The purport of Articles 406 and 347(1) of the former Debtor Rehabilitation and Bankruptcy Act, which provides for the interruption of a revocation lawsuit filed by a creditor by a bankruptcy creditor and the acceptance of a lawsuit by a trustee in bankruptcy / In cases where a trustee in bankruptcy takes over a revocation lawsuit lawfully filed by a creditor prior to the declaration of bankruptcy and exercises the right to set aside by changing a claim to the extent of succession, whether a creditor’s revocation lawsuit complies with the limitation period should be determined at the time when the first proceeding by

The former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 11828, May 28, 2013; hereinafter “ Debtor Rehabilitation Act”) provides that the litigation procedures shall be interrupted when a creditor’s revocation lawsuit filed by the creditor is pending in the court at the time bankruptcy is declared bankrupt against the debtor. This is to prevent the creditor from exercising his/her right of revocation after the bankruptcy is declared bankrupt, taking into account not only the creditor’s revocation lawsuit is a party to the bankruptcy debtor, but also the result of the lawsuit may directly affect the increase or decrease of the bankruptcy estate, but also the bankruptcy creditor is prohibited from exercising his/her right of revocation without resorting to bankruptcy proceedings (see Article 424 of the Debtor Rehabilitation Act).

Instead, the Debtor Rehabilitation and Bankruptcy Act provides that a trustee in bankruptcy may take over a revocation lawsuit filed by a creditor after the bankruptcy is declared against the debtor, thereby absorbing the creditor’s individual right of revocation into the form of propagation of the bankruptcy estate, namely, the exercise of the trustee’s right of revocation, who performs duties for the joint interest of all the bankruptcy creditors, thereby seeking a uniform disposal in the bankruptcy procedure for the purpose of fairly realizing and distributing the debtor’s property. This is because the right to deny any act that the debtor in bankruptcy knows that it would prejudice the bankruptcy creditor and seek restitution of the property deviating from the debtor’s right of revocation has the same purpose as the right of revocation.

In light of the purport of the Debtor Rehabilitation Act, which provides for the interruption of a revocation lawsuit filed by a creditor and the acceptance of a lawsuit by a trustee in bankruptcy, if a trustee in bankruptcy takes over a revocation lawsuit lawfully filed by a creditor prior to the declaration of bankruptcy against the debtor in bankruptcy, the effect of the revocation lawsuit filed by the creditor is succeeded to the trustee in bankruptcy. Therefore, in cases where the trustee in bankruptcy takes over the revocation lawsuit by the creditor and exercises the avoidance power by modifying the claim within the scope of succession, barring any special circumstance, whether the period of exclusion shall be determined based on the time when the revocation

Articles 347(1), 396(1), 405, 406, and 424 of the former Debtor Rehabilitation and Bankruptcy Act (Amended by Act No. 11828, May 28, 201)

The plaintiff in bankruptcy trustee of Dong-do, a bankruptcy debtor corporation, a lawsuit taking over the lawsuit of the Korea SPD Savings Bank.

Limited Company (Law Firm, Attorney Lee Lee-ho, Counsel for defendant-appellant)

Supreme Court Decision 2012Da27735 Decided June 26, 2014

Seoul High Court Decision 2014Na32078 decided April 30, 2015

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. The first sentence of Article 405 of the former Debtor Rehabilitation and Bankruptcy Act (amended by Act No. 11828, May 28, 2013) provides that “The avoidance power may not be exercised upon the lapse of two years from the date on which bankruptcy is declared.” Article 396(1) of the same Act provides that “The avoidance power shall be exercised by the trustee in bankruptcy by means of lawsuit, claim for avoidance or defense.”

Meanwhile, Article 406(1) of the Debtor Rehabilitation Act provides, “If a lawsuit filed by any bankruptcy creditor under Article 406(1) of the Civil Act is pending in the court at the time the bankruptcy is declared, the lawsuit shall be interrupted until the takeover of the lawsuit or the termination of the bankruptcy procedure.” The first sentence of Article 347(1) of the same Act, which is applicable mutatis mutandis under Article 406(2) of the same Act, provides, “The lawsuit pending in the court at the time the bankruptcy is declared, may be taken over by the bankruptcy trustee or the other party.

As above, the Debtor Rehabilitation Act provides that a lawsuit filed by a creditor for revocation shall be interrupted when the court is pending at the time the debtor is declared bankrupt. This is to prevent the creditor from exercising his/her right of revocation after the bankruptcy is declared against the debtor, taking into account the following: (a) although the creditor’s revocation lawsuit is not a party to the bankruptcy debtor who is declared bankrupt, the outcome of the lawsuit may directly affect the increase or decrease of the bankruptcy estate; and (b) the bankruptcy creditor is prohibited from exercising his/her right of revocation without resorting to the bankruptcy procedure (see Article 424 of the Debtor Rehabilitation Act).

