Whether a title trustee is liable for civil liability against a title truster regardless of whether the crime of embezzlement is established where the title trustee arbitrarily disposes of real estate acquired by the registration of ownership transfer from the title truster following bilateral title trust (affirmative)

Even if a title trustee’s arbitrary disposal of real estate acquired by the registration of ownership transfer from a title truster based on bilateral title trust is not punished for embezzlement, the above act constitutes a tort under the Civil Act regardless of whether it constitutes criminal embezzlement, and thus, constitutes a tort under the Civil Act. The reasons are as follows.

① The Supreme Court en banc Decision 2016Do18761 Decided February 18, 2021 rendered that, in cases of bilateral title trust between a title truster and a title truster who transfers the title of real estate owned by him/her to a title trustee in violation of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), the relationship between the title trustee and the title truster is not a new trust worth protecting under the Criminal Act, but a title trustee cannot be deemed to be a “person who takes custody of another’s property” in relation to the title truster. Therefore, even if the title trustee disposes of the real estate entrusted to him/her at will, the former Supreme Court precedents changed the previous Supreme Court precedents

② Civil liability and criminal liability are different principles from each other in terms of guidance ideology, burden of proof, degree of proof, etc. As criminal liability for illegal acts is held liable for acts violating the legal order of society, and is subject to public sanctions against an offender, civil liability is held individually liable for infringing another person’s legal interest, and the compensation system is based on the guiding principle for the victim’s losses. As such, even if an act does not constitute criminal offense, it should be examined from a perspective that constitutes civil tort is separate from criminal liability.

③ The Real Estate Real Name Act states that any title trust agreement (Article 4(1)) and any change in real rights to real estate, made by registration under a title trust agreement (main sentence of Article 4(2)), are null and void. Even if a title trustee’s registration is made pursuant to a title trust agreement, any change in real rights to real estate shall not take effect. As a result, real estate ownership remains in the title truster regardless of the registration, and the title truster may file a claim against the title trustee for the cancellation of the registration, based on the right to demand the exclusion from any interference with the ownership as an owner of real estate. However, Article 4(3) of the Real Estate Real Name Act provides that “The invalidity of a title trust agreement and any change in real rights pursuant thereto cannot be asserted against a third party.” Accordingly, if the title truster arbitrarily disposes of real estate to a third party, the title truster cannot seek the cancellation of the ownership transfer registration by asserting his/her ownership to a third party, and the third party who acquired real estate from the title trustee becomes effective. Accordingly, the title truster’s arbitrary disposal of real estate without the title trustee’s consent constitutes tort liability.

④ Supreme Court en banc Decision 2016Do18761 Decided the Supreme Court en banc Decision 2016Do18761 revealed that the intrinsic nature of the crime of embezzlement is to illegally acquire another person’s goods entrusted on the basis of a fiduciary relationship, and that the relationship between the title truster and the title trustee is not a fiduciary relationship worth protecting the criminal law, and thus, the title trustee’s act of voluntary disposal cannot be acknowledged as embezzlement. Therefore, insofar as the title truster’s ownership is infringed upon due to the title trustee’s voluntary disposal, it is reasonable to deem that the title trustee bears civil liability against the title truster regardless of

Article 750 of the Civil Act, Article 4 of the Act on the Registration of Real Estate under Actual Titleholder’s Name, and Article 355(1) of the Criminal Act

Supreme Court en banc Decision 2006Da6713 Decided February 1, 2008 (Gong2008Sang, 288) Supreme Court en banc Decision 2013Da218156 Decided June 20, 2019 (Gong2019Ha, 1423) Supreme Court en banc Decision 2016Do18761 Decided February 18, 2021 (Gong2021Sang, 668)

Plaintiff

Defendant 1 and one other (Attorney Yoon-young, Counsel for the defendant-appellant)

Busan High Court Decision 2015Na5347 decided July 7, 2016

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined.

1. Factual basis

The reasoning of the lower judgment and the record reveal the following facts.

A. The Plaintiff and Defendant 2 drafted a sales contract stating that the instant real estate shall be sold in KRW 275 million to Defendant 1, who is the wife of Defendant 2 (hereinafter “instant sales contract”). On March 20, 2012, the registration of ownership transfer was completed in Defendant 1’s name on the instant real estate.

B. On October 30, 2012, Defendant 2 sold the instant real estate to the Nonparty in Defendant 1’s name, and on the same day, completed the registration of ownership transfer under the Nonparty’s name regarding the instant real estate.

C. Around August 2013, the Plaintiff filed a criminal complaint against the Defendants on suspicion that the Defendants arbitrarily disposed of the instant real estate while the Defendants kept the instant real estate in custody. A prosecutor issued a disposition to the effect that Defendant 1 was guilty. However, Defendant 2 was prosecuted against the Defendant 2 by Ulsan District Court Decision 2014No3966, Jul. 23, 2015, and Defendant 2 appealed to the same court 2015No9466, Jul. 23, 2015. The appellate court affirmed Defendant 2’s conviction, but the Supreme Court reversed and remanded the judgment of the lower court on the ground that, in the case of bilateral title trust, the real estate trusted by the trustee does not constitute embezzlement even if the title trustee arbitrarily disposed of it (Supreme Court Decision 2017Do3997, Apr. 1, 2021).

