Whether the refund claims that can be collected pursuant to Article 33 of the former Subsidy Management Act and Article 17-2 of the former Local Finance Act are estate claims under Article 473 subparagraph 2 of the Debtor Rehabilitation and Bankruptcy Act (negative)

In addition to the following circumstances in light of Article 33(2) of the former Subsidy Management Act (amended by Act No. 13931, Jan. 28, 2016; hereinafter “former Subsidy Management Act”), Article 33-3(2) of the Act on the Management of Subsidies amended by Act No. 13931, Jan. 28, 2016; Article 7 of the Addenda (amended by Act No. 12687, Jan. 28, 2016); Article 17-2(4) of the former Local Finance Act (amended by Act No. 12687, May 28, 2014; hereinafter “former Local Finance Act”)’s text, purport, and amendment history, the amount of refund under Article 33(2) of the former Subsidy Management Act; Article 17-2(4) of the former Local Finance Act is more than the amount of public charges collected; and further, it cannot be deemed that the priority order is more than the amount of other claims determined.

Public charges refer to claims that can be collected in the same manner as delinquent taxes are collected under the National Tax Collection Act, excluding national taxes, customs, provisional import surtax, local taxes, and additional charges and disposition fees for arrears related thereto (Article 2 subparagraph 8 of the Framework Act on National Taxes).

The main text of Article 35(1) of the Framework Act on National Taxes and the main text of Article 71(1) of the Framework Act on Local Taxes provide for the priority order of collection of national taxes, local taxes, additional dues, and expenses for disposition on default, and provide that priority shall be given to “other public charges”

On the other hand, a claim that can be collected according to the example of the disposition on default under the National Tax Collection Act is recognized as the right of self-execution in the collection procedure. Therefore, a separate provision should be provided in order to recognize a priority of other public charges as well as other bonds.

Therefore, Article 33 of the former Subsidy Act and Article 17-2 of the former Local Finance Act do not constitute “a claim that can be collected according to the example of collecting national taxes and that takes precedence over the general bankruptcy claims” under Article 473 subparag. 2 of the Debtor Rehabilitation and Bankruptcy Act, and thus, such claims cannot be deemed as estate claims.

Article 473 subparag. 2 of the Debtor Rehabilitation and Bankruptcy Act; Article 33 of the former Subsidy Management Act (Amended by Act No. 13931, Jan. 28, 2016); Article 33-3 of the Subsidy Management Act; Article 7 of the Addenda (Amended by Act No. 12687, Jan. 28, 2016); Article 17-2 of the former Local Finance Act (Amended by Act No. 12687, May 28, 2014); Article 2 subparag. 8 and Article 35 (1) of the Framework Act on National Taxes; Article 71 (1) of the Framework Act on Local Taxes

Seoul Guarantee Insurance Co., Ltd. (Attorney Ba-soo et al., Counsel for the defendant-appellant)

Defendant (LLC & Yang LLC, Attorneys Lee Han-hoon et al., Counsel for the defendant-appellant in bankruptcy)

Seoul High Court Decision 2016Na2068459 decided June 8, 2017

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

The grounds of appeal are examined.

1. (a) According to Article 31(1) of the Subsidy Management Act (hereinafter “Subsidy Act”), when the head of a central government agency revokes the decision to grant a subsidy, the head of a central government agency should order the return of the subsidy corresponding to the revoked portion of the subsidy and the interest accrued therefrom within a specified period, if the subsidy has already been granted with respect to the subsidy program in the revoked portion.

Article 33(2) of the previous Subsidy Act (amended by Act No. 13931, Jan. 28, 2016; hereinafter “former Subsidy Act”) provides that “The collection of such refund shall take precedence over other public charges, except national and local taxes.”

In contrast, Article 33-3(2) of the Subsidy Act (amended by Act No. 13931, Jan. 28, 2016; hereinafter “the amended Act”) provides that “the collection of such refund shall take precedence over other public charges or other claims, excluding national taxes and local taxes.” Moreover, Article 7 of the Addenda (amended by January 28, 2016; hereinafter the same) provides that “the priority order between refund under Article 33-3(2) and other claims shall apply from the claims arising after the enforcement of this Act.”

Meanwhile, Article 17-2(4) of the former Local Finance Act (amended by Act No. 12687, May 28, 2014; hereinafter “former Local Finance Act”) provides for the priority of collection of refunds following the cancellation of the decision to grant subsidies from the head of a local government as stipulated in Article 33(2) of the former Subsidy Act.

