Whether the property is included in the basic property for calculating the legal reserve (negative), and in such case, whether the property should be deducted from the special profit when calculating the shortage of the person who filed the claim for the legal reserve of inheritance (affirmative)

In cases where an ancestor donated property to his/her heir or to a third party before the institution of statutory reserve of inheritance has arisen and ownership has been transferred to the donee upon completion of the performance, even if inheritance commenced after the predecessor died after the enforcement of the Civil Act amended by Act No. 3051 on December 31, 197 (hereinafter “amended Civil Act”), the inheritance does not require that the donated property be subject to a claim for restitution by the system of statutory reserve of inheritance. This is because, in cases where the provision of statutory reserve of inheritance of the amended Civil Act is applied to donations performed before the enforcement of the amended Civil Act, the donee’s vested right is limited or infringed by retroactive legislation, and it is contrary to the purport of Article 2 of the Addenda of the amended Civil Act. The legal relationship with respect to the donated property whose legal relationship has already been finalized before the enforcement of the amended Civil Act is the same as the person liable for restitution, regardless of whether the secured portion of inheritance is the person liable for restitution, and it is reasonable to view that the property does not also be included in the underlying property for calculation

However, the purport of the legal reserve of inheritance is to guarantee the legal heir’s right to inheritance and to ensure fairness among the inheritors. Article 1115(1) of the Civil Act provides that “The person with the right to legal reserve of inheritance may claim the return of the property within the extent of shortage when there is a shortage in the legal reserve of inheritance due to the inheritee’s donation or testamentary gift.” This likewise applies to cases where the property donated prior to the enforcement of the amended Civil Act exceeds the legal reserve of inheritance, and thus, it goes against the purport and purpose of the legal reserve of inheritance to not consider special profits solely on the ground that the property was donated before the enforcement of the amended Civil Act. In addition, insofar as Article 1118 through Article 108 of the Civil Act applies mutatis mutandis, there is no restriction on the time to calculate the shortage of legal reserve of inheritance, and Article 1008 of the Civil Act does not relate to Article 2 of the Addenda of the Civil Act.

Therefore, even if the property of donations completed prior to the enforcement of the amended Civil Code is excluded from the basic property for calculating the legal reserve of inheritance, the above property should be deducted from the special profit when calculating the shortage of legal reserve of inheritance between the person who filed the claim for the return

Article 108 of the former Civil Act (amended by Act No. 3051 of December 31, 197), Addenda (amended by Act No. 3051 of December 31, 197), Article 1008, Article 1113, Article 115(1), and Article 1118 of the Civil Act

Supreme Court Decision 2010Da78722 Decided December 13, 2012 (Gong2013Sang, 124)

Plaintiff 1 and one other (Law Firm LLC, Attorney double-luminous, Counsel for the plaintiff-appellant)

Defendant (Attorney present-soo et al., Counsel for the defendant-appellant)

Seoul Western District Court Decision 2017Na34855 decided October 12, 2017

The judgment below is reversed, and the case is remanded to the Seoul Western District Court.

The grounds of appeal are examined.

1. Where the decedent donated property to his/her heir or to a third party before the legal reserve system was established and ownership is transferred to the donee upon completion of the performance, the decedent’s inheritance does not require the recovery of inherited property by the legal reserve system even if the inheritance commences after the decedent died after the enforcement of the Civil Act amended by Act No. 3051 on December 31, 1977 (hereinafter “amended Civil Act”). This is contrary to the purport of Article 2 of the Addenda to the amended Civil Act because, if the provision on legal reserve of the amended Civil Act applies to donations performed before the enforcement of the amended Civil Act, the donee’s vested right is restricted or infringed by retroactive legislation (Supreme Court Decision 2010Da78722 Decided December 13, 2012). As such, the legal relationship with the donated property, the legal relationship of which has already been finalized prior to the enforcement of the amended Civil Act, regardless of whether the claimant is a legal reserve of inheritance or a person liable to return the property. Therefore, it is reasonable to deem the property to be included in the statutory reserve of inheritance.

However, the purport of the legal reserve of inheritance is to guarantee the legal heir’s right to inheritance and to ensure fairness among the inheritors. Article 1115(1) of the Civil Act provides that “The person with the right to legal reserve of inheritance may claim the return of the property within the extent of shortage when there is a shortage in the legal reserve of inheritance due to the inheritee’s donation or testamentary gift.” This likewise applies to cases where the property donated prior to the enforcement of the amended Civil Act exceeds the legal reserve of inheritance, and thus, it goes against the purport and purpose of the legal reserve of inheritance to not consider special profits solely on the ground that the property was donated before the enforcement of the amended Civil Act. In addition, insofar as Article 1118 through Article 108 of the Civil Act applies mutatis mutandis, there is no restriction on the time to calculate the shortage of legal reserve of inheritance, and Article 1008 of the Civil Act does not relate to Article 2 of the Addenda of the Civil Act.

Therefore, even if the property of donations completed prior to the enforcement of the amended Civil Code is excluded from the basic property for calculating the legal reserve of inheritance, the above property should be deducted from the special profit when calculating the shortage of legal reserve of inheritance between the person who filed the claim for the return

2. According to the reasoning of the judgment below, the court below determined that the plaintiffs' assertion that the real estate donated by the deceased before the enforcement of the amended Civil Act should be considered as special profits, cannot be considered as basic property for calculating legal reserve regardless of whether the plaintiffs received donations from the deceased as long as the registration of ownership transfer was completed in the names of the plaintiffs prior to the enforcement of the amended Civil Act, and rejected the defendant's assertion, and ordered the registration of ownership transfer for the inherited real estate

In light of the above legal principles, the court below is just in holding that the real estate fulfilled before the enforcement of the amended Civil Code under the name of the plaintiffs cannot be deemed as the basic property for calculating the legal reserve of inheritance, but it is not acceptable in holding the court below's decision that did not determine

In other words, the court below should have judged whether there was a shortage of legal reserve of inheritance in consideration of the plaintiffs' special benefits if it is recognized that the gift of the above property was donated.

Nevertheless, the lower court’s rejection of the Defendant’s assertion without examining whether the registration was completed solely on the ground that the registration was completed prior to the enforcement of the amended Civil Code is erroneous in matters of law by misapprehending the legal doctrine as to the special benefit of legal reserve and failing to exhaust deliberation, which affected the conclusion of the judgment. The ground of appeal

3. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Cho Jae-chul (Presiding Justice)