Appellant Co., Ltd. (Attorney Han-chul, Counsel for defendant-appellant)

1. A joint management agent of another corporation (Law Firm Cheongn, Attorneys Choi Chang-il, Counsel for the defendant-appellant)

Principal Corporation

Busan District Court Order 2008 Ma1 dated May 19, 2008

1. The decision of the first instance shall be revoked;

2. The case is remanded to Busan District Court.

1. Purport of request;

The rehabilitation procedure shall commence with respect to the principal of the case.

2. Purport of appeal;

The same shall apply to the order.

1. Basic facts

In full view of the records and the overall purport of the examination of the case, the following facts are substantiated.

(a) Summary and status of the principal of the case;

1) 사건본인은 1983. 10. 28. 토목건축공사업, 주택사업, 준설공사업, 전기공사업, 소방설비공사업, 전기통신공사업 등을 사업목적으로 하여 설립된 비상장 주식회사이다.

2) As of December 31, 2007, the number of shares issued by the principal of the case is 1210,142 common shares (one share amounting to 5,000 won, paid-in capital amounting to 609,0710,000 won). 1,046,783 shares (85.93%) as the representative director, the non-party 1 corporation, the company of the principal of the case, 68,00 shares (5,58%) 48,00 shares (3.94%) 48,00 shares (3.94%) as the composition creditor, the non-party 3 corporation of the bankrupt, the non-party 4 corporation of the bankrupt, the non-party 5 corporation of the bankrupt, the non-party 5 corporation of the bankrupt, the total amount of KRW 250,000 shares (1.69%) and the remaining shares (2.86%) are all 1,500,000 won under joint management,37100000 won,39.

3) 사건본인은 주로 부산 및 경남, 서울, 경기, 제주, 원주 등지의 도로 확·포장 및 기반시설 등 관급 토목공사를 위주로 실적을 올려 왔고, 2005년도 토목건축공사업 분야에서 전국 순위 141위(부산 순위 9위), 조경공사업 분야에서 전국 순위 83위(부산 순위 2위)에 해당하는 등 1군에 속하는 건설업체였다.

(b) Progress of composition procedures and previous rehabilitation procedures;

1) Around August 197, the principal of the instant case was in default due to failure to recover the construction cost and unsold in lots, pressure on repayment of loans from the second financial right, etc. In relation to major construction works, the principal of the instant case was subject to the Busan District Court’s decision of approval of composition (Seoul District Court 97Mo1) as of February 2, 1998 upon filing an application for composition with the Busan District Court. Since then, the principal of the instant case has repaid the amount of KRW 90.5 million as of February 2, 1998, including KRW 523,8950,400,000 for the net income of 2001, KRW 1.43,608,8472 for the net income of 202, KRW 1.67,359,308 for the net income of 203, and KRW 90.5% for the composition procedure as of December 31, 2005.

2) However, due to the aggravation of the financial status due to the decline in credit delivery and liquidity due to the commencement of composition procedures, the number of construction cost increases due to the increase in the number of local markets of large construction companies in the Seoul metropolitan area, and the increase in the number of large construction companies in Busan metropolitan area. In such a situation, the construction cost in excess of the contract price in three apartment construction works, other than Ansan apartment, has occurred, and the construction work in Jeju △ apartment in order to prevent the payment of construction cost from being properly paid due to the delayed payment due to the delayed payment of damages in the construction work in the Jeju △ apartment in 2004. Ultimately, the construction work in the Jeju △ apartment in 2004, has been difficult, and eventually, the net loss in the year 2003,6922,721 won in the year 2005, and the settlement of the last loss in the year 15.6 billion won in the year 2006, and the settlement of bills has not been made considerably worse.

3) On July 20, 2006, the principal of this case filed an application for commencement of rehabilitation procedures with Busan District Court 2006 Mahap1, and the above court decided commencement of rehabilitation procedures on September 15, 2006 and appointed a manager.

