Makman Newspapers Co., Ltd. (Law Firm two others, Attorneys O Jong-ap et al., Counsel for the plaintiff-appellant)

Seoul Economic Examination Co., Ltd. (Law Firm Mapyeong, Attorneys Masung-si et al., Counsel for the defendant-appellant)

Korea General Media Co., Ltd. (Law Firm LLC, Attorneys Gangwon-hee et al., Counsel for the defendant-appellant)

September 23, 2015

Seoul Western District Court Decision 2014Gahap36733 Decided April 9, 2015

1. Revocation of the first instance judgment.

2. The defendant shall implement the transfer procedure for the shares listed in the attached list to the plaintiff.

3. The costs of the lawsuit shall be borne by the Defendant in both the first and second instances.

The same shall apply to the order.

1. Basic facts

The following facts are not disputed between the parties, or can be acknowledged by comprehensively taking into account the following facts: Gap evidence 1, Gap evidence 2-1 through 6, Gap evidence 3, Gap evidence 4-1 through 4, Gap evidence 4-9, Gap evidence 10, Eul evidence 1, Eul evidence 5, Eul evidence 7, Eul evidence 2, Eul evidence 2, and non-party 4's testimony of the court of first instance.

A. The Plaintiff is a company that aims at newspaper publishing business, and the Defendant is a company that aims at publishing and selling newspapers. Meanwhile, Nonparty 1 is currently working as the Defendant’s representative director from September 20, 200 to March 5, 201, Nonparty 2 is the Defendant’s representative director from December 6, 201 to March 5, 201, and the Plaintiff’s joint representative director from April 18, 201 to April 17, 2015.

B. On December 31, 2012, when Nonparty 1 purchased 600 million won of the Defendant’s outstanding shares of KRW 10,000 registered ordinary shares of KRW 10,00 (hereinafter “instant shares”) from the Defendant’s Intervenor’s Intervenor, an affiliate of ○○○ Daily, who himself worked as the chairperson of ○○○ Daily, and the purchase price shall be paid on January 25, 2013; however, Nonparty 1 made the purchaser’s name as Nonparty 2. After concluding a title trust agreement with Nonparty 2 on January 25, 2013 (hereinafter “instant title trust agreement”), Nonparty 2 paid KRW 600,00 to the Defendant’s Intervenor as the purchase price of the instant shares. Nonparty 2 paid the said money as the purchase price of the instant shares.

Article 1 (Subject-Matter of Trust) of the Title Trust Agreement for the Shares included in the main text of this Agreement refers to the subject-matter of the instant shares (the face value of which is KRW 600 million) that Nonparty 2 purchases from the Defendant joining the Defendant. Article 2 (Method of Trust) Nonparty 1 provides Nonparty 2 with KRW 600 million for the purchase of shares. Where Nonparty 3 (Management of Trust Property) exercises all rights and obligations as a shareholder, Nonparty 2 exercises all rights and obligations as a shareholder, he/she shall comply with Nonparty 1’s intention and exercise them for the benefit of Nonparty 1. In addition, Nonparty 2’s rights and benefits acquired as a shareholder belongs to Nonparty 1. Nonparty 5 (Duties of Nonparty 2) is prohibited from disposing of the subject-matter of trust or providing it as security, etc.

C. The Defendant’s shares are 325,000 shares issued by the Defendant. From December 31, 2012 to December 31, 2012, the Defendant’s shareholder registry entered Nonparty 1’s 120,00 shares issued by the Defendant (36.92% of the total number of shares, and acquisition on October 1, 200), Nonparty 3, who is a shapes of Nonparty 1, is 90,00 shares of the same (27.69% of the total number of shares, and acquisition on October 1, 200), Nonparty 6, and Nonparty 7, respectively, 15,00 shares (4.62% of the total number of shares, and acquisition on October 1, 200), Nonparty 2 owned 60,00 shares (18.46% of the total number of shares, 200 shares, and 90% of the total number of shares acquired on December 1, 2012).

D. On August 28, 2013, the Plaintiff made a negotiation with M&A with the intent to acquire the Defendant’s management right together with the remaining shares other than the shares owned by Nonparty 6 and Nonparty 7 among the Defendant’s total shares issued by the Defendant (hereinafter “instant acquisition negotiation”), and the main contents of the draft agreement on acquisition of shares in the process are as follows.

