[1] Whether the act is included in the so-called "an act that the debtor knows that the rehabilitation creditor or the rehabilitation secured creditor is prejudicial to the rehabilitation creditor or the rehabilitation secured creditor", which is an act subject to avoidance under Article 100 (1) 1 of the Debtor Rehabilitation and Bankruptcy Act (affirmative)

[2] Where the act subject to avoidance in the rehabilitation procedure is harmful to other rehabilitation creditors, etc. but is recognized as reasonable, whether the act is subject to the exercise of the right to set aside under Article 100(1) of the Debtor Rehabilitation and Bankruptcy Act (negative)

[3] The burden of proving whether the beneficiary was unaware of the fact that the beneficiary did not know at the time of the act subject to avoidance (=beneficiary) / Whether the debtor can exercise the avoidance power only when the debtor was in excess of his/her obligation at the time of the act subject to avoidance (negative), and whether the beneficiary’s awareness of whether the debtor was in excess of his/her obligation at the time of the act subject to avoidance can be the main basis for the good faith recognition (negative)

[1] “Act performed by an obligor with knowledge that it would compromise rehabilitation creditors or rehabilitation secured creditors” under Article 100(1)1 of the Debtor Rehabilitation and Bankruptcy Act includes not only so-called fraudulent act absolutely reduced the general property of a company which is a joint security of all creditors, but also so-called biased act contrary to equity with other rehabilitation creditors, such as repayment to a specific creditor. In order to be recognized as an intentional person, “the company’s knowledge that it would prejudice the rehabilitation creditors” as a subjective element. In particular, in the case of a biased act, it is necessary to “the awareness that a certain creditor would reimburse” in order to prevent a type of act subject to denial under the Debtor Rehabilitation and Bankruptcy Act and to avoid the principle of equality of creditors applied when rehabilitation procedures commence in order to ensure the safety and balance of transaction, but it is not necessary to further express the intent or intent of active harm to the rehabilitation creditors, etc.

[2] Even if the act subject to avoidance in the rehabilitation procedure is harmful to rehabilitation creditors, etc., there may be cases where a rehabilitation creditor, etc. may be deemed to have committed such act socially necessary, considerable or inevitable, depending on individual and specific circumstances at the time of the act, and in such exceptional cases, it shall not be subject to the exercise of the avoidance power under Article 100(1) of the Debtor Rehabilitation and Bankruptcy Act in light of the legal guidance or concept of justice, such as equality of creditors and coordination of protection of debtors and interests of the debtor. Here, the issue of “reasonableness” should be determined in detail in light of the principle of good faith and fairness, based on the source of the repayment fund, relationship between the rehabilitation company and the creditor, whether the creditor in collusion with the rehabilitation company or forced the rehabilitation company to perform such influence as forcing the repayment. In addition, the allegation and certification of the circumstances that fail to meet the requirements for illegality is the beneficiary, who is the opposite party.

[3] Where a person who received a profit by the debtor's act knowing that the debtor's act was prejudicial to rehabilitation creditors (hereinafter "beneficiary") did not know that the debtor's act was prejudicial to the rehabilitation creditors at the time of such act, it cannot be denied, but since the beneficiary's bad faith is presumed, the beneficiary bears the burden of proof as to his/her good faith. Unlike the case of the creditor's right of revocation whose main purpose is to maintain and secure the debtor's general property, unlike the case of the creditor's right of revocation, it is not necessary to view that the right of denial can be exercised only when the total amount of debts at the time of such act exceeds the total amount of assets. Thus, the recognition of the beneficiary as to whether the debtor was in excess of his/her obligation at the time of the act of

[1] Article 100 (1) 1 of the Debtor Rehabilitation and Bankruptcy Act / [2] Article 100 (1) of the Debtor Rehabilitation and Bankruptcy Act, Article 2 of the Civil Act, Article 288 of the Civil Procedure Act / [3] Article 100 (1) 1 of the Debtor Rehabilitation and Bankruptcy Act, Article 288 of the Civil Procedure Act, Article 406 (1) of the Civil Act

