Seosan Welfare Foundation (Law Firm Head, Attorneys Park Jae-hwan, Counsel for the plaintiff-appellant)

The State Market

February 25, 2010

Gwangju District Court Decision 2009Guhap2429 Decided October 1, 2009

1. All appeals filed by the plaintiff and the defendant are dismissed.

2. The costs of appeal shall be borne by each party.

1. Purport of claim

The Defendant’s imposition of penalty surcharge of KRW 42,948,00 against the Plaintiff on March 19, 200 shall be revoked.

2. Purport of appeal

Of the judgment of the court of first instance, the part against the plaintiff shall be revoked. The defendant's disposition of imposition of penalty surcharge of KRW 42,948,000 against the plaintiff on March 19, 200 shall be revoked in the amount of KRW 21,474,00.

Defendant: The part against Defendant in the judgment of the first instance court shall be revoked, and the Plaintiff’s claim corresponding to the above revocation shall be dismissed.

1. Details of the disposition;

A. The Plaintiff obtained permission for incorporation from the Gwangju Metropolitan City Mayor on May 7, 2007. Nonparty 3, the representative of the Plaintiff, and her husband, and Nonparty 4, the Plaintiff’s director, as the Plaintiff’s husband, obtained conditional permission to the effect that the permission for incorporation may be revoked if the permission for incorporation is not performed, by selling within 6 months, one parcel of land, 1/2 of the building, and one of the five stories above the ground, 903.4 square meters and five stories above the ground, among the inn building, and one parcel of land in Gwangju Northern-gu (hereinafter “instant real estate”).

B. On May 1, 2008, the Plaintiff received a request for the disposal of ordinary property from the Gwangju Metropolitan City Mayor to take administrative measures, such as revocation of establishment permission, if he/she fails to comply with the above conditions of permission. On August 1, 2008, the Plaintiff entered into a title trust agreement with Nonparty 1 on the instant real property, and accordingly, completed the registration of ownership transfer on the instant real property on the ground of sale in the future between Nonparty 1 and his/her husband.

C. On October 22, 2008, the Gwangju District Prosecutors' Office indicted Nonparty 3 and 4, the above non-party 3 and 4, in violation of Article 3 of the Act on the Registration of Real Estate under Actual Titleholder's Name (hereinafter "Real Estate Real Name Act"), on the charge of title trust of the real estate in violation of the Act on the Registration of Real Estate under Actual Titleholder's Name (hereinafter "Real Estate Real Name Act"), and notified the Defendant of the offense of violation of the Real Estate Real Name Act on November 21, 2008.

D. Accordingly, the Defendant issued a prior notice of imposition of penalty surcharge to the Plaintiff and received an opinion from Nonparty 3 on January 14, 2009, and on March 19, 2009, imposed a penalty surcharge of KRW 42,948,000 on the Plaintiff on the ground that the Plaintiff violated Article 3 of the Real Estate Real Name Act with respect to the instant real estate in accordance with Article 5 of the same Act.

[Reasons for Recognition] Uncontentious Facts, Gap evidence 1-1, 2, Gap evidence 2, Gap evidence 3-1, 2, Gap evidence 4, 7, Eul evidence 1-3, Eul evidence 3, Eul evidence 4-1, 4-2, and the purport of the whole pleadings

2. Whether the instant disposition is lawful

A. The plaintiff's assertion

① Although the Plaintiff tried to dispose of the instant real estate in order to implement the conditions for permission for incorporation of the Gwangju Metropolitan City Mayor, the instant disposition by the Defendant, which was not taken into account at all, should be revoked in its entirety as it is unlawful in deviation from and abuse of discretion, even though it did not intend to engage in anti-social acts, such as speculation, tax evasion, evasion of laws, or tax evasion, or to avoid restrictions pursuant to Acts and subordinate statutes by abusing the real estate registration system, which led to the registration of title trust by failing to sell the said real estate. (ii) Even if it is not a domestic affairs, the Plaintiff did not have held the title trust for the purpose of evading taxes or avoiding restrictions pursuant to the laws and

(b) Related statutes;

The entries in the attached Table-related statutes are as follows.

