Dongyang Total Financial Securities Co., Ltd. (Law Firm Barun et al., Counsel for the defendant-appellant)

See the list of supplementary intervenors (LLC, Kim & Lee LLC, Attorneys Lee Dong-chul et al., Counsel for the supplementary intervenor-appellant)

Hanil Construction Co., Ltd. (Law Firm Rate, Attorney Cho Il-young, Counsel for the plaintiff-appellant)

October 4, 2011

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

As to the Plaintiff KRW 20,000,000 and KRW 2,000,000 among them, the Defendant shall pay to the Plaintiff 20,000,000 per annum from September 3, 2010, and KRW 18,00,000,00 per annum from the day following the day of service of the copy of the application for modification of the purport of the instant claim to the day of complete payment.

1. Basic facts

A. The Plaintiff is a financial investment business entity that runs investment trading business, investment brokerage business, collective investment business, investment advisory business, discretionary investment business, trust business, etc. under the Financial Investment Services and Capital Markets Act (hereinafter “Capital Markets Act”).

B. Conclusion of the instant specified money trust contract, purchase of corporate bills, etc.

1) The Plaintiff entered into a specified money trust agreement (hereinafter “specified money trust agreement”) with each trustor, including the Plaintiff’s Intervenor, which specifies the Defendant’s corporate bills (CP) as the object of managing trust funds. According to the trustor’s management instruction, the Plaintiff purchased and holds from Korea Commercial Securities Co., Ltd. the sum of KRW 20 billion (hereinafter “each corporate bills of this case”) totaling KRW 4 par value of each corporate bills issued by the Defendant as follows.

on February 11, 2010, when the issue date of the check number 1 (number 1 omitted) 2,000,000,000 for the place where the payee is paid on the date of issuance of the check number 5,00,000 for the check number in the main sentence of this Article, "〃 3 (number 3 omitted) 5,00,000,000 for the check 4 (number 4 omitted) 3,00,000 for the check 4 (number 4 omitted) 3,00,000 for the check 3,00,000 for the check 3,00,000 for the check 11, 2010 " "

C. Defendant’s corporate restructuring

A national bank, a principal creditor bank of the Defendant, classified the Defendant as a person subject to the workout program on June 2010, and applied for a joint management proceeding by the creditor banks established by the creditor banks' council pursuant to Article 7 (1) of the former Corporate Restructuring Promotion Act (amended by Article 2 (1) of the Addenda to the said Promotion Act; hereinafter the same shall apply). The Defendant's creditor financial institutions' council (hereinafter referred to as the "the council of this case"), which was composed of the parties, commenced the joint management proceeding by creditor financial institutions pursuant to Article 8 of the former Promotion Act on July 5, 2010, and decided to suspend the request for reimbursement of all credit extension by creditor financial institutions pursuant to Article 2 (6) of the former Promotion Act on September 3, 2010 at the Council, Article 21 of the former Promotion Act.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 4, 8, Eul evidence Nos. 1 and 3, the purport of the whole pleadings

2. Determination on the cause of the claim

According to the above facts, the defendant, as the issuer of each commercial paper of this case, is obligated to pay the total sum of 20 billion won and delay damages to the plaintiff as the holder of each commercial paper of this case, unless there are special circumstances.

3. Effect of a resolution to postpone exercising bonds;

A. Summary of the parties' assertion

1) The defendant's assertion

The Plaintiff constitutes a creditor financial institution under Article 2 subparagraph 1 (e) of the Promotion Act, and Article 2 subparagraph 6 (b) of the Promotion Act provides that a bill purchase is one of the credit extension provided by the Financial Services Commission. Article 3 (2) of the Regulations on Supervision of Financial Institutions for the Promotion of Corporate Restructuring (hereinafter “Supervision Regulations”) and Article 3 (2) of the Promotion Act provide that the purchase of commercial papers by securities companies is subject to the Promotion Act. Thus, the Plaintiff’s claim of this case constitutes a deferred claim under Article 9 of the Promotion Act, regardless of whether it is due to a general monetary trust or due to a specified money trust.

