[1] Whether an act subject to avoidance under Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, which is an act subject to avoidance, includes a so-called biased act in the "act by the debtor knowing that the debtor would harm the bankruptcy creditors" (affirmative)

[2] In a case where an obligor’s act of extinguishing his/her obligation, such as repayment, made to a specific obligee at the time of insolvency was exchanged with a new supply of goods or a provision of service, and where the obligor’s act of extinguishing his/her obligation can be reasonably balanced between the value of the benefits received by the obligor and the value of the benefits extinguished by the pertinent act, whether the act of extinguishing his/her obligation constitutes an act that may be denied pursuant to Article 39

[3] The base point of time to determine whether the act subject to avoidance constitutes an act detrimental to bankruptcy creditors (=at the time of the act), and whether the same applies to cases where the act is a condition precedent (affirmative in principle)

[4] When Gap corporation entered into a contract with Eul et al., an attorney-at-law to delegate a request for adjudication and administrative litigation on the disposition rejecting the correction of value-added tax with Eul et al., the case holding that Gap corporation's act of transferring the amount equivalent to the contingent remuneration among the refund claims does not constitute an act that can be denied under Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, in case where Gap et al. transferred the amount equivalent to the contingent remuneration among the refund claims to Eul et al., and Eul et al. to Eul et al., and Gap et al. agreed to refer the remainder after receiving the full amount refunded to Eul et al., and Gap et al. prepared and delivered the "written request for transfer of national tax refund" to Eul et al. under the Framework Act on National Taxes.

[5] In a case where there are extenuating circumstances to deem that an attorney’s fee agreed upon for delegated duties is unreasonably excessive and thus contravenes the principle of good faith and the concept of equity, whether the attorney’s claim for remuneration is limited to the extent deemed appropriate (affirmative)

[6] In a case where it is recognized that the act subject to avoidance under the bankruptcy procedure is socially necessary, reasonable, or inevitable, and it can be viewed that the general bankruptcy creditor should bear the reduction of the bankruptcy estate or the unfair evaluation of the bankruptcy estate, whether the act is subject to the exercise of the avoidance power under Article 391 of the Debtor Rehabilitation and Bankruptcy Act (negative), and the standard for determining the reasonableness of the act in this case

[7] The burden of proving whether the beneficiary was unaware of the fact that the beneficiary would harm the bankruptcy creditor at the time of the act subject to avoidance under Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act (=beneficiary)

[1] The "act that the debtor knows that it would be prejudicial to the bankruptcy creditor", which is an act of avoidance as stipulated in Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, includes not only the act of reducing the bankruptcy estate by deviating from the bankruptcy estate of the debtor's general property, which is a joint security of all creditors, but also the act of reducing the bankruptcy estate by deviating from the bankruptcy estate, and also the act of making certain creditors favorable from the debtor's distribution of dividends and undermining equal distribution among the bankruptcy creditors.

[2] Even if a debtor committed an act of extinguishment of obligation, such as repayment to a specific creditor, in the event of insolvency, such act was conducted simultaneously with a new supply of goods or a provision of service, and if a reasonable balance can be acknowledged between the value of the benefit received by the debtor and the amount of debt extinguished by the pertinent act, such extinguishment of obligation cannot be deemed an act detrimental to the bankruptcy creditor, barring special circumstances, and it does not constitute an act that can be denied under Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy

[3] Whether the act subject to avoidance constitutes an act detrimental to the bankruptcy creditor should be determined at the time of such act. The same shall also apply to the case where the act is subject to a condition precedent, barring any special circumstances.

