However, abuse of bankruptcy proceedings is a ground for rejection of a petition for bankruptcy (Article 309(2) of the Debtor Rehabilitation Act). The abuse of bankruptcy proceedings is a kind of principle prohibiting abuse of rights, and whether a petition for bankruptcy constitutes an abuse of bankruptcy proceedings ought to be determined by comprehensively taking into account various circumstances, including the interests and disadvantages incurred by creditors and interested parties, including the debtor, due to bankruptcy proceedings. In a case where a creditor files a petition for bankruptcy as a means of threatening the debtor in order to obtain unfair profits in a situation where there is no possibility for the creditor to receive dividends through bankruptcy proceedings or the amount of dividends is anticipated to be extremely low, it constitutes abuse of bankruptcy proceedings by the creditor. As such, even if there is no legitimate interest in the bankruptcy proceedings, filing a petition for bankruptcy is beyond the purpose or function of the bankruptcy system

In determining whether a creditor has a legitimate interest in the bankruptcy procedure, consideration should also be given to the nature and amount of the claim held by the creditor who filed a petition for bankruptcy, the ratio of the creditor who filed a petition for bankruptcy among all creditors, the debtor’s financial status, etc. However, the bankruptcy estate may increase through the exercise of avoidance power by the trustee in bankruptcy, the debtor’s director, etc. upon commencement of the bankruptcy procedure. Furthermore, the purpose of the creditor’s ultimate realization through a petition for bankruptcy may also be an important factor.

1. The purpose of bankruptcy proceedings is to fairly realize the obligee’s rights through the realization and distribution of the obligor’s property. In a case where a cause of bankruptcy exists for the obligor, the obligee is in principle to realize his/her rights through bankruptcy proceedings. Accordingly, Article 294(1) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”) provides that either the obligee or the obligor may file a petition for bankruptcy, and Articles 305 through 307 provide for the cause of bankruptcy. If a petition for bankruptcy is entrusted only to the obligor, the bankruptcy may result in the obligee’s potential interest arising from the bankruptcy procedure due to the obligor’s failure to file a petition for bankruptcy. Accordingly, the obligee may also file a petition for bankruptcy at an appropriate time.

However, abuse of bankruptcy proceedings is a ground for rejection of a petition for bankruptcy (Article 309(2) of the Debtor Rehabilitation Act). The abuse of bankruptcy proceedings is a kind of principle prohibiting abuse of rights, and whether a petition for bankruptcy constitutes an abuse of bankruptcy proceedings ought to be determined by comprehensively taking into account various circumstances, including the interests and disadvantages incurred to creditors and interested parties, including the debtor, due to bankruptcy proceedings (see Supreme Court Order 201Ma154, 1555, Jan. 25, 201, etc.). In a case where a senior creditor files a petition for bankruptcy as a means of threatening the debtor in order to obtain unfair profits in a situation where there is no possibility for the creditor to receive dividends through bankruptcy proceedings or the amount of dividends is extremely anticipated to be extremely low, the abuse of bankruptcy proceedings by the creditor constitutes an abuse of bankruptcy proceedings. As such, even if there is no legitimate benefit pursuant to the bankruptcy proceedings, the filing of the petition for bankruptcy proceedings is deemed to go beyond the purpose and function of the bankruptcy system

In determining whether a creditor has a legitimate interest in the bankruptcy procedure, consideration should also be given to the nature and amount of the claim held by the creditor who filed a petition for bankruptcy, the ratio of the creditor who filed a petition for bankruptcy among all creditors, the debtor’s financial status, etc. However, the bankruptcy estate may increase through the exercise of avoidance power by the trustee in bankruptcy, the debtor’s director, etc. upon commencement of the bankruptcy procedure. Furthermore, the purpose of the creditor’s ultimate realization through a petition for bankruptcy may also be an important factor.

2. The lower court determined that the petitioner’s bankruptcy petition of this case was an abuse of bankruptcy procedure on the following grounds: (a) the petitioner’s bankruptcy petition of this case was merely based on pressure to recover the claim; and (b) it was merely an abuse of bankruptcy procedure

A. The applicants filed a petition for bankruptcy with the debtor on December 12, 2014, in order to recover their claims, against the bankruptcy trustee of Pyeongtaek Ho Construction Co., Ltd. (hereinafter “Seoul Chang Construction”), but lost the claims, such as the collection money lawsuit.

B. Even if the debtor is in bankruptcy proceedings, there is no asset to liquidate and distribute, and such circumstances are well known to the applicants, who are partners of the debtor.

