In a case where rehabilitation procedures were commenced against Gap corporation and rehabilitation procedures were abolished before authorization was granted for the rehabilitation plan, and bankruptcy was declared pursuant to Article 6 (2) of the Debtor Rehabilitation and Bankruptcy Act, but Eul corporation, which concluded a legal service contract with Gap corporation, did not receive service fees for legal advice provided by Eul corporation to the day prior to the date of commencement of rehabilitation procedures from the date of commencement of rehabilitation procedures, the case holding that legal advice service claims of Eul corporation constitute public-interest claims under Article 179 (1) 5 of the Debtor Rehabilitation and Bankruptcy Act, and they constitute estate claims under Article 6 (4) of the Debtor Rehabilitation and Bankruptcy Act due to declaration of bankruptcy against Gap corporation, but the above claims cannot be deemed as "property claims taking precedence over other estate claims" under Article 477 (2) of the Debtor Rehabilitation and Bankruptcy Act.

Upon the commencement of rehabilitation procedures with respect to Gap corporation, rehabilitation procedures were abolished before authorization was granted for the rehabilitation plan, and bankruptcy was declared pursuant to Article 6(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Bankruptcy Act”). The case is that Eul law firm, which entered into a legal service contract with Gap corporation, did not receive service fees for legal advice provided by the Eul law firm from the date of commencement of rehabilitation procedures until the date of

Article 477(2) of the Debtor Rehabilitation Act provides special exceptions to the principle of pro rata distribution and repayment of estate claims under Article 477(1). Thus, only the estate claims specified in Article 473(1) through (7) and (10) of the Debtor Rehabilitation Act explicitly provided for in Article 477(2) should be construed as falling under the "joint estate claims" (hereinafter "joint estate claims"), and the above claims are specifically acknowledged as estate claims in consideration of the trustee's trust in his act or the unique nature of related bankruptcy in which rehabilitation procedures continue, and it is difficult to find reasonable grounds to grant the status of estate claims, and as such, Article 477(2) of the Debtor Rehabilitation Act provides for special exceptions to the principle of pro rata distribution and repayment of estate claims under Article 477(1) of the same Act, the case holding that the above claims cannot be deemed as having priority over the above estate claims on the ground that the trustee's act was the same as the act of the trustee in bankruptcy, and thus, the above claims cannot be deemed as having accrued from the above bankruptcy estate claims.

Articles 1, 6(2) and (4), 179(1)5, 423, 473, 475, 476, and 477 of the Debtor Rehabilitation and Bankruptcy Act

Law Firm Yang Hun-Ga

trustee in bankruptcy of IMP Co., Ltd. (Law Firm Taeju, Attorneys Yang-soo et al., Counsel for the plaintiff-appellant)

Seoul Central District Court Decision 2019Da576569, 2020Gahap510312 Decided June 4, 2020

February 17, 2021

1. The part concerning the counterclaim among the judgment of the first instance shall be modified according to the claim that was modified by the court as follows.

It is confirmed that the estate claims of the Plaintiff (Counterclaim Defendant) listed in the attached Table 1 falls under “other estate claims” as provided by Article 477(2) of the Debtor Rehabilitation and Bankruptcy Act.

2. The costs incurred by a counterclaim, out of the total costs of lawsuit, shall be borne by the plaintiff.

1. Purport of claim

(a) Main claim;

The Defendant (Counterclaim Plaintiff; hereinafter “Defendant”) pays 210,00,000 won to the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) and the interest calculated at the rate of 6% per annum from April 1, 2018 to November 12, 2019, and 12% per annum from the next day to the date of full payment.

(b) Counterclaim;

In addition, it is confirmed that the Plaintiff’s estate claim (hereinafter “instant claim”) stated in the separate sheet No. 1 does not constitute an estate claim which takes precedence over other estate claims provided for in Article 477(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”). (In the first instance trial, the Defendant filed a claim to confirm that the instant claim does not fall under the estate claim provided for in Article 477(2) of the Debtor Rehabilitation Act, first instance court’s claim to confirm that the instant claim does not fall under the estate claim provided for in Article 473 of the Debtor Rehabilitation Act, and then the court made it clear that it seeks confirmation as the primary claim, and subsequently changed the conjunctive claim to exchange it).

