Plaintiff (Law Firm Yang Hun-Ga, Attorney Soh Sung-jin, Counsel for the plaintiff-appellant)

Co., Ltd. and one other (Law Firm Bew, Attorneys Lee We-woo, Counsel for the plaintiff-appellant)

March 24, 2017

Seoul Central District Court Decision 2015Kahap51968 Decided May 13, 2016

1. Revocation of a judgment of the first instance;

A. It is confirmed that the shareholders of the shares listed in the separate sheet between the Plaintiff and Defendant CM Development are the Plaintiff.

B. Defendant Doltriart Co., Ltd. shall implement the transfer procedure in the name of the Plaintiff with respect to the shares listed in the separate sheet to the Plaintiff.

2. The total costs of the lawsuit are borne by the Defendants.

The same shall apply to the order.

1. Basic facts

A. Establishment of the Defendants and capital increase with consideration

1) Defendant CM development (hereinafter “Defendant CM development”) is a company established on June 17, 1998 for the purpose of leasing and selling real estate by Nonparty 1 (Seoul: Nonparty 1) and Nonparty 2. Nonparty 1 was in office as the representative director of Defendant CM development from the time of the aforementioned establishment to January 16, 2009, and Nonparty 3 was in office as the representative director of Defendant CM development from January 16, 2009 to March 17, 2009; from June 8, 2012 to June 8, 2015, Defendant CM development was in office as the representative director of Defendant CM development; from May 21, 2012 to March 20, 2013, respectively.

2) At the time of establishment, Defendant CM development issued 10,00 won shares of 50 million won per face value (in total, 50 million won per face value), 30,000 won new shares of 50 million won per face value (in total, 15,000 won per face value) on January 27, 199, and 360,00 won per face value (in total, 1.8 billion won per face value) on May 31, 200.

3) While Nonparty 2, who was a major shareholder, had been in the auction procedure for the above golf club site, which was in arrears with the construction of the △△ Group, on April 21, 2000, the above golf club site was in progress. On April 21, 2000, Defendant Capital Slife Co., Ltd (hereinafter “Defendant Capital Co., Ltd”) established as the subsidiary company of Defendant CM development, participated in the above auction procedure, and around April 2000, the land price for the above golf club was successful at KRW 12.5 billion and paid the successful bid price in full on or around June 200, changed the name of the above golf club to that of the said golf club to that of the Glife Gule Gule G Co., Ltd. (hereinafter “instant golf club”).

3) In order to raise necessary funds in the course of the successful bid for the instant golf course, Defendant Doltriart issued 523,333 shares (total face value 5,233,330,000 shares) with a face value of KRW 10,00 from KRW 100 to KRW 5,333,00,00 for the purpose of raising funds. As a result, Defendant Doltriart issued 523,333 shares (total face value 5,233,30,00 shares) with a face value of KRW 523,333 shares (total face value 5,330,00 shares). At the time of capital increase, Defendant CM development was 196,00 shares, ○○○○○○ (English name omitted), a foreign investor, 160,000 shares of KRW 133,3333,440,00 shares (hereinafter “instant shares”).

B. Notice of termination of title trust to the Plaintiff of Defendant CM Development and transfer of title to the instant shares

1) On March 24, 2010, Defendant CM development notified the Plaintiff of the termination of the title trust on the instant shares, and requested the Plaintiff to return the share certificates if they were in custody. However, the Plaintiff did not reply to Defendant CM development.

2) On August 25, 2010, Defendant CM development sent to Nonparty 1 a notice to the effect that “As from June 17, 1998 to January 16, 2009, the date of the establishment of the Defendant CM development, the representative director of the Defendant CM development, was responsible for managing the company owner’s capital, it is responsible to identify and restore the location of the share certificates representing the shares trusted in title in the future of the Plaintiff, who is HM, Ha-dong, H-dong, in the period of his service, during which he was responsible, so that it can identify the location of the said share certificates and return them to Defendant CM development.” However, Nonparty 1 did not send any reply to Defendant CM development.

