Where a deposit account holder’s title trust contract is revoked as it constitutes a fraudulent act, whether restitution should be made by transferring the account claim against the account holder to the donor and ordering the financial institution to give notice of transfer (affirmative in principle)

A title trustee is obligated to transfer the right acquired by a contract with the other party in relation to a title truster to the title truster, and where a deposit principal title trust contract is concluded between the contributor and the account holder, the title truster is obligated to transfer his/her claim to return the deposit to the financial institution upon the request of the contributor. Thus, where the deposit principal trust contract is cancelled due to a fraudulent act, barring any special circumstance, such as where the title truster withdrawss the deposit from the deposit account and uses the deposit from the deposit account or terminates the deposit account, the restitution following the cancellation shall be made by transferring the deposit claim against the financial institution to the donor and ordering the financial

Article 103 (title Trust), Articles 406 and 702 of the Civil Act

Korea

Defendant (Law Firm Sejong, Attorneys Kim Yong-dam et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2013Na2015430 decided May 21, 2014

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The lower court determined that the act of Nonparty 1’s trusting the name of the account in the name of the Defendant to the Defendant in excess of debt belongs to the Defendant with respect to the external relationship between the financial institution and the third party, constitutes a fraudulent act, which reduces the liability property in relation to the general creditor of Nonparty 1.

Examining the reasoning of the judgment below in light of the relevant legal principles and records, the judgment of the court below is just and acceptable, and contrary to the allegations in the grounds of appeal, there were no errors in the misapprehension of legal principles as to the existence of a private interest in a deposit ownership trust

2. Regarding ground of appeal No. 2

A. Restoration following the revocation of a fraudulent act shall be based on the return of the object itself, and it shall be based on an exceptional return only on cases where it is impossible or considerably difficult to return the original object. In cases where the return of the original object is impossible or considerably difficult, it does not mean cases where the return of the original object is not simply an absolute or physical impossibility, but also includes cases where the creditor cannot expect the realization of the performance from the beneficiary or subsequent purchaser in light of the rules of social experience or the concept of transaction (see Supreme Court Decisions 97Da58316, May 15, 1998; 2007Da63102, Mar. 26, 2009).

A title trustee is obligated to transfer the right acquired under a contract with the other party in relation to the title truster to the title truster. Where a title truster agreement has been concluded between the contributor and the account holder, the title truster shall be deemed to have the obligation to transfer his/her claim to return the deposit to the financial institution upon the request of the contributor. Thus, where the title truster agreement is cancelled as it constitutes a fraudulent act, the restoration following the cancellation shall be made by transferring the deposit claim to the financial institution to the truster and ordering the financial institution to notify the transfer to the financial institution, barring any special circumstances such as where the title truster withdrawss and uses the deposit from the deposit account or terminated the deposit account.

B. According to the reasoning of the lower judgment and the record, around October 16, 2007, the Defendant issued a passbook and a transaction seal to Nonparty 1, and Nonparty 1 deposited a cashier’s check of KRW 1,03,000,000 (hereinafter “the check of this case”) received from Nonparty 2 in excess of the debt, and used the cash for the personal purpose of Nonparty 1 by withdrawing the cash from Nonparty 1 or his agent, and as a result, around January 29, 2012, the balance of the account of this case was 57,103 won.

Examining these facts in light of the legal principles as seen earlier, since the Defendant delivered the passbook and transaction seal of the instant account upon Nonparty 1’s request to Nonparty 1, the deposit owner title trust agreement concerning the instant account (hereinafter “instant deposit owner trust agreement”) was concluded between the Defendant and Nonparty 1. If the instant account remains unrepared with remaining balance, restitution due to the cancellation of the instant deposit owner trust agreement should be made by transferring the deposit owner’s right to return to the Defendant to Nonparty 1 and ordering the financial institution to notify the transfer thereof, barring special circumstances.

In light of the above circumstances, the lower court should have determined the method and scope of restitution after examining whether the instant account remains without being terminated at the time of the closing of argument in the lower court, as long as much as the balance remains, and when the instant account was terminated, how much the money in the instant account was used for any purpose.

Nevertheless, the lower court ordered the Defendant, the obligee, to pay the Plaintiff the face value of the instant check, KRW 1.03 billion, and delay damages therefrom, as a result of the cancellation of the instant deposit owner title trust agreement. In so doing, the lower court erred by misapprehending the legal doctrine on the method of restitution in cases where the deposit owner trust agreement is revoked by fraudulent act, thereby failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point is with merit.

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Jo Hee-de (Presiding Justice)