The share acquisition agreement contained in the main text of this Agreement is entered into between Nonparty 1, Nonparty 3, Nonparty 2, and the Plaintiff (hereinafter “Buyer”) on August 28, 2013. The following terms and expressions of this Agreement have the meanings as follows. The term “subject company” means the Defendant. The term “stocks subject to this case” means the seller’s 175,000 common shares per share issued by the company owned by Han Cement (53.9% of the total number of outstanding shares) and the seller’s 175,000 common shares (53.9% of the total number of outstanding shares). The term “the second stock” means the seller’s 10,000 common shares issued by the company owned by Nonparty 1 and the seller’s 120,000 common shares at the same time, and the seller’s 120,000 shares at the same time means the seller’s 10,000 shares subject to the termination of this Agreement and all of this Agreement.

E. Although the initial stock acquisition agreement does not stipulate the purchase price in the initial draft, at the time of the preparation of the said draft, the Plaintiff presented to Nonparty 4 and Nonparty 3 the purchase price of 16 billion won for the shares subject to the instant draft, and there was an agreement that the Plaintiff would purchase KRW 5 billion upon the cancellation of provisional attachment on the shares 120,000 for the shares subject to the second draft. Nonparty 2 did not participate or present his opinion in the process of consultation with the Plaintiff, Nonparty 4 and Nonparty 3 on the purchase price.

F. Meanwhile, on August 5, 2013, prior to the undertaking negotiation of the instant case, Nonparty 2 deposited KRW 600 million into the bank account designated by Nonparty 1 upon Nonparty 1’s request. On September 24, 2013, the National Tax Service, which was the Defendant’s Intervenor as the Defendant joining the instant case, to release the seizure of September 23, 2008, the Defendant paid KRW 256,986,100 of the delinquent national tax of the Defendant joining the Defendant, and paid KRW 100 million to Nonparty 1 on October 25, 2013.

G. On March 5, 2014, the Defendant opened a general meeting of shareholders and appointed Nonparty 8, who is not Nonparty 2, as a new representative director. At that time, the share certificates issued with respect to the instant shares (hereinafter “instant share certificates”) were kept in the Defendant’s company’s depository, but Nonparty 2 took out the instant share certificates from the company’s depository on the day when the said general meeting of shareholders was held.

H. On April 10, 2014, the Plaintiff entered into a share purchase agreement with Nonparty 2 to purchase the instant shares of KRW 1.05 billion (hereinafter “instant share purchase agreement”) and paid KRW 1.05 billion to Nonparty 2 on the same day, the Plaintiff received delivery of the instant share certificate from Nonparty 2 and continues to hold it until now.

2. The parties' assertion

A. The plaintiff's assertion

The Plaintiff purchased the instant shares from Nonparty 2, the owner of the instant shares, and lawfully succeeded to and acquired the instant shares. Even if Nonparty 2 was not the owner of the instant shares at the time of the conclusion of the instant share purchase agreement, the Plaintiff purchased the instant shares from Nonparty 2, who possessed the instant share certificates, and received the instant share certificates. Therefore, Nonparty 2 was unaware of the fact that Nonparty 2 was not the owner of the instant shares, and did not have gross negligence, and acquired the instant shares in good faith.

B. Defendant’s assertion

The shares of this case are merely those of Nonparty 1, the representative director of the defendant, to purchase the shares in the name of Nonparty 2 and to trust only the name on the register of shareholders to Nonparty 2, and thus, Nonparty 2 cannot acquire the shares of this case by succession. In addition, the plaintiff cannot acquire the shares of this case by succession since he was well aware that Nonparty 2 was merely the title trustee of the shares at the time when he purchased the shares of this case from Nonparty 2 and delivered the share certificates of this case, and that he was not the owner of the shares of this case.