3) On November 5, 2010, Defendant CM Development sent a delivery-certified mail to the Plaintiff’s work-based law firm, the Plaintiff located in Jongno-gu Seoul ( Address omitted), and notified the Plaintiff that “If the Plaintiff terminates the title trust of the instant shares once again, and if the Plaintiff did not give any answer to the said notice within 10 days from the date of receipt, it shall be deemed that the content of the notification of Defendant CM development is recognized. Defendant CM development requested the transfer procedure for the instant shares to Defendant CM PM Ltd., and if the Plaintiff asserts that the instant shares are not owned by Defendant CM development, but owned by the Plaintiff, Defendant CM development would bring a lawsuit against the Plaintiff and Defendant CMST, seeking the return of the instant share certificates and the transfer procedure, and the said notification was delivered to the Plaintiff on the 5th of the same month. However, the Plaintiff did not exercise any right to the instant shares by no later than 2013, May 24, 2013.

4) After December 9, 2010, Defendant CM development requested Defendant CM development to implement the transfer procedure for the instant shares. Defendant CM development changed the name of the instant shares from the Plaintiff to Defendant CM development.

C. Denial of the Defendants’ shareholder status

1) On April 26, 2013, Defendant Doltriart was decided to commence rehabilitation procedures as Seoul Central District Court 2013 Ma67, but on December 5, 2013, the rehabilitation procedures was abolished on December 5, 2013. Thereafter, Defendant Doltriart was decided to commence rehabilitation procedures again on March 28, 2014 as Seoul Central District Court 2013 Ma284, and Nonparty 4 and Nonparty 5 was appointed as the administrator, but the rehabilitation procedures were completed on August 12, 2015 in the instant lawsuit.

2) In the above Seoul Central District Court 2013 Ma67 decided May 24, 2013, the Plaintiff reported the instant shares on May 24, 2013, but at the time, the administrator entrusted only Defendant CM development or its shareholder name to the Plaintiff, and the said title trust agreement was terminated on the ground that the said title trust agreement was terminated on December 16, 2013.

[Ground of recognition] Facts without dispute, Gap 1 to 5 evidence, Eul 1 to 4 evidence (including each number; hereinafter the same shall apply) and the purport of the whole pleadings

2. Determination as to the cause of action

A. The parties' assertion

1) The plaintiff's assertion

On June 1, 2000, the Plaintiff paid KRW 440 million as the share price, and acquired the instant shares, and thereafter, it is a shareholder registered in the shareholder registry of Defendant Dolle Development. Defendant Dolle Development entered the shareholder registry of the instant shares in the name of Defendant CM Development on the ground that the title trust agreement was terminated with the name of the instant shares, which was entrusted by Defendant CM Development to the Plaintiff. The Plaintiff did not have concluded a title trust agreement with the instant shares with Defendant CM development, and thus, the transfer of ownership made in the future of Defendant CM development is null and void. Accordingly, the Plaintiff sought confirmation against Defendant CM development as the shareholder of the instant shares, and sought implementation of the title transfer procedure for the restoration of the authentic name of the instant shares against Defendant Dolle Development.

2) The defendants' assertion

At the time of the issuance of the instant new shares, Defendant CM Development and the Plaintiff entered into a title trust agreement with Defendant CM Development, at the time of the issuance of the instant new shares, on the title trust agreement with the Plaintiff, Nonparty 1’s representative director of Defendant CM Development, the title of the instant shares. After that, Defendant CM development terminated the said title trust agreement with the Plaintiff on November 9, 2010, Defendant CM development terminated at the latest, and Defendant CM development changed the name of the register of shareholders in the name of Defendant CM development on December 9, 2012. As such, the ownership of the instant shares is the Defendant CM development from the beginning, the Defendants are unable to comply with the Plaintiff’s request.

B. Determination

1) Relevant legal principles

A person registered as a shareholder in the register of shareholders is presumed to be a shareholder of the company, and in order to reverse the presumption, the person bears the burden of proof on the part of denying his/her shareholder's rights (see, e.g., Supreme Court Decisions 84Da2082, Mar. 26, 1985). Therefore, in order to deem that the name of a shareholder in the register of shareholders was trusted and that there was a separate shareholder in substance as the name borrowed, the party asserting such title trust relationship should prove the fact of borrowing the name (see, e.g., Supreme Court Decisions 2007Da27755, Sept. 6, 2007; 2010Da91916, Mar. 24, 2011).

2) Determination as to whether title trust with respect to the instant shares is held

A) As seen earlier, insofar as from June 5, 200 to December 9, 2010, the Plaintiff was registered as the shareholder of the instant shares in the shareholder registry of Defendant Doltriart from around June 5, 200, until the transfer of ownership is completed in the name of Defendant CM development, the beneficial shareholder of the instant shares is presumed to be the Plaintiff.

