209Na4371 Compensation for Damages

○○ (No. )

OOOOO-dong OOO-dong OOOO-dong OOO-dong OO-ho

Attorney Nam-chul et al.

○ Bank Co., Ltd.

Seoul ○○○○○○ OO

this representative director

Law Firm Democratic LLC, Counsel for defendant-appellant

[Defendant-Appellee]

Seoul Central District Court Decision 2008Gahap112327 Decided April 23, 2009

April 21, 2010

May 26, 2010

1.The judgment of the first instance court, including the extension of the primary claim and the addition of the ancillary claim, shall be amended as follows:

A. The defendant shall pay to the plaintiff 39,524,518 won with 5% interest per annum from December 6, 2007 to May 26, 2010, and 20% interest per annum from the next day to the day of complete payment.

B. The plaintiff's remaining main claim and the conjunctive claim added in the trial are all dismissed.

2. Of the total litigation costs, 80% is borne by the Plaintiff, and the remainder is borne by the Defendant, respectively.

3. The above paragraph 1(a) may be provisionally executed.

1. Purport of claim

The defendant around 331, 313, 369 won and this case as to the plaintiff from December 6, 2007

Until the delivery date of a copy of the complaint, 5% per annum, and 20% per annum from the next day to the day of complete payment.

D. Preliminaryly, the defendant shall pay to the plaintiff 207, 589, 288 won and any of them

From February 28, 2008 to the service date of a copy of the complaint of this case, 5% per annum and full payment from the following day shall be made.

Until the day, 20% interest per annum shall be paid (the plaintiff shall make a primary claim at the trial.)

the preliminary claim was extended and added.)

2. Purport of appeal

The judgment of the first instance shall be revoked. The defendant shall be KRW 331, 313,369 and the complaint of this case against the plaintiff.

The amount of money shall be paid at the rate of 20% per annum from the day after the delivery date of the duplicate to the day of full payment.

1. Basic facts

A. The Plaintiff and ○○○’s wife’s ○○○○○○○○○-dong, a merchant who has been engaged in field-based funeral services for not less than 30 years at the ○○○○○○-dong, and on January 2, 2007, Gangwon○ deposited KRW 1,217,00,000 at the ○○○○○○-○○○○ branch of the Defendant bank (hereinafter “Defendant bank”) and became a VIP customer of the Defendant bank, and around that time, ○○○-○ (a private customer), who had been in charge of the said branch’s VIP customer management, has been engaged in various counseling and management related to the ○○○○’s banking services.

B. The ○○○○○○○○○○○○○○○○○, ○○○○○○○, and its ground buildings (hereinafter referred to as “○○ real estate”) are to acquire the land at the court auction. In order to draw a bid bond, the Defendant bank visited and consulted with the ○○○ in order to withdraw his deposit. The ○○ solicited the Defendant bank to obtain a loan from the Defendant bank. The ○○○ was to accept the proposal of the ○○○○, and the ○○ was to obtain a loan from the Defendant bank (hereinafter referred to as “the instant loan”).

C. When ○○○ had ○○ real estate sold at the auction procedure, he first withdraws his deposit and paid the sales price in full on October 8, 2007, and completed the registration of ownership transfer under his name with respect to ○ real estate on October 18, 207.

D. On November 15, 2007, ○○ and the Plaintiff visited the Defendant bank in order to inform the Plaintiff that the ownership transfer registration has been made in the Gangnam-gu, ○○○○, and the Plaintiff met the ○○○. Around November 15, 2007, the ○○ and the Plaintiff solicited the Plaintiff to subscribe to the Fund.

E. On November 23, 2007, Gangnam ○○ and the Plaintiff visited the Defendant bank to set up a collateral on ○○ Real Estate, and received KRW 900 million from the instant loan to the Gangwon○○ account. On the same day, ○○ and the Plaintiff solicited the Plaintiff to subscribe to the Fund under the Plaintiff’s name. The Gangwon○ decided to subscribe KRW 80 million out of the instant loan to the Fund, and deposited KRW 800 million out of the instant loan into the Plaintiff’s account on November 26, 2007.

