○○ Stock Company’s Bankruptcy Trustee ○

Intervenor, Inc.

Defendant 1 Co., Ltd. and 1 (Law Firm Gyeong & Yang, Attorneys Kim Yong-ki et al., Counsel for the defendant-appellant)

December 17, 2008

Daejeon District Court Decision 2005Gahap1192, 2007Gahap421 decided Dec. 6, 2007

1. All appeals by the Defendants are dismissed.

2. The costs of appeal are assessed against the Defendants.

1. Purport of claim

The primary purport of the claim is to deny the sales contract concluded on December 18, 2001 between the bankrupt ○○ Co., Ltd. and Defendant 2’s agricultural partnership as well as the purchase and sale contract concluded on May 13, 2005, and to the Plaintiff as to the instant land. As to the instant land, Defendant 2’s agricultural partnership completed on December 21, 2001 as the receipt of receipt on December 21, 2001 by the Daejeon District Court, each transfer of ownership, each transfer of ownership, each registration of Defendant 1 Co., Ltd. completed on May 13, 2005 as the receipt of receipt on May 13, 2005, and each cancellation registration procedure will be implemented.

Preliminary Claim: Defendant 2’s agricultural partnership shall pay to the Plaintiff the amount of KRW 4,100,000 and the amount of KRW 5% per annum from December 18, 2001 to the date of delivery of a copy of the application for modification of the claim and the cause of the claim from November 5, 2007 to the date of delivery of the application for modification of the claim, and 20% per annum from the next day to the date of full payment. As to the land of this case, the Defendants’ sales contract concluded on May 13, 2005 between the Defendants was revoked, and Defendant 1 Co., Ltd will implement the procedure for registration of cancellation of each ownership transfer registration completed on May 13, 2005 to the Daejeon District Court Seosan Branch Branch of the Daejeon District Court.

2. Purport of appeal

Of the judgment of the first instance court, the part concerning the conjunctive claim against Defendant 1 corporation and the part against Defendant 2 regarding the conjunctive claim against Defendant 2 for the agricultural partnership corporation shall be revoked, and all of the plaintiff's claims corresponding to the above revoked are dismissed.

1. Scope of the judgment of this court;

With respect to the plaintiff's primary and conjunctive claims, the court of first instance dismissed the part of the lawsuit of denial as to the sales contract between the defendants on May 13, 2005 and dismissed the remainder of the claim, and among the conjunctive claims, the claim against the defendant 2 for the defendant 2 was partially accepted (the partial rejection of the claim for delay damages) and the claim against the defendant 1 corporation was accepted, and only the defendants appealed against the part against it. Thus, the scope of the judgment of this court is limited to the claim against the defendant 2, excluding the damages for delay which were partially dismissed against the defendant 2, and the claim against the defendant 1 corporation.

2. Quotation of judgment of the first instance;

The reasoning for this Court’s explanation concerning this case is as follows: (a) the part of the judgment's portion on the Defendants’ assertion of the court of first instance is changed to the following three; and (b) the judgment of the court of first instance is identical to that of the court of first instance except for the addition of the judgment as to the matters alleged in the court of first instance to the following 4. Therefore, it is acceptable in accordance with the main sentence of

3. The modified part

B. Determination as to the defendants' assertion

(1) Whether a sales contract of this case expired pursuant to the sales contract of this case

(A) The defendants' assertion

1) On August 12, 2002, Nonparty 1 Co., Ltd. sold 2,316,270 common shares of Nonparty 4 Co., Ltd., registered preferential shares of KRW 80,220 to Nonparty 3 Co., Ltd. in KRW 12,367,385,199; however, the purchase price was paid at the same time as the purchase price was paid in cash until September 11, 2002; and Nonparty 3 Co., Ltd., the purchaser of the purchase price did not pay the purchase price by September 11, 2002, concluded a share acquisition agreement with the purport that the contract becomes null and void.

2) However, the non-party 3 and the non-party 1 corporation did not prepare a purchase price of approximately 240 million shares of the non-party 4 corporation. Thus, the non-party 3 corporation provided the land owned by the non-party 1 corporation as collateral and agreed to purchase only KRW 6.12 million out of the above non-party 4 corporation's shares. Accordingly, on September 10, 2002, on September 10, 2002, the non-party 3 corporation set the right to collateral security on the land, etc. of this case to the non-party 1 corporation and received 1.2 million shares of the non-party 4 corporation from the non-party 1 corporation.

