Credit Guarantee Fund (Attorney Jeong-jin, Counsel for the plaintiff-appellant)

Defendant (Attorney Yang Jae-soo, Counsel for the defendant-appellant)

July 12, 2007

Seoul Central District Court Decision 2004Da138157 Delivered on December 28, 2004

1.The judgment of the first instance shall be modified as follows:

A. The sales contract concluded on May 1, 2003 between Nonparty 2 and the Defendant with respect to the real estate listed in the separate sheet shall be revoked within the scope of KRW 160,049,795.

B. The defendant shall pay to the plaintiff 160,049,795 won and 5% interest per annum from the day following the day when the judgment became final and conclusive to the day of complete payment.

2. Of the total litigation costs, 2/3 shall be borne by the Plaintiff, and the remainder by the Defendant, respectively.

1. Purport of claim

[The plaintiff sought cancellation of ownership transfer registration as to the real estate listed in the attached list (hereinafter “the apartment of this case”) as a whole cancellation of the original purchase and sale contract as stated in the original order (hereinafter “the sales contract of this case”) and return of originals, and sought payment of the money stated in the attached list as part of the above sales contract and compensation for the value of the above apartment of this case. The plaintiff tried to reduce or modify the purport of the claim.]

2. Purport of appeal

The judgment of the first instance is revoked. The sales contract of this case concluded on May 1, 2003 between the non-party 2 and the defendant is revoked. The defendant will implement the procedure for the cancellation registration of the ownership transfer registration (hereinafter referred to as the "transfer registration of this case") completed on May 23, 2003 with respect to the apartment of this case to the non-party 2.

1. Basic facts

The court's explanation on this part is identical to that of the corresponding part of the judgment of the first instance ("1. basic facts") except in the case where the court uses "18% per annum from August 2, 2003 to the date of full payment" as "18% per annum from the second part of the judgment of the first instance and 20% per annum from the next day to the date of full payment." Thus, this part is identical to the corresponding part of the judgment of the first instance ("1. basic facts").

2. Determination

(a)the existence of preserved claims;

In principle, it is required that a claim that can be protected by the obligee’s right of revocation has arisen prior to the commission of an act that can be viewed as a fraudulent act. However, there is a high probability that at the time of the fraudulent act, there has already been legal relations that serve as the basis of establishment of the claim, and that the claim should be established in the near future in the near future. In the event a claim has been created due to its de facto in the near future, the claim can also be the preserved claim

In light of the above legal principles, as seen in the above facts, at the time of May 1, 2003 when Nonparty 2 entered into the instant sales contract with the Defendant for the apartment of this case, the credit guarantee agreement was already established, which serves as the basis for establishing the Plaintiff’s claim for reimbursement against Nonparty 2, and the Defendant had already caused a credit guarantee accident due to delinquency in principal. On May 16, 2003, which was immediately after the conclusion of the sales contract, the Plaintiff acquired the claim for reimbursement against Nonparty 2 by paying the principal and interest of Nonparty 2 by paying the principal and interest of Nonparty 2, the Plaintiff’s claim for reimbursement against Nonparty 2 is subject to the obligee’s right of revocation.

B. Establishment of fraudulent act

(1) Title trust of an apartment

The reasoning for this Court's explanation is as follows: (a) the corresponding part of the judgment of the court of first instance [whether or not the apartment of this case was trusted to Nonparty 2] is the same as that of the judgment of the court of first instance (whether or not the apartment of this case was trusted to Nonparty 2).

(2) The validity of registration of initial ownership completed by title trust and the responsible property

According to the provisions of Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”), where a title truster and a title trustee enter into a title trust agreement on real estate with the owner who was unaware of the fact that the title trustee was a party to the agreement, and the title trustee entered into a sales agreement on real estate and completed the registration of ownership transfer of the relevant real estate in the name of a trustee pursuant to the sales agreement (hereinafter “contract title trust agreement”), notwithstanding the invalidity of the title trust agreement between the title truster and the title trustee, the change in real rights to the relevant real estate by the registration of ownership transfer itself is deemed valid, and the title trustee acquires full ownership of the relevant real estate (see, e.g., Supreme Court Decision 200Da21123, Dec. 26, 2002).

In light of the facts acknowledged above, as the non-party 1 was unable to directly conclude the sales contract due to the reasons such as the lack of membership qualification, it is confirmed that the non-party 2 entered into the sales contract for the apartment complex in the name of the non-party 2, the second modern collective housing association (hereinafter "the association of this case") and the non-party 2, who is the contracting title, and completed the registration of preservation of ownership (hereinafter "registration of preservation of this case") in the name of the contracting title. According to this, it is reasonable to view that the non-party 1 and the non-party 2 entered into the so-called contract title trust agreement in relation to the above sales contract (hereinafter "title trust agreement of this case") with the non-party 1 and the non-party 2, who is the other party to the sales contract, without knowing the existence of the above title trust agreement.

Therefore, regardless of the invalidity of the title trust agreement in accordance with Article 4(1) of the Real Estate Real Name Act, the acquisition of real rights by the preservation registration in this case itself is valid, and as a result, Nonparty 2, the title trustee, obtained full ownership of the apartment in this case, and as a result, the apartment in this case becomes a responsible property in relation to the general creditors.

(3) Disposal, intentional intent, and beneficiary's bad faith

As acknowledged earlier, if Nonparty 2 sold or disposed of the apartment house of this case, which is its sole property, under high probability that the obligation for indemnity against the Plaintiff would occur, barring any special circumstance, it would constitute a fraudulent act against the Plaintiff, the obligee, the intention of Nonparty 2, the obligor, and the Defendant’s bad faith, the beneficiary, is presumed.

