[1] In a case where a title truster and a title trustee entered into a so-called “title trust agreement,” and the title trustee was not aware of the existence of a title trust agreement, and completed the registration of ownership transfer under the name of the title trustee of real estate, whether such agreement constitutes the subject of penalty surcharges under Article 5(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name

[2] The meaning of "the time when the title trust relationship is terminated" under the proviso of Article 5 (2) of the Act on the Registration of Real Estate under Actual Titleholder's Name

[1] In light of the contents and structure of the relevant statutes, including Articles 3(1), 5(1) and (3), and 6(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), in principle, where a real right to real estate is registered in the name of a title trustee under a title trust agreement, a penalty surcharge shall be imposed on the title truster. Thus, in cases where the title truster and the title trustee entered into a contract under a title trust agreement with the owner who was unaware of the fact that the title trustee was a party to the contract and completed the registration of ownership transfer of the pertinent real estate in the name of the trustee pursuant to the sales contract after entering into a contract on real estate under a title trust agreement with the owner who was unaware of the fact that the title trustee was a party to the contract and completed the registration of ownership transfer of the pertinent real estate pursuant to the said

[2] Article 5 (2) (proviso) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”) provides that “the time of termination of a title trust relationship” shall be deemed as the time when the title truster and the title trustee cancel the title trust, rather than the time when the title trust relationship is externally terminated, and the real right to real estate is not required to do so at the time when the violation of the Real Estate Real Name Act is terminated, or the real right to real estate is transferred from the title trustee pursuant to the provisions of public collection, judgment, auction or any other Act, or the title truster directly transfers the registration to the person who acquired the real estate through a disposal act, transfers the registration to the head of Si/Gun/Gu having jurisdiction over the location of the relevant real estate, or entrusts the Korea Asset Management Corporation with the sale of the real estate. The title truster cannot be said to have terminated the title trust relationship under the Real Estate Real Name Act merely because he/she filed a lawsuit against the title trustee on the ground of termination of the title trust, or a favorable judgment in the lawsuit becomes final.

[1] Articles 3(1), 5(1) and (3), and 6(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name / [2] Article 5(2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name

[1] Supreme Court Decision 2007Du21563 Decided January 17, 2008 (Gong2008Sang, 239) Supreme Court Decision 2007Da90432 Decided October 14, 2010 (Gong2010Ha, 2062)

Plaintiff 1 and one other (Attorneys Park Ho-ho et al., Counsel for the plaintiff-appellant)

The head of Gangnam-gu Seoul Metropolitan Government (Attorney Lee Sung-soo)

Seoul High Court Decision 2011Nu15956 decided October 6, 2011

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

In a case where several persons jointly purchase real estate, the legal relationship between the buyers is merely a co-ownership, and the seller bears the obligation to transfer the ownership of the share to the buyer. There may also be cases where the seller bears the obligation to transfer the ownership in the partnership with the buyer's partners. However, if the buyer acquired the ownership of the real estate as the partnership's property for the purpose of running a joint business through mutual investment, the partnership's property naturally becomes a combination of the partnership's property pursuant to Article 271 (1) of the Civil Act. However, if the partnership acquired the ownership of the real estate under one partner's name without making a joint ownership registration, it shall be deemed that the partnership held the title in trust to the partner (see, e.g., Supreme Court Decisions 94Da54894, Sept. 15, 1995; 2003Da252566, Apr. 13, 2006).

The court below acknowledged the facts based on the employment evidence, and held that the plaintiffs and the non-party acquired the actual ownership of each share of the previous apartment or new apartment or new apartment or new apartment or the non-party under a title trust with the plaintiff 1 and the non-party 2 as to the new apartment or new apartment because only the registration of ownership transfer or preservation is completed in the name of the plaintiff 2 and the non-party 1's sole name. In light of the above legal principles and records, the judgment below is just, and contrary to the allegations in the grounds of appeal, there are no errors in the misapprehension of legal principles as to the title trust and the freedom of contract principle, any errors in the misapprehension of legal principles as to the title trust and the freedom of contract principle, any violation of the rules of evidence.