B) Meanwhile, according to the statement in Eul evidence 11, it is recognized that around January 2003, the non-party 1 prepared by the non-party 2 in relation to the shares of the defendant Dolin Slin Shipbuilding, "the non-party 1 will hold 18% of the shares of the defendant Dolin Shipbuilding. It includes the plaintiff's shares. The price for the plaintiff's shares (4.400 million) should be paid by the end of February. If the plaintiff's shares (4.400 million) is levied at the end of February, the promise will be null and void, and the shares will be returned to the company by June 2003 (hereinafter "the certificate of this case"). However, it is recognized that the plaintiff did not notify the non-party 2 of the cancellation of the title trust and the return of the share certificates of this case on March 24, 2010, and if the plaintiff did not notify the non-party 2 of the request for the return of the shares of this case within 10.10 days of the cancellation of title trust.

However, in full view of the following facts, which can be acknowledged by adding the whole purport of the pleadings to the testimony of Nonparty 2 of the first instance trial witness Nonparty 1, 2, 4, 8 through 11, and 15, and part of the testimony of Nonparty 2 of the first instance trial, the above facts and the evidence submitted by the Defendants alone are insufficient to deem that the beneficial shareholder of the instant shares back to the presumption that the Plaintiff was the Plaintiff and only lent only the name of the Plaintiff to Defendant CM development, and there is no other evidence to support this. Accordingly, the Defendants’ assertion that the instant shares were nominal in trust to the Plaintiff is without merit.

(1) The Defendants asserted that, in order to prevent Defendant CM development from becoming an oligopolistic shareholder of Defendant CM Co., Ltd., the Plaintiff trusted the name of the instant shares to the Plaintiff. However, even if all of the instant shares were owned by Defendant CM development, the number of the shares is 230,000 shares (Defendant CM development + 186,00 shares + 44,00 shares) with total shares issued by 533,333 shares, and it is difficult to deem that Defendant CM development trusted the instant shares to the Plaintiff for that reason, since there is no concern for an oligopolistic shareholder’s problems, it is difficult to deem that the instant shares were trusted to the Plaintiff, and there is no reason to believe that Defendant CM development trust the name of the instant shares to the Plaintiff.

(2) On June 1, 200, the Plaintiff issued a cashier’s check with a face value of KRW 440 million at the face value, and paid the purchase price of the instant shares to Defendant Dolin Slin Sling, and Nonparty 6, who was the representative director at the time of Defendant Dolinging, stated that “the amount to be paid is received as a share payment” on the copy of the said cashier’s check, and issued it to the Plaintiff with the seal of the representative director affixed.

The Defendants asserted that the actual payment of the acquisition price of the instant shares is Defendant CM development, inasmuch as Nonparty 2 paid the acquisition price of the instant shares to Defendant CM to Nonparty 1 who was the representative director at the time of Defendant CM development by preparing KRW 440 million with Nonparty 7’s funds, and the Plaintiff received KRW 440 million with Nonparty 1 and paid the purchase price of the instant shares by issuing a check after receiving KRW 440 million with Nonparty 1. However, as seen above, Nonparty 2’s testimony of Nonparty 2 as consistent with the Defendants’ assertion does not have any indication to acknowledge that Nonparty 2 or Nonparty 7 paid KRW 440 million with Defendant CM development, and it is difficult for the said Defendants to support the payment of the purchase price of the instant shares in light of the financial data or receipts on payment of KRW 4440 million,000,000,000,000 to Defendant CM development, and there is no other evidence to support the actual payment of the shares.

(3) The Plaintiff received and holds each share certificate as indicated in the separate sheet representing the instant shares from Defendant Doltriart. The Defendants held the said share certificates until January 2009 by Nonparty 1, who was the representative director of Defendant CM development, and delivered them to the Plaintiff upon resignation of the representative director. However, there is no evidence to acknowledge this.

(4) Defendant CM development did not prepare any written statement to confirm that the title of the instant shares was trusted to the Plaintiff.

