[1] In a case where the transfer of shares made before the issuance of share certificates was made within six months from the date of incorporation or the date of payment of new shares but the company fails to issue share certificates within six months from the date of incorporation (affirmative)

[2] Whether the new shares issued by the consolidation of shares is identical in commendation before consolidation (affirmative)

[3] In a case where a stock consolidation takes place without issuance of stock certificates although there was a transfer of stocks after the issuance of stock certificates, and the company did not issue new stock certificates within six months thereafter, whether the transfer of stocks takes effect only by the declaration of intention of the parties concerned before the consolidation (affirmative)

[4] In a case where co-inheritors, including Gap and Eul, agreed to divide the inherited property according to the will letter, Gap acquired all of the shares of Byung corporation, and Eul lost part of the share certificates at the time of the predecessor's survival and Gap was issued a re-issuance share certificate to Eul thereafter, but Byung did not acquire possession of the share certificates at the time of the agreement, and Byung did not issue new shares before the re-issuance of the share certificates, the case holding that in a case where Byung did not issue new shares by six months after the consolidation of shares, if Byung did not issue new shares by six months after the expiration of the period of time after the consolidation of shares became effective, Gap did not acquire ownership of the shares by the above agreement alone without the issuance of share certificates, but Gap did not acquire ownership of the shares at the time of the merger, and the judgment below which held that Gap did not acquire ownership of the shares without any deliberation.

[1] Article 335(2) of the former Commercial Act (amended by Act No. 5053, Dec. 29, 1995; see current Article 335(3)); Articles 335(3) and 336(1) of the Commercial Act / [2] Article 442(1) of the Commercial Act / [3] Articles 335(3), 336(1), and 442(1) of the Commercial Act / [4] Article 335(2) of the former Commercial Act (amended by Act No. 5053, Dec. 29, 1995; see current Article 335(3)); Articles 336(1) and 442(1) of the Commercial Act

[1] Supreme Court Decision 94Da36421 delivered on May 23, 1995 (Gong1995Ha, 2226) Supreme Court Decision 2000Du1850 Delivered on March 15, 2002 (Gong2002Sang, 919) / [2] Supreme Court Decision 2004Da51887 Delivered on June 23, 2005 (Gong2005Ha, 1228)

Plaintiff (Law Firm Barun, Attorneys Park Jae-sik et al., Counsel for the plaintiff-appellant)

Hankra Co., Ltd and one other (formerly, Pacific Industries Co., Ltd.) (Law Firm Pacific, Attorneys Lee Jong-soo et al., Counsel for the plaintiff-appellant)

Busan High Court Decision 2008Na6199, 6205 decided Nov. 28, 2008

Supreme Court Decision 2008Da96963, 96970 Decided February 25, 2010

Busan High Court Decision 2010Na3483, 3490 decided June 15, 2011

The part of the judgment of the court below other than the dismissed part of the lawsuit shall be reversed, and that part of the case shall be remanded to Busan High Court.

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

1. Judgment on the Plaintiff’s grounds of appeal

A. In full view of the relevant provisions of the Commercial Act, where a share transfer contract is concluded and the consolidation of shares is carried out by the company prior to delivering the share certificates to the transferee of the shares, the court below determined that the transferee of the shares may transfer the shares by submitting old share certificates within the period of submission of the share certificates publicly announced by the company and obtaining new shares from the company, and delivering the new shares to the transferee of the shares. Meanwhile, the merger of shares becomes effective when the period of submission of the share certificates publicly announced by the company as a matter of principle expires, regardless of whether the shareholder submitted them to the company, the old share certificates

The court below, based on the above legal principles, found the following facts: (a) on January 10, 1985, the deceased non-party 1 (hereinafter "the deceased non-party 2"), the co-inheritors except the non-party 2 were gathered to divide the inherited property pursuant to the contents of the testament of this case; (b) according to the entry in the testament of this case, the plaintiff acquired all shares of the defendant company 1,887,546 shares (hereinafter "share shares subject to inheritance") that the deceased had kept the share certificates at his own home safe; (c) on the ground that the non-party 3 took share certificates of 271,228 shares (hereinafter "the shares of this case") among the deceased's survival at the time of the death of the deceased, it was difficult to view that the plaintiff had lawfully acquired the share certificates of this case from the non-party 3 as the shares of this case at the time of the agreement of this case, and that the plaintiff was delivered the share certificates of this case to the non-party 1 and the shares of this case before 1987.

Furthermore, the court below rejected the Plaintiff’s assertion, i.e., the delivery of the new shares to the Plaintiff after the consolidation of shares, and the Plaintiff’s claim that the transfer of shares prior to the issuance of the new shares takes effect only with the agreement between the parties by the method of a designated assignment of shares, and thus, it is difficult to deem that the Plaintiff intended to transfer the new shares solely by the delivery of the new shares. Even if the issuance of the new shares is deemed as the transfer of shares by the method of a designated assignment of shares, the court below rejected the claim for the transfer of shares upon the lapse of 10 years thereafter.

B. The lower court’s aforementioned determination is justifiable to the extent that it determined that the Plaintiff did not acquire ownership of the instant shares while it issued old stock certificates prior to the consolidation because the Plaintiff merely received new stock certificates invalidated by the consolidation and did not receive valid stock certificates.

However, the plaintiff's assertion that the transfer of shares of this case takes effect only with the declaration of intention between the parties as the transfer of shares before the issuance of share certificates is not only because the court below asserted that the transfer of shares of this case takes effect with the issuance of new shares after the consolidation of shares, but also because the agreement of this case on the division of inherited shares that had existed before the consolidation of shares was made with the agreement of this case on the division of inherited shares, which also includes the purport that the transfer of shares takes effect before the issuance of share certificates. Accordingly, the court below's rejection of the part's claim and the effect of the transfer of shares of this case is not acceptable for the following reasons.