2. Regarding ground of appeal No. 2

A. In light of the contents and structure of relevant Acts and subordinate statutes, such as Articles 3(1), 5(1) and (3), and 6(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), in principle, where a real right to real estate is registered in the name of a title trustee under a title trust agreement, a penalty surcharge shall be imposed on the title truster. Thus, in cases where the title truster and the title trustee entered into a contract for title trust with the owner who was unaware of the fact that the title trustee was a party to the contract and completed the registration of ownership transfer of the pertinent real estate in the name of the trustee pursuant to the contract for title trust, even if the title trustee fully acquired ownership of the relevant real estate pursuant to the proviso to Article 4(2) of the Real Estate Real Name Act, the penalty surcharge is imposed under Article 5(1) of the Real Estate Real Name Act.

Meanwhile, “the time when the title trust relationship is terminated” under the proviso of Article 5(2) of the Real Estate Real Name Act is not simply the time when the title truster and the title trustee terminate the title trust within the country, but externally, it is difficult to deem that the real right to real estate is transferred from the title trustee under the provisions of public collection, judgment, auction or any other Act, or that the title truster has made a sale or other disposal of the real right to real estate, and that the title truster directly transfers the registration to the person who acquired the real estate due to such disposal, entrusts the sale or request the Korea Asset Management Corporation to obtain the ownership under the Real Estate Real Name Act (see Supreme Court Decision 2007Du21563, Jan. 17, 2008; Supreme Court Decision 2001Du14040, Apr. 20, 2007). The title trustee cannot be readily concluded to have completed the title trust relationship under the Real Estate Real Name Act (see Supreme Court Decision 2007Du21563, Jan. 17, 2008).

In the same purport, the court below held that the disposition of the penalty surcharge in this case is unlawful on the grounds that in the case of a contract title trust, the seller’s bona fide seller’s title trust cannot exist at the time when the title trust relationship is registered under the name of the title trustee, and thus, it cannot be deemed that the registration under the name of the title trustee is valid in the contract title trust, even if the title truster violated Article 3(1) of the Real Estate Real Name Act, which is subject to the penalty surcharge, and the period of registration under the name of the title trustee as of the date of imposition of the penalty surcharge falls under “the period of violation of Article 3” under Article 5(3) of the Real Estate Real Name Act, and in the case of the previous apartment, the status of Plaintiff 2’s member with respect to the share of the site from October 1, 2002 to September 28, 2005, which was transferred to Plaintiff 1, and it did not err by misapprehending the legal principles as to the title trust agreement under Article 5(3) of the Real Estate Real Name Act.

B. Meanwhile, the exclusion period of the imposition of the penalty surcharge under Article 5 (1) of the Real Estate Real Name Act is five years, and the initial date is the time when the registration of title trust was cancelled (see, e.g., Supreme Court Decisions 2004Du2509, Jul. 22, 2004; 2004Du2776, Jan. 13, 2006). According to the records, the title trust relationship between Plaintiff 1, Nonparty, and Plaintiff 2 with respect to the previous apartment was terminated on September 28, 2005, and the disposition was lawful since the Defendant imposed the penalty surcharge of this case on July 6, 2010, which was five years thereafter.

The judgment of the court below to the same purport is just, and there is no violation of law as alleged in the grounds of appeal.

3. As to the third ground for appeal

The court below acknowledged the facts as stated in its reasoning based on the evidence of employment, and determined that the defendant's disposition on July 6, 2009, which was the time when the defendant notified the plaintiffs of the violation of Article 3 (1) of the Real Estate Real Name Act, which was the time when he notified the plaintiffs of the contents of the disposition prior to the administrative disposition. Rather, it is reasonable to conclude that the plaintiffs confirmed the violation of the Real Estate Real Name Act by the plaintiffs on July 2, 2010, which was the time when the plaintiffs submitted opinions. Meanwhile, under Article 5 (2) of the Real Estate Real Name Act, the real estate price which was the object of the title trust is stipulated to be based on the value as of the date when the penalty surcharge is imposed, unless the defendant confirmed that the real estate price which was the object of the title trust was based on the value as of the date when the penalty surcharge is imposed, not on January 1, 2009, which was the basis of the newly constructed apartment on July 6, 2010.

In light of the relevant legal principles and records, such judgment of the court below is just, and contrary to the allegations in the grounds of appeal, there are no errors in the misapprehension of legal principles and rules of evidence.

4. Conclusion

Therefore, all appeals are 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 Lee In-bok (Presiding Justice)