17, 1998, and the defendant 3 was in general service as the representative director of the plaintiff from January 1, 197 to June 24, 1998; the defendant 4 was in general service as the representative director of the corporation from December 16, 1992 to November 15, 1998; the representative director of the corporation from December 16, 1992 to June 16, 199 to June 195; the defendant 2 was in charge of the plaintiff's business from March 16, 1995 to June 19, 1995.

B. Facts constituting grounds for liability for damages

(1) Embezzlement or breach of trust of the company funds related to Nonparty 2

On August 16, 1994, the Plaintiff subcontracted the mold construction work for the Haak 2 Apartment Construction to Non-Party 2 Co., Ltd. (hereinafter “Non-Party 2”). However, Defendant 1 and 5 conspired with the above non-party 2 to enter into the said contract and make payments with promissory notes in excess of the actual construction cost for the purpose of raising funds, and then received a return of KRW 1,201,60,000 from August 31, 1994 to the head of the Peace Bank under the name of the above non-party 2, which was made by the above Defendants. The Defendants were to deliver this money to the Plaintiff on seven occasions from August 29, 194 to September 9, 199, thereby causing damage to the Plaintiff.

Defendant 4 was in office as the representative director of the claimed Housing Co., Ltd. at the time, but in fact, the Plaintiff served as the president of the Seoul metropolitan area, and the said subcontract was concluded upon the final settlement of Defendant 4.

(2) Embezzlement or breach of trust of the company funds related to Nonparty 1

On December 27, 1996, the Plaintiff subcontracted the construction work of the construction work of Blue Office Office (hereinafter “Non-Party 1”) to Non-Party 1 Company (hereinafter “Non-Party 1 Company”) and entered into a final contract on August 14, 1997 with the construction work price 3,512,300,000 on which the contract was modified, and paid the said amount to Non-Party 1 by the withdrawal of promissory notes and the current account.

On August 25, 1997, the Plaintiff subcontracted the construction of an officetel to Nonparty 1 at the contract price of KRW 11,286,00,000 to Nonparty 1, and paid the price in the above manner.

However, Defendant 1, 2, 3, and 5 concluded the said subcontract by appropriating an excessive amount of construction expenses for the purpose of raising funds. Of promissory notes paid to Nonparty 1, the sum of KRW 300 million and KRW 400 million, the sum of KRW 200 million and KRW 1 billion on October 31, 1997, the collection was made through the Seocho-Nam branch of the National Bank, and around November 10 of the same year, Defendant 1, 2, 3, and 5 received cash from Nonparty 1’s employees to Nonparty 3 and sent it to Defendant 1 through Nonparty 4’s managing director. On November 25, 1997, Defendant 2 billion incurred damages equivalent to KRW 2 billion to the Plaintiff by delivering the amount of KRW 1 billion out of the amount of promissory notes collected through the branch of the above National Bank to Defendant 1.

(3) Embezzlement of loans, etc. related to Shan Telecom Co., Ltd.

On July 2, 1997, the Plaintiff entered into a monetary loan agreement to borrow KRW 1,70,000,000 per annum from SK Telecom Co., Ltd. with interest of KRW 12% per annum, and with maturity on November 28, 1997, and received the equivalent of the same amount of shares from the issuance of SK Telecom Co., Ltd., and paid KRW 180,000 per annum from SK Telecom Co., Ltd. on December 3, 1997, the Plaintiff paid KRW 1,796,071,232 for repayment. On that day, the Plaintiff paid KRW 1,70,000,000 and KRW 86,071,232 to the above SK Telecom Co., Ltd.

However, Defendant 1 and 5 did not deposit the funds borrowed from the SK Telecom Co., Ltd. as above but recorded false books as if they were normally deposited to the Plaintiff, and delivered them to Defendant 1, thereby causing damage equivalent to KRW 1,786,071,232 to the Plaintiff.

