[1] Whether the former Act on the Registration of Real Estate under Actual Titleholder's Name prohibits any title trust regardless of the purpose of tax evasion or any violation of statutes and imposes administrative and criminal sanctions (negative)

[2] Whether Article 5 of the former Act on the Registration of Real Estate under Actual Titleholder's Name concerning the Imposition of Penalty Surcharge violates the principle of prohibition of double punishment or the principle of proportionality (negative)

[3] Whether a penalty surcharge should be mitigated pursuant to the proviso of Article 3-2 of the Enforcement Decree of the Act on the Registration of Real Estate under Actual Titleholder’s Name belongs to the administrative agency’s discretion (affirmative)

[4] The case holding that Article 5 (2) of the former Act on the Registration of Real Estate under Actual Titleholder's Name shall apply to cases where an administrative litigation, etc. is filed against a disposition imposed on a penalty surcharge pursuant to Article 5 (2) of the former Act on the Registration of Real Estate under Actual Titleholder's Name and the procedure therefor is not completed until the new Act enters into force

[1] Articles 3, 5, 6, and 7 of the former Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007) prohibit all title trust regardless of the existence of tax evasion or the purpose of violation of Acts and subordinate statutes, and impose administrative and criminal sanctions on the violator. However, it cannot be said that the violation is against the essence of the capitalistic market order under Article 119(1) of the Constitution and the principle of private autonomy inherent in the right to pursue happiness under Article 10 of the Constitution or violates the essence of the principle of property right guarantee under Article 23(1) of the Constitution. Furthermore, the legislative purpose of the Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007) to prevent speculation, evasion of laws, and stabilization of real estate transaction and real estate price, and at present, the legislative purpose is just and appropriate means to achieve the above legislative purpose, and it cannot be viewed that the title truster is subject to administrative and criminal rights restitution.

[2] The penalty surcharge under Article 5 of the former Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007) is imposed and collected by an administrative agency in light of its purpose, function, subject and procedure, etc., on the part of the person who has the actual right to the real estate, to deprive him of unlawful gains arising from the title trust act, or to compel him/her to fulfill the obligation to make a real-name registration under the above Act, and it does not constitute punishment as an exercise of the State’s penal right prohibited under Article 13(1) of the Constitution. Thus, even if the above Act provides that the imposition of a penalty surcharge may be made in addition to criminal punishment, it does not constitute a violation of the prohibition of double punishment. Furthermore, regarding the amount of the penalty surcharge, the value of the real estate as of the date on which the administrative agency imposed the penalty surcharge, the value of the real estate as at the time when the title trust relation was already terminated or when the penalty was imposed, the period of violation, tax evasion, or evasion of taxes, etc.

[3] The proviso of Article 3-2 of the Enforcement Decree of the Act on the Registration of Real Estate under Actual Titleholder’s Name stipulates that a penalty surcharge may be mitigated by 50/100 if it is not for the purpose of evading taxes or avoiding restrictions under the law, and it is apparent that it is a discretionary mitigation provision. Thus, even if the above grounds for mitigation exist, whether to reduce the penalty surcharge is at the discretion of the authority imposing the penalty

[4] The case holding that Article 5 (2) of the former Act on the Registration of Real Estate under Actual Titleholder's Name (amended by Act No. 8418 of May 11, 2007) shall be applied to a disposition on which a penalty surcharge was imposed pursuant to Article 5 (2) of the former Act on the Registration of Real Estate under Actual Titleholder's Name (amended by Act No. 8418 of May 11, 2007), where the procedure of the administrative litigation, etc. is not completed until the new Act enters into force, and where a title trust relationship has already been terminated at the time of the imposition of the penalty surcharge, the penalty surcharge shall be calculated on the basis of the real estate value at the time of the termination

[1] Articles 3, 4, 5, 6, and 7 of the former Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007); Articles 10, 23(1), 37(2), and 119(1) of the Constitution / [2] Articles 5 and 7 of the former Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007) / [3] Article 3-2 of the Enforcement Decree of the Act on the Registration of Real Estate under Actual Titleholder’s Name / [4] Article 5(2) of the former Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 11, 2007); Article 5(2) of the Addenda to the Act on the Registration of Real Estate under Actual Titleholder’s Name (amended by Act No. 8418 of May 2, 201)