3) After that, among the non-party 1 corporation’s non-party 4’s shares were not paid the purchase price by the non-party 3 corporation, it was necessary to arrange non-party 1’s non-performing claims against the non-party 2 corporation, the subsidiary holding approximately 61% of the issued shares. Accordingly, the non-party 1 corporation, the non-party 1 corporation, and the non-party 3 corporation sold 1.2 million shares of the non-party 4 corporation, which it originally decided to sell to the non-party 3 corporation at KRW 6.12 billion to the non-party 3 corporation, via the non-party 3 corporation, and the ○○ corporation directly pays the price to the non-party 1 corporation, thereby changing the purchaser of the above shares into ○○ corporation, and the ○○ corporation decided to transfer the above shares to the non-party 2 corporation as payment in kind in the existing loan amount and interest thereon.

4) However, since ○○○ Co., Ltd. failed to perform the above purchase price obligation, it requested Defendant 2’s farming association to guarantee the above obligation to Nonparty 1 Co., Ltd. to secure its performance. Accordingly, Defendant 2’s farming association guaranteed the purchase price liability for the stocks of Nonparty 4 Co., Ltd. in an amount equivalent to KRW 6.12 million against Nonparty 1 Co., Ltd., and had the obligor set up the instant collateral security right with the instant land as ○○ Co., Ltd. to secure this.

5) However, since ○○○ Co., Ltd. failed to repay the above debts to Nonparty 1 Co., Ltd., and received a decision to commence auction on the instant land from Nonparty 5 Co., Ltd., upon receipt of an application for voluntary auction from Nonparty 1 Co., Ltd., the said decision to commence auction, Defendant 2 acquired the right of advance reimbursement of the trustee’s claim against ○○ Co., Ltd., and Defendant 2 Co., Ltd., declared that it would offset it against the purchase-price claim under the instant sales contract as an automatic bond, and all of the above sales-price obligations are extinguished by Defendant 2’s declaration of intention to offset it against the amount equal to the purchase-price claim under the instant sales contract. As such, Defendant 2’s sales-price obligation against ○○ Co., Ltd. is no longer nonexistent, and as long as there is no sales-price claim under the first sales contract of ○ Co., Ltd.

(B) Determination

1) On December 12, 2002, Defendant 2: (a) created the instant right to collateral security with respect to the instant land to Nonparty 1 Co., Ltd.; and (b) Nonparty 5 Co., Ltd., which was transferred the said right to collateral security from Nonparty 1 Co., Ltd., requested a voluntary auction on the instant land; and (c) currently conducting auction on the said land; and (d) according to the evidence No. 8, Defendant 2 Co., Ltd. sent to the Plaintiff a certificate of the content that Defendant 2 Co., Ltd. would offset the Plaintiff’s claim for the purchase price against the Plaintiff’s equal amount with the Plaintiff’s right to collateral security as a trustee, and reached the Plaintiff around that time.

2) Furthermore, as alleged by the Defendants, as to whether ○○ Stock Company purchased the shares of Nonparty 4 from Nonparty 1 Co., Ltd. in KRW 6.120,000,000, KRW 1,2, Eul’s evidence Nos. 1-1 through 3, Eul’s evidence Nos. 2 and 3-1, 2, Eul’s evidence Nos. 4 through 6, Eul’s evidence Nos. 7-1 through 7, and Eul’s testimony and evidence Nos. 13 through 17 are insufficient to acknowledge it, and there is no other evidence to acknowledge it.

Therefore, the defendants' assertion on the premise that ○○ Stock Company bears the above obligation to purchase and sell shares to the non-party 1 corporation, and Defendant 2's joint and several liability is without merit.

(2) Whether the right to collateral security exceeding the market price of the instant land was established at the time of the second sale contract, and the method of restitution

(A) The defendants' assertion

1) The selling price of the instant land by ○○ Co., Ltd. to Defendant 2 to Defendant 2 was KRW 4.1 billion, and there was no particular change in the market price of the instant land at the time of the second sale contract thereafter.