(5) As seen earlier, the Plaintiff’s assertion that the title trust agreement was not concluded with Defendant CM Development but did not respond to any notification of the termination of the title trust agreement by Defendant CM Development. However, since shares were issued after the issuance of the share certificates, in principle, the transfer of shares is made by the method of transferring the share certificates, so long as the Plaintiff, a legal professional, holds the share certificates, there is no particular problem in protecting the rights as a shareholder, and the Plaintiff’s assertion that the Plaintiff did not respond to the notification of the termination of the title trust of Defendant CM development does not conflict with

On the other hand, when the rehabilitation procedure for Defendant Doltriart began (Seoul Central District Court 2013 Ma677), the Plaintiff filed a stock report on May 24, 2013 on the instant shares 44,000 shares, and exercised its shareholder rights.

(6) The Defendants asserted that even though Defendant Doltriart issued new shares on January 9, 2004 and notified the Plaintiff to exchange old shares as new shares, the Plaintiff did not find new shares. This is because the Plaintiff was not the actual owner of the instant shares.

However, in addition to the purport of the whole pleadings stated in Gap evidence Nos. 8 through 11, the non-party 1 was prosecuted for the facts that he refused to return all documents, such as the corporate seal impression, passbook, account book, and defendant slock's share certificates after he was dismissed from the office of the representative director of defendant CM development on January 16, 2009 (Seoul Central District Court 2010Gohap272), and was convicted of the violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Embezzlement). The appeal and appeal by the non-party 1 against the above judgment were all dismissed, and the above judgment became final and conclusive. ② The share certificates of defendant Clock, which were issued on June 1, 200 by the non-party 2, which were found to have been embezzled by the non-party 1 in the above criminal trial, were no more than 100 billion won stock certificates and no more than 20 billion won stock certificates were applied to the above non-party 1's new shares development.

In light of the fact that Defendant CM development requested the Plaintiff to return old stock certificates even after the change of management, the Defendants failed to submit any data to recognize that Defendant CM development notified the Plaintiff of the issuance of new stocks on January 9, 2004, and the Defendants themselves did not actively urge the management of Defendant CM development and Nonparty 1 to exchange old stock certificates with new stock certificates, in light of the fact that the management of Defendant CM development and Nonparty 1 did not actively urge the Plaintiff to exchange old stock certificates with new stock certificates, it is difficult to conclude that the Plaintiff did not exchange old stock certificates with new stock certificates with the Plaintiff, and therefore, it cannot be deemed that the Defendants did not exercise the rights as shareholders on January 9, 2004.

(7) The confirmation document of this case prepared by Nonparty 1 around January 16, 2003, stating that “Non-Party 1 shall hold 18% of the shares of Defendant Dol Slin Slin Slin Slin, but shall pay the price until the end of August 2003. The above 18% includes the Plaintiff’s shares, but the price for the Plaintiff’s shares shall be paid at the end of February 2003. In conclusion, this promise becomes null and void and is returned to the company.” Under the premise that the shares of this case were held in title trust in the future of the Plaintiff, it appears to the purport that Non-Party 1 would pay the purchase price for shares to Non-Party 2, not the Plaintiff, and that it was considerably short of the Plaintiff’s statement that “Non-Party 1, the Plaintiff, despite having not lent the name of the shares of this case, did not know that it was a witness of the Plaintiff’s investment in this case’s name, or that it was not easy to find the Plaintiff’s testimony of this case.”

3) Sub-decisions

As long as the Plaintiff and Defendant CM Development’s title trust agreement on the instant shares is not recognized, the Plaintiff is the actual shareholders’ right holder who acquired the instant shares at the time of capital increase by issuing new shares on June 5, 200, and the transfer of the instant shares made on the ground of the termination of a title trust agreement is null

Therefore, as long as Defendant CM development, who is the nominal owner on the register of shareholders, has a duty to implement a transfer procedure to change the name of a shareholder on the register of shareholders with respect to the instant shares, Defendant CM development is disputing this, Defendant CM as the shareholder on the register of shareholders, Defendant CM development has a benefit to seek confirmation as the shareholder of the instant shares against Defendant CM development.

3. Conclusion

Therefore, the plaintiff's claim against the defendants shall be accepted on the ground of its reasoning. Since the judgment of the court of first instance is unfair on the ground of its conclusion, the judgment of the court of first instance shall be revoked, and it shall be confirmed that the plaintiff is the shareholder of the shares of this case between the plaintiff and the defendant CM development, and the defendant Doll-ri shall order the plaintiff to implement the transfer procedure on the register of shareholders on the shares of this case.

[Attachment]

Judges Yoon Sung-sung (Presiding Judge)