C. Determination

(1) Determination on the petition for revocation of the instant penalty surcharge disposition

Article 3(1) of the Real Estate Real Name Act provides that “any person shall not register any real right to real estate in the name of the title trustee under the title trust agreement” and Article 5(1) of the same Act provides that any title truster who violates the provisions of Article 3(1) shall be punished by a penalty surcharge within the limit of an amount equivalent to 30/100 of the real estate price concerned. In addition, Article 3(1) of the Enforcement Decree of the same Act provides that the head of a Si/Gun/Gu shall notify the person who committed the violation of Article 5(1) of the Act of the payment of the penalty surcharge in writing within one month after confirmation of the violation. Article 3-2 provides that the penalty surcharge may be mitigated by 50/100 if it is not for the purpose of evading taxes or avoiding restrictions under the Acts and subordinate statutes. In full view of the above provisions, whether to impose a penalty on the title truster shall fall under the binding act, and thus, it can only be imposed within the scope of a penalty surcharge, not for the purpose of evading taxes or avoiding restrictions under the Acts and subordinate statutes.

In the instant case, the Plaintiff committed a title trust act prohibited under Article 3(1) of the Real Estate Real Name Act, and criminal punishment for such criminal facts are as seen earlier. The Defendant is only able to reduce 50/100 of the penalty surcharge only in the case of statutory grounds, and is not entitled to full reduction of, or exemption from, the penalty surcharge, and thus, the disposition imposing the penalty surcharge of this case cannot be deemed unlawful. Accordingly, the Plaintiff’s assertion on the premise that the disposition imposing the penalty surcharge of this case is a discretionary act cannot be accepted.

(2) Determination as to the assertion of mitigation of the instant disposition

The proviso of Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act provides that “where taxes are evaded or taxes are not avoided by Acts and subordinate statutes, penalty surcharges may be mitigated by 50/100.” The main purpose of the Real Estate Real Name Act is to prevent anti-social acts, such as speculation, evasion of taxes, and evasion of laws, which abuse the real estate registration system, and thus, it is rather unreasonable to treat both a person subject to evasion of taxes or avoidance of restrictions by Acts and subordinate statutes and a person who has no such purpose, it shall be deemed that a penalty surcharge should be mitigated according to the standards in the attached Table of the Enforcement Decree of the Real Estate Real Name Act pursuant to Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act, if the violator has no purpose of evading taxes or avoiding restrictions by Acts and subordinate statutes.

Therefore, in light of the purport of the entire pleadings as to whether the Plaintiff’s act of title trust of the instant real estate was evaded tax or evaded restrictions under the laws and regulations, the Plaintiff’s act of title trust of the instant real estate was subject to a decision to sell KRW 23 million, which is a half of the appraised value (460 million) of the instant real estate after opening a temporary directors’ meeting, and the Plaintiff’s registration of title trust of the instant real estate could not be deemed to have been revoked due to the Plaintiff’s failure to sell the instant real estate until the amendment of its articles of incorporation pursuant to the above provisional board of directors, and the Plaintiff’s actual act of title trust of the instant real estate was made to Nonparty 1, who had expressed the Plaintiff’s intention to purchase the instant real estate before being a director, and the Plaintiff and Nonparty 1 et al., who had been aware of the Plaintiff’s intention to purchase the instant real estate under the title trust of the instant real estate under the title trust of the instant real estate from 200 million to 300 million.

Therefore, the penalty surcharge of KRW 42,948,00 imposed on the Plaintiff should be mitigated to KRW 21,474,00 (=42,948,000 + 50/100). Therefore, the portion exceeding KRW 21,474,00 out of the instant disposition should be revoked illegally.

3. Conclusion

Therefore, the plaintiff's claim of this case is justified within the scope of the above recognition, and the remaining claims are dismissed as it is without merit. The judgment of the court of first instance is just and it is without merit, and each appeal of the plaintiff and defendant is dismissed as it is so decided as per Disposition.

Judges dives (Presiding Judge)