(4) Embezzlement of company funds related to Busan National Housing Association

Defendant 1, 3, 5, and 6 used the company’s funds to adjust the provisional payments to Defendant 1 and to provide funds to the president of the association of the second Busan District Housing Association. In order to avoid the shortage of the funds, Defendant 1, 3, 500,000 won should be accounted as if they were lent to the members of the association of the Busan District Housing Association to compensate for the shortage of the funds. In spite of the absence of the fact that the funds were actually leased from July 3, 1996 to December 26, 1996, the amount equivalent to KRW 6,50,000 should be accounted as if they were lent to the members of the association of the Busan

(5) embezzlement or breach of trust of company funds related to the Seoul Hawn Housing Association

Defendant 1, 2, 3, and Defendant 5, who were disbursed in the year 197, embezzled the company’s funds without permission for the reorganization of funds for Defendant 1’s non-funds and business expenses, and for the purchase of real estate in Defendant 1’s personal name (such as boom buildings, etc. in Seoul Dong-dong), and incurred damages equivalent to the same amount to the Plaintiff, even though they did not have actually leased the company funds from March 28, 1997 to December 24, 197 in order to avoid the shortage of funds embezzled, even though they did not actually leased the funds, they did not lend the company funds to the first association in Seoul, the Seoul, the 196, 158,948 won to be used for the accounting purpose, and did not incur damages to the Plaintiff.

(6) embezzlement of company funds related to the Hongdong Housing Association

Defendant 1, 2, 3, and 5 embezzled company funds for the reorganization of provisional payments by Defendant 1’s president, provision of funds to the president of the Hongdong Housing Association, and repayment of bonds borrowed for the purpose of raising funds for the purpose of raising funds for the establishment of funds, and then, in order to avoid the shortage of funds embezzled, Defendant 1, 2, 3, and 5 did not actually lend funds from December 9, 1997 to May 26, 198 to the Hongdong Housing Association, even though he did not actually lend funds, he did not lend funds equivalent to KRW 8,37,00,000 to the Seoul Hongdong Housing Association, thereby causing damage to the Plaintiff.

(7) Unfair debt exemption

Defendant 1, 7, and 5 sold the Plaintiff’s shares of 175,000 shares (the closing price of December 26, 1997) held by Defendant 1 on December 197, 197, immediately before the default of the development of the claimed industry, as if they were sold around January 28, 1997 (the closing price of 1,730 won per share as of January 28, 1997) as if they were sold to the Plaintiff on January 28, 1997 (the closing price of 20,50,000 won per share as of January 28, 1997); the above sales price of 30,00,000,000 won per share as of December 3, 1997; the amount of 175,000 won as interest on the development of the claimed industry; and the amount of 30,000 won and 190,000 won as of March 1, 20097.

2. Determination

A. The Defendants’ liability for damages arises

A director shall perform his duties with the care of a good manager with respect to the company (Article 382(2) of the Commercial Act, Article 681 of the Civil Act, and Article 681 of the Civil Act), and if a director acts in violation of Acts and subordinate statutes or the articles of incorporation or neglects his duties, he shall be jointly and severally liable for damages to the company, and the director shall also be liable for damages to the company. In addition, since the director is not limited to expressing his intent on a bill presented to the board of directors as a member of the board of directors as a member of the board of directors, and as well as to comprehensively monitor the performance of duties by other directors in charge, he shall not be exempted from liability for damages suffered by the company if the director of other directors in charge of the company neglects his duties despite there are grounds for suspecting that the performance of duties by other directors in charge of the company is illegal (Article 399(1) of the Commercial Act).

With respect to this case, as shown in the above facts of recognition, the defendants, who were the president, president, chief executive officer, and directors of the Plaintiff Company, were directly involved in embezzlement of the Plaintiff Company's funds and creation of secret funds, or did not so, the Defendants neglected to perform their duties in violation of Acts and subordinate statutes, and the Defendants are jointly and severally liable to compensate the Plaintiff for damages arising from each act under Article 399 (1) and Article 401-2 (1) and (2) of the Commercial Act.

B. Determination as to Defendant 4’s assertion

Defendant 4 asserted that the defendant was the representative director of the claimed house around August 1994, and that the defendant did not know about the creation of the above 1.B. (1) as the representative director of the plaintiff, and that the creation of the above 1.B. (1) was made by the defendant 1 and 5's order, and the defendant did not participate, and therefore, the defendant did not bear liability for damages. The defendant asserted that the claim for indemnity against the plaintiff was set off against the amount equal to the defendant's amount of damages.