2) On the other hand, the sum of the maximum debt amount of the instant mortgage and the mortgage transferred to Nonparty 7 on March 5, 2003, which was established on the instant land at the time of the second sale contract, is at least 9.5 billion won, and the market price of the instant land is exceeded.

3) As such, since the maximum debt amount and secured debt on the instant land exceed the market price of the instant land at the time of the second sale contract, the instant second sale contract cannot be deemed a fraudulent act.

4) Even if the 2nd sales contract of this case constitutes a fraudulent act, it shall be deemed that the fraudulent act is established only within the extent of the balance obtained by deducting the secured debt amount of the right to collateral security already established at the market price of the land of this case. In the Daejeon District Court case No. 2005 Mata-Ma8830, Seosan-dong (number 1, 2, 3, and 4 omitted) among the total 29 parcels of real estate subject to auction, since the successful bidder paid the price in full due to the decision to permit the sale, such restitution in such case shall be based on the method of compensation for value, not the return of the original property.

(B) Determination

1) In a case where a real estate on which the mortgage is established is transferred by a fraudulent act, the fraudulent act is established within the scope of the value of the real estate, namely, within the extent of the balance obtained by deducting the secured debt amount of the mortgage in the market value, and if the secured debt amount exceeds the value of the real estate, the transfer of the real estate concerned cannot be deemed a fraudulent act. Here, the secured debt amount in this context is not the maximum debt amount in the case of a mortgage but the actual amount arising out of the secured debt amount (Supreme Court Decision 2000Da42618 delivered on October 9, 201). The sale price of the land by ○○ Co., Ltd. to Defendant 2 for the farming association corporation was KRW 4.1 billion. At the second sale contract, the secured debt amount in this case was set up at the above land. However, there is no evidence that the secured debt amount of the land in this case exceeds the market value at the time of the second sale contract, and the Defendants voluntarily acknowledged that the total market value of the land in this case was 909,794.700.

2) In addition, where a creditor’s revocation of fraudulent act and claim for restitution are acknowledged pursuant to Article 406(1) of the Civil Act, the beneficiary is obligated to return the object of the fraudulent act to the debtor as restitution. If it is impossible or considerably difficult to return originals, the beneficiary shall compensate for the equivalent amount of the value of the object of the fraudulent act as the performance of the duty to restore if it is impossible or considerably difficult to return originals. Here, the case where the originals are impossible or considerably difficult to return are not simply absolute or physical impossible, but it means the case where the realization of the originals cannot be expected in light of the social experience rules or the transaction concept (Supreme Court Decision 2006Da43620 Decided December 7, 2006). Thus, the circumstances alleged by the Defendants do not seem to fall under cases where the originals are impossible or considerably difficult to return.

3) Therefore, the Defendants’ above assertion is without merit.

4. Additional determination

A. Whether a set-off is based on the prior right of indemnity held as a guarantor for an obligation against the non-party 2 corporation

(1) The defendants' assertion

(A) According to the instant sales contract, ○○ Incorporated Co., Ltd. jointly and severally guaranteed Defendant 2’s obligation to Nonparty 2 Co., Ltd. and requested for the provision of security. Accordingly, Defendant 2 guaranteed the obligation of ○○ Incorporated Co., Ltd. to Nonparty 2 on March 5, 2003, and created a collateral security right with a maximum debt amount of KRW 1.5 billion to Defendant 2 Co., Ltd. as to the instant land, the mortgagee of the instant land as Nonparty 2 Co., Ltd., and the debtor as Defendant 2 Co., Ltd., with a maximum debt amount of KRW 1.5 billion.

(B) However, the non-party 5 Company applied for a voluntary auction of the instant land and received a decision to commence auction. Defendant 2’s farming association, as a joint guarantor or a surety, acquired a prior right to reimbursement of the deposit guarantor within the scope of KRW 1.5 billion, which is the maximum debt amount of the right to collateral security. Defendant 2 expressed his intention on October 10, 2008 to offset it against the amount equal to the purchase price claim under the sales contract of this case as an automatic bond, thereby extinguishing the above sales price debt within the extent of equal amount.