2. Purport of appeal

Of the judgment of the court of first instance, the part of the counterclaim against the defendant is revoked. All of the defendant's counterclaims are dismissed (in spite of the modification of the purport of the claim, the contents that seek confirmation as the altered main counterclaim claims are identical to the main counterclaim claims of the court of first instance, so the plaintiff's appeal is valid as against the

1. Scope of adjudication of this court;

In the first instance court, the Plaintiff filed a claim against the Defendant as a principal legal counsel service fee, and the Defendant filed a counterclaim to confirm that the Plaintiff’s claim does not constitute an estate claim under Article 477(2) of the Debtor Rehabilitation Act or an estate claim under Article 473 of the Debtor Rehabilitation Act (a claim for a principal counterclaim). Accordingly, the first instance court rendered a judgment citing the Plaintiff’s principal claim and the Defendant’s main counterclaim in whole.

Accordingly, only the plaintiff appealed against the part on the counterclaim among the judgment of the court of first instance. Since the defendant modified the purport of the counterclaim, the scope of the judgment of this court is limited to the changed primary and conjunctive counterclaim.

2. Basic facts

A. EMP Co., Ltd (hereinafter “debtor”) is a company aimed at the development, manufacture, commercialization, distribution, and sale of poly-mixed products. The Ulsan District Court decided to commence rehabilitation procedures for the debtor company on June 13, 2016.

B. The Plaintiff entered into each legal service contract (hereinafter collectively referred to as the “instant legal service contract”) with the debtor company as follows. After the commencement of rehabilitation procedures with respect to the debtor company, the Plaintiff entered into a contract with the Ulsan District Court (hereinafter referred to as the “instant contract”) with the permission of the Seoul District Court and provided advice related to domestic rehabilitation procedures and advice on the bankruptcy procedure of the U.S. Edson, the parent company of the debtor company, while maintaining the contract Nos. 1, 2, which is the existing contract.

On July 1, 2011, details of the time when the Plaintiff entered into the table contained in the main text, which was requested by the debtor company on July 1, 201, to provide legal advice services requested by the debtor company, such as consulting on legal issues related to the operation and technology of the debtor company, the introduction of technology, and legal issues related to other transactions, preparation of documents, negotiation and review, etc., attending the meetings of the debtor company; on March 28, 2016, the Plaintiff provided legal advice services requested by the debtor company on July 5, 2016, such as consultation on general legal issues, such as the operation and transaction of the debtor company, provision of legal opinions, preparation of documents, negotiation and review, and attendance at the meetings of the debtor company; on July 5, 2016, the Plaintiff provided legal advice services to the debtor company; on July 28, 2016, the preparation and review of legal parts related to the debtor company's transaction structure; support for the formation of legal room, preparation and negotiation of related contract, and consultation on trading.

C. On August 28, 2017, the Ulsan District Court ordered a debtor company’s custodian to submit a rehabilitation plan with respect to the continuation of the debtor company’s business until November 13, 2017. However, the custodian and the debtor company did not submit the rehabilitation plan by the above deadline. The debtor company filed an application for bankruptcy with the above court on November 6, 2017. On November 14, 2017, the above court revoked rehabilitation procedures for the debtor and decided to discontinue rehabilitation procedures on November 30, 2017.

D. On December 12, 2017, the Ulsan District Court declared the debtor company bankrupt in accordance with Article 6(2)1 of the Debtor Rehabilitation Act (Article 6(2)1 of the Debtor Rehabilitation Act) (Ulsan District Court 2017Hahap516), and the defendant was appointed as the trustee in bankruptcy of the debtor company.

