Whether it constitutes a fraudulent act to provide the sole property of the debtor in excess of the obligation as security for a specific creditor

Unless there are other special circumstances, the act of an obligor providing real estate, which is the only property of the obligee, to any one of the obligees, as collateral security, becomes a fraudulent act in relation to other obligees, barring special circumstances. This legal doctrine also applies where the obligee is the maximum creditor of collateral and the market value of real estate falls short of the amount of the secured obligee's claim

Article 406 of the Civil Act

[Judgment of the court below]

Defendant Kim Sung-sung, Counsel for the defendant-appellant

Seoul High Court Decision 85Na1935 delivered on December 6, 1985

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

The grounds of appeal by the Plaintiff’s attorney are examined.

If the obligor’s property is insufficient to repay the entire obligation, then the obligor provides a certain obligee with a provisional registration based on the promise to sell or purchase the immovable property under his name as a security for the obligee, or if the obligor has made a principal registration based on such provisional registration, such obligee is entitled to receive reimbursement of the secured debt in preference to other obligees, so it would reduce the obligee’s joint security to the extent that it would be more unfavorable than the previous obligee, and thus, would be prejudicial to the interests of other obligees. This legal principle also applies where the obligee is the maximum obligee and the market value of the immovable property is less than the secured obligee’s claim amount. Therefore, barring any special circumstance, the obligor’s act of offering the immovable property, the only property of which is its own property, to one of the creditors, as a security for the obligor, constitutes a fraudulent act in relation to other obligees, barring any special circumstance. According to the facts duly established by the lower court, the Nonparty, as well as the Nonparty’s mutual name, is running the Plaintiff and the Defendant, who bears the obligation under its own name, and thus, would not affect the Nonparty’s obligation.

Therefore, without further proceeding to decide on other grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Jae-hee (Presiding Justice)