In cases where a trustee in bankruptcy does not express any intention on whether to cancel a bilateral contract and instead takes the bankruptcy procedure by deeming a claim on the bilateral contract reported by the other party as a bankruptcy claim, and the conditions of compulsory composition are not expressly provided for the method of the performance of an executory bilateral contract, whether Article 50(2) of the former Bankruptcy Act should apply mutatis mutandis to the revocation of such bilateral contract (affirmative)

The compulsory composition under the bankruptcy procedure is a procedure to avoid the bankruptcy liquidation and to promote the economic rehabilitation of the bankrupt by prescribing the repayment method under the terms of composition on behalf of cash for a bankruptcy claim. The bankruptcy procedure is terminated by compulsory composition. However, inasmuch as the other party filed a bankruptcy claim under the bilateral contract that occurred prior to the declaration of bankruptcy, and the bankruptcy trustee did not express any intent as to the cancellation of the bilateral contract, and the bankruptcy procedure was initiated by deeming a claim under the bilateral contract reported by the other party as a bankruptcy claim, and the compulsory composition condition only provides for the repayment terms of the monetary claim including the bankruptcy claim reported by the other party and separately provides for the execution methods of the executory contract, it is different from that of the other party’s contractual relationship cannot continue even if the bankruptcy trustee did not confirm whether to cancel the bilateral contract, and thus, the former Bankruptcy Act (Article 20(2) of the Debtor Rehabilitation and Bankruptcy Act (Article 7428 of Mar. 31, 2005) should apply mutatis mutandis to the rescission of the contract by applying Article 520(2) of the Debtor Rehabilitation Act.

Article 50 (1) (see current Article 335 (1) and (2) (see current Article 335 (2) of the Debtor Rehabilitation and Bankruptcy Act) of the former Bankruptcy Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005)

Plaintiff (Law Firm Deputy, Attorneys Ahn Byung-jin et al., Counsel for the plaintiff-appellant)

Defendant Incorporated Foundation

Supreme Court Decision 2007Da24442 Decided July 26, 2007

Seoul High Court Decision 2007Na74425 decided January 17, 2008

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. The bankruptcy procedures commenced pursuant to the former Bankruptcy Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005; hereinafter “Bankruptcy Act”), where both the bankrupt and the other party to the bilateral contract have not yet completed the performance of the bilateral contract at the time that the bankruptcy is declared, the bankruptcy trustee may either cancel the bilateral contract or claim the other party to fulfill his/her obligations at his/her option. Meanwhile, the other party may demand confirmation as to whether the bankruptcy trustee will cancel the bilateral contract with a reasonable period of time, and if the bankruptcy trustee fails to confirm the existence of the contractual obligation within a reasonable period of time, it is deemed that the bilateral contract is cancelled if the other party fails to fulfill his/her contractual requirements, and the other party may demand confirmation as to whether to cancel the bilateral contract with a definite answer as to whether to cancel the bilateral composition contract, on the other hand, the other party’s right to demand confirmation as to whether to cancel the bilateral composition contract is not subject to compulsory composition or not.

2. According to the facts duly admitted by the court below and the evidence adopted by the court below, the plaintiff entered into a contract with the defendant to manufacture, supply, and install stone in the park cemetery created by the defendant on August 7, 1998 (hereinafter "the contract of this case"). The plaintiff manufactured, supplied, and installed stone in the park cemetery 117 period from January 19, 199 to March 10, 200, but the plaintiff was declared bankrupt on November 10, 200 that the defendant did not manufacture, supply, and install stone in the above park cemetery 9Ha293 period. The contract of this case was a continuous transaction with water necessary for the defendant's park cemetery business, and the contract of this case was planned to maintain the contract of this case with the defendant's park cemetery business, and the contract of this case was planned to be settled at the same time as the plaintiff did not report the execution of the contract of this case to the bankruptcy administrator at all before the expiration of the contract's compulsory composition procedure, and the plaintiff did not know the price of stone in this case.

Examining such circumstances in light of the legal principles as seen earlier, the instant contract ought to be deemed to have been cancelled by applying Article 50(2) of the Bankruptcy Act mutatis mutandis to the bankruptcy trustee, unless the bankruptcy procedure is in progress, unless the bankruptcy trustee reports a claim arising out of the bilateral contract before the other party is declared bankrupt as a bankruptcy claim, and the bankruptcy claim reported by the other party was dealt with pursuant to the bankruptcy procedure without the option of the performance or rescission following the executory bilateral contract. The compulsory composition condition also provides for only the repayment condition of monetary bankruptcy claims, including the bankruptcy claim reported by the other party, and does not separately provide for the method of performance of

If so, the contract of this case is cancelled by the trustee in bankruptcy, and the plaintiff claims for the performance of the right to claim damages that may arise therefrom as a bankruptcy claim, it shall be deemed that the right to manufacture, supply, and install stone as stipulated in the contract of this case has expired, and the argument in the grounds of appeal to the contrary is not acceptable.

However, as long as the right to manufacture, supply, and install tins subject to confirmation or the validity of the contract of this case all terminates, the court below should dismiss all the claim of this case seeking confirmation. However, as stated in its reasoning, the court below determined that the right to manufacture, supply, and install tins arising under the contract of this case continues to exist as bankruptcy claims, and that there is no benefit in confirmation on the ground that it can be exercised only in accordance with the composition condition, and that there is no benefit in confirmation, and thus, the court below rejected the lawsuit of the plaintiff's primary and preliminary claim, but as only the plaintiff appealed, it cannot render a judgment of dismissal disadvantageous to the plaintiff, the appellant

Therefore, the appeal is 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.

Justices Kim Nung-hwan (Presiding Justice)