E. The Plaintiff did not receive a total of KRW 501,152,615 for legal advice provided from June 13, 2016 to December 11, 2017, which was the date of commencing the rehabilitation procedure for the debtor company, from June 13, 2016 to December 11, 2017.

[Reasons for Recognition] Unsatisfy, Gap evidence Nos. 1 through 10 (including satisfy number), Eul evidence Nos. 1 and 2, the purport of the whole pleadings

3. Relevant statutes;

The major Acts and subordinate statutes related to the instant case are as shown in attached Form 2.

4. Determination on a counterclaim

A. The defendant's assertion

At present, compared to the bankruptcy foundation, since the total amount of the estate claims of the debtor company is significantly high compared to the bankruptcy foundation, the defendant is expected to repay the estate claims in proportion to the estate claims under Article 477(1) and (2) of the Debtor Rehabilitation Act. The claim in this case is an estate claim under Article 6(4) of the Debtor Rehabilitation Act, but the claim in Article 473 subparag. 4 of the Debtor Rehabilitation Act is not a "claim arising from the trustee's act in the bankruptcy procedure of the debtor company" or any equivalent claim, and thus, it cannot be deemed an "priority estate claim" as one taking precedence over other estate claims under Article 477(2). However, the plaintiff asserted that the claim in this case falls under the estate claims under Article 473 subparag. 3, 4, and 7 of the Debtor Rehabilitation Act, which are the estate claims under Article 477(2) of the Debtor Rehabilitation Act, or should be treated as a preliminary estate claim corresponding thereto under Article 477(2) of the former Debtor Rehabilitation Act.

B. Judgment on the main claim

1) Whether a priority claim constitutes an estate claim

The instant claim constitutes a public-interest claim under Article 179(1)5 of the Debtor Rehabilitation Act, and becomes an estate claim upon declaration of bankruptcy with respect to the debtor company pursuant to Article 6(4). However, for the following reasons, the instant claim cannot be deemed an estate claim first under Article 477(2) of the Debtor Rehabilitation Act.

A) Under the literal interpretation of the Debtor Rehabilitation Act, there is no ground to view priority claims arising in the rehabilitation procedures prior to the declaration of bankruptcy as estate claims under Article 477(2).

(1) The Debtor Rehabilitation Act provides, for various policy reasons for the fair and smooth bankruptcy proceeding, general estate claims provided for in Article 473 and special estate claims provided for in Article 477 and Article 477 of the same Act, with respect to the method of repayment when the bankruptcy estate falls short of the total amount of estate claims. The estate claims that take precedence over other estate claims provided for in the Debtor Rehabilitation Act shall be treated with special circumstances so that it may be reimbursed prior to other estate claims in the proceeding of the bankruptcy or equity, or in the public interest and policy reasons. Therefore, as far as possible, the contents of estate claims may be predicted and clearly interpreted in accordance with the language and text of the Debtor Rehabilitation Act.

(2) According to Article 477(1) of the Debtor Rehabilitation Act, where it becomes clear that the bankruptcy estate is insufficient to repay the total amount of the estate claims, the repayment of the estate claims shall be made in proportion to the amount of unpaid claims, notwithstanding the preferential right provided for in other Acts and subordinate statutes. Article 477(2) of the Debtor Rehabilitation Act provides for special exceptions to such principles. As such, only the estate claims enumerated in Article 473 subparag. 1 through 7 and subparag. 10 of the same Act explicitly provided for in Article 477(2) ought to be interpreted to have priority over other estate claims. However, Article 477(2) of the Debtor Rehabilitation Act does not list “public-interest claims that constitute the estate claims pursuant to Article 6(4)” together with “Article 473 subparag. 1 through 7 and 10.”

