The meaning of "act of a debtor giving a special benefit under the name of a third party" under Article 219 of the Debtor Rehabilitation and Bankruptcy Act, and whether the act of a third party on its own account constitutes such act (negative)

Article 219 of the Debtor Rehabilitation and Bankruptcy Act provides, “The act of an obligor giving special benefits to some rehabilitation creditors, rehabilitation secured creditors, shareholders, and equity right holders, instead of according to the rehabilitation plan under his/her or a third party’s name shall be null and void.” Here, “the act of an obligor giving special benefits in the name of a third party” refers to the act of providing special benefits that are different from that of the rehabilitation plan in order for the obligor to either calculate or calculate his/her own account and to interfere with the fair formation of the rehabilitation plan in the name of a third party, or to unfairly affect the establishment of the rehabilitation plan,

Article 219 of the Debtor Rehabilitation and Bankruptcy Act

National Bank of Korea (Law Firm Lee & Lee LLC, Attorneys Park Jae-chul et al., Counsel for the defendant-appellant)

Defendant 1 and one other (Law Firm Jungwon, Attorneys Gangnam-gu et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2011Na9155 decided February 7, 2013

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Comprehensively taking account of the evidence adopted by the lower court: (i) Defendant 1 was a shareholder and representative director of the Nam Construction Co., Ltd. (hereinafter referred to as “Seoul Construction”); (ii) it was a major shareholder holding 97.69% of the shares issued by the Defendant Samsungnam Co., Ltd. (hereinafter referred to as “Defendant Co., Ltd”); and (iii) it was decided to commence the rehabilitation plan on July 11, 2008 and appoint Defendant 1 as the manager of the Daegu Construction Co., Ltd.; (iv) the Plaintiff’s claim was KRW 14,922,850,40, and KRW 19.37% of the total amount of rehabilitation claims; and (v) it was decided that the Plaintiff would continue to sell shares of the Plaintiff’s rehabilitation plan on condition that the Plaintiff would sell shares of KRW 100,000,000,000,000,0000,000,000 won.

Based on the above factual basis, it is reasonable to view that the share sales contract of this case entered into by Defendant 1, who is the actual owner and manager of the Nam Construction, in the name of the Defendants with the officers and employees of the Nam Construction, as the act of the debtor, and that the share sales contract of this case was null and void as the act of giving a special benefit different from the rehabilitation plan in the name of the third party under the name of the debtor under Article 219 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”).

In addition, the court below determined that the share sales contract of this case where the rehabilitation procedure is expected to continue against the principle of equality of rehabilitation creditors and the purchase of shares by conversion of investment from a specific rehabilitation creditor cannot be permitted as an act of giving special benefits, and it goes against the purpose of the rehabilitation system. Thus, the court below held that it is null and void as it goes against good morals and social order under Article 103 of the

2. However, the lower court’s determination is difficult to accept for the following reasons.

A. As to the invalidation under Article 219 of the Debtor Rehabilitation Act

Article 219 of the Debtor Rehabilitation Act provides that “The act of an obligor giving special benefits to some rehabilitation creditors, rehabilitation secured creditors, shareholders, and equity right holders without resorting to the rehabilitation plan in the name of his/her or a third party shall be null and void.” Here, “the act of an obligor giving special benefits in the name of a third party” refers to the act of providing special benefits different from that of the rehabilitation plan in order for the obligor to make his/her own account or account and to interfere with the fair formation of the rehabilitation plan in the name of a third party or to unfairly affect the establishment of the rehabilitation plan, and the act of a

According to these legal principles, in the instant case where the Plaintiff sought a share purchase price from Defendant 1, the purchaser of the instant share purchase agreement, and the Defendant Company, its joint guarantor, if the share purchase agreement of the instant case constitutes Article 219 of the Debtor Rehabilitation Act and may be deemed null and void, it should be the case where the Plaintiff, the debtor, intended to calculate or calculate, and entered into the share purchase agreement of the instant case in the name of the Defendants.

However, even if examining the record, it does not appear that it was concluded in the name of the Defendants, a third party, in the name of the Defendants, the debtor, and it did not appear that the Defendant Company’s joint and several liability act could have an indirect impact on the Gohap Construction, a parent company, and it cannot be deemed that it was done for the account of Gohap Construction, a debtor (which is the debtor).

Therefore, it is difficult to view that the share sales contract of this case constitutes “the act of providing certain rehabilitation creditors special benefits in the name of a third party” under Article 219 of the Debtor Rehabilitation Act.

B. As to the invalidity under Article 103 of the Civil Act

An act of anti-social order null and void under Article 103 of the Civil Act includes not only cases where the contents of rights and obligations, which are the object of a juristic act, violate good morals and other social order, but also cases where the content itself has the nature of anti-social order by forcing it legally or attaching conditions contrary to social order or monetary consideration to a juristic act, and where the motive of the juristic act indicated or known to the other party is anti-social order (see, e.g., Supreme Court Decisions 9Da56833, Feb. 11, 2000; 2009Da37251, Sept. 10, 2009).

In light of such legal principles, the following circumstances revealed by the facts as seen earlier, namely, ① Article 219 of the Debtor Rehabilitation Act does not apply to the act of offering special benefits for a third party’s own account, which prohibits an act contrary to the principle of equality among rehabilitation creditors; ② the sales price of the instant share sales contract is calculated based on the net asset value of the west Construction; thus, the sales price cannot be deemed significantly excessive to the extent that it constitutes an illegal interest in the resolution of the assembly of related persons; ③ even if the debtor’s rehabilitation procedure is in progress, the transfer of shares converted into equity pursuant to the rehabilitation plan is not restricted; and ③ even if the debtor’s rehabilitation procedure is in progress, the contents of the share sales contract of this case where the Defendants, a custodian or subsidiary of the west Construction, intended to purchase shares converted into equity from the Plaintiff, cannot be deemed to contravene good morals and other social order; and it is difficult to view that the content of the share sales contract of this case’s sales contract to legally enforce it or to constitute a case where the other party becomes contrary to social order and order.

C. Sub-committee

Nevertheless, the lower court determined that the share sales contract of this case was null and void under Article 219 of the Debtor Rehabilitation Act as well as that it was a juristic act contrary to good morals and other social order and thus null and void under Article 103 of the Civil Act. In so determining, the lower court erred by misapprehending the legal principles on Article 219 of the Debtor Rehabilitation Act and Article 103 of the Civil Act, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit

3. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court 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 Yang Chang-soo (Presiding Justice)