F. On November 26, 2007, the Plaintiff: (a) visited the Defendant bank with his deposit passbook and seal; (b) visited the Defendant bank; (c) requested withdrawal of KRW 800 million remaining in the Gangnam bank account; and (d) deposited KRW 800,000 into the Plaintiff’s account; and (c) ○○ deposited KRW 80,000 into the Plaintiff’s account.

G. On December 6, 2007, the Plaintiff visited the Defendant Bank, under the Plaintiff’s name, signed and sealed the application form for the indirect investment goods transaction of the instant fund, and signed and sealed the application form for the indirect investment goods transaction of the instant fund, and signed and sealed by the Plaintiff to KRW 500,000,000,000 on Sloves-type investment trust (A-1) (hereinafter “Cloves Fund”) shares investment trust 1 (hereinafter “CJ-type investment trust 1 (hereinafter “Fund”) in Asia infrastructure, and Sloves fund and Cloves fund combined with the fund, with KRW 30,000,000,000 in KRW 30,000,000,000 on each of the instant funds’ respective explanation notes and major contents on the investment prospectus of each of the instant fund, and stated “○○” and “the following explanation” in the official column and “the following description” on the investment prospectus of each of the instant fund.

H. Afterwards, Schlage's Fund's appraised value has increased until December 12, 2007, and thereafter, the average appraised value has decreased overall since then, and the Fund's appraised value has decreased overall.

I. Since the decline in the appraised value of each of the funds of this case, the ○○ and the Plaintiff was unable to resist while resisting the Defendant bank. Accordingly, on February 27, 2008, the ○○ and the Plaintiff drafted a letter of statement to guarantee the difference when the appraised value of each of the funds of this case fell below KRW 700 million. The appraised value as of February 27, 2008 of each of the funds of this case was KRW 701,18,703.

j. Meanwhile, in the case of Schlage Fund, the appraised value as of May 20, 2008 was 529,092,050 won in excess of 500 million won and continued to decline thereafter, and in the case of the Fund, the Creamble continued to have reached 529,092,050 won in excess of 500 million won.

3.2. The appraised value of each of the instant funds has come to reach a maximum of KRW 254,176,229. On May 20, 2008, the appraised value of each of the instant funds was to reach a maximum of KRW 76,928,204 in total ( Schlage’s 529,092,050 + 050 + Cock was to KRW 247,836,154 in total).

(k) On September 26, 2008, the Plaintiff filed an application for redemption of each of the instant funds with the Defendant bank on October 9, 2008, and received reimbursement of KRW 492,586,084 (324,571,623 + 168,000 + 168,01,000 + 168,000 won + 461 won) of the fund’s redemption price, and KRW 1,24,571,00,000,000 from the Defendant bank on September 26, 2008, and KRW 324,571,57, A’s evidence Nos. 1,2,7, A’s evidence Nos. 12-1, 2-2, 12-4, 2-1, 2-1, 3-1, 3-1, 1-4, 2-1, 3-1, 1-2, and 4 of the witness testimony.

2. Judgment as to the plaintiff's primary claim

A. The plaintiff's assertion

The Defendant Bank has a duty to protect the Plaintiff, an investor, as an investment distributor of the Fund, and accordingly, has a duty to explain important matters such as risk of transaction (Duty to explain). In light of the customer’s investment purpose, asset status, and attitude of investment and risk of securities investment, etc., the Defendant Bank has a duty to recommend the customer to be appropriate (principle of suitability). As seen below, the Plaintiff subscribed to each of the instant funds due to 331, 313, 369 won as a tort committed by ○○ or an incidental breach of contractual obligation, and thus, was liable to compensate for the said damages suffered by OO.

(1) Without notifying the Plaintiff of the purchase of each of the funds of this case, the private investment fund of 80 million won, by deceiving the Plaintiff to deposit funds in a foreign bank, and affixed the relevant documents, and then arbitrarily subscribed to each of the funds of this case. Such act by the private investment fund constitutes tort.

