In a case where a debtor financing in a situation where it is difficult for him/her to implement a project due to financial difficulties is the best way to exercise the ability to repay the debt, and where the debtor provided real estate as security to a certain creditor and received new funds additionally, whether the debtor’s act of creation of security right constitutes a fraudulent act (negative)

Article 406 of the Civil Act

Supreme Court Decision 2000Da50015 Decided May 8, 2001 (Gong2001Ha, 1340) Supreme Court Decision 2008Da42874 Decided October 23, 2008

Plaintiff (Law Firm Beneficiary, Attorneys Shin Dong-ho et al., Counsel for the plaintiff-appellant)

Korea Land Trust Co., Ltd. (Attorney Kim Dong-dong, Counsel for defendant-appellant)

Seoul High Court Decision 2013Na45749 decided January 24, 2014

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

The grounds of appeal are examined.

1. An obligor in excess of his/her obligation constitutes a fraudulent act in relation to another obligee, barring any special circumstance. However, barring any special circumstance, an obligor’s act of offering real estate owned by him/her as collateral to a person among creditors constitutes a fraudulent act in relation to another obligee, barring any special circumstance. However, barring any special circumstance, barring any special circumstance, deeming it the best way for an obligor to continue his/her business by financing funds in a situation in which it is difficult to continue its business due to the financing, and, in cases where the obligor provided certain creditors as collateral and received new funds additionally from him/her, barring any special circumstance, the obligor’s act of creation of security interest does not constitute a fraudulent act (see Supreme Court Decision 200Da5015, May 8, 2001). Such legal principle likewise applies to cases where a trust contract between the obligee providing new funds and the third party designated by him/her is concluded as a beneficiary in lieu of the creation of security interest and the registration of ownership by reason of trust. Whether this method constitutes a trust act should be determined by comprehensively taking into account the purpose of trust and financial intent (see.

In addition, the reason of the written judgment is sufficient to indicate the judgment on the party's assertion and other means of offence and defense to the extent that it can be recognized that the text is fair (Article 208 of the Civil Procedure Act).

2. On the grounds indicated in its reasoning, the lower court determined that the instant trust agreement constituted a fraudulent act committed with the purpose of impairing creditors including the Plaintiffs and avoiding obligations, on the following grounds: (a) the instant trust agreement was concluded under the judgment that continuing to implement the sale business and restoring the debt performance ability or ability of a company with ASEAN; and (b) relevant financial institutions, majority of buyers and constructors; and (c) the instant trust agreement constituted a fraudulent

Examining the reasoning of the judgment below in light of the evidence duly admitted, the above judgment of the court below can be deemed to be based on the legal principles as seen earlier (see Supreme Court Decision 2001Da57884, Dec. 12, 2003). Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the determination of amnesty, the burden of proof of intention to commit suicide, and the degree of proof on the beneficiary’s good faith, which led to failure to exhaust all necessary deliberations or failure to state the reasons for the judgment, which affected the conclusion of the judgment.

3. 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 Shin Young-chul (Presiding Justice)