[1] Where a business entity is unable to execute a sales contract to a buyer, where the sales guarantee company concludes a trust contract to dispose of trust real estate after performing the sale in lots or the performance of refund and completed the registration of trust pursuant thereto, whether the trust contract is null and void pursuant to Article 5(2) of the former Trust Act because the purpose of the trust contract is illegal or impossible (negative)

[2] Whether a sale guarantee company constitutes “acquisition of real estate” under Article 105(1) of the former Local Tax Act in a case where the sale guarantee company entered into a trust contract with a truster for the guarantee of sale of housing and received the transfer of the land, which is a trust property, from the truster on the ground thereof (affirmative)

[1] Article 5(2) of the former Trust Act (wholly amended by Act No. 10924, Jul. 25, 201; hereinafter the same) provides that “a trust shall be null and void if its purpose is unlawful or impossible.” The purport of Article 5(2) of the former Trust Act is that a truster transfers a specific property right to a trustee to manage and dispose of such property right for the purpose of the trust by having the trustee manage and dispose of such property right (Article 1(2)). As such, if a trust violates the mandatory provisions and its purpose is unlawful or it is deemed impossible to realize the trust contract from the time of the trust contract to the point of view because it is impossible to sell the real estate to the buyer for the purpose of original impossible performance, the validity thereof cannot be recognized. Therefore, if the sales guarantee company concludes a trust agreement to dispose of the real estate after performing the sale or refund, and completes the registration of the trust, it cannot be deemed unlawful or impossible to achieve the specific purpose of the trust agreement as it goes against the specific provisions of the Act prohibiting the sale or refund.

[2] Real estate acquisition tax does not include the acquisition of real estate by transferring the ownership of real estate through the transfer of the ownership, regardless of whether the acquisitor of the real estate acquires the ownership of the real estate or not, unless there are special circumstances. Article 110 subparag. 1(a) of the former Local Tax Act provides that a trustee of the trust property under the Trust Act takes the transfer of the real estate, who is a trustee of the trust property, and does not impose acquisition tax on the premise that it constitutes “acquisition” under Article 105(1) of the former Local Tax Act (wholly amended by Act No. 1021, Mar. 31, 2010; hereinafter the same).

If a sales guarantee company entered into a trust contract with a truster for the guarantee of sale of housing and received the transfer of the land, which is a trust property, from the truster, it constitutes “acquisition of real estate” as prescribed by Article 105(1) of the former Local Tax Act. After all, even if the performance of the house sale guarantee, the purchaser paid the sale price to the buyer, it cannot be deemed that the land already acquired is re-acquisition. In such cases, the acquisition tax on the acquisition of the land of trust property based on the initial trust contract is not imposed under Article 110 subparag. 1(a) of the former Local Tax Act.

[1] Articles 1(2) and 5(2) of the former Trust Act (wholly amended by Act No. 10924, Jul. 25, 2011; see current Article 2); / [2] Articles 105(1) (see current Article 7(1)) and 110 subparag. 1(a) (see current Article 9(3)1) of the former Local Tax Act (wholly amended by Act No. 1021, Mar. 31, 2010)

[2] Supreme Court Decision 2005Du9491 decided Apr. 12, 2007 (Gong2007Sang, 737)

The Housing and Urban Guarantee Corporation (Law Firm Chuncheon, Attorneys Yoon Tae-tae, Counsel for the defendant-appellant)

C. P.S. (Law Firm TelBS, Attorneys Lee Jae-in et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2015Nu31284 decided July 16, 2015

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

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 2 and 3

Article 5(2) of the former Trust Act (wholly amended by Act No. 10924, Jul. 25, 2011; hereinafter the same) provides that “a trust shall be null and void if its purpose is unlawful or impossible.” The purport of Article 5(2) of the former Trust Act is to transfer a specific property right to a trustee or take other measures, thereby allowing the trustee to manage and dispose of the relevant property right for the purpose of the trust (Article 1(2)). Thus, if a trust is unlawful, or it is for the purpose of original impossibility because it is impossible to realize it from the time of the trust contract because it violates the mandatory provisions, or because it is impossible for the trustee to dispose of the real estate for the purpose of disposal after performing the sale or refund, if the sale guarantee company concludes a trust contract after performing the sale or refund, and completes the registration of the trust, the trust cannot be deemed null and void as it goes against the specific purpose prohibiting such act from performing it, or it cannot be deemed unlawful or impossible to achieve the specific purpose of the trust contract.

In the same purport, the court below is justified in holding that the trust contract and trust registration of this case entered into by the Korea Housing and Urban Guarantee Corporation, which is the plaintiff who made the house sale guarantee, to provide a sale guarantee such as the performance of the sale in lots or the performance of the refund after the occurrence of the guarantee accident due to the failure of the business operator, cannot be deemed to constitute an impossible purpose. Contrary to the allegations in the grounds of appeal, the court below did not err by misapprehending the legal principles on impossibility of the purpose of trust

2. Regarding ground of appeal No. 1

Article 105(1) of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010; hereinafter the same) provides that “The acquisition tax shall be imposed on a person who has acquired real estate, vehicles, mechanical equipment, standing trees, aircraft, ships, mining rights, fishing rights, golf membership rights, riding club membership rights, condominium membership rights, condominium membership rights, or membership rights to use athletic facilities complex.” Article 110 Subparag. 1(a) provides that “The acquisition tax shall not be imposed on a person who has acquired trust property through a trust (limited to the trust registration under the Trust Act and accompanied by a trust registration) and transfers the trust property from a truster to a trustee.”

Real estate acquisition tax is not imposed on a person who acquires real estate by taking advantage of the fact that it is the transfer of goods and by taking advantage of the distribution tax that recognizes and imposes a tax-bearing force. “Acquisition of real estate” under Article 105(1) of the former Local Tax Act includes all cases of acquisition of real estate by taking advantage of the transfer of registration of ownership, regardless of whether the person who acquired the real estate acquires the ownership substantially complete (see, e.g., Supreme Court Decision 2005Du9491, Apr. 12, 2007). Article 110 Subparag. 1(a) of the former Local Tax Act provides that acquisition tax shall not be imposed on a person who acquired the trust property by reason of trust under the Trust Act, and it does not impose acquisition tax on the premise that it falls under “acquisition” under Article 105(1) of the former Local Tax Act.

If a sales guarantee company entered into a trust contract with a truster for the guarantee of sale of housing and received the transfer of the land, which is a trust property, from the truster, it constitutes “acquisition of real estate” as prescribed by Article 105(1) of the former Local Tax Act. After all, even if the performance of the house sale guarantee, the purchaser paid the sale price to the buyer, it cannot be deemed that the land already acquired is re-acquisition. In such cases, the acquisition tax on the acquisition of the land of trust property based on the initial trust contract is not imposed under Article 110 subparag. 1(a) of the former Local Tax Act.

In the same purport, the lower court is justifiable to have determined that the instant disposition by the Defendants, which imposed acquisition tax, was unlawful by deeming that the Plaintiff’s Housing and Urban Guarantee Corporation acquired the instant land on the grounds of the housing sale trust agreement and actually acquired the instant land from the buyer for the purpose of implementing the housing sale guarantee. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the transaction,

3. Conclusion

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 Kwon Soon-il (Presiding Justice)