[4] Where Company A entered into a contract with Company B, etc. to entrust the affairs of a request for adjudication on the disposition rejecting the correction of value-added tax and administrative litigation with Company B, etc. while insolvency, the company A shall pay only the contingent fee without commencement, and Company B, etc. shall delegate the affairs of receiving the refund amount to Company B, etc., and Company B, etc. shall prepare and deliver “written request for transfer of national tax refund” to Company B pursuant to the Framework Act on National Taxes, and upon the occurrence of litigation seeking the cancellation of the disposition rejecting the correction of value-added tax, Company A, etc. entered into a contract of transferring the amount equivalent to the contingent fee out of value-added tax refund claims to Company B, and Company A was declared bankrupt, the case held that Company A entered into a contract of transferring the amount of the contingent fee out of the refund claims under the delegation contract entered into with Company B, etc., with Company B, which could not be seen as having fulfilled the conditions of the contract that could be deemed as having been created before and after the transfer of claims, but it shall not be deemed as having fulfilled the terms of the existing contract that the transfer of claims were newly made.

[5] Where there is an agreement between the parties on the remuneration for the handling of delegated affairs in a lawsuit, an attorney-at-law who has completed the delegated affairs may claim payment of the full amount of the agreed remuneration: Provided, That the attorney-at-law who has completed the delegated affairs may claim the full amount of remuneration within the reasonable scope, in exceptional circumstances where there are extenuating circumstances to deem that the agreed remuneration unfairly exceeds the principle of trust and good faith or the concept of equity due to the excessive amount of remuneration in consideration of the ordinary relationship with the client, the circumstances leading up to the acceptance of the case, the progress and difficulty of the handling of the case, the degree of effort, the value

[6] Even if an act subject to avoidance in the bankruptcy procedure is harmful to a bankruptcy creditor, there may be cases where it is recognized that the act in question was socially necessary, considerable, or inevitable, depending on individual and specific circumstances at the time of the act, and thus general bankruptcy creditors need to suffer the reduction of the bankruptcy estate or unfair business practices. In such exceptional cases, it shall not be subject to the exercise of the avoidance power under Article 391 of the Debtor Rehabilitation and Bankruptcy Act, in light of the guiding ideology or the concept of justice of the Act on the Equal Opportunity of Creditors, Protection of Debtor and Bankruptcy and Coordination of Interest in Bankruptcy. Here, the existence of reasonableness of the act should be determined specifically in light of the principle of good faith and the idea of fairness, in light of the obligor’s property and business conditions at the time of the act, the purpose and intent of the act, and other subjective conditions of the obligor at the time of the act, as well as the source of the repayment fund, the relationship between the obligor and the obligee

[7] Even if an act is subject to avoidance under Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, if the person who received the benefit was unaware of the fact that he would harm the bankruptcy creditor at the time of the act, it cannot be denied, but such beneficiary's bad faith is presumed as such, so the beneficiary bears the burden of proof of good faith.

[1] Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act / [2] Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act / [3] Article 391 of the Debtor Rehabilitation and Bankruptcy Act / [4] Article 391 of the Debtor Rehabilitation and Bankruptcy Act / [5] Articles 2 and 686 of the Civil Act / [6] Article 391 of the Debtor Rehabilitation and Bankruptcy Act / [7] Article 391 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act, Article 288 of the Civil Procedure Act

[1] [6] [7] Supreme Court Decision 201Da5637, 56644 decided Oct. 13, 201 (Gong2011Ha, 2351) / [2] Supreme Court Decision 2015Da24047 decided Sept. 21, 2017 (Gong2017Ha, 1965) / [3] Supreme Court Decision 2002Da41589 decided Nov. 8, 2002 (Gong2003Ha, 466), Supreme Court en banc Decision 2013Da8564 decided Jun. 28, 201 (Gong2013Ha, 1329) / [5] Supreme Court Decision 91Da872839 decided Dec. 13, 191; Supreme Court Decision 2003Da53839 decided Nov. 29, 2013; Supreme Court en banc Decision 20137Da538397519 decided Dec.

Plaintiff (Appointed Party) 1 and 2 others

Plaintiff (Appointed Party)’s bankruptcy trustee, the bankrupt corporation, the bankrupt party’s taking over the lawsuit, the Plaintiff

It is as shown in the attached list 1.

