Where a seizure registration is made by the disposition on default before the bankruptcy is declared, dividends may be received directly from the dividend court.

If the registration of attachment was made by the disposition on default before the bankruptcy is declared, the dividends can be received directly from the dividend court for the amount in arrears occurred after the registration of attachment.

Article 47 (Effect of Seizing Real Estate, etc.)

Suwon District Court Branch 2017-Gohap-8484 Objection to the distribution

Bankruptcy Debtor AA Limited Partnership ○ ○○○

Korea

15, 2018

2018.19

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff, including the part resulting from the supplementary participation.

Cheong-gu Office

Of the dividend table prepared by the above court on August 2, 2017, the amount of KRW 14,210,329,090 against the defendant among the dividend table prepared by the above court on August 2, 2017 shall be corrected to KRW 14,058,260 against the plaintiff, and KRW 504,058,260 against the plaintiff shall be corrected to KRW 14,714,450,350, respectively.

1. Basic facts

A. On August 26, 2010, the director of the ○○○ Tax Office under his jurisdiction (hereinafter referred to as the “Plaintiff”) did not pay 334,280,380 won earned income tax and 169,77,880 won of other income tax and 504,058,260 won (=34,280,380 won + 169,77,880 won + 169,77,80 won). On August 26, 2010, ○○○○○-dong ○○○○○ 1229,333,514.7 square meters of land and above-ground buildings (hereinafter referred to as “instant real property”) were seized pursuant to Article 24(1) of the National Tax Collection Act (hereinafter referred to as the “Seizure”).

B. On May 18, 2011, 201, ○○○○○, a general partner of the National Pension04-3 K&AC, the instant real estate, had commenced the auction procedure of real estate rental on an application for voluntary auction by the general partner of the Korea National Pension Fund 04-3 K&A, the corporate restructuring association, at around 2009.

C. Meanwhile, the JJ was ordered by the Seoul Central District Court on August 25, 2000 to commence rehabilitation procedures, but the rehabilitation procedures were abolished on November 24, 2010 and was declared bankrupt by the Seoul Central District Court on April 25, 2010, and the Defendant was appointed as the bankruptcy trustee.

D. On June 13, 201, the Plaintiff filed a claim for the delivery of KRW 14,317,649,540 in total amount of taxes in arrears by the JJ on June 13, 201, which was before the end of the period of demand for distribution during the said voluntary auction procedure. However, on August 22, 2017, the House Administrative Court prepared a distribution schedule stating that the remainder of taxes in arrears incurred after the instant seizure shall be distributed to the Plaintiff only the total amount of 504,058,260 won (= KRW 334,280,380 + KRW 169,77,80 + KRW 169,780) out of the proceeds from the sale of the instant real estate.

E. The Plaintiff appeared on the aforementioned date of distribution, and raised an objection against KRW 14,210,392,090 out of the Defendant’s dividend amount, and filed the instant lawsuit on August 29, 2017, which was seven days thereafter.

[Ground of recognition] Unsatisfy, Gap evidence Nos. 1 through 4 (including each number), the purport of the whole pleadings

2. Relevant statutes;

It is as shown in the attached Form.

3. The parties' arguments and issues

A. The plaintiff's assertion

1) According to Article 349(1) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”), where a tax claimant has collected delinquent taxes on the property that belongs to the bankrupt estate before the declaration of bankruptcy, the disposition may continue even after the declaration of bankruptcy, and may receive direct dividends even in the voluntary auction procedure commenced with respect to the property owned by the bankrupt.

2) On August 26, 200, prior to the declaration of bankruptcy against the JJ, the Plaintiff seized the instant real estate by a disposition on default. Pursuant to Article 47(2) of the National Tax Collection Act, the effect of the seizure extends not only to the amount of delinquent local taxes causing the seizure but also to the amount of delinquent local taxes for which the statutory due date has arrived after the registration of the seizure. Since the Plaintiff participated in the auction procedure after the seizure of this case and claimed the delivery of delinquent local taxes, the distribution schedule should be revised to the effect that the Plaintiff distributes dividends based on delinquent local taxes (i.e., 14,210,392,090 won (=14,714,450,350 won) - 504,058,260 won.

