[1] Where a decision to discontinue the rehabilitation procedures has become final and conclusive after authorization was granted for the rehabilitation plan for the debtor, and the bankruptcy procedures have been implemented pursuant to the ex officio declaration of bankruptcy under Article 6(1) of the Debtor Rehabilitation and Bankruptcy Act, whether the trustee in bankruptcy may take over the litigation procedures based on the right to set aside during the previous rehabilitation procedures (affirmative), and in such case, whether the lawsuit following the exercise of the right to set aside is terminated (negative)

[2] In a case where one or both parties to a continuous contractual relationship agree to withhold the right to terminate, whether a continuous contract may be terminated upon meeting the requirements stipulated in the agreement (affirmative), and whether the termination is recognized as limited to the contract that generates the continuous contractual relationship (affirmative)

[1] In light of the contents and purport of Article 6(1) and (6) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”), when the debtor is authorized to discontinue the rehabilitation procedures, even if the decision to discontinue the rehabilitation procedures is confirmed after the authorization is granted for the rehabilitation plan, when the bankruptcy procedures are implemented following the ex officio declaration of bankruptcy under Article 6(1) of the Debtor Rehabilitation Act, the trustee in bankruptcy under Article 6(6) of the Debtor Rehabilitation Act may take over the litigation procedures following the exercise of the avoidance power that the custodian performed in the previous rehabilitation procedures. In such a case, the lawsuit following the exercise of the avoidance power shall not

[2] In a case where one or both parties to a continuous contractual relationship agree to withhold the right to terminate, the contract may be terminated in the future by continuously cancelling the contract upon meeting the requirements stipulated in the agreement, but such termination is limited to the contract which continuously generates the right to terminate.

[1] Article 6 (1) and (6) of the Debtor Rehabilitation and Bankruptcy Act / [2] Article 543 of the Civil Act

[2] Supreme Court Decision 2011Da101544, 101551 Decided April 24, 2014

Amon Co., Ltd. (Law Firm Jeong & Yang, Attorneys Kang Jae-in et al., Counsel for the plaintiff-appellant)

The trustee in bankruptcy of the debtor, the non-party taking over the lawsuit of the non-party (Law Firm Dadam, Attorneys Park Ho-jin et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2012Na10678 decided September 7, 2012

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

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

1. As to the grounds of appeal regarding the lawsuit in this case is terminated by the final decision to discontinue rehabilitation procedures

Article 6 (1) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”) provides that “Where a decision to discontinue rehabilitation procedures is confirmed after authorization is granted for a rehabilitation plan for a debtor who is not declared bankrupt, the court shall declare bankruptcy ex officio when it deems that the debtor is a cause for bankruptcy.” Paragraph (6) of the same Article provides that “when a bankruptcy is declared pursuant to the provisions of paragraph (1) or (2), the proceedings that are conducted by a custodian or a protective custodian shall be interrupted. In this case, the proceedings may be taken over by the trustee or the other party.” In light of the contents and purport of the above provisions, even if the decision to discontinue rehabilitation procedures is confirmed after authorization is granted for the rehabilitation plan, when the proceedings are performed under the ex officio bankruptcy under Article 6 (1) of the Debtor Rehabilitation Act, the trustee in bankruptcy under Article 6 (6) of the Debtor Rehabilitation Act may take over the proceedings based on the exercise of the avoidance power that the custodian has performed in the previous rehabilitation procedures, and in such case, the lawsuit shall not be concluded within the time limit for exercising the avoidance power.

According to the records, after authorization was granted for the rehabilitation plan on November 8, 201 for Agys Co., Ltd. (hereinafter “debtor”), the decision to discontinue the rehabilitation procedure was finalized on October 30, 2012, which was pending in the final appeal, and on November 2, 2012, the Defendant was appointed as the trustee in bankruptcy of the debtor company, along with the declaration of bankruptcy for the debtor company, pursuant to Article 6(1) of the Debtor Rehabilitation Act, etc. on November 2, 2012. The Defendant filed an objection to the decision to accept the claim for denial on November 6, 2012, and can be recognized that the Plaintiff taken over the litigation procedure of this case against the non-party in the administrator of the Plaintiff’s debtor company.

