In cases where a contract title trust agreement was concluded after the enforcement of the Act on the Registration of Real Estate under Actual Titleholder’s Name, the subject of unjust enrichment to be returned to the title truster (=purchase fund) / In cases where the title trustee agreed to transfer the real estate under title trust in lieu of performing the duty to return the purchase fund ex post facto on the premise that the title trustee acquired full ownership, and completed the registration of ownership transfer

According to Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), in cases where a title truster and a title trustee entered into a contract title trust agreement with the owner who was not aware that the title trustee was a party to the contract and concluded a contract for the sale of real estate with the owner who was unaware of the fact that the title trustee was a party to the contract, and the registration of ownership transfer of the relevant real estate is completed in accordance with the contract, the title trustee, notwithstanding the invalidity of the title trust agreement between the title truster and the title trustee, is fully entitled to ownership of the relevant real estate, and the title trustee is merely liable to return unjust enrichment to the title truster. However, in cases where the contract title trust agreement was concluded after the enforcement of the Real Estate Real Name Act, the title truster could not acquire ownership of the relevant real estate from the beginning, and thus, the damage suffered by the title truster

In such a case, if the parties to a contract title trust agree to the effect that a title trust agreement is valid, i.e., transfer of ownership registration on real estate in the future of the title truster on the premise that the title truster holds the so-called internal ownership, or pay the price for the disposal of real estate to the title truster, such agreement is null and void in accordance with Article 4(1) of the Real Estate Real Name Act that stipulates that the title trust agreement is null and void. However, as seen earlier, if the title trustee agreed to transfer the trusted real estate itself in lieu of performing the obligation to return the purchase fund ex post under the premise that the title trustee acquired the full ownership of the title trustee, and accordingly, completed the registration of ownership transfer in the future of the title truster, such registration is based on the substitute benefit agreement, which is the cause for the transfer of a new ownership transfer, and thus, is valid, barring any special circumstances, such as where the agreement is null and void, and it is not denied

Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name;

Supreme Court Decision 2002Da66922 Decided January 28, 2005 (Gong2005Sang, 393) Supreme Court Decision 2007Da69148 Decided February 14, 2008

Plaintiff

Defendant (Law Firm Barun, Attorneys Park Jong-chul et al., Counsel for the defendant-appellant)

Busan High Court Decision 2013Na4381, 4398, 4404 decided April 2, 2014

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

The grounds of appeal are examined.

1. According to Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), where the title truster and the title trustee entered into a contract title trust agreement with the owner who was the party concerned and did not know that the title trustee was a title trust agreement and completed the registration of ownership transfer of the pertinent real estate in accordance with the said contract, the title trustee, despite the invalidity of the title trust agreement between the title truster and the title trustee, notwithstanding the invalidity of the title trust agreement between the title truster and the title trustee, is entitled to complete ownership of the pertinent real estate, and the title trustee is merely liable to return unjust enrichment to the title truster. However, where the said contract title trust agreement was concluded after the enforcement of the Real Estate Real Name Act, the title truster was not entitled to acquire the pertinent real estate ownership from the beginning, and thus, the damage suffered by the title truster due to the invalidation of the said title trust agreement is not the pertinent real estate itself, but the purchase fund provided to the title truster, and therefore, the title trustee is deemed unjust enrichment (see Supreme Court Decision 207Da69148, Feb.