4) On January 22, 2007, the custodian of the instant principal submitted the rehabilitation plan to the above court, and on April 17, 2007, the Injin Accounting Corporation, who is the inspector, respondeded that “it is difficult to review the plan because there are too many families, but the sale price of the land allotted in recompense for the land readjustment and rearrangement project in the Geumpo District is based on the abortion sales, and in addition, it is possible to implement the rehabilitation plan if the selling price of the land allotted in recompense for the land readjustment and rearrangement project in the Geumpo District is assumed at KRW 2,54,964 per square year, and in other cases, the additional reduction or exemption of claims

5) Accordingly, a custodian submitted a revised rehabilitation plan on April 19, 2007. On April 23, 2007, the above court held a meeting of interested parties for the examination and resolution of the revised rehabilitation plan on April 23, 2007, and divided them into the group of rehabilitation secured creditors and rehabilitation creditors and divided them into the group of rehabilitation creditors. As a result, rehabilitation creditors in the group of rehabilitation creditors shall agree with the creditors holding voting rights equivalent to approximately 73.1% of the total amount of voting rights and meet the requirements for a resolution. However, rehabilitation secured creditors in the group of rehabilitation secured creditors failed to meet the requirements for a resolution with the consent of only the secured creditors holding voting rights equivalent to approximately 27.3% of the total amount of voting rights, the above court terminated the meeting of interested parties, which was announced on April 30, 2007.

6) On April 30, 2007, the above court determined a protection clause for rehabilitation secured creditors and decided to authorize the above rehabilitation plan. Accordingly, on May 16, 2007, the appellant filed an immediate appeal against Busan High Court Decision 2007Ra147 on May 16, 2007.

7) From the perspective of remuneration on September 21, 2007, the above appellate court revoked the first instance decision and rendered a decision not to grant authorization of the above rehabilitation plan on the grounds that the above rehabilitation plan cannot be satisfied that it is possible to implement the said plan from the perspective of remuneration, and that the rehabilitation plan does not guarantee liquidation value. The custodian of the principal in the case was dissatisfied with the above decision and re-appealed to Supreme Court Decision 2007Ma1256, Jan. 14, 2008.

C. Progress of the application for commencing the procedure

1) On January 18, 2008, immediately after the above decision of the Supreme Court, the principal of the case filed an application for commencement of the rehabilitation plan again on January 22, 2008. The main ground for the application is that the inspector’s review report, which was based on the appellate court and the decision of the appellate court of the previous rehabilitation procedure, is 6.93 billion won as the actual time amount in relation to the rehabilitation security right, and the amount of KRW 2.1 billion as the difference arises by counting it as the actual time amount of the rehabilitation security right. The principal of the case, after the submission of the previous rehabilitation plan, was erroneous in failing to reflect the claim against the principal of the case related to the land readjustment and rearrangement project of the Geumpo District. Since there was a change in circumstances in which the possibility of implementation of the rehabilitation plan has increased due to the asset value of the non-party 6 corporation, which the principal of the case holds stocks after the submission of the previous rehabilitation plan, it was to request the granting of the opportunity to establish a new rehabilitation plan and obtain authorization.

2) On February 1, 2008, the court of first instance decided to commence the rehabilitation procedure for the principal of this case on May 19, 2008, after examining 1, the representative director of the principal of this case. The main reason is ① The non-party 6 corporation, the principal of which holds 30,000 shares, suffered net loss of 4.4 billion won as a result of closing accounts in 2006, but according to the settlement of accounts in 2007, the net asset value was 21.8 billion won, and the stock value was increased as it was calculated by calculating the arithmetic average of the generated shares. ② The value of the principal of this case was approximately KRW 1.6 billion in the Busan District Court Decision 2006Ga21562, and the principal of this case was confirmed to have the right to construct the land readjustment project, and the principal of this case was 31.7 billion won in the amount of the principal's interest in the land rearrangement plan.

3) On May 19, 2008, the court of first instance announced the decision to commence the rehabilitation procedure, and the appellant filed an immediate appeal against the above decision on May 30, 2008.

2. Determination as to the existence of grounds for dismissing an application for commencing rehabilitation procedures

A. Relevant provisions

Article 34(1) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Integrated Act”) provides that the application for commencement of rehabilitation procedures shall be dismissed in cases where the application for commencement of rehabilitation procedures is not bona fide as a passive requirement and is not bona fide (Article 42 Subparag. 2 and 3) or in cases where the application for commencement of rehabilitation procedures is not bona fide (Article 34(1) of the Debtor Rehabilitation and Bankruptcy Act (Article 34 of the Debtor Rehabilitation and Bankruptcy Act).

