The objective standard for appraisal of the value of property under Article 90 of the Debtor Rehabilitation and Bankruptcy Act (=the value assessed on the premise that the company continues to exist); and the method for appraisal of the value at this time / Whether the same applies to the calculation of the value of the subject matter of a rehabilitation security right pursuant to Article 141(4) of the same Act

In valuation of property value under Article 90 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Bankruptcy Act”), the objective standard of valuation shall be the value assessed on the premise of the continuation and rehabilitation of the company, i.e., the company’s dissolution and liquidation, i.e., the company’s dissolution and disposal value of each individual property premised on the company’s disposal. In this context, the method of valuation based on the profitability doctrine, such as profit reduction method, may be deemed a standard method depending on the type and characteristics of the property. However, it is sufficient that the method of valuation, depending on the type and characteristics of the property, can be expressed in view of the company’s continuity, even if it is based on the method of valuation based on the cost doctrine, such as cost doctrine, or on the market principle such as transaction comparison method, such as transaction comparison method. The same applies likewise to the calculation of the value of the subject matter

Articles 90 and 141(4) of the Debtor Rehabilitation and Bankruptcy Act

Supreme Court Order 90Ma954 dated May 28, 1991 (Gong1991, 1728)

Korean Bank (Law Firm Sejong, Attorneys Lee Young-gu et al., Counsel for the defendant-appellant)

The administrator of the non-party who was the administrator of the debtor MTTN Co., Ltd. (Attorney Kim Gi-ri, Counsel for the plaintiff-appellant)

Seoul High Court Decision 2015Na2062546 decided November 10, 2016

The appeal is dismissed. The costs of appeal are assessed against the defendant.

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

In the appraisal of property value under Article 90 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Bankruptcy Act”), the objective standard of appraisal shall be the value assessed on the assumption of the company’s continuation and rehabilitation, i.e., the company’s dissolution and liquidation, i.e., the company’s dissolution and disposal value of each individual property premised on the company’s disposal. In this context, the method of valuation based on the profitability doctrine, such as profit reduction method, may be deemed a standard method depending on the type and characteristics of the property. However, it is sufficient if it is possible to express an objective value considering the company’s continuity even if it is based on the valuation method based on the cost doctrine, such as cost doctrine, or the transaction comparison method, such as the transaction comparison method (see Supreme Court Order 90Ma954, May 28, 1991). This also applies to the calculation of the value subject to rehabilitation security right under Article 141(4) of the Debtor Rehabilitation Act.

After comprehensively taking account of the adopted evidence, the lower court acknowledged the facts as indicated in its holding, and determined to the effect that the value of the instant real estate, which is the object of rehabilitation security right, ought to be assessed on the premise that MTTTTTT would continue to hold the instant real estate and conduct business activities. Therefore, it cannot be assessed on the basis of the acquisition cost of the instant real estate solely on the premise that MTTTTTE resell resells the instant real estate in violation of the resale restriction agreement, and that it is reasonable to assess the appraised value of KRW 91,58,00,000 as of March 31, 2013, which was the time the decision to commence the instant rehabilitation procedure was rendered. In light of the aforementioned legal principles, the lower court did not err by misapprehending the legal doctrine on the appraisal of the value of the proposed rehabilitation security, psychological research, and the determination of rights related to resale gains, contrary to what

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)