C. Of the 1,616 members of the debtor’s association, 76 members filed a written application with the first instance court of this case against bankruptcy. The debtor’s board of directors passed a resolution against bankruptcy and passed a resolution to change the business period by 2025.

(d) If the debtor goes bankrupt, there is a high risk of dispute over the ownership of land in the business area between its members, and it is expected that personal and social losses, such as flood damage caused by the unsatisfed roads, will be very high.

E. The bankruptcy procedure should not be used as a procedure for examining the misconduct of executive officers, such as the head of the debtor's partnership, and the debtor is scheduled to file a lawsuit against the trustee in bankruptcy or proceed with the business by changing the business plan.

3. However, it is difficult to accept such determination by the lower court.

A. According to the reasoning of the lower judgment and the record, the following facts are revealed.

(1) The instant project was virtually suspended since 2006, which was in default, and part of the construction was resumed, and the construction was resumed again. The debtor has been established for 18 years, but it is virtually impossible to complete the construction without securing additional construction costs.

(2) The applicants paid part of the farmland preservation charges imposed on the obligor since 2007, and won the lawsuit seeking return of unjust enrichment against the obligor due to the failure to refund the farmland preservation charges imposed on the obligor. The total sum of the amount of the unjust enrichment recognized by the applicants as having against the obligor is KRW 388,409,630.

(3) The debtor's liability is a total of KRW 7,980,058,963, including farmland charges and construction costs, KRW 36,00,00,00 for total deposit, KRW 6,605,327 for office fixtures, and bankruptcy claim of KRW 60,50,000 for office fixtures, KRW 3,909,763,335 for foundation claims, and KRW 64,452,368,662 for the debtor's liability. However, as seen below, since the property owned by Pyeongtaek Chang-si alone alone lacks the repayment of estate claims with priority compared to bankruptcy claims, bankruptcy claims for Pyeongtaek Chang-si are difficult to be actually paid.

(4) Although the balance of deposits held by Pyeongtaek Chang-si held exceeds KRW 6.6 billion as of February 25, 2016, the case is pending in which the amount verified as estate claims is approximately KRW 6.0 billion as of July 6, 2015, and other cases seeking the payment of estate claims are sought as of July 6, 2015.

B. We examine the above facts in accordance with the legal principles as seen above 1.

(1) According to the reasoning of the order of the court below, an important asset owned by the debtor is a claim for the establishment of a common hall. However, since the establishment of a common hall cannot be fully repaid in light of its property condition, a bankruptcy claim for the establishment of a common hall does not have any particular meaning. However, a claim for return of unjust enrichment recognized as an estate claim may be distributed in proportion to the amount of the claim, along with other estate claims. Therefore, solely on the ground that a claim for return of unjust enrichment, which is recognized as an estate claim, cannot be apportioned in proportion to the amount of the claim. Therefore, it is difficult to conclude that even if a bankruptcy proceeding for the debtor is in progress, there is no asset to be distributed to the applicant or only distribution of the amount that is not profitable to the extent that

If a debtor is declared bankrupt, it would be difficult for the debtor to continue to conduct the business of this case. However, considering the fact that the business of this case was in a prolonged state since it was in the insolvency status, it is difficult to readily deem the debtor to normalize the business of this case on the ground that the debtor was not declared bankrupt. Meanwhile, the debtor who is declared bankrupt is also entitled to file a petition for rehabilitation (Articles 44(1)1 and 58(2)1 of the Debtor Rehabilitation Act). Thus, the debtor’s possibility of rehabilitation is not completely excluded by the declaration of bankruptcy.

(2) In full view of the above circumstances, there is room to deem that the petitioner’s petition for bankruptcy in this case is not a means of threatening the debtor to gain unjust profits, rather than a means of threatening the debtor’s property status, etc. Therefore, the lower court should have deliberated on the following: (a) the amount of the distributable property and the estate claim confirmed by the debtor, such as balance of deposits; (b) the possibility of increasing the distributable property if bankruptcy proceedings are initiated on the debtor; and (c) the purpose of the debtor to ultimately achieve through the bankruptcy petition; and (d) the applicant’s petition for bankruptcy

Nevertheless, the lower court determined that the Plaintiff’s petition for bankruptcy was an abuse of the bankruptcy procedure. In so determining, the lower court erred by misapprehending the legal doctrine on the abuse of bankruptcy procedure, thereby adversely affecting the conclusion of the judgment.

4. The applicant’s reappeal is with merit, and the order of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)