Examining the above facts in light of the legal principles as seen earlier, insofar as the Defendant appointed as a bankruptcy trustee along with the declaration of bankruptcy on the debtor company, the instant lawsuit cannot be deemed to have been terminated. Therefore, the Plaintiff’s ground of appeal on this part cannot be accepted.

2. As to the Plaintiff’s ground of appeal concerning termination of contract

A. In a case where one or both of the parties to a continuous contractual relationship agree to withhold the right to terminate, the validity of the agreement may be terminated in the future by continuously terminating the contract upon meeting the requirements stipulated in the agreement (see, e.g., Supreme Court Decision 2011Da101544, Apr. 24, 2014; 201Da101551, Apr. 24, 2014). However, the recognition of such termination is limited to the contract that continuously generates a claim relationship.

B. Review of the reasoning of the first instance judgment as cited by the lower court and the record reveals the following facts.

1) On December 23, 2009, the debtor company and the Plaintiff agreed that each other may terminate all or part of the contract immediately on the following grounds: (a) the debtor company supplied black chips produced by CCCCC chips to the Plaintiff and sell them exclusively; and (b) both parties enter into a product supply contract with the content of dividing business profits by 50% (hereinafter “instant supply contract”). Article 11(2) of the supply contract of this case provides that each other may terminate all or part of the contract at the time of application for bankruptcy, liquidation, company reorganization, or commencement of composition procedure (Article 11(2).

2) On February 25, 2010, the debtor company and the Plaintiff paid royalties of USD 5 per unit to the debtor company even though the debtor company did not take charge of the manufacture of the black stuff products, but the Plaintiff entered into an attached agreement with the terms of exemption from the sales profit of USD 50 per unit under the supply contract of this case (hereinafter “the first attached agreement of this case”) and entered into an attached agreement with the debtor company on April 12, 2010, again, the Plaintiff acquired the black box 25 million won from the debtor company, and the Plaintiff independently produces the black box stuff regardless of the debtor company with the ownership and the right of use, and the Plaintiff independently entered into an agreement with the debtor company on March 3, 2010 with the content that the obligation of payment of USD 5 per unit of USD 5 per unit of the first attached agreement of this case is no longer available (hereinafter “the last attached agreement of this case”).

3) When the debtor company has significantly deteriorated the financial status due to the embezzlement, etc. of the representative director, and entered the de-listing examination after being notified of the rejection of opinions in the audit, and thereby making it impossible to repay obligations normally, the debtor company was decided to commence the rehabilitation procedure on April 30, 2010 and was decided to commence the rehabilitation procedure on June 17, 2010.

4) On July 16, 2010, the Plaintiff notified the Nonparty that the instant supply contract, the instant first subsidiary agreement, and the instant final subsidiary agreement were terminated on the grounds of Article 11(2)1 or 2 of the instant supply contract to the administrator of the debtor company. The said termination notice reached the Nonparty around that time.

5) On August 2, 2010, the Nonparty asserted that the instant final accessory agreement entered into by the debtor company was an act subject to the exercise of avoidance power under the Debtor Rehabilitation Act, and filed a claim for denial against Suwon District Court 2010No. 13, Suwon District Court. On March 30, 2011, the said court rendered a decision to deny the instant final accessory agreement on the ground that the instant final accessory agreement entered into between the debtor company and the Plaintiff constituted a gratuitous act subject to avoidance under Article 100(1)4 of the Debtor Rehabilitation Act.