Defendant 1 (Attorney Park Jong-chul et al., Counsel for the defendant-appellant)

Defendant 2 (Law Firm ELDB Partners, Attorneys Baeat et al., Counsel for the defendant-appellant)

Intervenor of an independent party

Seoul High Court Decision 2016Na2082721, 208937 decided October 18, 2017

All appeals are dismissed. Of the costs of appeal, the part arising between the bankruptcy trustee of the bankrupt company, the bankruptcy trustee of the plaintiff (appointed party) and the defendant 1 is assessed against the above bankruptcy trustee, the plaintiff (including the appointed party), the plaintiffs (including the appointed party) and the defendant 2, including the supplementary participation part. The part arising between the plaintiff and the defendant 2 is assessed against the independent party intervenor including the supplementary participation part.

The grounds of appeal are examined.

1. As to the grounds of appeal by the trustee in bankruptcy of the bankrupt Doccco World Co., Ltd. (hereinafter “Plaintiff Appellant”) who is the taking over of the lawsuit by the Plaintiff (Appointed Party)

A. Regarding ground of appeal No. 1

(1) “Act committed by an obligor, who is an act subject to avoidance as prescribed by Article 391 subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”), includes not only the act of reducing the bankruptcy estate by deviating from the debtor’s general property, which is a joint security of all creditors, as well as the act of reducing the debtor’s general property from the bankruptcy estate, but also the so-called biased act that not only affects the debtor’s property relationship, such as repayment or provision of security to a specific creditor, thereby favorable to a specific creditor in terms of the debtor’s property relationship and thereby undermining equal distribution among the bankruptcy creditors (see, e.g., Supreme Court Decision 201Da56637, 5644, Oct. 13, 201).

However, even if a debtor committed an act of extinguishing his/her obligation, such as repayment to a specific creditor, in the event of insolvency, such act was conducted simultaneously with the supply of new goods or the provision of services, and if a reasonable balance is recognized between the value of the benefit received by the debtor and the amount of debt extinguished by the pertinent act, barring any special circumstance, such extinguishment of obligation does not constitute an act that may be denied pursuant to Article 391 subparag. 1 of the Debtor Rehabilitation Act, barring any special circumstance (see Supreme Court Decision 2015Da24047, Sept. 21, 2017).

Meanwhile, whether an act subject to avoidance constitutes an act detrimental to a bankruptcy creditor ought to be determined at the time of such act (see Supreme Court Decision 2002Da41589, Nov. 8, 2002, etc.). The same applies to cases where the act is subject to a condition precedent, barring any special circumstance (see Supreme Court Decision 2013Da8564, Jun. 28, 2013, etc.).

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

(A) From around 2007, Drink Co., Ltd., a door-to-door sales business entity (hereinafter “Drink”), the sales commission was practically suspended due to its failure to pay the sales commission to the sales agents including the Plaintiff (Appointeds) and the designated parties. Around May 31, 2007, each of the sales offices was reported to the head office on November 16, 2007. Drink had already been in capital impaired on the statement of financial position in 2006, prior to the date of reporting the closure of business.

(B) Around June 30, 2009, the case entered into a contract with Defendant 1 and the Nonparty (hereinafter “Defendant 1, etc.”) who is an attorney-at-law to entrust the handling of administrative affairs with respect to a request for adjudication and administrative litigation on a disposition rejecting the correction of value-added tax (hereinafter “Defendant 1, etc.”), and agreed to pay only the contingent fee as follows, without starting the contract.

1) 6% (including additional dues for refund) of the refund (including value-added tax) shall be paid for the success of the delegated affairs at the trial stage, and 7% (including additional dues for refund) of the refund (including value-added tax) shall be paid for the success of the delegated affairs at the administrative litigation stage.

2) For the convenience of business, D Cases delegate the receipt of refundable tax to Defendant 1, etc., and Defendant 1, etc., on behalf of D Cases, shall settle the remainder after receiving the full amount of refund from the relevant agency and remitting the full amount to D Cases. D Cases shall separately prepare and deliver a request for transfer of national tax refund to Defendant 1, etc.