2. The judgment of the court below

The lower court determined that Defendant 2’s arbitrary sale of the instant real estate owned by the Plaintiff to the Nonparty while Defendant 2 was under title trust with the Plaintiff and completed the registration of ownership transfer under Defendant 1’s name, and thus, Defendant 2 was liable to compensate the Plaintiff for tort by embezzlement of the instant real estate

In addition, the lower court determined that Defendant 1 was liable to compensate the Plaintiff’s damages jointly with Defendant 2, as he participated in, or aided and abetting Defendant 2’s embezzlement by intention or negligence.

3. Judgment of the Supreme Court

A. First of all, Defendant 2’s ground of appeal that the instant real estate was not a title trust by the Plaintiff is erroneous in the selection of evidence and fact-finding, which are the exclusive authority of the lower court, which is a fact-finding court, and does not constitute a legitimate ground of appeal. In light of the records, the lower court did not err in its judgment by failing to exhaust all necessary deliberations, contrary to what is alleged in the grounds of appeal, by exceeding the bounds of the principle

B. Based on this premise, we examine whether a civil tort is established in a case where the title trustee arbitrarily disposes of the trusted real estate in a bilateral title trust relationship.

Even if a title trustee’s arbitrary disposal of real estate acquired by the registration of ownership transfer from a title truster based on bilateral title trust is not punished for embezzlement, the above act constitutes a tort under the Civil Act regardless of whether the ownership of the title truster is constituted a criminal offense, and the title trustee is liable to compensate the title truster for damages. The reasons are as follows

(1) The Supreme Court en banc Decision 2016Do18761 Decided February 18, 2021 (hereinafter “Real Estate Real Name Act”) revised the previous Supreme Court precedents on the following grounds: (a) in the case of bilateral title trust between a title truster and a title truster who transfers the title of real estate owned by him/her to the title trustee in violation of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), the relationship between the title trustee and the title truster is not a relationship with trust valuable to protect under the Criminal Act; and (b) the title trustee cannot be deemed to have a position of “a person who takes custody of another’s property” in relation to the title truster’s relationship with the

(2) Civil and criminal liability applies to different principles in terms of guiding ideology, burden of proof, degree of proof, etc. The criminal liability for illegal acts is held liable for acts in violation of social legal order, and while the content of public sanctions (criminal punishment) against an actor is that is, civil liability is held individually liable for infringing another person’s legal interest, and the compensation system is based on the equitable and reasonable burden of damages. Thus, even if the act does not constitute a criminal offense, whether it constitutes a tort under civil law should be examined from a perspective separate from criminal liability (see Supreme Court Decision 2006Da6713, Feb. 1, 2008).

(3) Article 4(1) of the Real Estate Real Name Act provides that a title trust agreement (Article 4(1)) and any change in real rights to real estate (main sentence of Article 4(2)) arising from a registration made pursuant to a title trust agreement shall be null and void. Even if the registration was made in the name of a title trustee pursuant to a title trust agreement, any change in real rights to real estate remains effective. As a result, the ownership of real estate remains in the title truster regardless of the registration, and the title truster may file a claim against the title truster for the cancellation of the registration based on the right to claim for the exclusion from interference with property (see Supreme Court en banc Decision 2013Da218156, Jun. 20, 2019). However, Article 4(3) of the Real Estate Real Name Act provides that “Where a title truster disposes of real estate to a third party at will, the title truster may not claim ownership to the third party, and the third party who acquired the real estate from the title trustee cannot seek cancellation of the ownership transfer registration, and thus, the title truster’s disposal of real estate becomes effective.

(4) The Supreme Court en banc Decision 2016Do18761 Decided 201 Decided that the essence of the crime of embezzlement illegally obtains another person’s goods entrusted on the basis of a fiduciary relationship, and the relationship between the title truster and the title trustee is not a fiduciary relationship worth protecting the criminal law, and thus, it cannot be deemed that the title truster’s ownership cannot be protected in the trust relationship. Therefore, as long as the title truster’s ownership was infringed upon due to a voluntary disposition by the title trustee, it is reasonable to deem that the title trustee bears the civil liability against the title truster regardless of whether the crime of embezzlement was established under the Criminal Act.

C. Examining the facts in light of the aforementioned legal doctrine, Defendant 2’s act of arbitrarily disposing of the instant real estate held by Defendant 2 for the Plaintiff according to the title trust agreement with the Plaintiff, which infringes on the Plaintiff’s ownership, and Defendant 2 bears a civil liability against the Plaintiff regardless of whether embezzlement is established under the Criminal Act.

D. Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine and the record, the lower court’s determination that Defendant 2’s arbitrary sale of the instant real estate to the Nonparty constitutes an embezzlement is no longer reasonable as it is based on the legal doctrine prior to the alteration, but it is justifiable to have determined that Defendant 2 is liable for damages arising from tort by arbitrarily disposing of the instant real estate while Defendant 2 kept it under title trust from the Plaintiff while keeping it under title trust. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by exceeding

E. Meanwhile, examining the reasoning of the lower judgment as to Defendant 1’s grounds of appeal in light of the relevant legal principles and records, the lower court’s determination that Defendant 1 was easily engaged in Defendant 2’s embezzlement is not reasonable on the grounds as seen earlier, but it is justifiable in its conclusion that Defendant 1 cooperateed in Defendant 2’s act of selling the instant real estate by intention or negligence, thereby recognizing Defendant 1’s joint tort liability. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err

4. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)