Plaintiff 1 and one other (Law Firm LLC, Attorneys Masung-si et al., Counsel for the plaintiff-appellant)

Defendant (Attorney Hong-sik et al., Counsel for the defendant-appellant)

Seoul Central District Court Decision 2007Gahap10997 Decided February 4, 2009

June 25, 2010

1. Of the judgment of the court of first instance, the part against the defendant in excess of the amount ordered to be paid below shall be revoked, and the plaintiff's claim corresponding to the revoked part

The defendant shall pay to the plaintiff 1 91,975,00 won with 5% per annum from December 27, 2007 to August 20, 2010, and 20% per annum from the next day to the day of full payment.

2. The defendant's remaining appeal is dismissed.

3. The total costs of the lawsuit are three minutes, which are one of which are borne by the plaintiffs, and the remainder by the defendant respectively.

1. Purport of claim

The defendant shall pay 60,200,000 won to the plaintiff 1 and 121,690,000 won to the plaintiff 2 with 20% interest per annum from December 27, 2007 to the day of full payment.

2. Purport of appeal

The judgment of the first instance is revoked. All of the plaintiffs' claims are dismissed.

1. Basic facts

The reasoning for this part of the court's explanation is as follows: "At present Seoul High Court Decision 2008No1143, Feb. 5, 2009 (Seoul High Court Decision 2008No1143)" was sentenced to seven years of imprisonment and fine 10,000,000 won from Seoul High Court (Seoul High Court Decision 2008No143). The defendant appealed against the defendant, but dismissed the appeal on May 28, 2009 (Supreme Court Decision 2009Do1446, May 28, 2009). The second part of the 6th 6th 7th 7th 7th 7th 201 7th 201 3th 3th 20 3th 201 3th 201 3th 201 3th 201.

2. Determination as to the cause of action

A. Summary of the plaintiffs' assertion

The court's explanation on this part is identical to the corresponding part of the judgment of the court of first instance, and thus cite it as it is in accordance with Article 420 of the Civil Procedure Act.

B. Determination as to the establishment of liability under Article 401(1) of the Commercial Act

1) Article 401(1) of the Commercial Act provides that when a director has neglected his/her duties by bad faith or gross negligence, he/she shall be jointly and severally liable for damages to a third party. The original purpose of Article 401(1) of the Commercial Act is that the director shall be that the director shall be liable for damages to the third party, if he/she causes damage to a third party due to bad faith or gross negligence of the director when he/she causes damage to the third party due to a director's failure to perform his/her duties due to bad faith or gross negligence, even if the director breached his/her duty as a good manager upon delegation by the company, in relation to the third party, even if he/she has breached his/her duty in relation to the third party (see, e.g., Supreme Court Decision 84Meu2409, Nov. 12, 1985).

(ii)the breach of duty by bad faith or gross negligence;

As seen earlier, ① When the registration of the investment advisory business and the discretionary investment business was revoked, and the non-party company demanded the return of the investment amount from around that time, the Defendant decided to provide capital increase to the non-party company for the return of investment funds to the above investors, which are not directly related to the non-party company. ② Around 2001 when the issuance of capital increase was made, domestic ordinary investors recognized the foreigner’s investment to be favorable information. Accordingly, the company’s investment in the business sector where the foreigner’s high profit is anticipated to increase its market price. Intensive investment in the business sector where the specific company was expected to have worked as an important factor to consider the decision-making of the company’s stocks. The Defendant announced the non-party company’s investment advisory business to use the non-party company’s funds through the non-party company’s participation representative director and the investment advisory business to use the funds through the non-party company’s offering of capital increase, as seen earlier, and the Defendant did not make up the funds to the non-party company’s funds as its manager in the account and trading sector.

3) Whether the damage falls under Article 401(1) of the Commercial Act

A) A shareholder of a stock company may claim compensation for damages against a director or company pursuant to Articles 401, 389(3), and 210 of the Commercial Act in cases where he/she suffered direct damage due to a representative director’s bad faith or gross negligence. However, the representative director’s embezzlement of company’s property and reduction of company’s property, thereby infringing the company’s economic interest, does not include indirect damage, such as loss caused by the company’s loss, in the concept of loss under Article 401(1) of the Commercial Act (see Supreme Court Decision 91Da36093, Jan. 26, 1993). In relation to the interpretation of Article 401(1) of the Commercial Act, direct damage refers to damage directly suffered by a third party due to the director’s breach of duty, regardless of whether the company was a director’s loss. In this regard, indirect damage refers to damage indirectly suffered by the company without any direct damage to a third party without any loss caused by the third party. In cases where a shareholder directly damages occur to a director, applying for sale of stocks, without justifiable reason.

B) In this case, the non-party company was a company with no special financial structure problems prior to the Defendant’s embezzlement of this case. The non-party company received limited opinions on the grounds that the non-party company did not carry out the business in a timely manner by violating the duty of care, and operated the company’s normal business activities, as seen earlier, on the grounds that the non-party company did not carry out any judgment data to audit the company’s overall account, and that the non-party company’s stocks were delisted on the grounds that the funds raised through new business, such as the Defendant’s disclosure, were not planned to invest in the non-party company for personal purposes, such as return of investment funds to investors separate from the non-party company, such as investment funds, and acquired large profits by using the financial method such as price manipulation and selling for consideration by using investment funds (Embezzlement equivalent to 160% of investment funds). It is difficult to find that the non-party company’s stocks were subject to a special loss under corporate management, which goes beyond the ordinary corporate management losses, and thus, cannot be found to be subject to de-listing.