In such a case, if the parties to a contract title trust agree to transfer the registration of ownership of real estate for the future of the next title truster on the premise that the title truster holds the so-called internal ownership, or to pay the price for the disposal of such real estate to the title truster, such agreement shall be null and void in accordance with Article 4(1) of the Real Estate Real Name Act that stipulates that the title trust agreement is null and void. However, as seen earlier, if the title trustee agreed to transfer the real estate under title trust in lieu of the performance of the obligation to return the purchase fund under the premise that the title trustee completely acquired ownership, and the title trustee subsequently completed the registration of transfer of ownership in the future, the registration of transfer of ownership is based on the substitute benefit agreement, which is the cause for the transfer of new ownership, and thus, it is valid unless there are any special circumstances, such as where the invalid title trust agreement is merely a measure to supplement the original title trust real estate, which is the object of the payment of property, and it is not denied its validity

2. As indicated in its holding, the lower court: (a) concluded a contract title trust agreement with the Plaintiff and the Defendant, the title trustee, and concluded a sales contract on the land of six parcels including each of the instant real estate with the Nonparty, the seller; (b) the Plaintiff was provided with part of the purchase price from the Defendant and paid the Nonparty the purchase price under the Plaintiff’s name with the money borrowed from the financial institution as security; and (c) completed the registration of ownership transfer on each of the instant real estate in the name of the Plaintiff; (d) the Nonparty was unaware of the existence of a title trust agreement between the Plaintiff and the Defendant; and (d) thereafter, the instant transfer agreement was concluded between the Plaintiff and the Defendant to transfer the ownership of each of the instant real estate to the Defendant; and accordingly,

Furthermore, for the following reasons, the lower court accepted the Plaintiff’s claim seeking cancellation of the registration of transfer of ownership of each of the instant real estate. In other words, the Plaintiff, a title trustee, acquired the complete ownership of each of the instant real estate pursuant to Article 4(1) and (2) of the Real Estate Real Name Act, and thereafter, the Plaintiff concluded the instant transfer agreement, at the Defendant’s request, to which the Defendant would again register the ownership transfer of each of the instant real estate in the future. This is merely a promise to return the title trust real estate under the premise that the invalid title trust agreement is valid through the form of a new agreement, and thus, the registration of each

3. However, we cannot accept the above decision of the court below.

According to the reasoning of the judgment below and the records, the plaintiff and the defendant entered into a contract title trust agreement with the non-party who was unaware of the fact that the plaintiff was a purchaser and completed a contract of title trust, and completed each registration of ownership transfer under the name of the plaintiff. The plaintiff and the defendant concluded a transfer agreement between the plaintiff and the defendant to transfer each of the real estate of this case to the defendant as a title truster instead of performing the plaintiff's obligation to return unjust enrichment against the defendant, and pursuant to the transfer agreement of this case, the transfer registration of each of the real estate of this case was completed in the future of the defendant pursuant to the transfer agreement of this case (the above facts are acknowledged by the final judgment in the previous civil procedure where the plaintiff asserted that the plaintiff purchased each of the real estate of this case from the non-party and then again sold it to the defendant (

Therefore, in light of the legal principles as seen earlier, the instant transfer agreement is deemed to have been concluded by the Plaintiff and the Defendant in lieu of performing the duty to return unjust enrichment, such as the Plaintiff’s return of purchase funds, etc. upon the invalidity of the title trust agreement, and constitutes a new cause for transfer of ownership. It is not readily concluded that the lower court’s determination is that “the act of promising the return of title trust real estate itself on the premise that the null and void title trust agreement is valid.” Therefore, each transfer of ownership registration completed under the instant transfer agreement shall be deemed to have been effective

Meanwhile, Supreme Court Decision 2011Da103472 Decided March 14, 2013 cited by the lower court, etc. purporting that the agreement that the title trustee transfers the title of real estate to the title truster or to the person designated by the title truster on the premise that the title trust agreement is valid should also be deemed null and void, and the agreement that the title trustee should transfer the title of real estate to the title truster or to return the proceeds of the disposition to the title truster

Nevertheless, the lower court determined that each of the instant registrations of ownership transfer was invalid, solely based on its reasoning. The lower court erred by misapprehending the legal doctrine on Article 4(1) and (2) of the Real Estate Real Name Act, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

4. Therefore, without examining the remaining grounds of appeal, we reverse the judgment of the court below and remand the case to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)