In cases where a trustee acquired ownership by completing the registration of ownership transfer under his/her name after concluding a real estate sale contract with a bona fide seller pursuant to the so-called contract title trust agreement, and the truster only has a claim for return of unjust enrichment against the trustee, whether the trustee’s act of disposing of the said real estate to a third party constitutes a fraudulent act that causes damage to the general creditors of the

According to Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name, where a trustee entered into a sales contract for real estate with the owner who was unaware of the fact that a title trust agreement was a party and completed the registration of ownership transfer under the name of the trustee pursuant to the so-called contract title trust agreement, the trustee shall acquire full ownership of the relevant real estate, notwithstanding the invalidity of the title trust agreement between the truster and the trustee, and the trustee shall be obliged to return unjust enrichment equivalent to the purchase price to the truster. In addition, even if the truster and the trustee agreed to transfer the title of the real estate in accordance with the trust agreement between the truster and the trustee’s instructions, this falls under the category of seeking return of the real estate under title trust under the premise that the title trust agreement is valid, and such agreement is null and void. In addition, where the truster only has a claim for return of unjust enrichment against the trustee, such real estate cannot be deemed as a responsible property provided to the general creditor of the truster, and even if the truster entered into a sales contract with a third party and completed the registration of ownership transfer, it cannot be deemed as a fraudulent’s.

Articles 406(1) and 741 of the Civil Act; Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name

Supreme Court Decision 2006Da35117 Decided November 9, 2006, Supreme Court Decision 2007Da90432 Decided October 14, 2010 (Gong2010Ha, 2062)

Korea

Defendant 1 (Attorney Go Young-gu, Counsel for defendant-appellant)

Defendant 2

Incheon District Court Decision 2010Na4806 Decided September 20, 2011

The part of the lower judgment against Defendant 1 is reversed, and that part of the case is remanded to the Incheon District Court Panel Division. The Plaintiff’s appeal against Defendant 2 is dismissed. The Plaintiff’s appeal against Defendant 2 shall be borne by 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 Defendant 1’s appeal

A. Comprehensively taking account of the adopted evidence, the lower court: (a) concluded a title trust agreement with Defendant 2, who acquired the instant real estate under Defendant 2 in the auction procedure; (b) purchased the instant real estate in the voluntary auction procedure under Defendant 2, and completed the registration of ownership transfer under Defendant 2 on September 16, 2004 after purchasing the instant real estate in the name of Defendant 2; and (c) paid the remainder of KRW 16,80,000 with the Nonparty’s funds as security and obtaining loans from the new bank under Defendant 2; (b) on December 10, 204, Defendant 2 established a provisional registration of ownership transfer claim on behalf of the Nonparty on December 3, 2004 with respect to the instant real estate as the grounds for registration of ownership transfer; and (d) concluded a provisional registration of ownership transfer claim on behalf of the Nonparty, including the Nonparty’s power to purchase and sell the instant real estate under the said title trust agreement; and (d) concluded the registration of ownership transfer with Defendant 10, 2000.7.

According to the above facts, the court below held that the title trust agreement between the Nonparty and Defendant 2 regarding the instant real estate was null and void pursuant to Article 4(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name, and that the Nonparty, the title truster, was unable to acquire ownership of the instant real estate. As such, Defendant 2 had the duty to return KRW 56,80,000, which was provided by the Nonparty out of the purchase price of the instant real estate to the Nonparty, to the Nonparty. However, on April 5, 2007, Defendant 2 agreed to transfer the ownership of the instant real estate to the Nonparty by granting documents, such as a certificate of seal impression necessary for the registration of the transfer of ownership of the instant real estate, and a power of attorney to the Nonparty, who had been aware of the ownership transfer registration under the name of the Nonparty’s real estate under the title of the said real estate, to the effect that the Nonparty transferred the ownership of the instant real estate to Defendant 1 in succession to the said right to claim the ownership transfer registration under the title of the said real estate to Defendant 2.

B. However, the lower court’s determination is difficult to accept for the following reasons.

According to Article 4(1) and (2) of the Act on the Registration of Real Estate under Actual Titleholder’s Name, where a trustee entered into a sales contract for real estate with the owner who was unaware of the fact that a title trust agreement was a party and completed the registration of ownership transfer under the name of the trustee pursuant to the sales contract, notwithstanding the invalidity of the title trust agreement between the truster and the trustee, the trustee acquires full ownership of the relevant real estate, and the trustee bears the duty to return unjust enrichment equivalent to the purchase price (see, e.g., Supreme Court Decision 2007Da90432, Oct. 14, 2010). In addition, even if a truster and the trustee agreed to transfer the name of real estate under the direction of the truster, such agreement falls under the category of seeking the return of the title trust real estate itself, on the premise that the title trust agreement is valid (see, e.g., Supreme Court Decision 2006Da35117, Nov. 9, 2006

In addition, where a truster has only a claim for return of unjust enrichment against a trustee, the real estate cannot be deemed as a responsible property provided for the joint security of the general creditors of the truster. Even if the truster becomes a substantial party, such as entering into a sales contract with a third party on the real estate, and completed the registration of transfer of ownership, it cannot be deemed as causing a decrease in the trustee's responsible property. Thus, it cannot be deemed as a fraudulent act detrimental to the general creditors of the truster.