[1] [2] [3] Supreme Court Decision 201Da5637, 5644 Decided October 13, 201 (Gong2011Ha, 2351) Supreme Court Decision 2014Da24112 Decided July 10, 201 / [1/2] Supreme Court Decision 2003Da65049 Decided March 26, 2004 (Gong2004Sang, 723) / [1/3] Supreme Court Decision 2003Da271 Decided November 10, 2005 (Gong205Ha, 1925) / [1] Supreme Court Decision 2014Da18131 Decided January 14, 2016 / [205Da2015319 decided March 26, 2015] Supreme Court Decision 2015Da319645 Decided January 14, 2016

The legal manager of the Debtor Rehabilitation and Bankruptcy Corporation (LLC, Kim & Lee LLC, Attorneys Hong-sung et al., Counsel for the defendant-appellant)

Military Personnel Mutual Aid Association (Law Firm LLC, Attorneys Lee Young-gu et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2016Na2024756 decided September 23, 2016

The judgment of the court below is reversed and the case is remanded to the Seoul High Court. All of the applicants for taking over the proceedings are dismissed. The expenses incurred in taking over the proceedings are borne by the applicants.

The grounds of appeal are examined.

1. Judgment on ground of appeal No. 1

For reasons indicated in its holding, the lower court maintained the first instance judgment rejecting the Plaintiff’s assertion that the debtor company was unable to entirely expect the implementation benefits or the execution benefits of the instant project as it completely renounced the instant project at the end of 2011 or before the instant repayment was performed.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err by misapprehending the bounds of the principle of free evaluation of evidence against logical and empirical rules, thereby adversely affecting the conclusion of the judgment.

2. Determination on grounds of appeal Nos. 2 and 3

A. 1) “Act performed by a debtor with knowledge that it would compromise rehabilitation creditors or rehabilitation secured creditors” under Article 100(1)1 of the Debtor Rehabilitation and Bankruptcy Act includes not only so-called fraudulent act absolutely reduced the general property of the company becoming joint security of all creditors, but also so-called biased act contrary to equity with other rehabilitation creditors, such as repayment to a specific creditor. In order to be recognized as an intentional person, “the company is aware that it would prejudice rehabilitation creditors” as a subjective element. In particular, in the case of biased act, “the perception that certain creditors will be repaid” is necessary to prevent the awareness of the type of act subject to denial under the Debtor Rehabilitation Act and to avoid the principle of equality of creditors, which is applied in the case where rehabilitation procedures are commenced in order to promote the safety and balance of transaction, but further, it does not require an intention or intent to actively harm rehabilitation creditors, etc. (see, e.g., Supreme Court Decision 2004Da46519, Jun. 15, 206).

2) Even if the act subject to avoidance under rehabilitation procedures is harmful to rehabilitation creditors, etc., there may be cases where it may be deemed that rehabilitation creditors, etc. need to suffer a decrease in the assets of the rehabilitation company or unfair business practices, depending on the individual and specific circumstances at the time of the act. In such exceptional cases, it shall be deemed that the act cannot be subject to the exercise of the avoidance power under Article 100(1) of the Debtor Rehabilitation Act in light of the legal guiding ideology or the concept of justice, such as the equality of creditors and the coordination of interests of the debtor. Here, the issue of “reasonableness” should be determined specifically in light of the subjective conditions of the rehabilitation company, such as the assets and business conditions of the rehabilitation company at the time of the act, the purpose and intent of the act, etc., as well as the source of the repayment fund, the relationship between the rehabilitation company and creditors, and whether the creditors in collusion with the rehabilitation company or forced the rehabilitation company to perform the repayment, etc. (see, e.g., Supreme Court Decision 2005Da239641, Sept. 26, 2014, 2007

B. Examining the reasoning of the lower judgment and the record in light of the aforementioned legal principles, in light of the following circumstances revealed by the reasoning of the lower judgment and the record, it is difficult to recognize that the act of paying the instant repayment to the Defendant, a specific creditor, was socially necessary and reasonable, or that it constitutes an exceptional case where rehabilitation creditors, etc. are obliged to suffer a decrease in the assets of the rehabilitation company or unfair business, under the circumstance that the debtor company, which is a joint and several surety, suffered financial difficulties, such as debt excess and liquidity shortage, debt arrears, and the maturity of the electronic means sales claim loan against the subcontractor, and that prior to the maturity of the electronic means sales claim loan against the subcontractor. It is sufficient to deem that the debtor company was aware that the repayment was made to the specific creditor in order to avoid the principle of equality

1) Around July 2011, the debtor company entered into the instant amendment agreement, and issued and delivered an electronic bill with a face value of KRW 100 billion and maturity of July 24, 2012 to the Defendant.