However, although the shares of listed company are important in the value of the share price reflecting the company's real assets, there is its significance in that the shares can be sold easily through the open market. However, if the shares of the non-party company were to be sold and sold in an exchange, i.e., delisting the eligibility to be traded in the exchange, thereby excluding the reorganization period, the circulation of shares as a listed company would virtually disappear. As such, the defendant planned to embezzled large amounts of shares in light of the size of the non-party company's capital stock, conducted various manipulation, false disclosure in order to maximize profits that can be taken in the process, and thereby delisting may be the same as the case where a director applied for delisting even though there is no justifiable reason, which is a direct damage. Thus, the damages suffered by the plaintiffs shall be deemed as damages under Article 401 (1) of the Commercial Act.

4) A causal relationship

Since the Defendant’s embezzlement, various means, etc. taking place during the process, delisting the shares of the Nonparty Company on the ground that the limitation of audit scope and the capital has been impaired, there is a proximate causal relation between the damages suffered by the Plaintiffs who held the shares of the Nonparty Company at the time of the delisting due to the Defendant’s unlawful neglect of duties.

5) Calculation of the damages suffered by the Plaintiffs due to the decline in the value of stocks due to delisting of stocks

A) Whether the plaintiffs sold 130 won per share of the shares held on July 9, 2002, which are the date of commencement of the reorganization sale and purchase

Upon examining the evidence submitted by the plaintiffs, there is no evidence to acknowledge that the plaintiffs sold shares of the non-party company held on July 9, 2002 (70,00 shares in the case of plaintiffs 1, 141,50 shares in the case of plaintiffs 2, and 140 shares in the case of plaintiffs 2) to 130 won per share (In light of the whole purport of the pleadings in each statement in No. 12-3, 4, and 18 evidence, the plaintiff 1 transferred shares of the non-party company held on July 23, 202, July 24, 200, and September 5, 200, the plaintiff 2 transferred shares of the non-party company held on July 23, 200, the non-party company shares of the non-party company held on July 26, 206, and the fact that the non-party company shares were transferred and replaced on September 26, 200.

B) Calculation of damages

The lower end price of Non-Party Company’s shares was 990 won prior to the date of suspension of trading ( March 7, 2002) on Non-Party Company’s shares. However, the highest end price between July 9, 2002 and July 30, 2002, which is the reorganization trading period based on the premise of delisting, is as seen earlier. Therefore, barring any special circumstance, damages suffered by the Plaintiffs, who are a minor shareholder due to de-listing of Non-Party Company’s shares, are the amount obtained by multiplying the amount obtained by deducting 340 won, the highest closing price formed during the reorganization trading period under the premise of de-listing at KRW 990, the lower end price of the shares at the time immediately before the suspension of trading, by the number of shares owned by the Plaintiffs (the Defendant asserts that, despite de-listing of Non-Party Company’s shares, at least 1,000 won per share was at least the actual value, but there is no evidence to acknowledge the amount of damages thereafter).

Therefore, Plaintiff 1 shall be deemed to have suffered losses of the parties: [200 won - (90 won - 340 won) x 70,000 won x 91,975,00 won - 141,500 won x 1400 won x 141,500 won .

6) Sub-decisions

Therefore, the defendant is obligated to pay to the plaintiff 1 the amount of 45,500,000 won, the amount of 91,975,000 won and damages for delay for each of the above amounts to the plaintiff 2.

3. Judgment on the defendant's defense of extinctive prescription

The defendant knew about the embezzlement of the defendant from December 2, 200 to November 2001 through broadcasting, newspaper reporting, and the trend of decline in share price. At least the time when share sale and purchase transaction was suspended or when the defendant was arrested on May 29, 2004. As long as three years have elapsed since then, the right to claim damages has expired by prescription. Thus, considering that the director's liability for damages against the third party under Article 401 of the Commercial Act is a special liability recognized by the Commercial Act in order to protect the third party, Article 766 (1) of the Civil Act providing for the short-term extinctive prescription of general tort liability is not applicable, and the period of extinctive prescription under Article 162 (1) of the Civil Act is ten years (Supreme Court Decision 2004Da6354 Decided December 22, 2006). Thus, the defense is not accepted.

4. Conclusion

Therefore, the defendant is obligated to pay the plaintiff 1 with 45,50,000 won and 91,975,000 won and 20% interest per annum under the Civil Act from December 27, 2007 to August 20, 2010, which is the day following the delivery date of the copy of the complaint of this case, as requested by the plaintiff, as to the above money, the defendant is obligated to pay the plaintiff 1 with 5,50,000 won and 91,975,000 won and 20% interest per annum under the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings from the next day to the day of complete payment. Accordingly, since each claim of this case of this case is justified within the above recognition scope and each remaining claim is unfair, the part against the defendant ordering payment exceeding the above recognized amount among the judgment of the court of first instance, which is revoked, and the remaining part of the defendant's appeal is dismissed as it is without merit.

Judges Jo Nam-dae (Presiding Judge)