(C) Accordingly, a case is subject to the former Enforcement Rule of the Framework Act on National Taxes (amended by Ordinance of the Ministry of Strategy and Finance No. 262, Feb. 28, 2012; hereinafter “former Enforcement Rule of the Framework Act on National Taxes”) with a seal impression affixed to the “request for transfer of national tax refund” (attached Form 24-2) and then issued to Defendant 1 with a certificate of personal seal impression attached thereto. According to the relevant laws and regulations such as the Framework Act on National Taxes, a taxpayer who intends to transfer the right to national tax refund to another person must request the head of the competent tax

(D) around August 2009, Defendant 1, etc. claimed a tax appeal against a disposition rejecting the correction of value-added tax on behalf of D Cases pursuant to the above delegation agreement, but received a decision of dismissal on March 9, 2010.

(E) On June 4, 2010, Defendant 1, etc. filed an administrative litigation against the head of the regional tax office, etc. seeking revocation of the disposition rejecting the correction of value-added tax (hereinafter “instant revocation disposition”).

(F) In the first instance court on February 23, 2012, the judgment ordering the revocation of the disposition rejecting value-added tax was rendered, and the judgment of the first instance court became final and conclusive around November 23, 2012, when the head of the regional tax office, etc. filed an appeal.

(G) On January 15, 2013, Korea made a mixed deposit of KRW 157,43,151,219, total amount of value-added tax refunds on D Cases.

(H) Meanwhile, D Cases prepared a contract on the assignment of claims with the content that KRW 11 billion, the amount equivalent to contingent fees, among value-added tax refund claims against Korea (hereinafter “instant refund claims”), was KRW 3.3 billion around the end of August 2012, ② KRW 3.3 billion on September 10, 2012, ③ KRW 3.3 billion on September 11, 2012, ④ KRW 1.1 billion on December 24, 2012, and notified Defendant 1 of the assignment of claims in the Republic of Korea around that time.

(i) On October 16, 2014, D Cases were declared bankrupt by the Seoul Central District Court 2014Hahap10072, and on the same day, Plaintiff Appellant was appointed as bankruptcy trustee.

(3) We examine the above facts in light of the legal principles as seen earlier.

D Cases prepared and delivered a request for the transfer of national tax refund to Defendant 1 pursuant to the delegation contract concluded with Defendant 1, etc. around June 30, 2009. Accordingly, a contract was concluded between D Cases and Defendant 1 on the condition of suspending the success of delegated affairs and the amount equivalent to the contingent remuneration out of the instant refund claims, and subsequently, the said suspension condition was fulfilled upon the final and conclusive judgment in a lawsuit seeking the revocation of the instant refusal disposition, and thus the said suspension condition became effective upon the fulfillment of the said suspension condition. Although a contract for the transfer of claims was prepared before and after the above favorable judgment and the notice of the transfer was given between D Cases and Defendant 1, it is reasonable to view that the act subject to avoidance is not a new contract for the transfer of claims, but an act to satisfy the requirements for setting up the existing contract for the transfer of claims. Accordingly, it should be determined at the point of time when the request for the transfer of national tax was prepared and issued, rather than at the time when the transfer contract was made.

At the time when the request for transfer of national tax refund was prepared and delivered, D Cases had already been in insolvency. However, D Cases’ transfer of the amount equivalent to the contingent remuneration out of the refund claim in this case to Defendant 1 can be deemed to have been conducted concurrently with Defendant 1’s provision of services. Since reasonable balance between the amount of service provided and the amount of assignment can be acknowledged, it cannot be deemed an act detrimental to bankruptcy creditors. Therefore, without considering the reasonableness of the act, it does not constitute an act that may be denied under Article 391 subparag. 1 of the Debtor Rehabilitation Act.

Therefore, it is inappropriate for the court below to determine that the above assignment of claims constitutes a case where general bankruptcy creditors need to suffer the reduction of the bankruptcy estate or the unfair treatment on the premise that the above assignment of claims would damage the bankruptcy creditors. However, the court below's conclusion rejecting the plaintiff's assertion that the above assignment of claims is subject to the exercise of the avoidance power under Article 391 of the Debtor Rehabilitation Act is reasonable, and there is no error of law that affected the conclusion of the judgment.