B. Defendant’s assertion

1) Pursuant to Article 349(1) of the Debtor Rehabilitation Act, any entitlement to direct dividends from the proceeds of sale shall be limited to the amount of delinquent local taxes causing seizure, and the amount of delinquent local taxes incurred after the registration of seizure does not constitute such amount.

2) The extension effect of seizure under Article 47(2) of the National Tax Collection Act is simply established for the convenience of the tax authority. It does not grant a special preferential effect to the delinquent amount that occurred after the registration of the seizure or excludes the provisions of other Acts and subordinate statutes. Therefore, the dividend based on the delinquent amount that occurred after the seizure of this case ought to be returned to the trustee in bankruptcy in principle under the Debtor Rehabilitation

C. Key issue of the instant case

The key issue of the instant case is: (a) in a case where a tax claimant claims a delivery of dividends based on the "amount of delinquent taxes incurred after the registration of the seizure, in addition to the amount of delinquent taxes caused by the seizure, after the seizure of property belonging to the bankrupt estate was made before the declaration of bankruptcy; (b) in a case where a tax claim is made based on a taxation claim, the other party to the delivery of dividends; (c) in a case where a tax claim is made based on a taxation claim, the other party to the payment of dividends; and (d) in a case where a tax claim is made based on the "amount of delinquent taxes incurred after the registration of the seizure" by participating in the voluntary auction procedure after the seizure of this case; and (c) in a case where a tax claimant requests a delivery of dividends based on "amount of delinquent taxes

4. Determination

(a) The other party to the delivery of dividends in cases of a request for delivery based on tax claims;

1) Relevant legal principles

The Debtor Rehabilitation and Bankruptcy Act grants a trustee in bankruptcy a right to manage and dispose of the bankrupt estate (Article 384 of the Debtor Rehabilitation Act) so that the trustee in bankruptcy can act as a central institution for the bankruptcy proceedings. In particular, with respect to the estate claims including a claim that can be collected pursuant to the National Tax Collection Act or the example of collection of national taxes (hereinafter referred to as "tax claims"), the trustee in bankruptcy shall, without resorting to the bankruptcy proceedings, reimburse the total amount of the above estate claims in preference to the general bankruptcy claims. When it becomes clear that the bankruptcy estate is insufficient to reimburse the total amount of the above estate claims, the repayment of each estate claims shall be distributed according to the ratio of the unpaid claim amount, regardless of the priority prescribed by the Acts and subordinate statutes (Articles 473, 475, 476, and 477 of the Debtor Rehabilitation Act). In certain cases, the tax claims shall be distributed equally to other estate claims, notwithstanding the priority prescribed by the Acts and subordinate statutes

In addition, in full view of the fact that a new disposition on default is not allowed due to a tax claim based on a tax claim after the declaration of bankruptcy (Article 349(2) of the Debtor Rehabilitation Act), etc., a claim filed by a tax authority in the auction procedure commenced by the exercise of the right to separation of real estate owned by the bankrupt shall be limited to the effect that the holder of the right to separate settlement shall prevent the holder of the right to separate settlement from obtaining the benefit which is more favorable than that prior to the bankruptcy due to the bankruptcy, and that such a claim shall be deducted from the amount of a claim which takes precedence over that of the right to separate settlement for the public interest of securing appropriate distribution resources. Therefore, the dividend following the request for delivery shall not be granted directly to the tax authority that is the creditor, but shall be granted to the trustee in bankruptcy so that the trustee in bankruptcy may repay the amount distributed to each estate creditor according to the procedure prescribed by the Debtor Rehabilitation Act (see