(3) Article 477(3)3 of the Debtor Rehabilitation Act, which was newly established on February 4, 2020 and enforced on the same day, provides that when the bankruptcy estate falls short of paying the total amount of the estate claims, a new loan among the claims that become the estate claims pursuant to Articles 6(4) and (9) and 7(1) shall take precedence over other estate claims, and the priority among the remaining claims shall be in accordance with Article 477(2). As such, Article 6(4) of the Debtor Rehabilitation Act explicitly provides that some of the public-interest claims that become the estate claims pursuant to Article 6(4) shall take precedence over other estate claims. From among the public-interest claims that become the estate claims pursuant to Article 477(3) of the Debtor Rehabilitation Act, it is reasonable to deem that the remainder of the estate claims not provided for in Article 477(3) does not take precedence over the other estate claims regardless of the grounds for the relevant interpretation.

B) It is difficult to find reasonable grounds to grant the status of estate claims, taking into account the nature of public-interest claims that constitute estate claims.

(1) Under Article 477(2) of the Debtor Rehabilitation Act, estate claims recognized as having priority over other estate claims are arising after the declaration of bankruptcy, and either have the nature of expenses and claims necessary to carry out the bankruptcy procedure (Article 473 subparag. 1, 3, 4, and 7), or have the nature of a claim recognized as estate claims for the sake of equity in the situation where the other party takes losses only when he/she gains profits from the bankruptcy estate, or has the nature of a claim recognized as estate claims for the sake of equity (Article 473 subparag. 5 and 6) or a claim recognized as estate claims in special social and policy consideration, such as tax collection or protection of workers (Articles 473 subparag. 2 and 10). On the other hand, public-interest claims, other than those having the aforementioned nature, include claims for rehabilitation of the debtor and those for other purposes necessary for the rehabilitation procedure under Article 6(1) or (2) of the Debtor Rehabilitation Act, which are deemed as having become effective in the rehabilitation procedure or bankruptcy proceeding. Therefore, it is difficult to view of the same nature of the bankruptcy procedure.

(2) The purpose of the rehabilitation procedure is to fairly liquidate and distribute the debtor, who faces distress due to financial difficulties, to coordinate legal relations among interested parties, such as creditors, shareholders, and equity right holders, with the aim of promoting the efficient rehabilitation of the debtor or his/her business (see Article 1 of the Debtor Rehabilitation Act). In addition, the purpose of the two systems is to fairly liquidate and distribute the debtor’s assets for which rehabilitation is difficult (see Article 1 of the Debtor Rehabilitation Act). In addition, taking into account the fact that there is a time interval between the time the rehabilitation procedure commences and the time the debtor is declared bankrupt under Article 6(1) or (2) of the Debtor Rehabilitation Act, and that there is a difference in the debtor’s property status, it is difficult to deem that the recognition of public-interest claims recognized in the rehabilitation procedure as a estate claim, and further,

C) The Plaintiff asserts that the instant claim is similar to “the claim arising from the act performed by the trustee in bankruptcy with respect to the bankrupt estate” under Article 473 subparag. 4 of the Debtor Rehabilitation Act, and that the instant claim ought to be deemed claims falling under Article 473 subparag. 4. This is the same in that both the trustee and the trustee in bankruptcy in the rehabilitation procedure hold the right to manage and dispose of the debtor’s property (Articles 56 and 384 of the Debtor Rehabilitation Act). However, as seen earlier, due to the difference between the purpose of the rehabilitation procedure and the bankruptcy procedure, the trustee’s business focuses on the debtor’s rehabilitation, while the trustee’s business focuses on distributing the debtor’s property to the maximum value and distributing it fairly, it is difficult to see that two institutions are identical [Article 492 of the Debtor Rehabilitation Act). In addition, when the bankruptcy is declared, the corporation is dissolved (Article 77(1) of the Civil Act and Article 27 subparag. 17 and Article 57-17 of the Debtor Rehabilitation Act).

In full view of these facts, the act of the custodian in the rehabilitation procedure is immediately the same as the act of the trustee in bankruptcy, and the instant legal service contract was concluded by the Defendant, the trustee in bankruptcy, and the instant claim cannot be deemed to constitute “the claim arising from the act of the trustee in bankruptcy with respect to the bankruptcy estate” under Article 473 subparag. 4 of the Debtor Rehabilitation Act.