B. Regarding ground of appeal No. 2

Where there is an agreement between the parties on the remuneration for the handling of delegated affairs, an attorney-at-law who has completed the delegated affairs may claim payment of the full amount of the agreed fees: Provided, That in cases where there are special circumstances to deem that the agreed fees unfairly excessive and thus contravenes the principle of trust and good faith or the concept of equity, the attorney-at-law who has completed the delegated affairs may claim payment of the full amount of remuneration within the reasonable scope (see, e.g., Supreme Court Decisions 91Da8722, 8739, Dec. 13, 1991; 2016Da358333, May 17, 2018).

The lower court rejected this determination on the ground that, in full view of the circumstances as indicated in its holding, it cannot be deemed that the agreed amount was unfairly excessive, on the grounds that the Plaintiff’s attorney’s assertion that the agreed amount was invalid against the principle of trust and good faith and the principle of equity, as the agreed amount was unduly excessive. In so doing, the lower court did not err by misapprehending the legal doctrine on the principle of trust and good faith and the principle of

2. As to Defendant 2’s ground of appeal

A. Regarding ground of appeal No. 1

Even if the act subject to avoidance in bankruptcy proceedings is harmful to bankruptcy creditors, there may be cases where it is deemed that the relevant act was socially necessary, reasonable, or inevitable, depending on individual and specific circumstances at the time of the act, and thus general bankruptcy creditors need to suffer the decrease in the bankruptcy estate or unfair trade. In such exceptional cases, in light of the guiding ideology or the concept of justice of the Debtor Rehabilitation Act, which is the equality of creditors, the protection of debtors and the coordination of the interests in bankruptcy, it shall not be deemed that the act cannot be subject to the exercise of the right to set aside under Article 391 of the Debtor Rehabilitation Act. Here, whether the act is reasonable should be determined specifically in light of the principle of good faith and the idea of equity, based on the following factors: (a) the debtor’s property and business status at the time of the act; (b) the debtor’s property and business status at the time of the act; (c) the purpose and motive of the act; (d) the source of the repayment fund; (d) relationship between the debtor and the creditor; and (e) whether the creditor in collusion with the debtor exercised influence over the same (see, etc.

The lower court determined, on the grounds indicated in its reasoning, that the assignment of claims to Defendant 2 by the case against Defendant 2 was socially necessary, reasonable, or inevitable.

In light of the aforementioned legal principles and records, the lower court did not err by misapprehending the legal doctrine on the standard for determining the reasonableness of an act, contrary to what is alleged in the grounds of appeal.

B. As to the remaining grounds of appeal

Even if an act is subject to avoidance under Article 391 Subparag. 1 of the Debtor Rehabilitation Act, if a person who receives benefit from such act was unaware of the fact that he/she would prejudice any bankruptcy creditor at the time of such act, it cannot be denied, but such beneficiary’s bad faith is presumed, and thus, the beneficiary himself/herself bears the burden of proof for such good faith (Supreme Court Decision 201Da56637, 56644 Decided October 13, 201).

The lower court determined that even if considering the circumstances that the transfer amount of claims to Defendant 2 against D Cases is less than the contingent remuneration agreed upon at the time of the advisory contract, such presumption alone is insufficient to reverse the presumption, and rather, in light of the time of the transfer of claims and the situation at the time of the transfer, the lower court seems to have been well aware of the fact that the said transfer was made preferentially to general creditors

In light of the aforementioned legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on the good faith of beneficiaries, contrary to what is alleged in the grounds of appeal.

The remaining grounds of appeal are not legitimate grounds of appeal, as they are erroneous in the deliberation of evidence and fact-finding which belong to the full power of the fact-finding court.

3. As to the appeal by an independent party intervenor

An independent party intervenor did not submit a statement of grounds for appeal within the submission period, and the petition of appeal does not contain any grounds for appeal.

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.

[Attachment 1] List of Intervenors to the Plaintiff: Omitted

【List of Appointed Persons: omitted】

Justices Park Jung-hwa (Presiding Justice)