[1] The purport of Article 36 (1) of the Trust Act and whether the case where the beneficiary's interest is infringed or threatened to be infringed upon as a result of the management of the trust property in violation of the management method established by the trustee constitutes "unforeseeable special circumstances" (negative)

[2] In case where the court changes the method of trust property management pursuant to Article 36(1) of the Trust Act, whether the truster may exercise the right to dispose of and manage the trust property jointly or the trustee may not dispose and manage it independently (negative)

[1] Article 36(1) of the Trust Act provides that when the management method of trust property becomes unsuitable for the interests of the beneficiary due to special circumstances unexpected at the time of the trust act, the truster, his heir, beneficiary, or trustee may file a claim for the change thereof with the court. In such a case, if there is such change of circumstances, recognizing the binding force of the original management method according to the original management method would be contrary to the good faith and the principle of fairness, thereby recognizing the change of the management method through a court judgment. Thus, not the prescribed management method itself is inappropriate, but it is merely a case where the beneficiary's interest is infringed or is likely to be infringed upon as a result of the trustee's management in violation of the management method determined by the trustee's

[2] The modification of the method of management under Article 36(1) of the Trust Act cannot be made against the purport of the Trust Act or the essence of the trust. The trust under the Trust Act is against the purport of the Trust Act or the intrinsic nature of the trust, and the truster transfers a specific property right to the trustee to manage and dispose of such property right for the purpose of the trust (Article 1(2) of the Trust Act). As the validity of the trust is that the trustee has the right to manage the trust property domestically and externally as the trustee transfers the ownership of the trust property to the trustee. However, the trustee merely bears the restriction on the management of the trust property as stipulated in the trust contract within the scope of the purpose of the trust. As such, the trustee has an exclusive right to dispose of and manage the trust property. The truster jointly exercises the right to dispose of and manage the trust property or imposes a substantial restriction on the truster so that it is impossible for the trustee to dispose of and manage the trust property independently.

[1] Article 36 (1) of the Trust Act / [2] Articles 1 (2) and 36 (1) of the Trust Act

[2] Supreme Court Decision 2000Da70460 decided Apr. 12, 2002 (Gong2002Sang, 1114)

Korean Real Estate Trust Corporation

East Asia Construction Industry Corporation

Seoul High Court Order 99Ra377 dated March 31, 200

The order of the court below is reversed and the decision of the first instance is revoked. The application of this case is dismissed.

1. On Nov. 5, 1997, the court below held 38 m27 m2 with the respondent's land in the name of the applicant's land and entrusted 185,056 m2 to the respondent, and the respondent concluded a so-called "land trust contract" with the respondent's 29 m29 m29 m2 with the proceeds from the sale of apartment units and the remainder after deducting taxes, construction costs, borrowings, and other expenses and trust fees from the proceeds from the sale of apartment units from the contract to the applicant. The respondent received the down payment and intermediate payment from the Respondent, the Respondent should first appropriate funds for the payment of the construction cost and trust fees and redemption of the borrowed money under Article 16 of the trust contract, and the Respondent's 270 m280 m270 m287 m2700 m2700 m2700 m2787 m2700 m2700 m2708 m27

2. However, we cannot accept the judgment of the court below for the following reasons.

A. Article 36(1) of the Trust Act provides that when the management method of the trust property becomes unsuitable for the interests of the beneficiary due to special circumstances unexpected at the time of the trust act, the truster, his heir, beneficiary, or trustee may file a claim with the court for the change thereof. In such a case, if there is such change of circumstances, recognizing the binding force of the original management method according to the original management method would be contrary to the good faith and the principle of fairness, thereby recognizing the change of the management method by a court judgment. Thus, not the prescribed management method itself is inappropriate, but it is merely a case where the beneficiary’s interest is infringed or is likely to be infringed as a result of the trustee’s management in violation of the management method determined by the trustee, it cannot

In addition, even where the method of management is changed under the above provision, it cannot be changed contrary to the purport of the Trust Act or the essence of the trust. The trust under the Trust Act provides that the truster shall jointly exercise the right of disposal and management of a specific property to the trustee or make a trustee manage and dispose of the property for the purpose of the trust (Article 1(2) of the Trust Act). As the validity of the trust is that the trustee has the right to manage the trust property within and outside the country as a result of the transfer of the ownership of the trust property to the trustee. However, the trustee merely bears the restriction on the management of the trust property within the scope of the purpose of the trust (Supreme Court Decision 2000Da70460 Decided April 12, 202). It is against the purport of the Trust Act or the purpose of the trust.

B. However, the court below held that the trustee's use of the apartment sales revenue in preference to the payment of apartment construction price or the redemption of bank loans under Article 16 (Management Method of Funds on Trust Property) of the Trust Contract in accordance with Article 16 (Management Method of Trust Property) of the Trust Contract of this case, which resulted in the reduction of trust property or in danger thereof by making loan to other trust business and making non-performing loans constitutes an unexpected special circumstance for the truster. However, the method of operating the funds under Article 16 of the Trust Contract of this case does not themselves become inappropriate for the beneficiary's interest, but merely because the trustee's management method in violation of the Trust Contract of this case does not cause the risk of causing damage to the truster as a result of the trustee's operation of the funds in violation of the method of operating the funds under the Trust Contract of this case

C. In addition, according to the records, the applicant made an application for changing the trust-related deposit account of this case managed by the respondent to the truster's name as the truster because the respondent arbitrarily lent apartment sale proceeds to other trust businesses in violation of Article 16 of the trust contract, and thus, the applicant made an application for changing the trust-related deposit account of this case managed by the respondent to the truster's name. Accordingly, the court below changed the management method that the respondent should obtain prior consent to the withdrawal and disbursement of the deposit in the name of the respondent but the truster should jointly exercise the trustee's right to manage and dispose of the trust property or to impose restrictions on the truster's prior consent to the trustee's exercise of the trustee's right to manage and dispose of the trust property is contrary to the purport of the Trust Act

D. Nevertheless, the court below partially accepted the applicant's application of this case for reasons as stated in its reasoning. In so doing, it erred by misunderstanding the legal principles on Article 36 (1) of the Trust Act and affecting the decision. The ground of reappeal pointing this out is with merit.

3. Therefore, the order of the court below is reversed without a need to determine the remainder of the grounds for reappeal, and the Supreme Court is decided to render a self-determination as to this case, and the application of this case by the applicant is dismissed as it is without merit. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Ji-dam (Presiding Justice)