D) The Plaintiff asserts that if estate claims under Article 6(4) of the Debtor Rehabilitation Act are not treated as estate claims with preferential right to payment, it cannot be protected in the event the debtor is unable to go through bankruptcy proceedings due to failure in rehabilitation, and thus, it is contrary to the legislative intent of Article 6(4) to legal fiction that public-interest claims are deemed estate claims.

However, as seen earlier, public-interest claims, as a matter of principle, have the nature of bankruptcy claims, and are limited to those recognized as estate claims giving preferential repayment and making occasional repayment (Article 475, Article 476 of the Debtor Rehabilitation Act). In light of the above, it is difficult to accept the Plaintiff’s assertion that public-interest claims should be recognized as estate claims first prescribed in Article 477(2) in preference to bankruptcy claims, if the bankruptcy estate is not in a situation sufficient to repay the total amount of estate claims, and if it is not in a situation sufficient to satisfy the repayment of the total amount of estate claims, the estate claims continue to be fully repaid (Article 477 and Articles 475, and 476).

E) When the decision to discontinue rehabilitation procedures is confirmed under Article 291 of the Debtor Rehabilitation Act, the Plaintiff asserts that, except in the case where a bankruptcy is declared in accordance with Article 6(1), the custodian shall repay the public-interest claims with the debtor’s property and the public-interest claims are protected. In light of the fact that the public-interest claims are protected, the Plaintiff’s first priority should not be placed in a position more favorable than the other estate claims by recognizing the estate claims as the estate claims, even in the case where a voluntary bankruptcy is declared pursuant to

However, once a bankruptcy is declared pursuant to Article 6(2) of the Debtor Rehabilitation Act, the debtor’s property shall be fairly liquidated and distributed in compliance with the purpose of the bankruptcy procedure. Public-interest claims are deemed to have been repaid in preference to bankruptcy claims as estate claims despite their nature, despite having the nature of their original bankruptcy claims, so that the status of public-interest creditors is sufficiently protected. Moreover, it cannot be interpreted that the status of public-interest creditors should be given equal status to other estate claims that arise after the declaration of bankruptcy. Moreover, considering the fact that the change in status of other claims arising from the performance of rehabilitation procedures is made by the fair realization and distribution of assets and the necessity for public-interest, it is unnecessary to recognize public-interest claims as estate claims. The Plaintiff’s above assertion cannot be accepted.

F) The Plaintiff, among the instant claims, acknowledged damages for delay after the bankruptcy was declared, as estate claims under Article 473 subparag. 4 of the Debtor Rehabilitation Act, and accordingly, asserted that the instant claims should be recognized as estate claims under Article 473 subparag. 4 of the same Act.

However, since estate claims are frequently repaid, the trustee in bankruptcy is obligated to repay the claims when the claims are estate claims (Article 475 of the Debtor Rehabilitation Act), and when the claims are not repaid, the trustee in bankruptcy shall be deemed to be a debt due to the act of the trustee in bankruptcy as provided in Article 473 subparag. 4 (see, e.g., Supreme Court en banc Decision 2013Da64908, Nov. 20, 2014). The approval of the trustee in bankruptcy as an estate claim under Article 473 subparag. 4 is limited to not all of the claims in this case, but to the portion of the damages for delay (Evidence No. 10), considering that there is no evidence that the trustee in bankruptcy approves the entire claims of this case as a foundation as provided in Article 473 subparag. 4 of the Debtor Rehabilitation Act, the Plaintiff’s above assertion cannot be accepted.

G) Meanwhile, according to Article 477(3) of the Debtor Rehabilitation Act, the Plaintiff asserts that, among priority claims, estate claims, other than new loans, among those acknowledged as estate claims, are governed by Article 477(2). Therefore, the instant claim, which is a special estate claim, should be recognized as estate claims, first of all, pursuant to Article 477(2) of the same Act.

