[1] In case where a person who acquired stocks with stock certificates files an application for change of ownership by offering stock certificates, etc., and a person who is authorized to prepare a register of shareholders fulfills his/her duty of formal examination, whether the change of ownership, thereby constituting lawful (affirmative in principle)

[2] The case holding that in a case where Company B, a subsidiary of Company A, issued new shares, paid the purchase price of the shares by cashier’s check, and issued the share certificates until now after Company C was dismissed from the office of representative director, and then Company C sent to Company C a notice demanding the return of share certificates, demanding Company C to return the share certificates, and then, issued Company B’s transfer of shares from Company B by claiming for the implementation of the transfer procedure on the ground that the title trust was lawfully terminated and the transfer procedure was completed, the case holding that Company B cannot be deemed as having fulfilled its duty to examine the claim for the transfer procedure

[1] A possessor of share certificates is presumed to be a lawful holder (Article 336(2) of the Commercial Act). A person who possesses share certificates is recognized as a right holder and the person who contests the issuance of share certificates must prove his/her dissenting opinion. When transferring shares, the transferee of the shares issued shall deliver the share certificates (Article 336(1) of the Commercial Act). A person who acquires the shares issued may solely file an application for a change of ownership against the company by proving the acquisition of the shares by presenting the share certificates. In this case, it is sufficient for the claimant to examine only the formal qualification as to whether the applicant occupies the true share certificates, and further, the applicant does not have the duty to examine the actual qualification as to whether the actual shareholder is the owner. Accordingly, the person who acquired the shares issued with the share certificates applies for a change of ownership by presenting the share certificates, etc., and the person who has the authority to prepare the register of shareholders has fulfilled the formal duty to examine the application, and if the change of ownership was completed accordingly, the change of ownership shall

[2] The case holding that in a case where Company A, a subsidiary company of Company B, issued new shares, and thereafter held shares until now after paying the purchase price of the shares by cashier's check, and Company A, a representative director of Company B, issued a notice demanding the return of share certificates after Company C was dismissed from the office of representative director, and sent Company B's notice demanding the return of share certificates to Company B so that the share certificates may be returned to Company B, the case held that Company B shall not be deemed to have fulfilled its duty to examine the claim for the performance of the transfer procedure, in light of the fact that Company B, a third party, who did not possess the share certificates even if he knows that Company B had a well-known share certificates, was holding the share certificates, and that Company B did not present the disposal document that Company A concluded a title trust agreement with Company B, which was alleged to cancel the title trust agreement.

[1] Articles 336 and 337 (1) of the Commercial Act / [2] Articles 336 and 337 (1) of the Commercial Act

[1] Supreme Court Decision 89Meu5345 delivered on July 11, 1989 (Gong1989, 1229) Supreme Court Decision 94Da36421 delivered on May 23, 1995 (Gong1995Ha, 226)

Plaintiff (Law Firm Yang, Attorneys Yang Sung-jin et al., Counsel for the plaintiff-appellant)

Co., Ltd. and one other (Law Firm Sofin, Attorneys Choi Won- Jae et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2016Na203057 decided May 12, 2017

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

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

1. As to the ground of appeal that there is an error in the presumption of the shareholder registry and the principle of burden of proof

A. A possessor of share certificates is presumed to be a lawful holder (Article 336(2) of the Commercial Act). A person who possesses share certificates is recognized as a right holder unless there is any counter-proof, and the person who contests it must prove the counterclaim (see Supreme Court Decision 89Meu5345, Jul. 11, 1989). When transferring shares issued with share certificates, the transferee of shares shall deliver the share certificates (Article 336(1) of the Commercial Act). A person who acquires shares for which the share certificates are issued may solely request the transfer of shares to the company by proving the transfer of shares by presenting the share certificates (see Supreme Court Decision 94Da36421, May 23, 195). In this case, the company is sufficient if the claimant examines only the formal qualification for the possession of the real share certificates, and further the claimant is not obligated to examine the substantive qualification for the real shareholder. Therefore, if a person who has acquired shares issued files an application for the transfer of ownership by presenting the share certificates through a lawful transfer of ownership.

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) Defendant CM development (hereinafter “Defendant CM development”) is a company established on June 17, 1998 for the purpose of real estate leasing business, etc., and Defendant CM development Co., Ltd. (hereinafter “Defendant CM development”) is the subsidiary company of Defendant CM development established on April 12, 200. The Nonparty, the Plaintiff’s Dong CM development was established from the time of the establishment of Defendant CM development to January 16, 2009.

2) At the same time, Defendant CM development was 196,000 shares, the Plaintiff’s 44,000 shares (hereinafter “instant shares”), and the ○○○○○ and the Belgiumex were 160,000 shares, each of which was 160,000 shares, and issued 523,333 shares at face value to raise funds on June 5, 200. At the same time, Defendant CM development was 196,00 shares, the Plaintiff’s 44,00 shares (hereinafter “instant shares”), and the ○○○ and Belgiumex were 160,00 shares and 133,333 shares.

