Standard for determining whether the property is included in the property subject to the calculation of the legal reserve where the property was donated before the legal reserve system enters into force.

In cases where an ancestor donated property to his/her heir or to a third party before the enforcement of the legal reserve of inheritance and ownership has been transferred to the donee after the completion of the performance thereof, even if inheritance commenced after the predecessor died after the enforcement of the Civil Act amended by Act No. 3051 on December 31, 197 (hereinafter “amended Civil Act”), the inheritance does not require the retroactive property to be returned by the legal reserve of inheritance. This goes against the purport of Paragraph (2) of the Addenda to the amended Civil Act, because if the provisions of the amended Civil Act apply to donations completed before the enforcement of the amended Civil Act, the vested right of the donee would be limited by retroactive legislation. Meanwhile, Paragraph (5) of the Addenda to the amended Civil Act provides that “The previous provisions shall apply to the inheritance commenced before the enforcement of this Act, even if the ownership of the property commenced after the enforcement of the amended Civil Act, is not yet implemented before the enforcement of the amended Civil Act.” Thus, even if the ownership of the property becomes effective after the commencement of the inheritance agreement, it is also included in the amended Civil Act’s statutory reserve of inheritance.

Article 108 of the former Civil Act (amended by Act No. 3051 of Dec. 31, 197), Article 1008 of the Addenda (amended by Act No. 3051 of Dec. 31, 197), Article 1113 of the Civil Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Gyeong, Attorneys Lee Gyeong-soo et al., Counsel for plaintiff-appellant)

Plaintiff (Law Firm Yang, Attorneys Hong-soo et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm Barun, Attorneys Park Jae-sik et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2009Na49843 decided August 12, 2010

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. The legal reserve of inheritance was newly introduced since January 1, 1979 when the Civil Act amended by Act No. 3051 of Dec. 31, 197 (hereinafter “Revised Civil Act”) came into effect. Accordingly, in the event inheritance commences after the enforcement of the amended Civil Act, the heir may claim the return of the property when there is a shortage in the legal reserve of inheritance equivalent to a certain percentage of inheritance due to the donation by the inheritee. On the other hand, the Civil Act prior to the amendment provides that “if there is a person among co-inheritors who received the donation of the property from the inheritee, the return of the excess portion is not required even if the inheritance exceeds the share of inheritance” (Article 108). Since the Civil Act provides that “Where there is a person who received the donation of the property from the inheritee among co-inheritors, a donee does not have the obligation to return the property acquired by the donation to the donor or his/her heir, barring special circumstances such as invalidity or revocation of the donation contract.”

Meanwhile, Article 2 of the Addenda to the amended Civil Act provides that "this Act shall not affect the validity of the previous Act," and it can be deemed that this reflects the request for the restriction of the right of acquisition or the prohibition of infringement by retroactive legislation.

In full view of the above provisions before and after the enforcement of the amended Civil Act, when the decedent donated the property to his heir or to a third party before the legal reserve of inheritance system and the ownership is transferred to the donee upon completion of the implementation thereof, even if inheritance commences after the predecessor died after the enforcement of the amended Civil Act, the donated property is retroactively not subject to a claim for return by the legal reserve of inheritance system. If the provision on legal reserve of inheritance under the amended Civil Act applies to donations performed before the enforcement of the amended Civil Act and completed performance, it would be limited by retroactive legislation, and thus, it would be contrary to the purport of Article 2 of the Addenda of the amended Civil Act.

On the other hand, Article 5 of the Addenda of the amended Civil Act provides that "the former provisions shall apply to the inheritance commenced before the enforcement date of this Act." Therefore, the amended Civil Act shall apply to the inheritance commenced after the enforcement date of the amended Civil Act. Thus, even if a donation contract was concluded before the enforcement date of the amended Civil Act, where the amended Civil Act was enforced without completion of its implementation and where inheritance commenced thereafter, the property which has become the object of the above donation contract pursuant to the amended Civil Act shall also be included in the return of legal reserve. Although Paragraph 2 of the Addenda of the amended Civil Act provides that the amended Civil Act shall not affect the validity arising from the previous Act, Paragraph 5 of the amended Civil Act provides that the amended Civil Act shall apply to the inheritance commenced after the enforcement of the amended Civil Act, but the amended Civil Act shall also apply to the inheritance that has already been implemented after the commencement of the inheritance (see, e.g., Article 1113(1) of the amended Civil Act to the donee before the commencement of the inheritance contract."

2. According to the reasoning of the judgment below, the court below acknowledged that the defendant received the real estate in the judgment from the deceased non-party, and included the real estate in the donated property, which is the basis for calculating the legal reserve of inheritance, but most of the real estate was registered in the name of the defendant before the enforcement of the amended Civil Act, and the implementation of the act of causing transfer of ownership is completed. Thus, in light of the above legal principles, even if the real estate in the name of the defendant was donated, the real estate shall not be included in the donated property, which is the basis for calculating the legal reserve of inheritance, as long as the registration of ownership was completed before the amended Civil Act enters into force. Nevertheless, the court below erred by misapprehending the legal principles as to the scope of donated property, which is the basis for calculating the legal reserve of inheritance, and it is obvious that such illegality affected the conclusion of the judgment

3. 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 Kim Chang-suk (Presiding Justice)