First of all, Article 477(3) of the Debtor Rehabilitation Act cannot be applicable to this case, which is a case declared bankrupt prior to its enforcement. In addition, the purport of the aforementioned provision is to preferentially repay claims on new loans, etc. differently from those provided for in Article 477(2) and to apply the remainder as it is, and it is difficult to deem that all claims on public-interest loans, etc. constitute estate claims as provided for in Article 477(2). In addition, the purport of Article 477(3) of the Debtor Rehabilitation Act, which prescribes that a new loan is provided for in Article 477(3), shall be repaid prior to other estate claims, is to reflect the purport that a new loan is repaid prior to other estate claims in the case of a new loan as provided for in Article 180(7). In view of the above, it is difficult to accept

2) Judgment on the Plaintiff’s abuse of rights

A) The Plaintiff asserted that the Defendant’s counterclaim claim of this case against the Plaintiff should be dismissed as abuse of rights, since it unfairly discriminates against the public interest creditors, since the Defendant’s claim of this case against the Plaintiff is treated as a priority claim, even though the Defendant, as a public interest creditor with respect to the obligor company, actually repaid a lot chemical (hereinafter “shot chemical”) in a position similar to the Plaintiff.

B) According to the evidence evidence Nos. 3 and 4, since the estate claim that was repaid by a ethyl chemical may be acknowledged as being a claim for ethyl price arising after the declaration of bankruptcy, it cannot be recognized that the defendant's abuse of rights as alleged by the plaintiff. This part of the plaintiff's assertion is without merit.

C. Sub-decision

Therefore, the instant claim constitutes “other estate claims” under Article 477(2) of the Debtor Rehabilitation Act. As long as the Plaintiff contests this, there is a benefit to seek confirmation. As long as the Defendant’s primary counterclaim claim is accepted, a separate examination is not conducted regarding the conjunctive counterclaim claim.

5. Conclusion

Therefore, the defendant's primary counterclaim should be accepted on the grounds of its reasoning. Since the defendant modified the purport of the claim in this court, the judgment of the first instance court should be modified in accordance with the amended purport of the claim. It is so decided as per Disposition.

Judges Lee Jong-young (Presiding Judge)

(1) According to the ruling of the declaration of bankruptcy No. 3, the following is indicated as the declaration of bankruptcy under Article 6(1) of the Debtor Rehabilitation Act, which appears to be a clerical error under Article 6(2) of the Debtor Rehabilitation Act

(2) Articles 474, 337(2), 347(2), 348(2), 398(1), 469, and 6(4) and (9) of the Debtor Rehabilitation Act.

3) This does not apply to this case, since it is applied from a bankruptcy estate constituted of a bankruptcy declaration case that was decided after enforcement pursuant to Article 2 of the Addenda.

4) The Debtor Rehabilitation Act (amended by Act No. 16920, Feb. 4, 2020) states that “When there is funds borrowed with the permission of the court in order to continue the debtor’s business among the claims arising from the debtor’s business and assets and other acts with respect to the loan of funds and other acts after the commencement of rehabilitation procedures in order to boost the inflow of new funds in the corporate rehabilitation procedures, and the claims arising from the debtor’s business and the purchase of materials and other acts indispensable for the debtor’s business continued after the commencement of rehabilitation procedures, the debtor or the protective custodian shall give priority to other estate claims, such as the claims for new funds and the employees’ wages, etc.”

5) Under age, rehabilitation secured creditors are restricted from exercising their rights in rehabilitation procedures, and rehabilitation secured creditors are entitled to preferential repayment of rehabilitation secured creditors over the other rehabilitation secured creditors. However, if rehabilitation procedures are implemented, security holders can promptly dispose of securities outside the bankruptcy procedures. Furthermore, the priority order of collection as rehabilitation claims and public charges claims, which were rehabilitation claims in the rehabilitation procedures, takes precedence over the general bankruptcy claims (health insurance premiums, etc.) is the estate claims in the rehabilitation procedures. Such change is based on the public interest and policy needs to achieve the purpose of the bankruptcy procedures.