Therefore, insofar as the council of this case decided to suspend the exercise of claims, etc. against the Defendant including each of the instant commercial papers until December 31, 2014, the Defendant cannot respond to the Plaintiff’s request until December 31, 2014.

2) The plaintiff's assertion

A) In light of the following points, the Plaintiff’s claim for each of the instant CPs by a specified money trust does not constitute credit extension subject to regulation under the Promotion Act and the Supervisory Regulations.

① In light of the history of the Promotion Act and the purpose of legislation, limiting the workout program and the Promotion Act to only the creditors’ creditor financial institutions among the creditors is based on the homogeneity between financial institutions that raise funds from many, unspecified public, and manage enormous funds raised therefrom through professional and reasonable judgments. A specified money trust is not only entrusted with funds individually from individual investors, but also is also entrusted with the management of the funds to the truster, and there is no homogeneity as a financial institution.

② The supervisory regulation does not purport to include a specified money trust in the acquisition of corporate bills through a bank’s trust account, in light of the trust business-related laws and regulations and the current status of its operation, and thus, it does not necessarily include a specified money trust in the instant money trust account. In addition, in the case of a securities company under the supervisory regulation, it does not stipulate that the purchase of corporate bills through a trust account is included in the credit extension, unlike the bank.

③ A specified money trust has its inherent difference from non-specified money trust in the method of managing funds. Rather, it is identical to the case where an individual investor directly acquires corporate papers, and the accounting and taxation methods, determination of whether the individual investor constitutes institutional investors, and determination of unsound business conduct, etc. are treated the same as the direct investment of individual investors. Therefore, it is reasonable to determine whether to apply the Promotion Act depending on whether individual investors of specified money trust fall under creditor financial institutions.

④ If the Plaintiff is deemed to be a creditor financial institution under the Promotion Act, the obligation to provide new funds and conversion into investment must be fulfilled according to the contents of the agreement of the instant conference. If it is interpreted that the beneficiary of a specified money trust bears such obligation, it would be contrary to the nature of the workout system prescribed by the Promotion Act, and would be able to incur more additional loss than the original of the trust property originally entrusted to the Plaintiff, and if it is interpreted that a securities company, which is a trustee (trust), bears the obligation as its own property, there is a problem that it is impossible to resolve even if it is interpreted to any extent contrary to the nature of the specified money trust that exclusively belongs to the truster, and against the Capital Markets Act and the instant specified money trust agreement that prohibit compensation for losses. Furthermore, it would result in the inclusion of the personal investor into the creditor financial institution, and how the personal investor’s opinions should be dealt with. Moreover, it would compel the investor to face unilateral loss.

B) In the event that an individual investor, other than a creditor financial institution, is interpreted to be included in a specified money trust, which is a beneficiary, the supervisory rule is illegal and invalid in the following respect:

① Article 2 subparag. 6 of the Promotion Act provides that “transactions that may cause financial losses to a financial institution in the event of default of payment of the other party to the transaction,” as a comprehensive provision in Item (f). Since corporate bills purchased as trust money of a specified money trust do not incur losses to a financial institution in the event of default of payment of the other party to the transaction, the truster (beneficiary) suffers losses, the supervisory provision, which is a subordinate statute, included in the scope of credit extension, exceeds the delegation scope of the Promotion Act, which is the superior statute.

② When interpreting that an individual includes a specified money trust that is a truster, it is against the legislative intent of the Promotion Act. As seen earlier, even if it is interpreted to any extent on the obligation to provide new funds and the obligation to conversion into investment, it would result in a violation of relevant Acts and subordinate statutes, such as the Capital Markets Act, or in violation of the nature of the Workhouse system and the nature of the specified money trust, which are regulated by the Promotion Act, or in violation of the principle of private autonomy, property

C) In a case of a specified money trust, which is a truster, if the former Promotion Act is interpreted to apply even to a specified money trust, the former Promotion Act itself is unconstitutional and invalid as it violates the principles of statutory reservation under the Constitution, the principles of delegated legislation, the equality rights, and the property rights

B. Determination

1) Relevant statutory provisions

【Promotion Act】

Article 1 (Purpose)

The purpose of this Act is to promote prompt and smooth corporate restructuring through market functions by providing for the matters necessary for promoting prompt and smooth corporate restructuring.