2) On May 2012, EEXE group entered into an agreement to improve the financial structure with the Korea Development Bank, a principal creditor bank, to implement a sound management plan for affiliated companies of EEXE group. The debtor company also signed and sealed the agreement as an affiliated company of EEXE group.

3) On July 23, 2012, the debtor company: (a) repaid 20 billion won out of the loan principal of the instant case to the Defendant as an affiliate company; and (b) additionally posted EEX-industry as joint and several sureties; (c) concluded a third modification agreement with the Defendant to postpone the repayment period until December 24, 2012; and (d) 70 billion won until July 24, 2013, with respect to the remaining principal of the loan amount of KRW 80 billion with the Defendant, the debtor company was holding a security right to the site of the instant project owned by ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ on behalf of the debtor company; and (b) the debtor company did not immediately request the borrower to exercise its security right to the loan site of this case or to change its ownership to the effect of the execution agreement.

4) On September 2012, the debtor company got below the level of commercial papers by the credit rating agency around speculative grade B + grade, and the company’s re-issuance was suspended due to the failure of △ Group △ Group, and the issuance of the external CP was suspended, etc. In addition, the debtor company had been suffering from financial difficulties, such as the maturity of the PF loans due to the shortage of real estate PF business in other business places, and in particular, with respect to the debtor company’s guarantee liability for the PF loans of Edi&C Co., Ltd., a borrower, even after the maturity on September 2012, it was lost the profits of time due to the failure to repay the loans.

5) The debtor company accrued from November 21, 2012 to December 31, 2012, the daily balance of funds (i.e., deposit (i., deposit - deposit) from around December 21, 2012 to at least KRW 10 billion, which is nearly less than KRW 10 billion each day, and began to delay B2B loan around November 30, 2012, and on December 30, 2012, the debtor company delayed the payment of wages to employees by approximately KRW 2.9 billion until December 31, 2012.

6) On December 31, 2012, the aggregate amount of assets of an obligor company as of December 31, 2012 was KRW 405,778,847,905, while the aggregate amount of debts exceeded the amount of debts in KRW 482,817,872,619. Of current assets, cash and cash assets was limited to KRW 1,303,939,80,00, and record the net loss of KRW 115,527,565,554.

7) Under such circumstances, the obligor Company remitted to the Defendant the amount of KRW 10,000,000,000 on December 24, 2012 for the repayment of the existing obligation under the 3 amendment agreement, and KRW 1,628,463,013 on January 22, 2013. The amount of such reimbursement was paid in cash, etc. at the time of the obligor’s collection of the construction sales claims held by the Company.

8) After the instant repayment act, it is difficult to find out the circumstances regarding the measures taken by the debtor company to normalize its management. On the other hand, the debtor company did not pay approximately KRW 3.5 billion, in 2013, and did not pay taxes of KRW 7.6 billion. On March 2013, the debtor company did not pay the amount of taxes of KRW 7.6 billion. On the other hand, the debtor company failed to pay the amount of taxes of KRW 2,517,230,024,746 on April 26, 2013. According to the rehabilitation plan, the debtor company failed to obtain additional financial support from the principal bank, which led to the commencement of rehabilitation procedures on April 26, 2013.

9) The circumstance that the Defendant exercised a right under a bill issued as security after the initial loan contract of this case, or did not seek payment of the full amount guaranteed by the obligor company at the request of the obligor company, and the instant repayment act is a partial repayment under the third modification agreement passed by the obligor company through the resolution of the board of directors, and it is difficult to deem that the Plaintiff’s exercise of the right to set aside is contrary to the good faith principle or the idea of fairness.

C. Nevertheless, the lower court maintained the first instance judgment, solely based on the grounds stated in its reasoning, that the instant repayment act was socially necessary, reasonable, or inevitable, and that the debtor company did not intend to cause any death. In so doing, the lower court erred by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by exceeding the bounds of the principle of free evaluation of evidence, thereby adversely affecting the conclusion of the judgment, thereby adversely affecting the conclusion of the judgment.