B. The appellant’s assertion of the immediate appeal

1) On September 23, 1998, the non-party 6 corporation, the principal of which holds shares, was a company incorporated in the composition procedure following the declaration of bankruptcy on or around April 2006 while the composition procedure was in progress with the decision of commencement of composition from the Busan District Court on September 23, 1998, and had already incurred 4.4 billion won operating loss in the year 2006. However, it is difficult to deem that net assets in the year 21.8 billion won have already been generated. Even if temporary profits have been increased, it cannot be deemed that the value of the shares has increased to a level of 1.6 billion won.

2) A civil lawsuit concerning a land readjustment project in the Geumpo District is merely a judgment of non-dembling because a land rearrangement project association did not submit a written response as a result of its business practice, and there is a possibility that the conclusion in an appellate court would be changed through a legitimate appeal, so the possibility of monetary inflow through the above lawsuit cannot be expected.

3) The activation of the construction competition due to the Busan New Port Development Project and the Gangseo District Development Project, taking into account by the court of first instance, is limited to the trend, and even if there are a large demand for construction due to the above project, it is extremely low possibility that the principal of the case, which had already been undergoing the rehabilitation procedure through the composition procedure, may receive the construction work. Therefore, it cannot be deemed that new funds are introduced to the principal of the case, raising the ability to perform, and improving the business ability.

4) Therefore, the decision to commence the rehabilitation procedure of the court of first instance is merely to prevent creditors from collecting a part of the claims by delaying the bankruptcy of the principal of the case, and thus, the above decision is revoked, and the application to commence the rehabilitation procedure of this case shall be dismissed.

C. Determination as to the existence of positive requirements

According to the above facts, the principal of the case at issue, while his assets as of March 31, 2008 were about about 19.7 billion won, the liabilities were about 75 billion won, and the total capital erosion status is complete. The principal of the case at issue is in a situation where it is unable to repay its obligations at maturity unless it substantially impedes the continuation of the business, such as the final settlement of default on April 6, 2006, and thus, Article 34(1)1 of the Integrated Bankruptcy Act provides for active requirements for the decision to commence rehabilitation procedures.

(d) judgment on the existence of passive requirements;

1) Vindication

In full view of the records and the overall purport of the examination of the case, the following facts are substantiated.

A) The principal of the case sought confirmation that the execution right of the land readjustment project of the Geumpo District District in force around the Geumpo District District District in the Geumpo District in Daegu-gu, Daegu-gun, Daegu-gun, was the principal of the case. The principal of the case was to receive from the above partnership and filed a lawsuit seeking payment of KRW 1 billion as part of the construction cost of KRW 31.79,3114,700, and was sentenced in the first instance trial.

B) On October 15, 2008, the Geumpo District Land Readjustment Cooperative appealed to the Busan High Court Decision 2007Na3810, and the above court rendered a judgment that rejected the main claim of the principal of this case on October 15, 2008, and accepted the conjunctive claim seeking payment of KRW 1 billion at the request of the principal of this case, and the court rendered a judgment that dismissed each of the appeals on February 26, 2009, while both parties appealed to the Supreme Court Decision 2008Da825377.

C) On the other hand, 1, a joint management agent of the principal of the case, was concluded with an agreement to receive land allotted by the authorities in recompense for development outlay under the construction cost according to the progress rate between the Geumpo District Land Readjustment Association and the land rearrangement association quarterly in connection with the execution of the said land rearrangement project, from October 205 to October 1, 2005, demanded the site warden to enter false fairness rate in daily work day and monthly work report, and demand the responsible supervisor to impliedly accept it. On March 1, 2006, 206, 5.20 billion won of the face value issued by the principal of the above land rearrangement project to transfer the business right of the above land rearrangement project to the non-party 7 corporation and to escape the bankruptcy by raising funds, 205 billion won of the above land rearrangement project, and 300 billion won of the above land rearrangement project was collected from the Busan High Court, which was sentenced to 105 billion won of the above land rearrangement project, and 205 billion won of the above money under joint management.

D) As of December 31, 2007, the principal of the case held 30,00 shares of the non-party 6 corporation as of December 31, 2007. However, on the balance sheet of 2007, the debt amount of the non-party 6 corporation was reduced by approximately KRW 23.4 billion from KRW 38 billion to KRW 14.62.56 billion from KRW 3,047,000 to KRW 14.666 billion from KRW 73 billion to KRW 17.465 billion from KRW 17.46 billion from KRW 17.3 billion from KRW 17.4 billion from KRW 17.8 billion to KRW 17.4 billion from KRW 19.3 billion from KRW 19.4 billion from KRW 03 billion from KRW 1394,570,000,000 from KRW 19.3 billion from KRW 138 billion from KRW 4.4 billion from KRW 1.68 billion from the net profits.3 billion.

