[1] Whether a claim for penalty surcharge constitutes a claim not exempt from liability even where an authorization for the rehabilitation plan is granted pursuant to Article 140(1) and the proviso to Article 251 of the Debtor Rehabilitation and Bankruptcy Act (negative)

[2] Whether the imposition of penalty surcharge after the approval order for rehabilitation plan is legitimate without reporting the administrative breach of duty, which was established prior to the commencement of rehabilitation procedures for the debtor, as rehabilitation claims (negative)

[1] The main text of Article 251 of the Debtor Rehabilitation and Bankruptcy Act provides that a debtor shall be exempted from liability for all rehabilitation claims and rehabilitation security rights except for the rights recognized by the rehabilitation plan or the provisions of this Act when it is decided to authorize the rehabilitation plan. However, Articles 140(1) and the proviso of Article 251 of the Debtor Rehabilitation and Bankruptcy Act provide that fines, minor fines, criminal litigation costs, additional charges, and fines for negligence before the commencement of rehabilitation procedures shall not be exempted even if it is decided to authorize the rehabilitation plan. This provision provides for exceptions to the exemption from liability for rehabilitation claims, etc. according to the decision to authorize the rehabilitation plan, and the corresponding claim shall be deemed limited, and the claims for penalty surcharges not listed in the above provision shall not be deemed as claims that are not exempt even if it is decided

[2] Where a violation of administrative duty, which is the object of imposition of a penalty surcharge, is established before the commencement of rehabilitation procedures for the debtor, even if the disposition of imposition is made after the commencement of rehabilitation procedures, the claim for the penalty surcharge becomes a rehabilitation claim, and where the rehabilitation plan is authorized without reporting the claim for a penalty surcharge specifically determined by the disposition of imposition on the debtor as rehabilitation claims, the administrative agency may not exercise its right to impose a penalty surcharge any longer by taking effect of exemption from liability for the claim for the penalty surcharge pursuant to the main sentence of Article 251 of the Debtor Rehabilitation and Bankruptcy Act. Therefore, a disposition of imposition

[1] [2] Articles 140(1) and 251 of the Debtor Rehabilitation and Bankruptcy Act

[2] Supreme Court Decision 2005Da43883 decided September 6, 2007 (Gong2007Ha, 1535)

Authorized Construction Co., Ltd. (Law Firm Street, Attorneys Park Jong-pon et al., Counsel for the plaintiff-appellant)

Head of Gwangjin-gu Seoul Special Metropolitan City (Law Firm TELS, Attorneys Lee Jae- Jae et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2012Nu1503 decided January 25, 2013

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 supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

The main text of Article 251 of the Debtor Rehabilitation and Bankruptcy Act provides that a debtor shall be exempted from liability for all rehabilitation claims and rehabilitation security rights except for any right recognized pursuant to the provisions of the rehabilitation plan or this Act when a decision to authorize the rehabilitation plan is made. However, Article 140(1) and the proviso of Article 251 of the Debtor Rehabilitation and Bankruptcy Act provide that the claims for fines, minor fines, criminal litigation costs, additional charges, and fines for negligence before the commencement of rehabilitation procedures shall not be exempted even if a decision to authorize the rehabilitation plan is made. This provision provides that exceptions to the exemption from liability for rehabilitation claims, etc. according to a decision to authorize the rehabilitation plan. Accordingly, the claims for penalty surcharges not listed in the above provision shall be deemed limited, and such claims shall not be deemed as claims not exempt even

Where a violation of administrative duties, which are subject to penalty surcharges, is established prior to the commencement of rehabilitation procedures for the debtor, even if the disposition of imposition thereof is after the commencement of rehabilitation procedures, the claim for penalty surcharges shall become a rehabilitation claim, and where the rehabilitation plan approval plan becomes authorized without reporting a penalty surcharge specifically determined by a future disposition as a rehabilitation claim, the administrative agency may not exercise its right to impose penalty surcharges any longer due to the effect of exemption from liability for the claim for penalty surcharges under the main sentence of Article 251 of the Debtor Rehabilitation and Bankruptcy Act. Therefore, a disposition of imposition after the rehabilitation plan approval is issued for the claim for penalty surcharges is illegal (see Supreme Court Decision 2005Da43883, Sept. 6, 2007, etc

According to the reasoning of the judgment below, the court below held that the registration of title trust on the land of this case was completed prior to the commencement of rehabilitation procedures against the plaintiff, but the defendant did not report the right to the penalty surcharge on the title trust as rehabilitation claim, and thus, it was unlawful for the defendant to impose the penalty surcharge on the title trust on the land of this case after

In light of the above legal principles and records, the above determination by the court below is correct, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of the legal principles as to rehabilitation claims or non-exempt claims under the Debtor Rehabilitation

2. Regarding ground of appeal No. 2

Article 3(1) of the Act on the Registration of Real Estate under Actual Titleholder’s Name provides that “any person shall not register any real right to real estate in the name of a title trustee pursuant to a title trust agreement.” Article 5(1) of the same Act provides that any title truster who violates the provisions of Article 3(1) of the same Act shall be punished by a penalty surcharge not exceeding an amount equivalent to 30/100 of the real estate price. In addition, the proviso of Article 3-2 of the Enforcement Decree of the same Act provides that any person may reduce the penalty surcharge by 50/100 if it is not for the purpose of evading taxes or avoiding restrictions pursuant to the Acts and subordinate statutes. However, the proviso of Article 3-2 of the Enforcement Decree of the Act on the Registration of Real Estate under Actual Titleholder’s Name is clear that the said proviso is a discretionary reduction provision. Thus, even if the grounds for reduction exist, if the authority imposing the penalty surcharge imposed the full amount without taking account of the reduction of the penalty surcharge, it cannot be concluded as unlawful, but if the above grounds were not erroneous (see Supreme Court Decision 2017Du71010.

According to the reasoning of the judgment below, the court below determined that the disposition imposing a penalty surcharge on the building of this case is unlawful, since the defendant imposed a penalty surcharge without considering all such circumstances, even though it is deemed that the plaintiff merely intended to obtain a title trust and use the building of this case for operating funds, and it cannot be deemed that the building of this case was a title trust for the purpose of evading taxes, such as value-added tax, or avoiding statutory restrictions.

In light of the above legal principles and records, the above measures of the court below are acceptable. Contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the grounds for reduction of penalty surcharges under title trust, or failure to exhaust all necessary deliberations.

3. 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 Kim Yong-deok (Presiding Justice)