Article 2 (Definitions)

1. The term "creditor financial institution" means a person who has granted credit to the relevant company and falls under any of the following items:

(e) Securities companies under the Securities and Exchange Act;

3. The term "principal creditor bank" means a principal creditor bank of the relevant enterprise (or a bank which has extended the largest amount of credit, if no principal creditor bank exists). In such cases, matters concerning the selection, replacement, etc. of the principal creditor bank shall be prescribed by the Financial Services

4. The term "enterprise" means a company having obtained credit extension from a creditor financial institution, the total amount of which is at least 50 billion won (hereafter referred to as "standard amount" in this subparagraph). In such cases, where the total amount of credit extension has decreased below the standard amount due to credit readjustment, repayment of debts, etc. after being deemed an enterprise showing signs of insolvency, it shall

6. The term "credit extension" means any of the following transactions prescribed by the Financial Services Commission:

(a) Loan;

(b) Purchase of bills and bonds;

(c) Facility leasing;

(d) Payment guarantee;

(e) Giving substitute payments following payment guarantee;

(f) A transaction that may incur a loss to financial institutions if the other party to the transaction becomes insolvent; and

(g) Transactions that may bring any loss on financial institutions even though the financial institutions do not engage directly in the transactions falling under items (a) through (f);

【Financial Institution Supervision Regulations for Facilitation of Corporate Restructuring】

Article 3 (Scope of Credit Extension)

(1) "Credit extension" under subparagraph 6 of Article 2 of the Promotion Act means all the claims that can be claimed to the relevant enterprise, such as loan claims, payment guarantee, securities and other claims: Provided, That the amount of claims guaranteed by a guarantee between creditor financial institutions shall be excluded from the amount of claims of the guaranteed creditor financial institution.

(2) Notwithstanding paragraph (1), the credit extension amount under subparagraphs 3 and 4 of Article 2 of the Promotion Act means the total amount of the credit held by the creditor financial institutions falling under subparagraph 1 (a) through (k) of Article 2 of the said Act in the balance sheet field of account of the financial institutions falling under subparagraph 1 (a) through (k) of Article 2 of the said Act, and subparagraph 1 (l) and (m) of Article 2

The scope of extension of credit in attached Table 2

Small and Medium-classification Bank Account of Small and Medium-classification in the main sentence of the table agency, loans in Korean currency, foreign currency loans, foreign currency loans, foreign currency loans, loan funds, payment-guaranteed loans, payment-guaranteed bonds, purchase of bills of exchange (purchase bills), credit card bonds, exclusive purchase of purchase funds, credit card bonds (including debit cards), purchase of repurchase agreement bonds, call loans, repurchase agreement bonds, repurchase agreement, purchase bills, rental bonds, public offering bonds and other credit-backed bonds CP (including guaranteed bills), purchase bills, rental bonds, outstanding subscription bonds and other credit-based fixed payment guarantee bonds, outstanding amount, outstanding payment guarantee, outstanding foreign currency loan agreements (including over-the-counter loans), endorsement bills, trust claims, repurchase agreement, repurchase agreement bonds, privately placed bonds, privately placed bonds, subscription bonds, repurchase bonds, repurchase rights payment guarantee bonds, credit-backed securitization bonds, repurchase rights payment guarantee bonds, investment trust bonds and other securities company's management bill bills (including MA bills of exchange bills of exchange bills), investment bonds and discount bonds (including guaranteed bills of exchange bills of exchange bills of exchange notes), investment bonds and discount bonds (including MA bills of subscription bills).