C. We examine the above facts in light of the legal principles as seen earlier.

Article 11(2)1 or 2 of the instant supply contract provides that, in cases where trust relationship, which forms the basis of the instant contract, is destroyed due to the aggravation of the financial standing of one of the parties during the continuation of the instant supply contract, and the contractual relationship is difficult to maintain as it is, the other party shall immediately terminate the relevant contractual relationship and shall terminate the contract, thereby extinguishing it in the future. As a result of the conclusion of the instant supply contract and the instant first accessory agreement, the Plaintiff and the debtor shall continuously extinguish the claims and obligations arising from the instant supply contract and the instant first accessory agreement, and only establish claims and obligations arising from the royalty settlement by March 13, 2010, and complete the performance of their obligations on April 13, 2010.

Therefore, as long as the Plaintiff and the debtor company do not have a continuous contractual relationship with the conclusion of the instant final accessory agreement, and the performance of obligations under the instant final accessory agreement has been completed, the Plaintiff cannot terminate the instant supply agreement and the instant first and final accessory agreement, which are the instant supply agreement and its subsidiary agreement, based on Article 11(2)1 or 2 of the instant supply agreement. Moreover, this is not different even where the Nonparty, who is the administrator of the debtor company, after the Plaintiff’s notice of termination of the contract on July 16, 2010, is reinstated by exercising the right to set aside a avoidance as to the instant final accessory agreement.

D. Therefore, although the reasoning of the lower court is inappropriate, it is justifiable to have rejected the Plaintiff’s assertion on the termination of the contract by deeming that the termination on July 16, 2010 by the Plaintiff was null and void. In so determining, the lower court did not err by misapprehending the legal doctrine on the acknowledgement of facts contrary to logical and empirical rules or the validity of the termination clause, contrary to what is alleged in the grounds of appeal.

3. As to the ground of appeal on the failure to meet the requirements to exercise the avoidance power

A. Article 100(1)4 of the Debtor Rehabilitation Act provides that “Any gratuitous act performed by the debtor after the suspension of payment, etc. or within six months prior thereto and any act for consideration that may be deemed identical thereto shall be subject to avoidance for the debtor’s property after the commencement of rehabilitation procedures, thereby promoting the reduction of the debtor’s property, restoration of profit from business, or equality among creditors.” Here, “Gratuitous act” refers to any act that the debtor reduces active property or increases his/her obligation without receiving any consideration, i.e., passive property,” and “an act that must be deemed identical” refers to any act that the other party has excessively contributed to as consideration and is in fact irrelevant to any gratuitous act (see, e.g., Supreme Court Decision 2014Da765, May 29, 2014). Since the denial of gratuitous act is not accompanied by consideration of the debtor’s profit and general interest, it should be determined by comprehensively taking into account the debtor’s subjective circumstance into account the debtor’s economic and economic intent and intent of the act, 20.

B. The lower court, citing the judgment of the first instance, acknowledged the facts as indicated in its holding, and determined that the debtor company’s transfer the ownership of and the right to use the gold punishment to the Plaintiff and waiver of the future royalty claims against the Plaintiff, while there is no direct and practical economic interest derived from the final subsidiary agreement of this case as well as the KRW 25 million received in return for a gold sentence, and thus, the conclusion of the final subsidiary agreement with the Plaintiff on April 12, 2010, which is within six months before the commencement of the application for commencing the rehabilitation procedure due to reasons such as suspension of payment, constitutes a gratuitous act under Article 100(1)4 of the Debtor Rehabilitation Act, or an act that is equivalent to the foregoing, and thus, constitutes an act subject to avoidance.

C. In light of the aforementioned legal principles and the records, the lower court did not err in its judgment by misapprehending the legal doctrine regarding hazards or illegality, etc. as a requirement for exercising the right to set aside, which is a gratuitous father or the right to set aside under Article 100(1)4 of the Debtor Rehabilitation Act. The Supreme Court Decision 2001Da39473 Decided September 24, 2002 cited in the grounds of appeal is different, and thus, it is inappropriate to invoke the instant case.

4. Conclusion

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.

Justices Park Poe-young (Presiding Justice)