2) Determination

In light of the above legal principles, in cases where a claim for delivery is filed by a public health claimant or a tax claimant participating in the auction procedure commenced by the exercise of the right to separation, the dividend on the request for delivery shall, in principle, be delivered to the trustee in bankruptcy, not the tax authority, who is the tax claimant. However, Article 349(1) of the Debtor Rehabilitation Act permits the express exception in cases of "disposition for arrears" before the declaration of bankruptcy. As such, as in the instant case, even in cases where a tax claim holder claimed for delivery based on the delinquent amount that

B. Whether Article 349(1) of the Debtor Rehabilitation Act is applicable

1) Relevant legal principles

Article 349(1) of the Debtor Rehabilitation Act provides that "where a disposition on default is issued in accordance with the National Tax Collection Act or the practices of collecting a national tax with respect to property belonging to a bankrupt estate, the declaration of bankruptcy shall not obstruct the continuation of such disposition." This is specifically stipulated that a disposition on default prior to the declaration of bankruptcy may continue even after the declaration of bankruptcy. Therefore, in cases where the tax authority seizes real estate (including participation in attachment) following a disposition on default prior to the declaration of bankruptcy in accordance with the National Tax Collection Act or the practices of collecting a national tax, it is reasonable to interpret that the priority of the disposition on default shall be ensured that even if the delinquent taxpayer is declared bankrupt, the preferential nature of the disposition on default shall be ensured by continuing the disposition on default and acquiring dividends without resorting to bankruptcy procedures. Accordingly, in the real estate auction procedure as an exercise of right to separation, the proceeds may be directly distributed from the sale thereof, and the same shall also apply to cases where it becomes clear that the bankruptcy estate is insufficient to fully repay the total amount of the estate claims (see Supreme Court

2) Determination

In light of the following circumstances revealed by comprehensively taking account of the aforementioned legal principles and the relevant Acts and subordinate statutes including the Debtor Rehabilitation Act and the National Tax Collection Act, “disposition on default” under Article 349(1) of the Debtor Rehabilitation Act refers to a disposition on default upon agreement, and it is reasonable to deem that a request for delivery under the National Tax Collection Act does not constitute a disposition on default for which

① As a matter of principle, only a trustee in bankruptcy receives proceeds from the realization of a bankrupt estate, the Debtor Rehabilitation Act provides that only “the holder of the right to separate settlement under Articles 412 and 349(1) of the Debtor Rehabilitation Act and only a tax creditor who has collected delinquent dispositions prior to the declaration of bankruptcy may receive proceeds directly.” The legislative intent of the Debtor Rehabilitation Act and the exceptions to Article 349(1) of the Debtor Rehabilitation Act, i.e., the right to manage and dispose of the bankruptcy estate, to be entrusted to the trustee in bankruptcy in a fair and reasonable manner, should be strictly construed as the requirements under Article 349(1

② If a taxpayer fails to fully pay taxes by the due date of payment, the procedure for promoting the compulsory realization of tax claims from the taxpayer’s property shall be taken to collect delinquent taxes, request for delivery, and participation in the attachment thereof shall be divided. The former means that the tax authority seizes the taxpayer’s property by itself, thereby carrying out a series of procedures, such as the realization of attached property and appropriation of proceeds from the realization of real estate. A request for delivery is a claim for distribution of delinquent taxes by taking part in the compulsory refund procedure already carried out by the tax authority, and is in the same nature as the demand for distribution, in compulsory execution (see Supreme Court Decision 91Da4834, Apr. 28, 192).

