In the case of a sale-type land (development) trust contract where the company, which is the truster, designates a third party as the beneficiary for the purpose of credit security, whether the right to the third party's profit is extinguished under Article 241 of the Company Reorganization Act unless it is reported as a security under Article 123 (1) of the Company Reorganization Act (negative)

Article 123 (1) of the Company Reorganization Act provides that "any property claim against a person other than the company which occurred prior to the commencement of reorganization claims or reorganization proceedings, which is secured by any lien, pledge, mortgage, transfer security right, provisional registration right, right to lease on a deposit basis, or preferential right existing in the company's property at the time of the commencement of reorganization proceedings, shall be a security." Thus, in order to become a security extinguished under Article 241 of the Company Reorganization Act when no report is made as a security, the security right should be the security right for the company's property at the time of the commencement of reorganization proceedings. In order to become a security extinguished under Article 241 of the Company Reorganization Act, the trust under the Trust Act is not naturally a beneficiary, but should be designated as a beneficiary entirely separate from the truster and the beneficiary even if the truster designates him as a beneficiary, so long as the former company, which is the truster, designates a third party as the beneficiary at the time of reorganization proceedings, even if it was so designated, such right shall not be deemed as a security right for the company to be transferred to the third party.

Articles 123(1) and 241 of the Company Reorganization Act, Article 1(2) of the Trust Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Han, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Plaintiff (Law Firm Kim & Lee, Attorneys Lee Jong-chul et al., Counsel for the plaintiff-appellant)

Dongyang Total Financial Securities Co., Ltd. (Law Firm Namsan, Attorneys Park Dong-jin, Counsel for the plaintiff-appellant)

Seoul High Court Decision 2001Na68558 delivered on July 11, 2002

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

1. Summary of the judgment below

The court below decided on October 31, 1996 that a new public corporation (hereinafter referred to as the "new public corporation") provided the defendant with a real estate trust (development trust contract (hereinafter referred to as the "trust contract of this case) within the limit of 2.7 billion won for the purpose of securing obligations for discounted bills under the bill transaction agreement that Han new public corporation acquired against the defendant as the first beneficiary of the trust contract, and that the new public corporation was appointed as the administrator of the company on December 16, 1997 and was decided to authorize the reorganization plan of this case on June 30, 198, because it was no longer necessary for the defendant to report the fact that the new trust contract of this case was concluded within the limit of 3 billion won for the above new trust company to the defendant as the first beneficiary of the above new trust company on the premise that the new public corporation was established as the beneficiary of the above new trust company or the above new trust company was no other trust company's interest, and thus, the defendant did not report the new trust claim of this case to the defendant as the trust contract of this case.

2. Judgment of the Supreme Court

Article 123 (1) of the Company Reorganization Act provides that "any property claim against a person other than the company which occurred prior to the commencement of reorganization proceedings or reorganization proceedings, which is secured by any lien, pledge, mortgage, transfer security right, provisional registration right, chonsegwon, or preferential right existing in the company's property at the time of the commencement of reorganization proceedings, shall be a security." Thus, in order to become a security extinguished under Article 241 of the Company Reorganization Act when no report is made as a security, the security right shall be limited to the security right for the company's property at the time of the commencement of reorganization proceedings. In order to become a security extinguished under Article 241 of the Company Reorganization Act, the trust under the Trust Act shall not become a beneficiary, but shall be designated as a beneficiary entirely separate from the truster, even if the truster designates him as a beneficiary (see Article 1 (2) of the Trust Act), and in case where the truster and the beneficiary are designated as a beneficiary, even if the company did not designate a third party as a beneficiary at the time of the commencement of reorganization proceedings for sale-type land (development), it shall not be deemed as a security right to be transferred to the third party.

Examining the records in light of the above legal principles, although some of the reasoning of the court below is insufficient, the court below's conclusion that the security to be extinguished under Article 241 of the Company Reorganization Act does not constitute a security to be extinguished even though it did not report the right to be acquired by the defendant as a security under the trust contract of this case, is just and acceptable, and there is no error in the misapprehension of legal principles as to the right to benefit and security for transfer, as otherwise alleged in the ground of appeal. The ground of appeal is rejected

3. Conclusion

Therefore, the appeal is 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 Song Jin-hun (Presiding Justice)