[1] The purport that the Act on the Registration of Real Estate under Actual Titleholder’s Name imposes an obligation to register the real right to real estate in his/her name on the title truster who violated Article 3(1) and imposes an enforcement fine if he/she violates the same

[2] Whether a title truster is subject to the enforcement fine under Article 6 of the Act on the Registration of Real Estate under Actual Titleholder’s Name in a title trust under a seller’s bad faith (negative)

[1] In full view of the contents and structure of Articles 3(1), 4(2) proviso, 5(1)1, and 6(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), the Real Estate Real Name Act provides that the Real Estate Real Name Act imposes a penalty on a title truster who violates Article 3(1) as a sanction on the violation itself, not a penalty, but requires the title truster to impose a duty to register the real right to the real estate in his/her own name and impose a non-performance penalty if he/she violates Article 3(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), thereby indirectly compelling the title truster to resolve any inconsistency between the name of the registration and the substantive legal relationship arising from the violation, thereby eliminating the state of illegality and ensuring the effectiveness

[2] If a title truster and a title trustee entered into a so-called contract title trust agreement and completed the registration of ownership transfer of real estate in the name of the title trustee pursuant to the sales agreement while knowing the title trust agreement between the title truster and the title trustee, the registration of ownership transfer under the name of the title trustee is null and void pursuant to the main sentence of Article 4(2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”) and the sales agreement entered into between the seller and the title trustee also becomes null and void, the ownership of real estate remains as it remains in the owner who entered into the sales agreement. Since the title truster

As such, since a title trust agreement and a change in real rights are both null and void in accordance with Article 4 of the Real Estate Real Name Act in a contract title trust with intent of a seller, imposing a charge for compelling performance on a title truster on the ground that a title truster did not register a real right to real estate in his/her name even if the title truster is unable to have a right to claim the registration of transfer against the owner of real estate under his/her name is difficult. In a contract title trust with intent of a seller, the title truster is not subject to the charge for compelling performance under Article

[1] Articles 3(1), 4(2), 5(1)1, and 6(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name / [2] Articles 4(2) and 6 of the Act on the Registration of Real Estate under Actual Titleholder’s Name

[1] Supreme Court Decision 2010Da95185 Decided September 12, 2013 (Gong2013Ha, 1747)

Daegu General Construction Co., Ltd. (Law Firm LLC, Attorneys Gyeong-soo et al., Counsel for the plaintiff-appellant-appellant)

Jinju Mayor (Law Firm Geum River, Attorneys Go-gu et al., Counsel for the plaintiff-appellant)

Busan High Court (Chowon) Decision 2013Nu1341 decided March 27, 2014

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. As to the second ground for appeal

A. (1) The Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”) prohibits real rights to real estate from being registered under the name of a title trustee pursuant to a title trust agreement (Article 3(1)), and imposes penalty surcharges on a title truster who violates the said Act (Article 5(1)1). In addition, Article 6(1) of the Real Estate Real Name Act provides that “A person subject to the imposition of penalty surcharges pursuant to Article 5(1)1 shall, without delay, register the real rights to the relevant real estate in his/her name: Provided, That the same shall not apply in cases falling under the proviso to Article 4(2), and if there is any justifiable reason that it is impossible to register under his/her own name, without delay after the said reason ceases to exist.” Article 4(2) proviso to Article 4(2) provides that where a title trustee becomes a party to a contract for the acquisition of real rights to real estate and the other party was unaware of the fact that a title trust agreement exists, the change in real rights

Furthermore, Article 6(2) of the Real Estate Real Name Act provides that the amount equivalent to 10/100 of the appraised value of the real estate shall be imposed as the enforcement fine when one year has passed from the date the penalty is imposed, and the amount equivalent to 20/100 of the appraised value of the real estate shall be imposed as the enforcement fine when one year has passed again.

(2) In full view of the provisions, structure, etc. of the Real Estate Real Name Act, the Real Estate Real Name Act does not only impose a penalty on the title truster who violates Article 3(1) as a sanction on the violation itself, but also imposes a duty to register the real right to the pertinent real estate in his/her name on the title truster and impose a charge for compelling compliance if the real right to the pertinent real estate is violated. The purpose of imposing a charge for compelling compliance is to remove the state of illegality and ensure the effectiveness of the Real Estate Real Name Act by indirectly compelling the title truster to take psychological pressure on the title truster to resolve the inconsistency between the title of registration and the substantive legal relationship caused by the

(3) If a title truster and a title trustee have entered into a so-called contract title trust agreement and completed the registration of ownership transfer of the pertinent real estate in the name of the title trustee in accordance with the said contract while knowing the title trust agreement between the title truster and the title trustee, the registration of ownership transfer under the name of the title trustee is null and void in accordance with the main sentence of Article 4(2) of the Real Estate Real Name Act, and the sales contract entered into between the seller and the title trustee is ex officio null and void. Thus, the ownership of the pertinent real estate remains in the owner who entered into the sales contract. Since the title truster has no relationship with the owner, it is not allowed for the title truster to file a claim against the owner for the registration of ownership transfer of the pertinent real estate

As such, since a title trust agreement and a change in real rights are both null and void in the title trust of the seller’s bad faith in accordance with Article 4 of the Real Estate Real Name Act, it is difficult to deem that imposing a charge for compelling performance on the title truster on the ground that the title truster did not register a real right to the relevant real estate in his/her name even if he/she did not have the right to claim the registration of transfer against the owner of the relevant real estate. In the context of the seller’s bad faith in the title trust of a contract, it is reasonable to deem that the title truster does not

B. Nevertheless, the lower court determined that the instant disposition that imposed the enforcement fine on the Plaintiff on the ground that the Plaintiff, the title truster of the contract title trust, was lawful, on the grounds that it is practically possible to register the instant land in his/her own name, because there is little possibility that the seller of the instant land, who already received the sales price, would demand the cancellation of registration under the name of the title trustee. In so doing, the lower court erred by misapprehending the legal doctrine

2. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)