In a case where a corporate manager was able to recognize the possibility of nonperformance under the Bankruptcy Act in a transaction conducted in the course of performing the business, but it was believed that such a situation could be avoided, and there was an intent to endeavor to perform the contract, whether it can be readily determined that there was the intention of fraud (negative)

Article 347 of the Criminal Act

Supreme Court Decision 2001Do202 Decided March 27, 2001 Supreme Court Decision 2015Do18555 Decided June 9, 2016

Defendant

Defendant

Law Firm Beneficiary, Attorneys Ko Ho-sung et al.

Suwon District Court Decision 2016No1695 decided October 28, 2016

The judgment of the court below is reversed, and the case is remanded to the Gu Government District Court.

The grounds of appeal are examined.

1. The judgment of the court below

A. The summary of the facts charged in the instant case is that the Defendant, who was the operator of Nonindicted Co. 1 (hereinafter “Nonindicted Co. 1”) and Nonindicted Co. 2 (hereinafter “Nonindicted Co. 2”) (hereinafter “Nonindicted Co. 2”) and Nonindicted Co. 4, who was an employee of Nonindicted Co. 3 (hereinafter “victim Co. 4”) of the victim Nonindicted Co. 3 (hereinafter “Nonindicted Co. 2”) without intent or ability to pay the amount of the steel materials despite being supplied with the steel materials on August 2013, by deceiving Nonindicted Co. 4 that “if the steel materials are supplied on credit to Nonindicted Co. 1 and Nonindicted Co. 2, the amount would be paid without money from September 2013 to September 27, 2013.” The Defendant acquired the steel materials amounting to KRW 46,86,593 on three occasions from August 13, 2013 to the same month.

B. The lower court reversed the judgment of the first instance that acquitted the Defendant and convicted the Defendant of the instant charges on the grounds stated in its reasoning.

2. Judgment of the Supreme Court

A. In the event of a transaction conducted in the course of carrying out the business, which is a result of a prediction of the nonperformance of obligation, and the part of fraud against the corporate manager is at issue, it is the same as the determination of the intent of fraud based on the result of the occurrence of the transaction that the corporate manager could have anticipated that the corporate body would be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to be able to avoid the occurrence of the transaction (see, e.g., Supreme Court Decisions 2001Do202, Mar. 27, 2001; 2015Do1855, Jun

B. The reasoning of the lower judgment and the evidence reveal the following.

1) On August 2013, Nonindicted Co. 1 appeared to have been supplied with steel materials from the victimized Co., Ltd. and then put them into the production of the product. Around that time, Nonindicted Co. 1 was engaged in the production of the product. From September 2013 to December 2013, the monthly sales from KRW 160,056, KRW 398 to KRW 283,89,336 on average of KRW 223,182,106, monthly average of KRW 187,071,598 to KRW 208,09,00 average of KRW 195,757,966 on average of KRW 195,75,966 on average of KRW 195,00 on average of KRW 197,757,745,345, May 18, 201; Nonindicted Co. 1 continued to conclude a supply contract with Nonindicted Co. △△△△△△△△.

2) Although Nonindicted Co. 2 failed to obtain any particular sales on August 2013, it appears that it started the manufacture of products, such as kitchen equipment, etc. around that time. The Defendant cannot be deemed to have lower the possibility of repaying the obligation to pay the price for the goods to the victimized company solely on the ground that he/she transferred his/her management right to Nonindicted Co. 8 on October 2013.

3) Trades between the Defendant and the victimized Company began by proposing that Nonindicted 4, an employee of the victimized Company, would find Nonindicted Company 1’s factory operated by the Defendant and supply steel materials. At the time, Nonindicted 4 thought that the Defendant had the ability to pay the goods on the grounds of the factory and machinery size of Nonindicted Company 1. In addition to the fact that the Defendant stated that he would pay the goods on the last day of the following month, as in other credit transactions, the Defendant would have paid the goods on the last day of the following month, the Defendant did not actively induce Nonindicted 4

4) Since the Defendant, after August 2013, managed funds by means of paying fixed costs incurred by manufacturing kitchen devices, etc. and immediately paying for raw materials purchase price of less than KRW 10 million, which requires liquidity, it is common sense for companies suffering from liquidity shortage, and there was no agreement that the Defendant agreed to preferentially pay for the goods to the victimized company due to the sales of the goods produced from steel materials supplied by the victimized company. Thus, it is difficult to deem that the Defendant intended not to pay for the goods to the victimized company on the ground of the foregoing fund management.

5) The Defendant considered to be able to repay the price of goods to the victimized company on August 2013. However, the Defendant asserted that, on September 2013, 2013, the payment of the price of the goods was 70 million won due to the default of △ Construction, which is the business partner, and that the Defendant had prepared an application for corporate rehabilitation after receiving legal advice from a legal expert. There is no evidence to deem that the Defendant had already prepared the rehabilitation procedure at the time when the materials were supplied by the victimized company. Considering the fact that the rehabilitation procedure was abolished on March 10, 2014 after the rehabilitation procedure was discontinued on March 10, 2014 and it was difficult to secure the materials at the time of its operation, it cannot be easily rejected solely on the ground that the Defendant’s assertion was not submitted. Thus, inasmuch as the Defendant cannot be said to have applied for the rehabilitation of Nonindicted Company 1 without paying the price of goods to the victimized company due to the aggravation of external economic conditions, and the Defendant did not have transferred the management right to the said Nonindicted Company 2.

C. Examining the above circumstances in accordance with the legal principles as seen earlier, even if the Defendant was able to recognize the possibility of nonperformance due to the aggravation of the financial situation of Nonindicted Company 1 and Nonindicted Company 2 around August 2013 due to the aggravation of the financial condition of the Nonindicted Company 1 and Nonindicted Company 2, it may be deemed that the Defendant believed that such a situation is likely to be avoided, and had an intent to endeavor to perform a contract to creditors, including the victimized Company. Therefore, the evidence submitted by the Prosecutor cannot be deemed to have proved, without any reasonable doubt, the fact that the Defendant intended to acquire the Defendant from the time when he was supplied with the steel materials from the victimized Company.

D. Nevertheless, the lower court erred by misapprehending the legal doctrine on the criminal intent in fraud and failing to exhaust all necessary deliberations, and thereby adversely affecting the conclusion of the judgment, on the grounds that the Defendant was guilty on the ground that he/she was aware of the criminal intent of defraudation, solely based on the circumstances in its reasoning.

3. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ki-taik (Presiding Justice)