In a case where the reorganization plan provides in lieu of satisfaction of the reorganization claim through debt-equity swap, the scope of the amount of the reorganization claim extinguished by performance, and whether a primary debtor, a guarantor or a guarantor of the reorganization company, a primary debtor, may claim the deduction of the amount of repayment against the reorganization creditor

Article 222(1) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), Article 240(2) (see current Article 250(2) of the Debtor Rehabilitation and Bankruptcy Act), Articles 428 and 466 of the Civil Act

Supreme Court Decision 2009Da47739 Decided November 12, 2009 (Gong2009Ha, 2084) Supreme Court Decision 2009Da85830 Decided March 25, 2010 (Gong2010Sang, 801)

T. L. S. S. S. Investment (Attorney Gong Chang-hun et al., Counsel for the plaintiff-appellant)

East Asia Construction Industry Co., Ltd. (Law Firm Jinjin, Attorneys Song-si et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2010Na35161 decided July 8, 2011

All appeals are dismissed. The costs of appeal are assessed against each appellant.

The grounds of appeal are examined.

1. Plaintiff’s ground of appeal

citing the reasoning of the judgment of the court of first instance, the court below rejected the Plaintiff’s claim for damages for delay on the above commercial papers on the ground that there was an agreement on damages for delay on the basis of which the Plaintiff is liable to apply the overdue interest rate on the commercial papers owned by the Plaintiff

In light of the relevant legal principles and records, the above judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors by misapprehending the legal principles on the interest rate in arrears of commercial papers, or by exceeding the bounds of the principle

2. As to the Defendant’s ground of appeal

In the event that the reorganization plan intends to substitute for the repayment of the reorganization claim through conversion into investment, the amount of claim equivalent to the appraised amount shall be deemed to have been repaid within the limit of the amount to be substituted for the repayment pursuant to the reorganization plan, and even if the market price of the new stocks acquired by the reorganization creditor exceeds the issue price per share of the stocks converted into investment, the claim of the reorganization creditor shall be extinguished only within the limit of the amount calculated by multiplying the issue price of the stocks converted into investment by the number of the stocks converted into investment. In such cases, where the main debtor is the reorganization company, the guarantor thereof, and where the guarantor is the reorganization company, the primary debtor may claim the above amount of claim against the reorganization creditor (see Supreme Court Decisions 2009Da4739, Nov. 12, 2009; 2009Da85830, Mar. 25, 2010).

In light of the above legal principles, the court below is just in rejecting the defendant's assertion that the amount of the plaintiff's claim can be deducted by applying the amount of KRW 72,00,00 which is the market price as of June 1, 2006, which is the effective date of the issuance of new shares exceeding the above issue price, to the extent of the amount assessed as 25,000 won per share of the shares of the Korea Venture Co., Ltd. which was converted into equity investment in reorganization proceedings against the Korea Venture Co., Ltd. which is the guarantor, and the defendant Co., Ltd. can only claim the above amount of deduction against the plaintiff.

3. Conclusion

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

Justices Kim Shin (Presiding Justice)