B. In addition to the following circumstances in light of Article 33(2) of the former Subsidy Act, Article 33(2) of the amended Act, Article 7 of the Addenda, and Article 17-2(4) of the former Local Finance Act’s text, purport, and amendment history, it cannot be deemed that Article 33(2) of the former Subsidy Act, and Article 17-2(4) of the former Local Finance Act provide that a refund is in a priority order in collection than that of other public charges, and that there is no provision that a refund is in a priority order in collection rather than that of other public charges.

(1) The term “public charges” means claims that can be collected pursuant to the disposition for arrears under the National Tax Collection Act, excluding national taxes, customs, provisional import surtax, local taxes, and additional charges and disposition fees for arrears related thereto (Article 2 subparag. 8 of the Framework Act on National Taxes)

(2) The main text of Article 35(1) of the Framework Act on National Taxes and the main text of Article 71(1) of the Framework Act on Local Taxes provide for the priority order of collection of national taxes, local taxes, additional dues, and expenses for disposition on default, and stipulate that priority shall be given not only to other public charges but

(3) On the other hand, a claim that can be collected according to the example of the disposition on default under the National Tax Collection Act is recognized as having the right of self-performance in the collection procedure. Therefore, a separate and explicit provision must be required to recognize a priority of “other public charges” as well as “other claims.”

C. Therefore, a claim for refund that can be collected pursuant to Article 33 of the former Subsidy Act and Article 17-2 of the former Local Finance Act does not constitute “a claim that can be collected according to the example of collecting a national tax and that takes priority over the general bankruptcy claim” under Article 473-2 of the Debtor Rehabilitation and Bankruptcy Act, and thus, it cannot be deemed an estate claim.

2. In full view of the adopted evidence, the lower court determined as follows, after recognizing the facts as indicated in its reasoning.

A. The Minister of Knowledge Economy (referring to the change of the name to the Minister of Trade, Industry and Energy) granted subsidies to Jeju Special Self-Governing Province in accordance with the “Standards for State Financial Support for the Inducement of Local Investment Enterprises by Local Governments.” From August 31, 2012 to January 10, 2013, Jeju Special Self-Governing Province granted the position subsidy, etc. (hereinafter “the Jeju Special Self-Governing Province”) pursuant to the “Ordinance on the Management of Jeju Special Self-Governing Province Subsidies” as part of the financial resources. Of the Jeju Special Self-Governing Province subsidies prior to the Jeju Special Self-Governing Province, the portion of the national subsidy prior to the Jeju Special Self-Governing Province constitutes indirect subsidies as prescribed in Article 2 subparag. 4 of the Subsidy Act

B. The Ministry of Employment and Labor determines “child care center support” as one of the government subsidy projects. The Korea Workers’ Compensation and Welfare Service, which is an entrusted institution of the Ministry of Employment and Labor, paid subsidies for the installation of child care centers in Ma Newel (hereinafter “instant subsidies”). The subsidies for the establishment of child care centers in this case shall be governed by the Subsidy Act with the subsidies granted by the State.

C. Article 473 Subparag. 2 of the Debtor Rehabilitation Act provides that, among claims to be collected according to the example of collecting a national tax, the priority order in collection takes precedence over the general bankruptcy claims. However, according to Article 33 of the former Subsidy Act, claims to be refunded are claims that can be collected according to the example of collecting a national tax, and the priority order in collection takes precedence over other public charges except national taxes or local taxes, but the literal interpretation cannot be interpreted to take precedence over general claims.

D. Considering that Article 7 of the Addenda to the amended Act limited the application of Article 33-3(2) of the amended Act after the enforcement of the amended Act, it is reasonable to view that the above amended provision aims to supplement the deficiencies of the previous provision, rather than simply confirming that the refund had priority over general claims, as alleged by the Plaintiff.

E. Therefore, the claims for refund following the revocation of the decision to grant subsidies to the Jeju-do Governor and the establishment of child care centers do not constitute estate claims under Article 473 Subparag. 2 of the Debtor Rehabilitation Act.

3. Examining the reasoning of the lower judgment in light of the evidence duly admitted, the lower court’s determination is justifiable based on the aforementioned legal doctrine. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine as to the scope of application and interpretation of Article 473 subparag. 2 of the Debtor Rehabilitation Act, or by misapprehending the legal doctrine as to the application and interpretation of Article 33(2) of the former Subsidy Act [However, according to Articles 44(1) main sentence and 34(2) subparag. 1(f) of the former Special Act on Balanced National Development (amended by Act No. 13931, Jan. 28, 2016), Article 33 of the former Subsidy Act (amended by Act No. 13931, Jan. 28, 2016) with respect to the Jeju subsidy, which is a subsidy for a local government’s subsidized project, the lower court’s claim to return the subsidy did not constitute estate claim under Article 33 subparag. 2 of the former Subsidy Act.

4. 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 Kim So-young (Presiding Justice)