Instead, the Debtor Rehabilitation and Bankruptcy Act provides that a trustee in bankruptcy may take over a revocation lawsuit filed by a creditor after the bankruptcy is declared against the debtor, thereby absorbing the creditor’s individual right of revocation into the form of propagation of the bankruptcy estate, namely, the exercise of the trustee’s right of revocation, who performs duties for the joint interest of all the bankruptcy creditors, thereby seeking a uniform disposal in the bankruptcy procedure for the purpose of fairly realizing and distributing the debtor’s property. This is because the right to deny any act that the debtor in bankruptcy knows that it would prejudice the bankruptcy creditor and seek restitution of the property deviating from the debtor’s right of revocation has the same purpose as the right of revocation.

In light of the purport of the Debtor Rehabilitation Act, which provides for the interruption of a revocation lawsuit filed by a creditor and the acceptance of a lawsuit by a trustee in bankruptcy, if a trustee in bankruptcy takes over a revocation lawsuit lawfully filed by a creditor prior to the declaration of bankruptcy against the debtor in bankruptcy, the effect of the revocation lawsuit filed by the creditor is succeeded to the trustee in bankruptcy. Thus, in cases where the trustee in bankruptcy takes over the revocation lawsuit by the creditor and exercises the avoidance power by modifying the claim within the scope of succession, barring any special circumstance, whether the limitation period should be determined at the time when the revocation lawsuit by the creditor

2. Review of the reasoning of the lower judgment and the record reveals the following facts.

A. On July 23, 2010, Dong Do Co., Ltd. (hereinafter “Dong Do”) drafted to the Defendant a letter of payment stating that “A person would pay KRW 2.61 billion by August 6, 2010” (hereinafter “instant letter of payment”), and on August 3, 2010, drafted a notarized deed (hereinafter “notarial deed of this case”), No. 4797, No. 2010, 2010, stating that he/she would accept compulsory execution with respect to the obligations stipulated in the instant letter of payment.

B. On October 11, 2010, the Korea Standards Bank for Savings Co., Ltd., Ltd., a creditor of Dongdo (hereinafter “creditor Bank”), filed a creditor revocation lawsuit to the effect that the Defendant’s claim stated in the instant Notarial Deed is nonexistent, and even if it exists, the agreement on the payment between Dong and the Defendant (hereinafter “instant repayment agreement”) was made for the purpose of having the Defendant preferentially repay the existing claim, and thus, constitutes a fraudulent act in relation to the creditor bank. The Defendant revoked the instant debt repayment agreement and filed a creditor revocation lawsuit to the effect that the creditor bank would pay KRW 1,063,638,422 to the creditor bank (hereinafter “instant creditor revocation lawsuit”).

C. Dongdo was declared bankrupt on July 31, 2012, and the Plaintiff was appointed as the bankruptcy trustee of Dongdo on the same day.

D. On October 1, 2014, the Plaintiff, a trustee in bankruptcy of Dong Do, took over the instant revocation lawsuit, and filed an application for modification of the purport of the claim and the ground for the claim with the purport that “The instant repayment contract constitutes a fraudulent act with the knowledge that Dong Do, a debtor in bankruptcy, would prejudice the bankruptcy creditor,” and that “the Defendant would pay KRW 813,638,42 to the Plaintiff” was to be filed on November 11, 2014 (the claim of this case was partially reduced).

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

A. After taking over the revocation lawsuit in this case, the Plaintiff, a bankruptcy trustee in Dong Do, denied the act subject to the creditor's revocation right within the scope of the creditor's revocation right exercised by the creditor bank, and changed the claim to the same effect as the creditor's revocation lawsuit in this case, which was taken over by the creditor bank as a bankruptcy creditor, and sought restitution to the bankrupt estate. Thus, since the Plaintiff taken over the revocation lawsuit in this case and exercised the right to set aside within the scope of succession, it is reasonable to deem that the Plaintiff's exercise of the right to set aside

Therefore, even if the Plaintiff changed the claim as above after the lapse of two years from the date on which the Plaintiff was declared bankrupt of Dongdo, the Plaintiff’s lawsuit of denial cannot be deemed unlawful due to the lapse of the exclusion period.

B. Nevertheless, the lower court determined otherwise, on the ground that the Plaintiff’s taking over the instant creditor revocation lawsuit and submitted a document changing the claim to a lawsuit for avoidance on November 11, 2014, and that the time passed two years from July 31, 2012, when the bankruptcy was declared against Dongdo, the Plaintiff’s lawsuit for avoidance was unlawful as the limitation period for exercising the right to set aside expires. In so determining, the lower court erred by misapprehending the legal doctrine on the assumption of the creditor revocation lawsuit by the trustee in bankruptcy and the point at which the period for exercising the right to set aside is observed, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on

4. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-dae (Presiding Justice)