[1] Constitutional Court en banc Order 99Hun-Ga18, 99Hun-Ba71 and 111, 200Hun-Ba51, 64, 65, 85, 201Hun-Ba2 (Hun-Ba57, 518)/ [3] Supreme Court Decision 2005Du3257 decided September 15, 2005 (Gong2005Ha, 1634)/ [4] Supreme Court Decision 2004Du1427 decided May 25, 2006, Constitutional Court en banc Order 2005Hun-Ba17, 206Hun-Ba17 decided May 25, 2006 (Hun-Ba16, 755)

Plaintiff

The head of Gangdong-gu Seoul Metropolitan Government

Seoul High Court Decision 2005Nu14501 Delivered on January 13, 2006

All appeals are dismissed. The costs of appeal are assessed against each party.

1. Judgment on the Plaintiff’s grounds of appeal

A. Whether a title trust agreement exists

According to the reasoning of the judgment below, the court below found the following facts based on its adopted evidence: the plaintiff purchased on February 6, 1990 and completed the registration of ownership transfer under its name (hereinafter “the real estate of this case”) as stated in its reasoning on April 25, 1995 that the provisional registration of the right to claim ownership transfer based on the plaintiff’s promise on April 22, 1994; on October 1, 1997, the ownership transfer registration based on the above provisional registration under the above non-party 1 (hereinafter “the ownership transfer registration”); on October 6, 1999, the plaintiff’s wife was completed the ownership transfer registration under the non-party 2’s name on September 20, 199; and on September 20, 199, the court below determined that the ownership transfer registration of this case was completed by the non-party 1, the title of the real estate of this case, after the plaintiff demanded the above non-party 1 to guarantee the real property in this case’s name.

Since the above recognition and judgment of the court below are justified, it cannot be said that there is any violation of the rules of evidence as otherwise alleged.

B. Whether the Real Estate Real Name Act is unconstitutional

In principle, the Act on the Registration of Real Estate under Actual Titleholder’s Name (hereinafter “Real Estate Real Name Act”) prohibits real rights to real estate from being registered under the name of a title trustee pursuant to a title trust agreement (Article 3). If this is followed, the title trust agreement and any change in real rights based thereon shall be null and void (Article 4), and a person who violates the obligation to register under the name of the person having the actual right to real estate may be subject to administrative sanctions (Articles 5 and 6), as well as criminal sanctions (Article 7).

Even if the Real Estate Real Name Act prohibits any title trust and imposes administrative and criminal sanctions on any violator, regardless of the existence of any purpose of tax evasion or violation of laws and regulations, it cannot be said that it violates the essence of the capitalistic market order under Article 119(1) of the Constitution and the private autonomy principle inherent in the right to pursue happiness under Article 10 of the Constitution, or infringes on the essence of the principle of property right guarantee under Article 23(1) of the Constitution. Furthermore, the legislative purpose of the Real Estate Real Name Act to prevent speculation, tax evasion, and evasion of laws and regulations, and to ensure normalization of real estate transactions and stability of real estate prices, is just, and the means to achieve the above legislative purpose is also appropriate. At present, in order to achieve the above legislative purpose, it is inevitable for the title truster to deny the validity of the title trust and impose administrative and criminal sanctions on him/her. Ultimately, since the title truster has the method of remedy for transfer of ownership or receiving monetary restitution by the legal principles of unjust enrichment, it cannot be deemed that it violates the principle of excessive prohibition under Article 37(1) of the Constitution.

In the case of a title truster deemed donated due to the existence of the purpose of tax avoidance, etc., the Plaintiff claims that there exists unreasonable discrimination between the two is subject to the penalty surcharge and criminal punishment under the Real Estate Real Name Act in the case of a simple title truster, but the penalty surcharge and criminal punishment under the said Act. However, as Article 45-2 (1) of the current Inheritance Tax and Gift Tax Act concerning the deemed donation of title trust property excludes land and buildings, the title truster in relation to land and buildings is not likely to be subject to the imposition of gift tax in addition to the sanctions under the Real Estate Real Name Act, and it cannot be deemed that there exists an administrative practice, as argued by the Plaintiff, and the discrimination, as alleged by the Plaintiff, is not attributable to the provisions of the

