In cases where the debtor provided a certain creditor with a security at the same time as a new loan, and the reasonable balance between the loan and the price of the secured object is acknowledged, and where it is not likely to cause a disposition detrimental to the bankruptcy creditor, such as the concealment or donation of the loan, etc., whether the act of offering a security constitutes an act that may be denied in accordance with each subparagraph of Article 391 of the Debtor Rehabilitation and Bankruptcy Act (negative)

Even if a debtor provided a certain creditor with a security in insolvent, this would have been exchanged with a new loan, and a reasonable balance between the loan and the price of the object for security can be acknowledged, and thus, if the debtor would have a concern over the disposition detrimental to the bankruptcy creditor, such act of offering security cannot be deemed an act detrimental to the bankruptcy creditor, and it does not constitute an act of denying it pursuant to each subparagraph of Article 391 of the Debtor Rehabilitation and Bankruptcy Act.

Article 391 of the Debtor Rehabilitation and Bankruptcy Act

Korea Deposit Insurance Corporation (Law Firm LLC, Attorneys Lee Jae-han et al., Counsel for the plaintiff-appellant)

Defendant 1 and eight others (Law Firm Barun et al., Counsel for the defendant-appellant)

Gwangju High Court ( Jeonju) Decision 2014Na1084 decided September 10, 2015

All appeals are dismissed. The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 2 through 5

Even if a debtor provided a certain creditor with a security in insolvent, such act was conducted simultaneously with a new loan, and a reasonable balance between the loan and the price of the object mortgaged can be acknowledged, and thus, if the debtor does not cause concerns over the disposition detrimental to the bankruptcy creditors, such act of offering security cannot be deemed an act detrimental to the bankruptcy creditors, and it does not constitute an act that can be denied pursuant to each subparagraph of Article 391 of the Debtor Rehabilitation and Bankruptcy Act.

The court below determined that the act of creation of the security interest in this case constitutes an act of causing damage to the bankruptcy creditors or a damage to the bankruptcy creditors on the ground that the act of creation of the security interest in this case was not aimed at securing the existing obligations of a mutual savings bank (hereinafter referred to as the “mutual savings bank prior to the date”), but was exchanged simultaneously with borrowing funds to promote the continuation of business without being subject to a disposition of business suspension, etc. by the Financial Supervisory Service, and that the amount of the loan is useful for any other purpose or is not likely to be seized, and thus, it cannot be concluded that the mutual savings bank prior to the date

In light of the aforementioned legal principles and records, the above determination by the court below is just, and contrary to the allegations in the grounds of appeal, there were no errors by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by inconsistency in the reasoning of the judgment, etc. In addition, the judgment below did not err by failing to exhaust all necessary deliberations in the judgment of the court below, as alleged in the grounds of appeal, inasmuch as the act of creation of security right in this case does not constitute an act of creation of security right as well as an act

The Supreme Court precedents cited in the grounds of final appeal are different from this case, and thus are inappropriate to be invoked in this case.

2. Regarding ground of appeal No. 1

The court below determined that even if the act of creation of the security right of this case brought about the damage to the external bankruptcy creditors, it is reasonable to view that it constitutes exceptional cases where general bankruptcy creditors are obliged to suffer the reduction of bankruptcy estate or the unfair evaluation of the bankruptcy estate.

This part of the judgment of the court below is merely a family and additional judgment, and as long as the judgment of the court below that the act of creation of security right in this case does not constitute an act detrimental to bankruptcy creditors, the legitimacy of the above home and additional judgment does not affect the conclusion of the judgment, and the ground of appeal on this point is not acceptable without further review.

3. Conclusion

Therefore, all appeals are 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 on the bench.

Justices Ko Young-han (Presiding Justice)