On the other hand, in cases where the tax authority simply requested a delivery in the compulsory refund procedure commenced before the declaration of bankruptcy without attaching the properties of the delinquent taxpayer, the delivery of dividends on the request for delivery to the trustee in bankruptcy is as seen earlier. If so, it is reasonable to interpret that the case of "disposition on default that recognizes the preferential repayment in Article 349(1) of the Debtor Rehabilitation Act" means a disposition on default excluding the request for delivery under the National Tax Collection Act

③ Article 349(2) of the National Tax Collection Act provides that a disposition for arrears based on a tax claim cannot be made after a declaration of bankruptcy is declared. However, the tax authority may, even after the declaration of bankruptcy, not directly proceed to the realization of the attached property, and it is always possible for the tax authority to request a delivery of the amount of delinquent taxes by taking advantage of the forced refund procedure already commenced. Therefore, there is no doubt to interpret the above provision as the disposition for arrears as the disposition for arrears under Article 349(1) of the National Tax Collection Act, which means a disposition for arrears. Thus, the interpretation of the disposition for arrears

④ Meanwhile, in light of its prior meaning, it is natural to view that the tax authority continues to proceed with a series of procedures, i.e., the realization and the appropriation of proceeds from realizing the delinquent’s property by seizing the delinquent’s property. As a result, the amount seized by a disposition on default is allowed to be repaid in preference to other estate claims even after the declaration of bankruptcy. As such, the tax authority may receive direct dividends from the proceeds from the auction procedure commenced through the execution of the right to foreclose outside bankruptcy. On the other hand, a request for delivery refers to a single act that the tax authority requests another executive agency to provide the amount equivalent to the amount of delinquent taxes, and thus does not change the concept of continuation of seizure

⑤ As seen above, permitting the continuation of the procedure even after the declaration of bankruptcy in the case of a disposition on default commenced before the declaration of bankruptcy is exceptionally made by the tax authorities, because it is not desirable for the tax authorities to make the time, expenses, effort, etc., of which the taxpayer is the subject of the disposition prior to the declaration of bankruptcy. On the other hand, the claim for delivery is intended to obtain the satisfaction of the tax claim by participating in the compulsory refund procedure commenced by another enforcement agency and obtaining the satisfaction of the tax claim according to a simplified procedure, and is not the same as the seizure and nature

Such point is that a tax claimant did not immediately proceed with the disposition on default after the seizure of real estate held by the delinquent taxpayer. However, the same shall apply to cases where a person declared bankrupt of the delinquent taxpayer claims the delivery of all delinquent taxes incurred after the registration of the seizure. It cannot be deemed that there was a disposition on default under Article 349(1) of the Debtor Rehabilitation Act, which is an exception to taxation claims specially provided for in tax claims. Furthermore, as examined in the above, it cannot be deemed that there is a ground to protect the same extent as the above request for delivery even under the interpretation of Article 47(2) of the National Tax Collection Act. Thus, it is reasonable to deem that Article 349(1) of the Debtor Rehabilitation Act is not applicable to a request for delivery of delinquent taxes arising after the registration of

(c) The meaning that the expansion and effect of seizure under Article 47(2) of the National Tax Collection Act has in bankruptcy proceedings;

1) Relevant legal principles

Article 47 (2) of the National Tax Collection Act provides that the effect of the seizure of real estate, etc. conducted by the head of a tax office shall also extend to the delinquent amount of national taxes for which the statutory due date has arrived at before the ownership of the relevant attached property is transferred pursuant to Article 35 (1) of the Framework Act on National Taxes. The purport of the above provision is to register the seizure once again, and if the seizure is completed, it is merely effective as a matter of course without the need to obtain a new registration of seizure, and it does not include a special priority of national tax claims arising after the seizure (see, e.g., Supreme Court Decision 2003Du6115, Nov. 12, 2004). The purport of the above provision is not to recognize the validity of the request for delivery of all delinquent

