In a case where an asset owned by an obligor is provided as a collateral security for another obligee’s claim, the method of assessing the obligor’s active property when determining whether a fraudulent act constitutes a fraudulent act / In a case where a joint mortgage is established on several real estate, whether the amount of each real estate secured by each joint mortgage is the amount apportioned by proportion to the amount of the secured claim of the joint mortgage in proportion to the value of each real estate (affirmative in principle), and whether such legal doctrine likewise applies to a case

Articles 368 and 406(1) of the Civil Act

Supreme Court Decision 2010Da64792 Decided January 12, 2012 (Gong2012Sang, 253) Supreme Court Decision 2013Da90402 Decided August 18, 2016 (Gong2016Ha, 1333)

Plaintiff (Attorney Kang-soo et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm citizen, Attorneys Lee Young-hoon et al., Counsel for the defendant-appellant)

Supreme Court Decision 2015Da214462 Decided July 29, 2016

Seoul High Court Decision 2016Na205007 decided May 17, 2017

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court. The Plaintiff’s appeal is dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Plaintiff’s ground of appeal

For reasons indicated in its reasoning, the lower court rejected the Plaintiff’s assertion that the amount of the secured debt of the second collateral mortgage of this case should be KRW 290,000,000, out of the amount of the secured debt of the second collateral mortgage of this case prior to the instant fraudulent act, should be deemed as KRW 290,000,000 at the time of the instant fraudulent act.

Examining the reasoning of the judgment below in light of the relevant legal principles and records, the judgment below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules

2. As to the Defendant’s ground of appeal

A. In determining whether a fraudulent act constitutes a subject matter of revocation by a creditor, if an asset owned by an obligor is provided as a physical collateral for another obligee’s claim, the part provided as a physical collateral cannot be deemed a debtor’s liability property for the general obligee. Therefore, if a joint mortgage is established on several real estates, only the balance obtained by deducting the amount of the secured claim held by other creditors from the value of the property offered as a collateral for the obligor’s claims, shall be evaluated as an obligor’s active property. In the event that a joint mortgage is established on several real estates, barring any special circumstance, the amount of the secured claim borne by each real estate is calculated by dividing the amount of the secured claim secured by the joint mortgage in proportion to the value of each real estate as a subject matter of joint mortgage in light of the purport of Article 368 of the Civil Act, barring any special circumstance (see Supreme Court Decision 2010Da64792, Jan. 12, 201

B. The lower court, based on the comprehensive review of the adopted evidence, found the facts as indicated in its reasoning, and determined as follows.

1) Of Nonparty 1, Nonparty 2, and Nonparty 3’s co-ownership of the instant real estate (each of the 1/3 equity shares), the amount of the secured debt borne by Nonparty 1’s co-ownership, the debtor, at the time of the conclusion of the instant sales contract, shall be KRW 695,00,00,00, which is the total amount of the secured debt of the said right to collateral security at the time of the conclusion of the instant sales contract. However, Nonparty 1’s co-ownership is merely 476,909,550 won (the value of the instant real estate 1,430,728,650 x 1/3), and thus, exceeds the amount of the secured debt of the said right to collateral security. Nonparty 1’s co-ownership bears only KRW 476,909,550,000 (695,000,000 won - 47,479,509, 2509) x 29, 25050

2) At the time of the conclusion of the instant sales contract, the amount of the secured debt of the second collateral mortgage of this case is KRW 970,00,00,00, and since the real estate of this case and ○○ apartment building owned by Nonparty 2 is divided in proportion to its value, the amount of the secured debt of the instant real estate of this case is KRW 284,985,542, which is calculated as follows: ① The amount of the secured debt of Nonparty 2’s co-ownership of the instant real estate is KRW 970,00,000: ① The remaining amount of the secured debt of this case’s real estate of KRW 735,728,650 (the remaining value of the instant real estate of KRW 1,430,728,650) - The remaining amount of the secured debt of the instant real estate of KRW 300,000,000 (the remaining amount of the secured debt of KRW 695,000,000) - the remaining amount of the instant real estate of KRW 30830.

3) Of the secured claims in the instant Claim Nos. 1 and 2, the total amount of the secured claims borne by Nonparty 2’s share in the instant real estate is KRW 394,030,767 (= KRW 109,045,225 + KRW 284,985,542). This does not exceed the above share value. Thus, the instant sales contract constitutes a fraudulent act by disposing of the property held by Nonparty 2’s general creditors for joint security.

C. However, among the judgment of the court below, it is difficult to accept the part concerning the calculation of the secured debt of the second collateral mortgage of this case, which is borne by Nonparty 2's co-ownership of the real estate of this case,

1) The co-ownership of the instant real estate by Nonparty 1 already bears the amount of the secured debt of the instant No. 1 collateral which takes precedence over the instant No. 2 collateral, and thus, the secured debt of the instant No. 2 collateral cannot be borne any further.

2) Accordingly, only Nonparty 2 and Nonparty 3’s share in the instant real estate and only Nonparty 2’s apartment building owned by Nonparty 2 had the secured debt of the instant No. 2. Of them, the secured debt to be borne by Nonparty 2’s share in the instant real estate shall be KRW 970,00,000 (the remaining value of the instant real estate mortgage) multiplied by the “ratio of the remaining value of the instant real estate to the remaining value of the instant real estate to the total value of the instant real estate ○○dong apartment” (the foregoing part of the lower court’s calculation), calculated the instant real estate shares out of the secured debt (the remaining value of Nonparty 2’s share in the instant real estate 367,864,325 (the remaining value of Nonparty 2’s share in the instant real estate 367,864,525) [the remaining value of Nonparty 2’s share in the instant real estate, the remaining value of Nonparty 2’s share in the instant real estate 367,5767,5050,515.

3) Ultimately, the amount of the secured debt borne by Nonparty 2’s co-ownership of the instant real estate out of the amount of the secured debt of Nonparty 1 and 2 collateral in the instant case is KRW 536,523,538 (i.e., KRW 109,045,225 + KRW 427,478,313). This exceeds the value of the said share, and thus, it does not constitute a fraudulent act even if the said share was disposed of through the instant sales contract.

4) Nevertheless, on the grounds as indicated in its reasoning, the lower court determined that the instant sales contract constituted a fraudulent act by disposing of the property held by the general creditors of Nonparty 2’s joint collateral. In so determining, the lower court erred by misapprehending the legal doctrine on the calculation of liability property where joint mortgage was established in determining whether a fraudulent act was committed, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal

3. Conclusion

Therefore, the part of the judgment below against the defendant is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The plaintiff's appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices

Justices Kwon Soon-il (Presiding Justice)