Whether the transferor is liable for tort against the first transferee, where the transferor becomes unable to exercise his/her rights as a shareholder in relation to the company due to the transfer of shares to a third party again, the second transferee obtains a change of entry in the register of shareholders, etc. (affirmative)

The transfer of shares before the issuance of share certificates takes effect only by the agreement between the transferor and the transferee. As such, upon the conclusion of a contract for share transfer, the transferor loses the shares which become the object of the transfer, and becomes the shareholders upon transfer. As such, the transferee may, barring any special circumstance, request the company which issued the shares to certify that he/she has acquired the shares, and the transfer becomes entitled to exercise his/her rights as a shareholder in relation to the company. Meanwhile, unless otherwise agreed in a contract for sale, purchase, donation or other bonds which are the cause of the transfer of shares, the transferor is not obliged to have the transferee enjoy full rights or interests with respect to the shares which are the object of the transfer. Therefore, the transferor cannot be held liable for the infringement of rights as the transferee’s shareholder by re-transfer or other disposal of shares to a third party, which would have already become the object of the transfer of shares to a third party, to the extent that the transferee becomes unable to exercise its rights as a result of the transferee’s failure to obtain the notification of the transfer of shares from the transferee to the company.

Article 335(3) of the Commercial Act; Articles 450(2) and 750 of the Civil Act

[Plaintiff, Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Jong-soo and 1 other, Counsel for plaintiff-appellant)

Plaintiff (Attorney Lee Byung-ok, Counsel for the plaintiff-appellant)

Defendant

Busan High Court (Chowon) Decision 2011Na2626 decided April 6, 2012

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. The lower court rejected the Plaintiff’s claim against the Defendant for damages arising from tort, asserting that Nonparty 1 actively participated in the Defendant’s transfer of stocks and incurred losses by entering into a transfer procedure for a part of the stocks, even though the Plaintiff was transferred the stocks of Jinil Transportation Co., Ltd. (hereinafter “ Jinil Transportation”) from Nonparty 1, and that Nonparty 1 actively participated in the transfer of stocks to the Defendant.

In the dual transfer of shares before the issuance of share certificates, the order between double assignees shall be determined in accordance with whether the notification of transfer by a certificate with a fixed date as stipulated in Article 450(2) of the Civil Act or the consent thereto was obtained. However, in this case, Nonparty 1 did not meet the requirement of the third party defense by giving notice of transfer of shares to the Defendant or obtaining the consent with a fixed date with respect to the transfer of shares from the Defendant as a transferor. In addition, even if the Defendant can be deemed to have obtained an implied consent on the transfer of shares from Jil Transportation by completing the transfer of shares in the name of Nonparty 2, who is the child of Nonparty 1 with respect to the shares that he received twice from the Defendant, as long as it is not based on the certificate with a fixed date, the obligation of notification of transfer of shares by the fixed date under the stock transfer contract in this case was performed, or it did not violate the transferor's duty as the transferor, and thus, it cannot be viewed that the Defendant did not participate in the above double transfer of shares.

2. However, the judgment of the court below which did not recognize the establishment of a tort against the dual transfer of shares prior to the issuance of share certificates by Nonparty 1 is not acceptable for the following reasons.

A. The transfer of shares prior to the issuance of share certificates takes effect only by the agreement between the transferor and the transferee, i.e., a share transfer contract. As such, upon entering into a share transfer contract, the transferor immediately loses the shares which become the subject matter of the transfer, and takes over the shares. As such, the transferee may, barring any special circumstances, claim for the transfer of shares by proving that he/she acquired the shares with respect to the company that issued the shares, and the transfer of shares is entitled to exercise the rights as a shareholder in relation to the company. Meanwhile, unless otherwise agreed in the contract of sale, donation, or other bonds which are the cause of the transfer of shares, the transferor is obliged to have the transferee enjoy all rights or interests with respect to the shares subject to the transfer of shares. Therefore, the transferor should not be subject to any infringement of the rights as a shareholder of the transferee by re-transfer or other disposal to a third party other than the company. Furthermore, in order to transfer the shares to a third party, the transferor is obligated to obtain notice of the fixed date or consent to the transfer of shares from the transferor (see Supreme Court Decision 2050. 393.5.4.5.

Therefore, if the transferor, as seen earlier, once again transfers the shares already no longer belonging to himself/herself to a third party in violation of the duty under the cause contract as seen earlier, and if the first transferee becomes unable to exercise his/her shareholder's rights as a shareholder in relation to the company by obtaining a transfer of ownership on the register of shareholders, etc., this act constitutes an unlawful infringement on the rights relating to the shares lawfully acquired by the first transferee to that extent, and the transferor shall be held liable for tort against the first transferee. Such liability of the transferor is not affected by the fact that, in case where each transferee becomes in a so-called-called-called-called relationship because the transferee has a mutual interest as to the ownership of shares because of the double transfer of shares, each transferee has taken the priority over the requirements of the third party as seen earlier, which would result in the failure of the first transferee to oppose the acquisition of the shares against the second transferee.

B. According to the reasoning of the judgment below and the record, the plaintiff entered into a contract for the transfer of the shares of this case with the non-party 1 and received the shares of this case from the non-party 1 around June 6, 2007, and around June 2007, the plaintiff and the non-party 1 notified the non-party 1's wife as the representative director of the contract of this case and delivered a copy and original copy of the contract. However, the non-party 1 prepared and delivered a written statement to the defendant that he transferred all of his actual shares of this case to the non-party between July 2007 and August 2007 without meeting the third party's claim against the plaintiff due to the notification of transfer with the fixed date of transfer on the non-party 1's own shares under the non-party 2's name as of October 207 (the non-party 2's shares transfer to the defendant). The defendant prepared the non-party 1's shares transfer under the non-party 2's name and the non-party 10 shares.

Examining the above facts in light of the legal principles as seen earlier, Nonparty 1 transferred the instant shares to the Plaintiff and did not meet the third-party resistance requirements, and the Defendant transferred the instant shares twice to the Defendant. Furthermore, as long as the Plaintiff could not exercise its rights as a shareholder in relation to the shares transferred to the Plaintiff in relation to the class service, as long as the Plaintiff became unable to exercise its rights as a shareholder in relation to the shares transferred to the Plaintiff, Nonparty 1’s tort against the Plaintiff is established.

Nevertheless, the court below held that the act of double transfer of shares in the name of Nonparty 1's shares out of the shares in this case did not constitute a tort against the plaintiff on the ground that the duty of the third party 1 to meet the requirements for the third party 1 was in an impossible condition, or that Nonparty 1 committed a breach of trust in violation of the duty of the transferor. It is erroneous in the misapprehension of legal principles as to the establishment of tort, which affected the conclusion of the judgment. The ground of appeal assigning this error is with merit.

3. 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 Ko Young-han (Presiding Justice)