3. Judgment on ground of appeal No. 4

A. A. Although a person who received a profit by an act that the debtor knew that the debtor would harm the rehabilitation creditor (hereinafter “beneficiary”) was unaware of the fact that the debtor would harm the rehabilitation creditor at the time of such act, such act cannot be denied, the beneficiary’s bad faith is presumed to have been borne by the beneficiary himself/herself (see, e.g., Supreme Court Decision 2014Da24112, Jul. 10, 2014). Unlike the obligee’s right of revocation for the main purpose of maintaining and securing the debtor’s general property, the right to set aside under the Debtor Rehabilitation Act, which regulates so-called correspondence, need not be deemed as exercising the right to set aside only when the total amount of the debt at the time of such act exceeds the total amount of assets (see, e.g., Supreme Court Decision 2003Da271, Nov. 10, 2005). Therefore, it should not be based on the good faith recognition of the beneficiary as to whether the debtor was in excess of the obligation at the time of distribution.

B. Examining the following circumstances revealed by the reasoning of the lower judgment and the record, as seen earlier, and comprehensively taking account of the financial and business status of the debtor company at the time of the instant repayment act, the amount of repaid debts, and the circumstances and timing leading up to the debtor company’s application for dishonor and rehabilitation, there is sufficient room to deem that it is insufficient to recognize the defendant’s malicious presumption as good faith by reversing it.

1) On January 20, 2010, the Defendant loaned the instant loan to ○○○ Global on January 20, 201 by setting the repayment date of the instant loan as January 20, 201, and the debtor company jointly and severally guaranteed the said debt.

2) As the ○○○ Global and the debtor company failed to perform its obligations until the above maturity date, the Defendant, on January 20, 201 and July 21, 201, suspended each of the due date and concluded a third modification agreement on July 23, 2012, changing the due date to July 24, 2013.

3) Around the time of the signing of the third modification agreement, the instant project was planned to build a new 240 accommodation with 14,000 employees accommodation with the accommodation capacity of 14,000 employees per day, but completed 300,000 employees accommodation with the accommodation capacity of 2,000 employees per day around September 1, 201, and later, the commencement of additional construction was delayed due to the delay in the relocation of the military base, and the sales scheme of idle site was reviewed in the instant project site, and was delayed due to the financial crisis, etc., and the Defendant was well aware of such circumstances. In addition, the Defendant was unable to obtain funding from E.E. under the financial structure improvement agreement.

4) Meanwhile, the Defendant, an executory company, held a pledge on the instant project site and building on the instant land and the instant ground building, as well as on the shares issued by ○○○○○○○○ Business and the deposit account. However, out of the instant loans, 15 billion won remaining after deducting the estimated sale of the project site was set as expected losses following the termination of the instant loan agreement, and as such, deeming that it is difficult to recover loans through the instant business and debtor company, the Defendant, upon entering into a third amendment agreement, was jointly and severally guaranteed by EEX Industries, an affiliated company of the debtor company.

C. Nevertheless, the lower court, based on the Defendant’s recognition as to whether the debtor company was in excess of the obligation at the time of the instant repayment act, maintained the first instance judgment judgment, which was accepted by the Defendant’s bona fide beneficiary defense. In so doing, the lower court erred by misapprehending the legal doctrine on the good faith of the beneficiary in intentional negligence, thereby adversely affecting the conclusion of the judgment. The grounds of appeal assigning this error are with

4. Judgment on the application for taking over the proceedings by the applicant for taking over the proceedings

The applicant for taking over the proceedings filed a request for taking over each of the legal proceedings, alleging that a decision to appoint a custodian was made on April 16, 2017 or July 2017, which was after the deadline for filing a statement of grounds for appeal, or that EEE Asset Management Company succeeded to the rights and obligations related to the instant lawsuit by dividing and establishing the instant lawsuit from the debtor company. However, where a judgment is rendered without pleading at the same stage of the proceedings of the court of final appeal, the applicant for taking over the lawsuit does not need to take over the lawsuit (see, e.g., Supreme Court Decisions 2013Da20106, Jan. 16, 2014; 2014Da210449, Apr. 29, 2016), and all of the applications for taking over the proceedings are not acceptable

5. Conclusion

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. All of the applicants for the continuation of proceedings are dismissed, and the expenses are borne by the applicants for the continuation of proceedings. It is so decided as per Disposition by the assent of all participating Justices

Justices Noh Jeong-hee (Presiding Justice)