(2) Determination

(A) On March 5, 2003, Defendant 2: (a) created the instant right to collateral security with respect to the instant land to Nonparty 2 Co., Ltd.; (b) Defendant 2 established the instant right to collateral security with the maximum debt amount of KRW 1.5 billion; and (c) Nonparty 5 Co. 5, who was transferred the said right to collateral security from Nonparty 1 Co., Ltd., requested a voluntary auction on the instant land and currently is conducting auction; and (d) according to the evidence No. 12, Defendant 2 Co., Ltd. sent to the Plaintiff a certificate of content that Defendant 2 Co., Ltd. would set off the Plaintiff’s right to collateral security with the Plaintiff’s right to collateral security against the Plaintiff on October 10, 2008, and reached the Plaintiff around that time.

(B) Therefore, as alleged by the Defendants, it is not sufficient to recognize the above only by the entries in the evidence No. 11-2 of the evidence No. 11-1 and No. 2 as to whether Defendant 2’s agricultural partnership jointly and severally guaranteed the obligation of Nonparty 2 corporation, as alleged by the Defendants. In addition, even if Defendant 2 jointly and severally guaranteed the obligation of Defendant 2 to Nonparty 2 corporation as alleged by the Defendants, it should fall under any of the subparagraphs of Article 42 of the Civil Act for Defendant 2 to exercise the prior right to indemnity against ○○ Stock Company, and there is no evidence to acknowledge that it falls under such case. Therefore, the above assertion by the Defendants is without merit.

(C) In addition, according to the provisions of Articles 370 and 341 of the Civil Act, as to whether Defendant 2’s agricultural partnership can exercise prior right to indemnity against ○○ Stock Company as the surety’s surety, the right to indemnity against the obligor of the surety is only caused by the surety’s repayment of the obligation to the surety or the loss of ownership of the mortgaged property due to the exercise of the mortgage. Thus, even in the case as alleged by the Defendants, the above assertion by the Defendants on the premise that the right to indemnity is created to Defendant 2’s agricultural partnership as the surety’s surety’s surety,

B. Whether set-off is based on the prior right to indemnity held as ○○ Stock Company and joint and several sureties

(1) The Defendants’ conjunctive assertion

(A) Even if the obligor of the instant right to collateral security is a non-party 3 corporation, not the ○○○○ Company, it is reasonable to view that, in light of the actual management relationship between the non-party 1 corporation, the non-party 2 corporation, the non-party 3 corporation, and all the non-party 8 corporations at the time of the instant right to collateral security, the ○○ Company was the primary debtor in the form of the instant right to collateral security, thereby jointly and severally guaranteeing the repayment of the share purchase price to the non-party 4 corporation with the non-party 1,20,00 shares of the non-party 3 corporation.

(B) However, it is apparent that the non-party 3 corporation has no means to pay the purchase price of the shares to the non-party 1 corporation, and since the auction is in progress for the land of this case, it is obvious that the defendant 2 farming association corporation will pay the purchase price of the shares on behalf of the

(C) Therefore, Defendant 2’s agricultural partnership has a prior right to claim 1/2 of the purchase price of shares to be subrogated against ○○ Co., Ltd., which jointly and severally guaranteed the above stock sale price obligation, and accordingly, Defendant 2’s agricultural partnership can set off the purchase price obligation under the first sale contract of this case as the prior right to claim ○○ Co., Ltd. as alleged earlier.

(2) Determination

On the other hand, as alleged by the Defendants, it shall be deemed that ○○○ Company, as the principal debtor in the form of the instant right to collateral security, was the principal debtor, and as between ○○ Company and Defendant 2’s agricultural partnership, it shall be deemed that there was an implied understanding that the repayment of Non-Party 3’s share purchase price and purchase price liability should be jointly and severally guaranteed. However, as alleged by the Defendants, solely based on the circumstance alleged by the Defendants, Defendant 2’s agricultural partnership cannot be deemed to have prior right to indemnity

5. Conclusion

Therefore, the part of the judgment of the court of first instance as to the conjunctive claim is justifiable, and the defendants' appeal against this is dismissed in its entirety as it is so decided as per Disposition.

[Attachment Omission of List of Real Estate]

Judge Lee Jin-man (Presiding Judge)