(2) In soliciting the Plaintiff to subscribe to each of the instant funds, ○○○ (hereinafter “○○”) solicited the Plaintiff to subscribe to each of the instant funds, (i) the Plaintiff did not have subscribed to the Fund before being in school, and (ii) the Plaintiff did not encourage the Plaintiff to subscribe to each of the instant funds. In such a case, ○○ (hereinafter “○○”) solicited the Plaintiff to subscribe to the Fund even though it did not encourage the Plaintiff to subscribe to each of the instant funds. (ii) Notwithstanding its duty to protect the Plaintiff by clearly explaining the nature and major contents of each of the instant funds, including the risks associated with the investment, by clearly explaining the nature of each of the instant funds, including the risks associated with the investment, the Plaintiff did not perform such duty; (iii) faithfully soliciting investments to protect investors’ interests; (iv) protecting investors’ interests by protecting the beneficiaries’ interests as good managers; and (v) providing the investors with correct information on the investment issues or objects, etc. so that investors can make reasonable investment decisions based on such information, the act constitutes an incidental breach of contractual duty or tort.

B. Determination

(1) Determination as to the assertion that ○○ arbitrarily subscribed to each of the instant funds without the Plaintiff’s consent.

As seen earlier, ○○○ and the Plaintiff, who received solicitation to join the Fund by ○○○ and ○○○, decided to subscribe to each of the instant funds in the name of the Plaintiff, and accordingly, the Plaintiff subscribed to each of the instant funds. As such, the Plaintiff’s allegation inconsistent with the above recognized facts is without merit without further review on the remainder of the issues.

(2) Determination of the violation of the principle of suitability, the duty of explanation, and the duty of customer protection (A)

1) The investment information described in the summary (key description) of each of the instant funds is Schlage’s fund

(1) Investment purpose: Seeking stable interest income and long-term increase in capital by mainly investing in a master investment trust that has a scenario of foreign stocks, mainly composed of enterprises engaged in business in connection with Brazil, Russia, India and China, representative enterprises and such countries.

(2) Major investment strategies: Investment made in Brazil, Russia, India, and China by country may, when controlling the importance of investment by country by utilizing the weighted average market values of each country, utilize the asset allocation model, such as Schlage's quantitative/non-credit quantitative analysis model, in order to enable investment decision-making and asset management companies to conduct exchange hedging at the discretion of asset management companies by classifying the currency of investment stocks into the currency of investment stocks.

(3) Major investment risk: A performance dividend product that is not subject to the Depositor Protection Act may cause an investment loss according to the fluctuation in stock prices and exchange rate fluctuations, etc.

(4) Type of investors suitable for investment risks: Investment risks of this investment trust shall be highly high in Grade I among Grade V, and therefore be suitable for investors capable of reducing the market risks accompanying overseas investments, risks accompanying original losses, risks of exchange rates fluctuations, etc.

(5) Base price: A fund whose net asset value of an investment trust is calculated or redeemed every day by dividing the total number of beneficiary certificates issued, at the price applied to purchase or redemption of beneficiary certificates.

(1) Investment purpose: Sponsoring active capital gains by the Cock that seeks to pursue high profits by investing at least 60% of the investment trust property in shares related to social infrastructure in Asia (including Australia) by concentrating the shares related to social infrastructure in an Asian Infrastructure Stock Investment Trust.

(2) Major investment strategies: C&S investment of less than 100% of trust property in the Asia Infrastructure Stock Exchange; investment trust of this investment trust shall be limited to raw materials, facilities, transportation, intensive investment in the stocks of enterprises in the field of energy, and exchange rate fluctuations risks in the fields of raw materials, facilities, transportation, concentration of stocks of enterprises in the field of energy, exchange rate fluctuations; and shall not be subject to the Hague Strategy for individual currencies other than US dollars.

(3) Major investment risk: A product that is not protected by the Depositor Protection Act and that is suitable for a long-term investment risk that may cause investment losses according to the fluctuation of prices in domestic and foreign stocks and foreign exchange fluctuation in Asian countries: An investment risk of this investment trust is very high in Grade 2 among Grade 5, and therefore, a product that is suitable for a long-term investment investor that may pursue high investment profits through investment in overseas stocks, etc. and reduce high investment risks.

(5) Base price: Schlage fund, at the price applied at the time of purchase or redemption of beneficiary certificates, divided into the total number of beneficiary certificates, and calculated every day by dividing the net asset value of the investment trust into the total number of beneficiary certificates).

