[1] Where a person who entered into a partnership agreement with another person and registered a business in a joint name, withdraws from the partnership relationship, and changes the business registration in another person's sole name, and the other party to the transaction after withdrawal bears the liability of the nominal lender under Article 24 of the Commercial

[2] In a case where the other party to a transaction knew of the nominal name or knew of the nominal name due to gross negligence, whether the liability of the nominal name holder under Article 24 of the Commercial Act is exempted (affirmative), and the burden of proof (=the nominal owner

[1] Article 24 of the Commercial Act / [2] Article 24 of the Commercial Act

[2] Supreme Court Decision 91Da18309 delivered on November 12, 1991 (Gong1992, 93) Supreme Court Decision 2000Da10512 delivered on April 13, 2001 (Gong2001Sang, 1123)

Plaintiff (Seoul General Law Firm, Attorneys Park Jong-soo et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm Loex, Attorneys Kim Dong-dong et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2005Na20592 Delivered on March 2, 2006

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal Nos. 1 and 2

Where the nominal owner concludes a partnership agreement with another person and permits another person to operate his/her business after completing a business registration under a joint name, and the other party to the transaction misleads another person as a joint business owner of the above business and trades the nominal owner, even if the nominal owner withdraws from the partnership and changes his/her business registration under another person’s sole name, if the nominal owner fails to take measures such as informing the other party of the withdrawal from the partnership, and thereby makes the other party mistake as a joint business owner, the nominal owner is still liable for any transaction made between another person and the other party

In addition, the liability of the nominal name lender under Article 24 of the Commercial Act is to protect a third party who trades by misunderstanding the nominal name as the business owner. Thus, if the other party to the transaction knew of or was grossly negligent in making the fact of the nominal name, he/she shall not be held liable. In such a case, whether the other party to the transaction knew or was negligent in making the fact of the nominal name, the nominal name lender who asserts exemption from liability bears the burden of proof (see, e.g., Supreme Court Decisions 91Da18309, Nov. 12, 1991; 200Da10512, Apr. 13, 2001).

The court below, based on the admitted evidence, concluded a partnership agreement between the defendant and the non-party to operate the new source as a joint proprietor of the new source of business, and registered the business with the non-party as a joint proprietor of the previous place of business even after the termination of the partnership agreement, and the non-party was aware of the fact that the new source of business was jointly used in the previous place of business at the same time as the defendant and the non-party, and the plaintiff knew that the above partnership agreement was terminated and that the new source of business was continued to use the trade name "new source of business" used by the non-party after the termination of the partnership agreement, and that the non-party continued to use the above trade name "new source of business" used in the previous name of the defendant and the non-party after the withdrawal of the defendant's joint proprietor of the new source of business. In light of the above legal principles and records, the judgment of the court below is justified to deem that the new source of business had been permitted by the non-party's prior to the termination of the partnership agreement, and that the new source of business was the non-party's new source of business.

The court below did not err in the misapprehension of legal principles as to the liability of the nominal lender under Article 24 of the Commercial Act, as alleged in the ground of appeal.

2. As to the third ground for appeal

According to the reasoning of the judgment below, the court below determined that the plaintiff was liable to pay the above 111,94,000 won to the plaintiff as the nominal lender pursuant to Article 24 of the Commercial Act and delay damages therefrom, after compiling the adopted evidence from January 2004 to August 15, 2004. The court below found that the plaintiff supplied 231,540,000 won in total to New Daily from January 2004, and did not receive 111,994,00 won out of the price. In light of the records, the court below's fact-finding and judgment are justified.

The court below did not err in the misapprehension of legal principles as to the illegality and free evaluation of evidence which are alleged in the grounds of appeal, or against the rules of evidence.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Shin Hyun-chul (Presiding Justice)