2) Whether supervisory regulations exceed the scope of delegation of the Promotion Act

Article 2 subparag. 6 of the Promotion Act defines "credit extension" as "credit extension as falling under any of the following items, which is determined by the Financial Services Commission." However, in light of the content and form of the above provision, the above item (f) provides for the restriction on the scope of credit extension to be commonly applied to the items listed in this subparagraph (a) through (e) above, and does not appear to be a provision that sets the limit of common delegation legislation. The above item (f) is merely a comprehensive provision on transactions that a financial institution, the subject of the transaction, is unable to obtain a certain economic benefit from the other transaction partner at the time of the other transaction partner's insolvency from a formal point of view, and it is difficult to view that the person who finally bears economic loss due to insolvency, is a financial institution, and therefore, the supervisory provision does not exclude a bill from the subject of credit extension due to a specified money trust so that it does not deviate from the delegation scope of the Promotion Act. Therefore, the Plaintiff's assertion related to this cannot be accepted.

3) Whether the purchase of corporate bills by the Plaintiff’s specified money trust constitutes credit extension by creditor financial institutions subject to the Promotion Act

A) Article 2 Subparag. 1(e) of the Promotion Act provides that “securities companies pursuant to the Securities and Exchange Act are included in the scope of “creditor financial institutions” and Article 44(2) of the Addenda of the Capital Markets Act (Articles 8635 and 8635, August 3, 2007) provides that “where securities companies are quoted in accordance with the previous Securities and Exchange Act at the time this Act enters into force, it shall be deemed that a financial investment business entity is quoted in accordance with this Act within the said scope.” Thus, it is evident that the Plaintiff falls under “creditor financial institutions” under Article 2 subparag. 1

B) Article 2 subparag. 6 of the Promotion Act defines “credit extension” as “the purchase of bills and bonds falling under any of the following, as determined by the Financial Services Commission.” Article 2 subparag. 6 of the Promotion Act explicitly states that the purchase of bills and bonds constitutes such purchase. Article 3(1) of the Supervision Regulations states that “Credit extension under Article 2 subparag. 6 of the Promotion Act refers to all bonds that can claim reimbursement against the pertinent company, such as loan claims, payment guarantee, securities, and other claims.” Article 3(2) of the Supervision Regulations also includes the purchase of corporate bills in the attached Table in relation to the calculation of credit extension amount under Article 2 subparag. 3 and 4 of the Promotion Act. Thus, it is clear that each of the instant corporate bills claims fall under “credit extension” under the interpretation of the Promotion Act and the Regulation on Supervision.

C) There is no difference between the general money trust and the trust in that the ownership of the trust property is transferred to the trustee according to the Trust Act as a type of trust and the trustee bears the duty not to exercise the ownership of the trust property in violation of the purpose of entrustment, and the proceeds accrue to the truster by managing the trust property in compliance with the truster’s entrusted purpose (in addition, the Gu or the truster entrusted the money to the trustee, not the trust), and the person who extended credit to the relevant company shall be deemed as the creditor financial institution with the legal ownership of each of the instant commercial papers. (2) According to Article 2 subparag. 1 of the former Promotion Act, the determination of whether the relevant financial institution constitutes “creditor financial institution” is a financial institution, and it is not determined depending on whether the relevant financial institution is the subject of actual economic effect arising from the extension of credit, or whether the pertinent financial institution has the authority to manage funds. (3) In light of the fact that Article 2 subparag. 6 of the former Promotion Act and the supervisory regulations only provide that the basic legal relationship is a specified money trust, excluding the case where the Plaintiff purchased a specific money trust.

D) The Plaintiff asserts that even a claim purchased through a specified money trust would be contrary to the history and legislative intent of the Promotion Act when applying the Promotion Act, and would be contrary to other Acts and subordinate statutes and the Constitution. However, aside from the argument of the legislative theory that excludes investment from the subject of the Promotion Act, it is difficult to view that a specified money trust is excluded from the “credit extension by creditor financial institutions” in the case of a specified money trust, even if the principle of constitutional interpretation of the Promotion Act is applied to the interpretation of the current Promotion Act without any explicit provision.