① “BRICS” means the word “in English name in four countries, including Ireland, Russia, India, and China,” consisting of four countries, namely, the first name in four countries, including the word “BRS”, and the word refers to the four countries, both of which may be expected to grow significantly in the future on the basis of low and excellent labor force and rich natural resources.

(2) The safety of a sustainable high growth engine as a new global growth engine, a large market with a maximum of 43% of the world population, a low-class and rich natural resources, and a safe effect of decentralization investment with a single country.

(3) Where the average career experience is at least 12 years, 29 local-level management personnel assigned for 29 local-level distribution are operated, and bricks are directly invested in four stocks.

4. The new growth engine blocks are anticipated to continue high growth in four countries in the initial stage of the new interest market, and the brocks contribution ratio in the global economic growth by 2040 to the level of contribution of 76% in the global growth by 2040, and the future prospects for the growth of the blocks in the future at a rate of 4 times every ten years compared to the present 10 years.

B) C&A Fund

① In relation to a project for building Asian infrastructure, “investment in shares of a company with outstanding growth: Investment in an infrastructure-related project is promptly reflected in the share price of the relevant company; thus, it is efficient to enhance the profitability of the fund and risk management.

(2) The initial stage of long-term nursing: In light of the characteristics of the infrastructure industry, it is expected that it will proceed over a long-term period of time in accordance with the economic development plan of the government, and the present is the early stage, so it is possible to enjoy profits continuously.

③ High growth potential: Asian infrastructure industry is expected to be the largest benefit due to the dynamic development of the Asian economy.

④ Since the core of the infrastructure investment heat is the main axis of Asian countries, the Asian Infrastructure Round provides an unsceptable investment opportunity.

5. Excellent management ability: It will strengthen the expertise of investment in cooperation with Insco (INVESCO H Long Long Long Ltd), a global investment and management company, which has a accumulated management know-how for the Asian infrastructure fund.

3) The Plaintiff had no experience in investing in the stocks or funds before joining the instant fund, etc. As a matter of course, the Plaintiff was forced to subscribe to each of the instant funds from the Defendant bank on November 15, 2007 and November 23, 2007 in the course of lending the proceeds from the successful bided ○○ and the Plaintiff to the Defendant bank. On December 6, 2007, the Plaintiff visited the Defendant bank from the Defendant Non-Party bank and then became affiliated with each of the instant funds at KRW 80 million out of the instant loan.

B) In joining each of the instant funds, the Plaintiff signed and sealed the written application for the transaction of indirect investment goods, signed and sealed each of the instant investment prospectus issuance and major description confirmations, and delivered them to the Defendant bank. The “(investment prospectus) printed on the investment prospectus issuance and major description confirmations of each of the instant funds” stated in the “public column in the following,” and “(s) written “to be provided,” and “to be provided,” stated in the public column in the following:

C) At the time of soliciting ○○ and the Plaintiff to subscribe each of the instant funds, ○○ explained about each of the instant funds by presenting a summary (c) and a leaflet, but did not present or deliver the investment prospectus of each of the instant funds.

[Reasons for recognition] Gap's evidence 2 through 4, Gap's evidence 13, 14, Eul evidence 2, Eul evidence 2, Eul evidence 2, 3, 5, and 6, Eul evidence 1, 2's testimony of public witness of the court of first instance, and 1)'s overall purport of the oral argument (b) where an executive officer or employee of a securities company actively solicits a customer to make an investment but incurred a loss as a result of investment, for the purpose of establishing tort liability against investors, it is not required to establish a tort liability against investors. However, even if it is not required to establish a positive deception as to whether the investment occurred as to whether the investment was made, the above legal principle is applied to the case where it interferes with the transaction process and method, customer's investment situation (e.g., asset status, age, social experience level, etc.), transaction risk, and its explanation to the general investor who lacks experience, or actively recommended a transaction involving excessive risk to the customer in light of the customer's investment situation.