Therefore, if a separate request for delivery or a document evidencing the amount of tax is not submitted by the date of sale after the completion of the registration of seizure due to the disposition on default of national taxes, the amount of tax in arrears recognized by the registration request on the execution record shall be distributed to the members of the competent administrative court. However, if the amount of dividend exceeds the actual amount in arrears as at the time of seizure of the tax claim which was the cause of seizure disposition, the amount in excess shall be the object of a distribution by the junior distribution authority. In such cases, even if other tax claims having the effect of seizure due to the disposition on default exist, unless a separate request for delivery exists by the completion date of the request for distribution, the amount in excess shall not be distributed in preference to the junior distribution authority (see, e.g., Supreme Court Decision 2011Da4160

2) Determination

A) On August 26, 2010, the Plaintiff seized the instant real estate owned by JJ under the National Tax Collection Act, and thereafter, upon the commencement of the voluntary auction procedure for the instant real estate, the Plaintiff filed a claim for delivery on the basis of the amount of delinquent taxes that occurred after the instant seizure. According to the foregoing findings, the effect of the instant seizure extends to the amount of delinquent taxes that occurred after the relevant seizure was registered pursuant to Article 47(2) of the National Tax Collection Act.

B) However, in light of the following circumstances revealed by comprehensively taking account of the aforementioned legal principles, it is reasonable to view that even if the effect of the instant seizure is limited to the delinquent amount that occurred after the registration of the seizure, the dividends on the delinquent amount can only be distributed pursuant to the principles prescribed in the Debtor Rehabilitation Act within the bankruptcy procedure, and that the Plaintiff, a tax claimant, cannot receive the dividends directly in the course of voluntary auction.

① The Debtor Rehabilitation Act provides for a tax claim to be a bankruptcy claim due to a declaration of bankruptcy (Article 473 subparag. 2 of the Debtor Rehabilitation Act); instead of allowing the continuation of a disposition on default prior to the declaration of bankruptcy (Article 349(1)); and subsequently making a new disposition on default after the declaration of bankruptcy impossible after the declaration of bankruptcy (Article 349(2)). The purport of the same ought to be deemed to be that a disposition on default is not to protect a tax claim more than the protection of an estate claim after the declaration of bankruptcy, unless the seizure was made as a disposition on default prior to the declaration of bankruptcy.

(2) Meanwhile, in light of the legal principles seen earlier, even if the effect of a tax claim owner’s seizure is not effective until the delinquent amount that occurred after the registration of the seizure under Article 47(2) of the National Tax Collection Act, a special preferential effect is not granted to the tax claim that occurred after the registration of the seizure. Therefore, in the case of delinquent amount that occurred after the registration of the seizure, a claim for delivery by the tax claim owner cannot be deemed a disposition for arrears for which a preferential repayment is recognized under Article 349(1) of the Debtor Rehabilitation Act, if the delinquent taxpayer is declared bankrupt, the claim for delivery by the tax claim owner cannot be deemed a disposition for arrears

③ In other words, the purport of Article 47(2) of the National Tax Collection Act is to prescribe the scope of the effect of the seizure in cases where the real estate seized by the disposition on default is transferred as the “legal deadline by which the transferee can objectively ascertain the amount in arrears,” thereby regulating the benefits of securing tax claims and protecting transaction order. In addition, there is no ground to interpret that the status takes precedence over other estate claims in bankruptcy proceedings (in particular, tax claims arising after the registration of seizure) is recognized. On the contrary, if a tax claimant claims the effect of seizure and directly receives the proceeds from the sale after the declaration of bankruptcy for all the amount in arrears arising from the disposition on default, it would go against the basic principles of bankruptcy proceedings as seen earlier

D. Sub-committee

A claim filed by the Plaintiff based on the delinquent amount that occurred after the seizure of the instant case cannot be deemed as a "disposition on default, for which preferential payment right is recognized even after the declaration of bankruptcy pursuant to Article 349(1) of the Debtor Rehabilitation Act. Therefore, the Plaintiff cannot receive dividends from the said delinquent amount directly during the voluntary auction procedure, and the dividends should be distributed to the Defendant, the bankruptcy trustee,

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.