E) From March 2004 to June of the same year, the compulsory composition procedure of the Busan District Court was initiated, and the compulsory composition procedure was decided by the above court. The creditor of the compulsory composition was holding the above short-term loans as the principal creditor of the compulsory composition, and the agreement was concluded between the non-party 8 and the non-party 8 on the debt reduction and replacement facility support to realize the company's normalization and restructuring. The non-party 6 corporation was exempt from approximately KRW 2.4.6 billion, such as the above short-term loan, instead of transferring the real estate located in the company to the non-party 8 company in accordance with the above agreement in 2007. The non-party 6 corporation received KRW 1.5 billion as the subsidies for interest in arrears, and thereby, the profit and loss statement of the non-party 6 corporation was reduced to KRW 2.12,851,417,173 as a result of the increase in the profit and loss statement as mentioned above.

F) However, according to the income and loss statement for the year 2007, the above company suffered a business loss of approximately KRW 1 billion in 2006, and approximately KRW 1.387 billion in 2007, and suffered a business loss of KRW 1.387 million in 2007.

2) Determination

A) In addition, there is no express provision that the debtor in the composition procedure cannot file an application for commencement of the rehabilitation procedure. Moreover, the fact that the principal of the case has been proceeding since February 1998, which again aggravated the business situation and financial structure and led to the commencement of the previous rehabilitation procedure is the same as seen earlier, and thus, it cannot be deemed that the previous commencement of rehabilitation procedure does not constitute a case in which the previous commencement of rehabilitation procedure is not bona fide.

However, unlike the judgment, even if res judicata is not recognized as to the appeal case, the appeal court revoked the first instance judgment in the previous rehabilitation procedure and did not approve the rehabilitation plan, and the Supreme Court also rendered a decision of rejection. The principal of the case filed an application for commencing the rehabilitation procedure of this case at the same time, which is no longer than 80,000 days, and there is an error in the examination report by the investigating committee among the reasons for the application. In light of the time interval and reasons for the application before and after the rehabilitation procedure, it may be deemed that the application for commencing the rehabilitation procedure of this case is actually intended to deviate from the instance system or to circumvent the previous decision's validity, and if the commencement order of rehabilitation procedure of this case is ordered, the debtor may cancel and terminate the executory contract of this case (Article 119 of the Integrated Bankruptcy Act), and if the application for commencing the rehabilitation procedure of this case was not executed at the same time by the rehabilitation court, it shall be deemed that the comprehensive execution order of non-party 1, the representative director of the case, was subject to the above comprehensive execution order of the rehabilitation procedure of this case, and transfer rate of the contract of this case.

B) In addition, as seen above, in a civil suit against the Geumpo District Land Partition Association of the principal of this case, it was recognized only KRW 1.39 billion, unlike the assertion that the construction cost would have reached approximately KRW 31.7 billion. The increase in the number of non-party 6 corporation is due to the execution of the previous compulsory composition decision and the agreement with the creditor, and the profit is due to the exemption of the debt and the inclusion of the profit in the net income in the financial statements. This is not due to the change in the situation that occurred after the above company's business performance in 2007, compared to the year 2006, or after the submission of the rehabilitation plan in the previous rehabilitation procedure, it is difficult to view the above increase in assets due to the above exemption of debt to be more than KRW 1.387 billion,000,000,000,000,000,000,000,000 won, which is more than the general rehabilitation creditor's interest in the rehabilitation procedure of this case.

C) Ultimately, the application for commencing the instant rehabilitation procedure is deemed to have a passive requirement that could not make a decision on commencing the rehabilitation procedure because it falls under the grounds provided for in subparagraphs 2 and 3 of Article 42 of the Integrated Bankruptcy Act.

3. Conclusion

Therefore, the appellant's immediate appeal of this case is with merit, and therefore the decision of the first instance is revoked under Article 53 (5) of the Consolidated City Act and the case is remanded to Busan District Court. It is so decided as per Disposition.

Judge Han-chul (Presiding Judge)

Note 1) An accounting corporation which prepared the report on external audit in 2007 of the non-party 6 corporation stated in Section 17 of Note 1 to the financial statements that “this situation described that there is an important uncertainty which may cause a significant question to the continued capacity of the corporation as a continuing corporation.”