Requirements for taxpayer's property disposal act to constitute fraudulent act and the time of determining

Article 406 of the Civil Act provides that “a fraudulent act” subject to the obligee’s right of revocation of a fraudulent act refers to an act that causes damage to the obligee by causing the obligor to go beyond his/her obligation by reducing active property or increasing his/her negative property, or by deepening that the obligor has already been in excess of his/her obligation. In addition, in a lawsuit for revocation of a fraudulent act, whether the obligor is in excess of his/her obligation should be determined at the time of the fraudulent act. In addition, even in a lawsuit for revocation of a fraudulent act as provided by Article 30 of the National Tax Collection Act, it is clear that the lawsuit for revocation of a fraudulent act is a kind of lawsuit for revocation of a fraudulent act as provided by Article 406 of the Civil Act, and the provisions of the Civil Act regarding the requirements or exercise are applied mutatis mutandis. Therefore, in order for

Article 30 of the National Tax Collection Act, Article 406 of the Civil Act

Supreme Court Decision 2010Da64792 Decided January 12, 2012 (Gong2012Sang, 253) Supreme Court Decision 2012Da11834 Decided April 26, 2013 (Gong2013Sang, 939)

Korea

Defendant (Law Firm Yang LLC, Attorneys Lee Han-young et al., Counsel for defendant-appellant)

Daejeon High Court Decision 2015Na10972 decided November 20, 2015

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

The grounds of appeal are examined.

1. “Fraud act” subject to the obligee’s right of revocation under Article 406 of the Civil Act refers to an act that causes damage to the obligee by causing the obligor’s excessive state of debt or deepening the obligor’s excessive state of debt by reducing active property or increasing small property. Moreover, whether the obligor is in excess of debt should be determined at the time of the fraudulent act (see, e.g., Supreme Court Decisions 2010Da64792, Jan. 12, 2012; 2012Da118334, Apr. 26, 2013).

The provisions of the Civil Act concerning the requirements or exercise of a fraudulent act under Article 306 of the National Tax Collection Act are clearly applicable mutatis mutandis to a lawsuit for revocation of a fraudulent act under Article 406 of the Civil Act. Thus, in order for a taxpayer to constitute a fraudulent act, the taxpayer’s act of disposal of property should either be in excess of his/her obligation or in excess of his/her obligation due to such disposal act, and it should be determined at the time of such disposal act.

2. On the grounds indicated in its reasoning, the lower court rejected the Plaintiff’s assertion that, on May 24, 2012, the act of donation constitutes a fraudulent act detrimental to the Nonparty’s tax claim against the Nonparty, deeming that the Nonparty’s active property at the time of donation of KRW 900 million to the Defendant was omitted in excess of his/her obligation as a gift exceeding his/her negative property.

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and records, the lower court’s aforementioned determination is justifiable. In so determining, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on whether a fraudulent act was committed in a claim for revocation of a fraudulent act based on a taxation

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 Jo Hee-de (Presiding Justice)