As to this, the defendant argues that the registration of transfer of ownership to a third party designated by the truster on the real estate entrusted by the trustee is merely a prohibition of the Real Estate Real Name Act, and it does not constitute a fraudulent act on the premise that it is merely a performance of the existing obligation following the termination of the title trust, and that the sales contract of this case is a formal contract concluded for convenience in order to transfer the ownership of the apartment of this case to the defendant, who is his own child, by cancelling the title trust agreement of this case concluded with the non-party 1 and restoring the ownership of the apartment of this case following such termination (the registration of transfer under the name of the defendant is made through the implementation of such contract).

However, even if the instant contract was concluded for convenience in order for Nonparty 1 to terminate the instant contract as alleged by the Defendant, and restore the title of the instant apartment to the Defendant’s future, unlike the transfer of the Real Estate Real Name Act, the Defendant’s assertion that the agreement would be null and void, barring any special circumstance after the enforcement of the said Act, and as to the null and void agreement, no obligation originally intended for the original agreement may accrue (However, as to the null and void agreement, it is not possible to present the concept of termination premised on the effective establishment of the agreement, as long as the agreement was concluded after the enforcement of the Real Estate Real Name Act, for the title truster to obtain ownership transfer registration of the instant apartment after the implementation of the said agreement, such an act cannot be seen as an act of real estate transfer registration under the Real Estate Real Name Act, which was concluded for the purpose of restoring the ownership of the real estate under the said agreement to the title truster, and thus, cannot be seen as an act of restoring ownership of the real estate under the said agreement to the title truster, such as an act of cancellation of the title trust registration.

On a different premise, the Defendant’s above assertion is not acceptable without having to examine the remainder of the issue.

(c) Revocation of, and reinstatement to, a fraudulent act;

(1) In full view of the statements in Gap evidence 6 and Eul evidence 20 and the fact-finding with respect to the branch office of our bank (hereinafter "Korea bank"), the court of this case (hereinafter "Korea bank"), the whole purport of the argument was examined. On February 25, 2003, the transfer date of the contract of this case, the establishment registration of the right to collateral security (hereinafter "right to collateral security") was completed with respect to the apartment of this case, and on March 17, 2004, the non-party 1 paid 40 million won to our bank, which is the total principal and interest of the secured debt, and cancelled the registration of creation of collateral security on March 19, 2004.

On the other hand, if the registration of creation of a mortgage was cancelled due to repayment, etc. after the fraudulent act was conducted with respect to the real estate on which the mortgage was established, the revocation of the fraudulent act and ordering the restoration of the real estate itself is unfair because it is unfair to restore to the portion which was not initially secured by the general creditors. In such a case, it is reasonable to cancel the fraudulent act within the extent of the balance obtained by deducting the amount of the secured debt of the mortgage from the value of the real estate, and order the compensation for the remaining value, not the original

Therefore, the sales contract of this case, which constitutes a fraudulent act, shall be revoked within the extent of the balance obtained by deducting the secured claim of this case from the value of the apartment of this case, and the defendant, who is a beneficiary, shall be liable to compensate for the remaining value of the plaintiff, who is the creditor following such revocation.

(2) Furthermore, we examine the specific scope of revocation and compensation for value.

On the other hand, the facts that the market price of the apartment of this case at the time of the closing of the party's argument do not conflict between the parties, and that the actual secured claim amount of the right to collateral of this case in the name of the bank cancelled after the fraudulent act is KRW 40 million as seen earlier. As such, 460 million, which remains after deducting the actual secured claim amount of the right to collateral of this case from the value of apartment of this case KRW 500 million, would be the limit of revocation of the fraudulent act (contract for Sale) and compensation for the value thereof.

Meanwhile, the scope of revocation of a fraudulent act is limited to the amount of claims of the revocation creditor, barring special circumstances. Thus, in the event that the restitution is ordered by the method of compensation for value, the amount of compensation is limited to the amount of claims of the revocation creditor, and at this time, the amount of claims of the creditor includes interest or delay damages incurred until the closing

However, as seen earlier, the amount of the Plaintiff’s claim, which is the creditor of this case, shall be KRW 87,621,269 of the indemnity amount which became final and conclusive by the judgment; KRW 18% per annum from May 16, 2003 to August 2, 2003; and KRW 72,428,526 of the delay damages at the rate of 20% per annum from the following day to July 12, 2007 until July 12, 2007; KRW 72,428,526 of the delay damages at the rate of 20% per annum (=87,531,93 x [18%) x 79 days per annum + 365 days per annum x (3 years + 3444/365 days per annum); KRW 160,769,7465,769,279,7650 and below the limit for calculating convenience]; it shall be discarded less than the total amount of KRW 160,679,279,2675 billion.

Ultimately, the amount that serves as the basis for the cancellation of the instant sales contract and compensation for value is KRW 160,049,795, which is the amount of the Plaintiff’s claim.

3. Conclusion

Therefore, the sales contract of this case shall be revoked within the limit of 160,049,795 won, and the defendant shall be liable to the plaintiff for compensation for delay at the rate of 5% per annum under the Civil Act from the day following the day when the judgment became final and conclusive to the day when the payment is made in full. Thus, the plaintiff's claim reduced at the court of first instance shall be accepted in its entirety with reasonable grounds. Since the judgment of the court of first instance is unfair in conclusion, it shall be accepted in part of the plaintiff's appeal and the decision of the court of first instance shall be modified as set forth in paragraph (1) of the order.

[Attachment List omitted]

Judges Park Jong-sung (Presiding Judge) (Presiding Justice)