In a case where a debtor purchases real estate from a third party by borrowing money from a third party, provides the relevant real estate as a security for a loan obligation, or where a debtor purchased real estate from a third party and completed the registration of ownership transfer before paying the purchase price, and then provides the relevant real estate as a security for a sales price obligation, whether the debtor's act of offering security constitutes a fraudulent act (negative in principle)

Unless there are special circumstances, a debtor in excess of his/her obligation provides real estate to any one of the creditors, as security for claims, constitutes a fraudulent act in relation to other creditors. However, the debtor's act of disposal of the debtor's property decreases in the debtor's whole property to cause or deepens the shortage of joint security for claims due to the debtor's act to constitute a fraudulent act. Thus, in cases where the debtor purchases real estate from a third party by borrowing funds from a third party, provides the relevant real estate as security for the loan obligation, or where the debtor purchased real estate from a third party and completed the registration of ownership transfer before the payment of the purchase price, and provided the relevant real estate as security for the payment of the purchase price, it cannot be deemed a fraudulent act if the existing creditors' joint security has decreased, such as where the debtor purchased the real estate from a third party and provided the relevant real estate as security for the payment of the purchase price. Furthermore, even if the above act of purchase of real estate and security was conducted in sequence within a short

Article 406(1) of the Civil Act

Supreme Court Decision 80Da1403 Decided May 25, 1982 (Gong1982, 594) Supreme Court Decision 97Da10864 Decided September 9, 1997 (Gong1997Ha, 3051) Supreme Court Decision 2008Da95663 Decided April 23, 2009

Credit Guarantee Fund

Plaintiff’s Intervenor (Law Firm Open, Attorneys Jeong Woo-jin et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other (Attorney Kim Dong-dong, Counsel for the defendant-appellant)

Seoul High Court Decision 2016Na2056166 decided May 16, 2017

All appeals are dismissed. The costs of appeal are assessed against the Plaintiff’s Intervenor.

The grounds of appeal are examined.

1. As to Defendant 1’s ground of appeal

A. An obligor in excess of his/her obligation constitutes a fraudulent act in relation to another obligee, barring special circumstances (see, e.g., Supreme Court Decision 97Da10864, Sept. 9, 197). However, to constitute a fraudulent act, an obligor’s act of disposing of his/her real estate constitutes a fraudulent act in relation to another obligee (see, e.g., Supreme Court Decision 97Da10864, Sept. 9, 197). However, as the obligor’s act of disposing of his/her property decreases in the obligor’s whole property to cause or deepens the shortage of joint security of claims due to the obligor’s act of borrowing funds from a third party, acquiring the relevant real estate from a third party, offering the relevant real estate as a security for a monetary obligation, or offering the relevant real estate as a security for a monetary obligation before the obligor purchases the real estate from a third party before the payment of the purchase price, the act of offering collateral cannot be deemed a fraudulent act if the existing creditors’ joint security has not been reduced or decreased by the existing creditors.

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) The sectional owners, including Defendant 1, who participated in the instant reconstruction project, as well as the construction company, trust company, etc., recognized Americo Mameri Maurco Co., Ltd. (hereinafter “Americo”) as the new implementer of the instant reconstruction project, and transferred shares of co-ownership among each of the instant lands, which were trusted to the existing trust company, to Americo, and Americo entrusted to the new trust company.

2) Accordingly, around February 2013, Defendant 1 entered into the instant agreement with Americo to sell the instant five buildings (the ownership was acquired by a final and conclusive judgment) in lieu of the said company to Americo, which were repaid by the said company in lieu of its own land shares and buildings [the building △△△ in which the said company intended to purchase the instant reconstruction project upon completion of its reconstruction project and the claim against Dmeri Korea Co., Ltd., the first implementer, and that Americo will pay KRW 1.84 billion to Defendant 1.8 billion.

3) Under the instant agreement, Defendant 1 transferred his/her share of co-ownership among each of the instant lands to Americo, completed the trust registration in the name of trust company, and completed the registration of ownership transfer under the name of Americo on July 21, 2015. However, Defendant 1 entered into the instant promise to sell and purchase the instant building on August 7, 2015, under the circumstances where it is difficult for Americo to actually receive the price pursuant to the instant agreement until he/she completed the construction by securing all co-ownership shares of each of the instant lands, and completed the instant promise to sell and purchase the instant building on August 10, 2015.

C. The lower court: (a) premised on the premise that, in a situation where it is difficult to implement a reconstruction project due to financial shortage, etc., it would be best for the implementer of the reconstruction project to obtain the shares of land in the site of the reconstruction project to obtain the completion of a new building by having the implementer of the reconstruction project acquire the shares in the land in the site of the reconstruction project; and (b) the members transfer the shares in their own land and the rights to the buildings in lots to the implementer of the reconstruction project; and (c) the trade reservation should not be deemed to constitute a fraudulent act in the event that the members entered into a promise to sell and purchase the property contributed to the implementer of the reconstruction project and completed the registration of the right to claim ownership transfer; and (d) based on the foregoing factual basis, determined that the instant promise to purchase and sell the land in this case was transferred to the

D. However, examining the above facts in light of the legal principles as seen earlier, it is not deemed that the existing creditors’ co-security has been reduced through a series of acts, before and after the instant promise to sell and purchase the instant building 5 with Defendant 1, in order to secure the payment obligation within 17 days after the Americo purchased the instant building from Defendant 1 and completed the registration of ownership transfer. Accordingly, the instant promise to sell and purchase the instant building cannot be evaluated as constituting a fraudulent act.

Ultimately, the reasoning of the lower court is somewhat insufficient, but the conclusion that the instant promise to sell and purchase does not constitute a fraudulent act is justifiable. Therefore, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the facts beyond the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine

2. As to the ground of appeal against Defendant 2

The Plaintiff’s Intervenor appealed to Defendant 2 of the lower judgment, but the petition of appeal does not contain any information in the grounds of appeal, and the appellate brief does not contain any information in the grounds of appeal.

3. 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 Jo Hee-de (Presiding Justice)