Meanwhile, according to Article 57 (1) 5 of the former Indirect Investment Asset Management Business Act and Article 55 (1) 5 of the Enforcement Decree of the same Act, any officer or employee in charge of sales of indirect investment securities is prohibited from actively soliciting indirect investment securities in light of the investor’s awareness of investment, investment purpose, and financial status. (2) The instant fund’s structure is complicated, and it is difficult for the Plaintiff to understand. (2) Each of the instant funds is a product with a high risk of change (5% between one week and 15%) that is highly likely to interfere with the Plaintiff’s investment risk trading of each of the instant funds, and (3) such high risk of investment risk (the fund’s first class - 5 class 1 among the funds - 2 class 6 class) that is likely to interfere with the Plaintiff’s investment risk trading of each of the instant funds at the time of soliciting investors to subscribe to the instant investment risk, and (4) that is adequate for the Plaintiff’s investment risk of each of the instant funds to provide safe investment risk factors or risks.

3) Therefore, the above unfair solicitation by ○○ constitutes a tort against the Plaintiff, and the above act by ○○○ constitutes an act closely related to the execution of the business affairs of Defendant Bank when objectively and externally viewed as an act closely related to the execution of the business affairs of Defendant Bank. As such, Defendant Bank is liable to compensate the Plaintiff as the employer of ○○○, who is the employer of ○○○.

(C) Damages suffered by the Plaintiff due to the ○○○○○○’s solicitation for private investment, including ① transaction fees or taxes, which were incurred without the need for customers to bear, and ② customer’s losses incurred without any unfair solicitation. In this case, the Plaintiff’s damages should be considered as 80 million won of the investment principal deposited in each of the instant funds, and thus, the Plaintiff should be considered as referring to 30 billion won of the investment prospectus, and 40 billion won of the investment risk should be considered as referring to 70 billion won of each of the instant funds, i.e., e., e., the Plaintiff’s investment risk at the time of investment solicitation, based on 208, 208, 300 won of each of the instant funds, and 40 billion won of the investment risks, i.e., e., e., 701, 708, 81, 978).

Ultimately, the amount of damages that the Defendant bank is liable to compensate for to the Plaintiff is KRW 39,524,518 (wons 98, 811, 297 x below KRW 0.4, and KRW 518). Thus, the Defendant bank is obligated to pay to the Plaintiff damages for the damages calculated at each rate of 20% per annum under the Civil Act from December 6, 2007, which is the date when each of the of the instant funds was incorporated to the Plaintiff, until May 26, 2010, which is the date when the Defendant bank rendered a final judgment, to dispute the existence and scope of the obligation to compensate to the Plaintiff, and the damages for delay calculated at each rate of KRW 39,524,518, and KRW 20 per annum under the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings from the following day until the date of full payment.

3. Judgment on the plaintiff's conjunctive claim

A. The plaintiff's assertion

Although the employee of the Defendant Bank, as an employee of the Defendant Bank, was prohibited from guaranteeing any form of profit including the investment principal in indirect investment, the Defendant Bank, the employer of the Defendant Bank, is obligated to compensate the Plaintiff for the damages suffered by the Plaintiff, preparing a letter guaranteeing losses on February 27, 2008, and making the Plaintiff postponed the redemption of each of the instant funds. This act by the ○○ constitutes a tort. Such act by the ○○○○ constitutes a tort. The Plaintiff suffered damages equivalent to KRW 208, 532, 619, due to the above act by the ○○○○, and thus, the Plaintiff suffered losses.

B. Determination

In addition, in light of the circumstances up to the preparation of each of the instant statements and the testimony of the witness of the first instance trial, each of the instant statements was not prepared by ○○○, but rather prepared by ○○○ and ○○○’s forced execution, and further, as to whether ○○ was unable to repurchase each of the instant funds by ○○○ and preventing the Plaintiff from repurchase of each of the instant funds, the testimony by ○○○ witness of the first instance trial alone was insufficient to acknowledge it, and there was no other evidence to acknowledge it. Thus, the Plaintiff’s assertion is not sufficient to further examine the scope of compensation for damages without any justifiable reason.

4. Conclusion

Therefore, the plaintiff's primary claim is justified within the above scope of recognition, and all of the conjunctive claims added in the court of appeal are dismissed as they are without merit. It is so decided as per Disposition by the court of first instance including the extension of the primary claim and the addition of the conjunctive claim in the court of appeal.

Justices Shin Young-chul and decorations

Judge Yang Chang-chul

Judges Dok-chan