Examining the record in light of the above legal principles, the Nonparty’s purchase of the instant real estate in Defendant 2’s name during the auction procedure constitutes a so-called contract title trust, which is the so-called seller’s bona fide seller, and Defendant 2, the trustee, takes full ownership of the instant real estate, and bears only the obligation to return unjust enrichment equivalent to the purchase price against the Nonparty, who is the trustee. Defendant 2, at the time of transferring the ownership of the instant real estate to Defendant 1, appears to have fulfilled the agreement on the premise that the initial title trust agreement is valid, and Defendant 2’s delivery of all documents necessary for the registration of transfer of ownership to the Nonparty is deemed to have been performed, and it does not be deemed to have transferred the instant real estate ownership to the Nonparty in lieu of the repayment of the obligation to return unjust enrichment to the Nonparty, with the knowledge that Defendant 2 only bears the obligation to return unjust enrichment to the Nonparty. Therefore, the instant real estate cannot be deemed as a joint collateral of the Nonparty’s general creditors, and even if the Nonparty was a substantial party to the instant real property, it cannot be deemed as a fraudulent act.

Nevertheless, on the premise that the agreement between Defendant 2 and the Nonparty on the transfer of ownership of the instant real estate was valid in lieu of repayment of the obligation to return unjust enrichment, the lower court determined that the secondary collateral reimbursement contract between the Nonparty and Defendant 1 constituted a fraudulent act. In so determining, the lower court erred by misapprehending the legal doctrine on the establishment of a fraudulent act or the interpretation of a legal act, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal by Defendant 1 on this point

2. As to the Plaintiff’s appeal against Defendant 2

According to the reasoning of the judgment below, on July 5, 2007, the Plaintiff filed a lawsuit against Defendant 2 on behalf of the Nonparty seeking return of unjust enrichment equivalent to KRW 156,800,000 from the proceeds of the instant real estate on behalf of the Nonparty. The first instance court rendered a judgment dismissing the Plaintiff’s claim on the ground that Defendant 2 transferred the ownership of the instant real estate to Defendant 1 on April 5, 2007 according to the direction of the Nonparty, the title truster, as a substitute payment for the performance of the obligation to return unjust enrichment, and that the said obligation has been extinguished on the ground that: (a) the Plaintiff’s appeal was dismissed, and the first instance judgment became final and conclusive

The Plaintiff’s ground of appeal against Defendant 2 is that, if the second water repayment contract is revoked as it constitutes a fraudulent act, payment in substitutes by Defendant 2 would result in not practical performance, and thus, the obligation to return unjust enrichment is not extinguished. This constitutes change of circumstances following the exercise of the right to formation after the closing of argument in the previous lawsuit and thus does not conflict with the res judicata of the final and conclusive judgment in the previous lawsuit, and thus, the Plaintiff’s claim against Defendant 2 seeking the return of unjust enrichment by subrogation of the Nonparty should also be accepted.

However, the revocation of a fraudulent act is effective relatively between the parties to a lawsuit seeking revocation, and a third party, other than the parties, is not affected by the revocation, unless there are other special circumstances (see Supreme Court Decision 2008Da7109, Jun. 11, 2009, etc.). Thus, even if the second collateral reimbursement contract between the Nonparty and the Defendant 1 is revoked as it constitutes a fraudulent act, as alleged by the Plaintiff, the validity of the revocation cannot be said to extend to Defendant 2, not the party to the lawsuit seeking revocation. Therefore, even if the second collateral reimbursement contract between the Nonparty and Defendant 1 is revoked, it cannot be deemed to constitute a legal relationship that occurred after the standard time that does not affect the res judicata effect of a final and conclusive judgment in the previous lawsuit, and thus,

3. Conclusion

Therefore, without further proceeding to decide on Defendant 1’s remaining grounds of appeal, the part against Defendant 1 among the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The Plaintiff’s appeal against Defendant 2 is dismissed, and the Plaintiff’s appeal against Defendant 2 is assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-dae (Presiding Justice)