First of all, the defendant's assertion that he did not participate in the above 1.b. (1). (1), according to Gap evidence 1-2, Gap evidence 1-2, Eul evidence 6-2-6, and the purport of the whole pleadings, the defendant merely held office as the representative director of the claimed house at the time of raising the above non-funds, but did not hold office as the plaintiff's representative director or director. However, it can be acknowledged that the plaintiff's representative director was in charge of the plaintiff's construction in Seoul area while performing the representative's business and was on the settlement line of the subcontract under the above 1.B. (1) and the above 1-3 and Eul evidence 2-6 were not trusted, and if the defendant did not know about the above 1-6, Gap evidence 1-2, and Eul evidence 9-3, and Eul evidence 1-2, and the defendant did not actively represent the above facts and did not know the above facts, and even if it did not know the above facts, it cannot be viewed that the defendant did not have any other duty to raise the above funds.

Second, in regard to the defendant's defense of set-off, if the debt has arisen as an intentional tort, the debtor cannot set up against the creditor by set-off, and as long as the defendant was aware of the fact that he did not actively participate in the creation of the above funds, the defendant is prohibited from setting-off against the plaintiff's claim for damages as an intentional tort. Therefore, the defendant's defense of set-off is groundless without the need to further examine.

C. Determination as to Defendant 2, 3, 5, and 6’s assertion

Defendant 2 asserts that Defendant 2 is not liable as long as he was unaware of the fact that Defendant 1, a private company, was a professional manager.

Defendant 3 asserts that the facts of the above 1.b. (2), (4), (5), and (6) have not been reported, and that the creation, use, and false accounting of funds were not known to the Defendant as long as the officers in charge of accounting and Defendant 1 directly handle them.

Although Defendant 5 collected the amount equivalent to the difference of the non-funds in Paragraph 1.b. (2) above, he did not know about the non-funds at all, and did not know about Paragraph 3, and as to Paragraph 4(5)(6), there was no method of accounting such as bonds and interest, etc. that are disbursed without raising the non-funds, and as to Paragraph 7, he asserted that Paragraph 5 is only the fact that he delivered an intention to such a method to the accounting supervisor of the applicant industry development.

Defendant 6 asserts that Defendant 6 was not a position to participate in the decision-making of the expenditure of the fund, but a member of the organization, who is in charge of the settlement of accounts, was bound to follow the direction of Defendant 5.

However, as seen in the above A., as a member of the board of directors, a director of a corporation is not limited to expressing his/her intent to the agenda presented to the board of directors, and is obligated to comprehensively monitor the performance of duties by other directors in charge of duties. Thus, the director of a corporation cannot be exempted from liability for damages incurred by the company when he/she neglects his/her duties despite the existence of grounds for suspecting that the performance of duties by other directors in charge of duties was illegal. Thus, as long as he/she did not know of the above embezzlement and the creation of funds by Defendant 1, etc., or did not follow the illegal instructions of embezzlement or fraudulent accounting, the Defendants cannot be exempted from liability because he/she did not know of the fact of raising funds by the board of directors or follow instructions. Accordingly, the Defendants’ aforementioned assertion is without merit without the need to further examine.

D. Scope of liability for damages

According to the above facts, for Defendant 1, 31,602,80,830,180 won (1,201,60,600,000 +2,000,000 + 1,786,071,232 won + 6,500,000 + 8,416,158,948 + 8,337,000,000, 3608,3608,408,608,608,500,000 for Defendant 2

However, as part of the above damages, the Plaintiff claimed KRW 1,00,000 for each of the above damages and the remaining Defendants for KRW 300,000,000 for each of the above damages jointly and severally with the above money. Therefore, Defendant 1 and 2 are jointly and severally liable for damages of KRW 1,000,000 for each of the above damages, and Defendant 3, 4, 5, 6, and 7 for each of the above damages and for this, Defendant 1, who is the following day after the delivery of a copy of complaint of this case sought by the Plaintiff after the above tort, is jointly and severally liable for the damages of KRW 300,000 for each of the above damages and the damages of KRW 300,000 for each of the above damages, from January 4, 2004, from December 4, 2003 to May 4, 200, from May 3, 7, 2007 to the same day.

3. Conclusion

If so, the plaintiff's claim of this case is accepted on the grounds of all.

Judges Lee Jong-soo (Presiding Judge)