In addition, in light of the purport and function of Article 5 of the Real Estate Real Name Act, and the subject and procedure of imposition, etc., the penalty surcharge imposed and collected by an administrative agency to deprive the illegal gains caused by the title trust act or to enforce the performance of the obligation to make a real-name registration under the Real Estate Real Name Act, it does not constitute a punishment as an exercise of the State punishment right prohibited under Article 13(1) of the Constitution. Thus, even if the Real Estate Real Name Act provides for criminal punishment and the imposition of penalty surcharge in addition, even if the Real Estate Real Name Act provides that the imposition of penalty is possible, it does not constitute a violation of the principle of prohibition of double punishment. Furthermore, regarding the amount of the penalty surcharge, the value of the real estate as of the date the administrative agency imposed the penalty, the value of the real estate as of the date on which the penalty was imposed, or the real-name trust relation had already been terminated at the time of the imposition of the penalty, or with the purpose of evading taxes or avoiding restrictions under the law, it cannot be deemed excessive.

Therefore, since each of the above provisions of the Real Estate Real Name Act is against the principle of private autonomy, the principle of equality, the principle of prohibition of excessive punishment, and the principle of prohibition of double punishment, it cannot be deemed that it violates the Constitution, and therefore, the court below's ground of appeal that the above provisions of the Real Estate Real Name Act are unconstitutional cannot be accepted.

(c) Whether penalty surcharges are mitigated;

The proviso of Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act provides that a penalty surcharge may be reduced by 50/100 if it is not for the purpose of evading taxes or avoiding restrictions under the statutes. This is clear that it is a discretionary mitigation provision. Thus, even if the above grounds for mitigation exist, whether to reduce a penalty surcharge should belong to the discretion of the imposing authority of the penalty surcharge (see Supreme Court Decision 2005Du3257, Sept. 15, 2005).

After comprehensively taking account of the adopted evidence, the lower court determined that there was no illegality of deviation from or abuse of discretion on the registration of transfer of ownership of this case, which was made for the purpose of evading compulsory execution, in view of the circumstances as stated in its reasoning, such as the fact that the representative created a collateral security on the real estate of this case for his own guarantee to the representative who acquired the company that the Plaintiff had worked, and the creditors of the representative are likely to enforce compulsory execution against the right to collateral security, thereby evading the registration of transfer of ownership of this case.

The above recognition and judgment of the court below are just, and there is no error in the misapprehension of legal principles as to the grounds for reduction of penalty surcharge under the proviso of Article 3-2 of the Enforcement Decree of the Real Estate Real Name Act.

2. Judgment on the Defendant’s grounds of appeal

Article 5(2) of the former Real Estate Real Name Act (amended by Act No. 8418 of May 11, 2007) provides that when imposing a penalty on a person who violates the obligation to register under the name of the person having the actual right to real estate, the value of the real estate as of the date on which the penalty is imposed, regardless of whether the title trust relation is terminated or whether the real name registration exists, shall be the real estate value which serves as the basis for calculating the penalty surcharge (hereinafter “real estate appraised value”). Article 5(2) of the same Act provides that the application has been suspended until the Constitutional Court Decision 2005Hun-Ga17 of May 25, 2006, declared that the real estate was inconsistent with the Constitution, and accordingly, the proviso to Article 5(2) of the former Real Estate Real Name Act (amended by Act No. 8418 of May 11, 2007) was newly established, and where the title trust relation was already terminated or the new administrative litigation procedure was not completed, the value of the real estate under the title trust relation.

In the case of this case, the proviso of Article 5 (2) of the Addenda to the current Real Estate Real Name Act applies, so the amount of penalty shall be calculated by using the value of real estate at the time of termination of the title trust relationship as the amount of real estate evaluation. According to the reasoning of the judgment below, the court below is just in the determination of the court below, as it calculated the value of the real estate at the time of termination of the title trust relationship, which is not the value of the real estate of this case as of the date the penalty is imposed, that is, the time of termination of the title trust relationship, not the value of the real estate of this case as of the date when the plaintiff donated the real estate to his wife, and the ownership transfer registration accordingly has been made,

3. Therefore, all appeals are dismissed, and the costs of appeal are assessed against each appellant. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Sung-tae (Presiding Justice)