C. The transfer of shares after the issuance of share certificates takes effect (Article 336(1) of the Commercial Act). In this case, the delivery of share certificates becomes effective with the expression of intent between the parties to the transfer of shares. However, even if there is no delivery of share certificates, a contract for the transfer of shares between the parties to the transfer of shares is effective with the declaration of intent to transfer shares. The transfer of shares before the issuance of share certificates has no effect against the company, but it has been effective for the company at the expiration of six months after its incorporation or the date of payment of new shares (Article 35(3) of the Commercial Act and Article 35(2) of the former Commercial Act (amended by Act No. 5053, Dec. 29, 195; hereinafter referred to as the "former Commercial Act"). The transfer of shares takes effect only with the declaration of intent of the parties to the transfer of share certificates in accordance with the general principle as to the transfer of nominative claim (see Supreme Court Decision 94Da36421, May 23, 1995).

Meanwhile, when the consolidation of shares takes effect, the old share certificates are invalidated, and the company issues new shares, and shareholders receive the number of new shares reduced to the degree of combined shares. Accordingly, the share certificates exchanged prior to the consolidation continue to be identical (see Supreme Court Decision 2004Da51887, Jun. 23, 2005).

In light of the foregoing legal principles and the provisions of the Commercial Act, if a company fails to issue new shares within six months after the consolidation of shares even though the old shares became effective, the transfer of shares takes effect only by the declaration of intention of the parties, even if there is no delivery of share certificates. Furthermore, even if the declaration of intent on the transfer of shares between the parties was made before the consolidation of shares takes place after the issuance of share certificates, if the consolidation was conducted without the delivery of old share certificates before the invalidation of the consolidation of shares and the company did not issue new shares by the lapse of six months thereafter, the transfer of shares becomes effective only by the declaration of intention between the parties concerned before the consolidation of shares at the expiration of six months after the consolidation of shares.

D. In light of the above legal principles, if the defendant company did not issue new shares until six months have passed since the effect of the consolidation of shares carried out on January 11, 1987, pursuant to Article 335(2) of the former Commercial Act, the plaintiff should be deemed as acquiring the ownership of the shares in this case by the agreement of this case without the issuance of share certificates. Furthermore, since the defendants were to the purport that the court of first instance did not issue separate share certificates after the said consolidation of shares (see the preparatory brief dated January 30, 2008, submitted by the defendants), it is reasonable to deem that the plaintiff acquired the ownership of the shares after the corresponding consolidation of shares in this case.

Therefore, the court below should first have deliberated and decided whether the defendant company issued new shares within 6 months after the aforementioned consolidation takes effect, and then determined whether the plaintiff acquired ownership after the corresponding consolidation of shares. However, the court below erred by failing to exhaust all necessary deliberations by misapprehending the legal principles on the transfer of shares, and thereby affecting the conclusion of the judgment. The plaintiff's ground of appeal pointing this out has merit.

2. Judgment on the Defendants’ grounds of appeal

A. As to the allegation in the grounds of appeal on the interpretation of expression of intent

Based on the above facts, the court below determined that the plaintiff acquired ownership of the shares of the co-inheritors except the plaintiff and the non-party 2 who did not participate in the agreement of this case among the shares of this case among the shares subject to inheritance of this case pursuant to the agreement of this case, and rejected the defendants' assertion that the agreement of this case was merely for the purpose of raising the best awareness that the plaintiff did not have a dissatisfaction to inherited property, but did not actually have an intention to re-distribution inherited property, on the ground that there is insufficient evidence to acknowledge this.

In light of the relevant legal principles and records, the above fact-finding and judgment of the court below are all justified. The court below did not err by misapprehending the legal principles on the interpretation of declaration of intent expressed in a disposition document, which affected the conclusion of the judgment, as otherwise alleged in the ground of appeal.

B. As to the ground of appeal on implied consent

The lower court rejected the Defendants’ assertion that the Plaintiff implicitly consented to the reversion of the shares of the instant inheritance by inheritance shares of co-inheritors, based on the facts and circumstances as indicated in its holding.

The Defendants’ assertion in this part of the grounds of appeal is that the lower court erred by misapprehending the bounds of the principle of free evaluation of evidence by conducting an exceptional fact-finding contrary to the empirical rule in fact-finding that led to such determination.

However, the recognition of facts and the selection and evaluation of evidence conducted on such premise are within the discretionary power of the fact-finding court unless they exceed the bounds of the principle of free evaluation of evidence. In light of the reasoning of the lower judgment and the record, this part of the fact-finding by the lower court does not seem to have erred by exceeding the bounds of the principle of free evaluation of evidence due to the fact-finding in violation of logical rules or empirical rules as alleged in the Defendants’ grounds of appeal. Accordingly, the aforementioned ground of appeal is merely criticism of matters belonging

3. Conclusion

As above, the court below erred by misapprehending the legal principles on stock transfer and by failing to exhaust all necessary deliberations in determining the shares acquired by the plaintiff in accordance with the agreement of this case among the shares subject to inheritance of this case, and it is obvious that this affected the conclusion of the judgment, and thus, the part of the judgment below which excludes the dismissed portion of the lawsuit

For the above reasons, without further proceeding to decide on the remaining grounds of appeal by the Plaintiff, the remainder of the judgment below, excluding the dismissed part of the lawsuit, shall be reversed, and this part of the case shall be remanded to the court below for further proceedings consistent with this Opinion.

Justices Ahn Dai-hee (Presiding Justice)