4) Whether the Promotion Act and supervisory regulations violate the Constitution or not

The Plaintiff asserts that, if the purchase bill based on a specified money trust is deemed to be included in the deferred claim under the Promotion Act, the supervisory regulation is invalid in violation of law or unconstitutionality, or that the Promotion Act is null and void. However, as seen earlier, the supervisory regulation only regulates the type of “purchase of bills and bonds” as stipulated by the Promotion Act within the delegation scope of the Promotion Act, and thus, the Plaintiff’s assertion is not inconsistent with the argument that the Promotion Act itself is unconstitutional. It is difficult to regard it as a subject of judgment by this court, and it cannot be deemed that the Promotion Act and the supervisory regulation are unconstitutional or unlawful in that sense.

A) The Promotion Act limits the exercise of a creditor financial institution’s property right by restricting the exercise of a creditor financial institution’s claim, but such property right may be limited by law for public necessity unless it infringes on its essential contents. ① The Promotion Act’s legislative intent enhances transparency in the company’s accounting and establishes a system that can efficiently manage the credit risk of creditor financial institutions, while promoting corporate restructuring promptly and smoothly, it is clear that the Promotion Act was enacted for public necessity at the same time as the creditor financial institutions’ recovery rate is increased. ② The Promotion Act’s establishment for public necessity; ② the creditor financial institutions, which did not attend the resolution of the Promotion Act’s Article 24 or expressed their opposing intent, may request the Plaintiff to purchase their claim against the council within seven days from the date of the resolution of the Council; ③ The Financial Services Commission may, if there is any disagreement with respect to the matters to be deliberated by the Council under Articles 26 through 28 of the Promotion Act, provide for an efficient resolution or resolution of the Council on the matters to be resolved by the Creditor financial institutions, such as the right to request the Council’s resolution or resolution on the matters to be resolved.

B) A creditor financial institution’s creditor financial institution’s exercise of a specified money trust is restricted by the creditor financial institution’s creditor financial institution’s exercise of a right to benefit, while general creditors, other than creditor financial institutions, are able to recover their claims normally during the process of corporate restructuring as it does not apply to the Promotion Act. However, in order to achieve a prompt and smooth corporate restructuring purpose, the Promotion Act merely provides for the creditor financial institutions that provided credit to the company in excess of a certain amount, not the procedure bound by all creditors, and excludes ordinary creditors’ claims from the inevitable exercise of a certain amount of claims. ② indirectly restricted in the exercise of a property right is the same as a specified money trust, non-specified money trust, securities investment trust’s beneficiaries. ③ If the claims included in a specified money trust are not included in the scope of a specified money trust under the Promotion Act, it has a significant impact on the financial situation of the company. Therefore, it is difficult to view that the Promotion Act would substantially function in the process of individual investors’ mobilization of specified money trust in a financial institution without reasonable distinction between the truster’s management method and investment order.

C) When applying the Promotion Act to credit extended through a specified money trust, problems arise in connection with the provision of new funds and the performance of the debt-equity swap obligation. However, in light of the following: (a) the allocation and implementation method of the above obligation can be determined by means of a clear contract in advance or negotiation after the fact that the truster and the truster enter into an ex post facto contract; (b) the truster could not recover only the profit based on the liquidation value from the creditor financial institution’s opposite exercise of the right to purchase; (c) the truster could not enjoy any additional benefit arising from the course of the workout program; or (d) the truster cannot be deemed as a violation of the essential substance of the property right or discrimination without reasonable grounds even if the truster bears such obligation through a new contract, etc.; and (c) even if the Plaintiff, as the trustee, bears the above obligation on its own property, it cannot be readily concluded that the Plaintiff’s such obligation cannot be deemed as a compensation agreement contrary to the nature of the Financial Investment Services and Capital Markets Act or the specified money trust.

C. Sub-committee

Therefore, each of the corporate bills of this case is subject to the resolution of deferment of exercising the claim of the Council of this case. Accordingly, the defendant may refuse the plaintiff's claim on the ground that at least the due date for each of the above corporate bills has not arrived until December 31, 2014 according to the above resolution. Thus, the defendant's assertion pointing this out has merit.

4. Conclusion

Therefore, the plaintiff's claim is dismissed as it is without merit. It is so decided as per Disposition.

[Attachment Omission of List of Intervenors to Support]

Judges Kim Hyun-tae (Presiding Judge)