3. Determination

A. Judgment on the Plaintiff’s assertion of succession acquisition

1) In the case of acquiring shares issued with the consent of a third party and paid the price for acquiring shares in the name of the third party, regardless of whether only the nominal lender was a de facto subscriber, and on the other hand, a mere nominal lender cannot be a shareholder. This legal principle applies to the case where the nominal lender merely entrusts another person with the name on the register of shareholders in connection with the acquisition of shares, etc., and the mere nominal lender cannot be regarded as a shareholder of the shares held in the title trust, and thus, the mere nominal lender cannot be regarded as an unentitled person, and even if he was a transferee of the shares from the unentitled person, he cannot be lawfully acquired the shares, unless there are special circumstances such as bona fide acquisition (see Supreme Court Decision 200Da63622, Jun. 25, 2002).

As to the instant case, the fact that Nonparty 1 and Nonparty 1 trusted the instant shares to Nonparty 2 on January 25, 2013 is as seen earlier. Therefore, it is reasonable to deem that Nonparty 2 was merely a person who was entrusted by Nonparty 1 with the name on the register of shareholders concerning the instant shares, and it cannot be deemed as a shareholder of the instant shares, and thus constitutes an unentitled person. Accordingly, the Plaintiff’s assertion of succession on a different premise is without merit.

2) On August 5, 2013, the Plaintiff asserted that Nonparty 2 agreed to acquire the ownership of the instant shares by Nonparty 2. Thus, on August 5, 2013, Nonparty 2 deposited KRW 600 million in the bank account designated by Nonparty 1 upon Nonparty 1’s request. On September 24, 2013, Nonparty 2 paid KRW 256,986,100 to Nonparty 1 in arrears and paid KRW 100 million to Nonparty 1 on October 25, 2013. However, in light of the purport of Nonparty 2’s testimony by Nonparty 2, Nonparty 1 and Nonparty 2, the Plaintiff’s assertion that Nonparty 2 did not obtain KRW 100 million in order to resolve his criminal case, and Nonparty 2 did not request Nonparty 2 to purchase the instant shares under the name of Nonparty 1’s request. However, the Plaintiff’s allegation that Nonparty 1 and Nonparty 2 received KRW 600 million in his criminal case was insufficient.

B. Judgment on the Plaintiff’s assertion of bona fide acquisition

On August 28, 2013, the Plaintiff: (a) agreed with Nonparty 2, the nominal owner of the instant shares, to first purchase the instant shares, including the instant shares on August 28, 2013; (b) agreed with Nonparty 2, the title holder of the instant shares up to 34.3% (i.e., 60,00/175,00 shares); and (c) agreed with Nonparty 4, and Nonparty 3 on the purchase price of the instant shares, including the instant shares, in a lump sum; (d) pursuant to the fact that the Plaintiff could not obtain a majority of the Defendant’s issued shares if it fails to secure the foregoing shares; (e) pursuant to the fact that Nonparty 2 and Nonparty 3 were aware of the fact that the instant shares were not issued by Nonparty 1, 25,000 shares in the process of acquiring the instant shares; and (e) pursuant to the fact that Nonparty 1 and Nonparty 2 were not issued by a notary public on the date of acquiring the instant shares, the Plaintiff’s consent to sell shares to 1050% shares.

However, in light of the facts acknowledged earlier and the purport of Nonparty 2’s testimony, the Plaintiff did not appear to have obtained ownership of the instant shares at least KRW 100 million on September 24, 2013, on the ground that Nonparty 2 did not appear to have obtained ownership of the instant shares at least KRW 00 million on the ground that Nonparty 1 did not appear to have obtained ownership of the instant shares at the time of the instant purchase and sale contract, or that Nonparty 2 did not have acquired ownership of the instant shares at least KRW 100 million on the ground that Nonparty 1’s purchase and sale of the instant shares at KRW 60 million, based on the fact that Nonparty 2 did not appear to have obtained ownership of the instant shares at the time of the instant purchase and sale contract for the instant shares. However, considering the fact that Nonparty 1 and Nonparty 2 did not appear to have concluded the instant purchase and sale contract for the instant shares at least KRW 100 million, the Plaintiff’s allegation that the instant shares were not lawfully acquired on the ground that the instant shares were 000 billion.

4. Conclusion

Therefore, the plaintiff's claim of this case is accepted on the ground of its reasoning, and the judgment of the court of first instance is unfair on the ground of its conclusion, and it is so revoked, and it is so decided as per Disposition by ordering the plaintiff to implement the transfer procedure for shares listed in the separate sheet.

[Attachment]

Judges Kim Jong-Un (Presiding Judge)