3) On June 1, 200, the Plaintiff issued a cashier’s check of KRW 440,000,000 at par value, and paid it to Defendant Dolle as the purchase price of the instant shares, and currently holds the share certificates.

4) On March 24, 2010 and November 5, 2010, Defendant CM Development sent a notice demanding the Plaintiff to return the share certificates of this case when it expresses its intent to terminate the title trust of the instant shares on two occasions, but the Plaintiff did not reply. In addition, the Plaintiff did not exercise any right related to the instant shares until May 24, 2013 when it reported the right to the instant shares in the rehabilitation proceedings against Defendant CM. Defendant CM Development sent a notice to the Nonparty on August 25, 2010 that the share certificates of this case may be returned to Defendant CM development. However, the Nonparty did not respond to this.

5) On December 9, 2010, Defendant CM Development: (a) filed a claim with the Plaintiff for the implementation of the transfer of title to the instant shares by asserting that the instant shares were originally trusted to Defendant CM development; (b) the title trust was lawfully terminated; and (c) filed a claim for the implementation of the transfer of title to the instant shares; (d) the documents sent to the Plaintiff and the Nonparty as stated in paragraph (4) and the documents stating the Nonparty’s “a confirmation of the fact” at the bottom of the main sentence stating that “a payment of the Plaintiff’s shares was made with respect to the Plaintiff’s shares and a return of the non-performance would be made; and (e) the Defendant CM entered the title holder of the instant shares on the register of shareholders from that time to Defendant CM

6) On January 16, 2009, the Nonparty was dismissed from office as the representative director of Defendant CM development, and thereafter, was convicted and convicted of the facts charged for embezzlement of Defendant CM’s corporate reduction, passbook, and Defendant CM’s slick stock certificates, etc. The Nonparty’s embezzlement in the above judgment was the stock certificates issued on June 5, 200 (hereinafter “Gu stock certificates”). In addition, on February 2, 2010, the Nonparty provisionally seized Defendant CM’s stock certificates, such as loans, etc. for Defendant CM development, as the claim right, and the object of the provisional seizure was also the old stock certificates.

C. Examining these facts in light of the legal principles as seen earlier, since the Plaintiff occupied the share certificates of this case, it is presumed to be a lawful holder. Unless there is any counter-proof, the Plaintiff is recognized as a right holder of the instant shares

On the other hand, the Defendants asserted that Defendant Dolle issued new shares on January 9, 2004 and notified the Plaintiff that he would exchange old shares as new shares, but did not comply with the Plaintiff. However, there is no evidence suggesting that the notice was given to the Plaintiff around that time. Rather, the Nonparty, who performed his duties as the representative director of Defendant CM development until 2009, was the old share certificate of Defendant Dolle that was the object of embezzlement or provisional seizure. Therefore, it cannot be said that Defendant Dolle did not issue new shares to Defendant Dolle’s shares or that at least issued new shares to the Plaintiff who is the right holder of the instant shares, and thus, the Defendants’ assertion is without merit.

Furthermore, even though the Plaintiff was well aware that he had the old share certificates with respect to the instant shares, the Defendant CMA, a third party who did not possess the share certificates, completed the transfer of the instant shares pursuant to the Defendant CM’s request for the performance of the transfer procedure. In light of the fact that Defendant CM development at the time did not present a disposal document that the Plaintiff entered into a title trust agreement with the Plaintiff on the instant shares, Defendant CM development cannot be deemed to have fulfilled the duty of formal examination on the request for the performance of the transfer procedure of Defendant CM development, which claimed the termination of the title trust as the cause of acquiring the shareholder rights.

Although the reasoning of the court below is somewhat inappropriate, it is not sufficient to conclude that the plaintiff who currently occupies the share certificates of this case is the right holder of this case, and therefore, the evidence submitted by the defendants alone is insufficient to prove that the presumption was followed and that the plaintiff merely lent the name for the ownership of the shares of this case to Defendant CM development. Thus, the court below's conclusion accepting the plaintiff's claim is justifiable. The ground of appeal is without merit.

2. As to the ground of appeal that there is an error of exceeding the bounds of the principle of free evaluation of evidence

In full view of the circumstances indicated in its holding, the lower court determined that it was insufficient to prove that the Plaintiff was presumed to have the right holder of the instant shares, and that the evidence submitted by the Defendants alone was insufficient to reverse the presumption, and that the Plaintiff was under title trust with Defendant CM development, or that the Plaintiff lent the instant shares to Defendant CM development.

Examining the relevant legal principles and records, the lower court did not err in its judgment by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, contrary to what is alleged in the grounds of appeal.

3. Conclusion

Therefore, all appeals are 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 on the bench.

Justices Kim Jong-hee (Presiding Justice)