[1] The purport of Article 66 of the former Bankruptcy Act stipulating the validity requirements of the alteration of a right or the requirement for setting up against it as an independent object of avoidance, and whether an act satisfying the validity requirements of the alteration of a right is subject to avoidance by Article 64 of the former Bankruptcy Act (negative)

[2] The meaning of "payment suspension" under Article 66 (1) of the former Bankruptcy Act

[3] The case holding that overseas escape of the bankrupt in excess of the debt constitutes the suspension of payment under Article 66 (1) of the former Bankruptcy Act

[1] The purport of Article 66 of the former Bankruptcy Act (repealed by Act No. 7428 of Mar. 31, 2005, Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act), which provides that the effect requirement of the alteration of a right or the requirement for setting up against one's own denial itself, is to be subject to the denial under the general provisions of Article 64 of the former Bankruptcy Act, even if the act satisfying the validity requirement or requirements for setting up against one's own denial. However, if it is impossible to deny the act which constitutes the cause of the alteration of a right, it shall be interpreted that the act satisfies the requirement or requirements for setting up against one's own intention and satisfies the strict requirements under Article 66 of the former Bankruptcy Act, so it shall be interpreted that the act of satisfying the requirements for the alteration of a right shall be subject to the avoidance only if it satisfies the strict requirements under Article 66 of the former Bankruptcy Act, and it shall not be subject to the avoidance under Article 64 of the former Bankruptcy Act.

[2] The term "payment suspension" under Article 66 (1) of the former Bankruptcy Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) refers to the case where the debtor explicitly and explicitly expresses that he/she is unable to repay his/her debts due to lack of his/her financial ability, generally and continuously.

[3] The case holding that where the bankrupt illegally and continuously expressed his intention to refuse the repayment of his debt, which constitutes the suspension of payment under Article 66 (1) of the former Bankruptcy Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) where the bankrupt escaped abroad when he faces a situation where the company is not in excess of his obligation due to a large amount of illegal investor loan, etc. from the company in which he concurrently holds the large shareholder and the Chairperson, such escape from overseas constitutes a suspension of payment as stipulated in Article 66 (1) of the former Bankruptcy Act

[1] Articles 64 (see current Article 391 of the Debtor Rehabilitation and Bankruptcy Act) and 66 (see current Article 394 of the Debtor Rehabilitation and Bankruptcy Act) of the former Bankruptcy Act (repealed by Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005) / [2] Article 66 (1) of the former Debtor Rehabilitation and Bankruptcy Act (repealed by Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005) (see current Article 394 (1) of the Debtor Rehabilitation and Bankruptcy Act) (see current Article 394 (1) of the Debtor Rehabilitation and Bankruptcy Act) / [3] Article 66 (1) (see current Article 2 of the Addenda of the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428, Mar. 31, 2005) (see current Article 394 (1) of the Debtor Rehabilitation and Bankruptcy Act)

The bankruptcy trustee in the East Asia Mutual Savings and Finance Company, the trustee in bankruptcy, the trustee in bankruptcy, the trustee in bankruptcy, the trustee in bankruptcy, the same trustee in bankruptcy, the trustee in bankruptcy, the trustee in bankruptcy, the trustee in charge of Kim Jong-soo, and the trustee in bankruptcy in bankruptcy of the bankrupt (Law Firm Digital Ballast, Attorney Choi Jae-Gyeong, Counsel for the plaintiff in bankruptcy, Counsel for the plaintiff in bankruptcy)

Hyundai Swiss Mutual Savings Bank, Inc. and one other (Law Firm Chungcheong, Attorneys Park Yong-ok et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2004Na67709 delivered on October 4, 2005

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The court below rejected the plaintiff's assertion of denial of the contract of this case on the ground that the act of the bankrupt (name omitted) entered into the contract of this case with the defendants constitutes "an act of the bankrupt with the knowledge that the bankrupt would prejudice the bankruptcy creditor" as provided by Article 64 subparagraph 1 of the former Bankruptcy Act (repealed by Act No. 7428 of March 31, 2005, hereinafter "the Bankruptcy Act"), but in light of the factual basis of the judgment acknowledged by the employment evidence, etc., the defendants, the beneficiary, did not know that it would prejudice the bankruptcy creditor at the time of the above act. In light of the records, the court below's decision that recognized the defendants' good faith is just, and there is no violation of the rules of evidence and the rule of experience or any violation of the burden of proof, as otherwise alleged in the ground of appeal.

2. Regarding ground of appeal No. 2

Article 66 of the Bankruptcy Act provides that the effect requirements or requirements for setting aside of the alteration of a right shall be the object of denial by the general provisions of Article 64 of the Bankruptcy Act, in its original effect requirements or requirements for setting aside. However, where it is impossible to deny an act which causes the alteration of a right, it shall be interpreted that the act satisfying the requirements for validity requirements or requirements for setting aside as much as possible and allowing special denial only when the act satisfies the strict requirements stipulated in Article 66 of the Bankruptcy Act in order to achieve the purpose intended by the parties. Thus, the act satisfying the requirements for the alteration of a right is only the object of avoidance, and it shall not be the object of avoidance by Article 64 of the Bankruptcy Act.

In the same purport, the court below is just in rejecting the plaintiff's assertion that the right to set aside under Article 64 subparagraph 1 of the Bankruptcy Act is exercised with respect to the registration of the establishment of a neighboring mortgage of this case, and there is no error of law such as misunderstanding of legal principles as to the denial of validity requirements under Article 6

3. As to the third ground for appeal

Article 66(1) of the Bankruptcy Act provides that "Where any registration or record which makes it effective after the suspension of payment or a petition for bankruptcy has been filed, it may be denied if such registration or record was made in bad faith at the expiration of 15 days after the date on which the act of assuming obligations, which is the cause of such registration, has occurred." The suspension of payment refers to the act of explicitly and explicitly expressing that the debtor cannot perform his/her obligations, which are due, generally and continuously, due to lack of self-sufficiency.

Examining the above legal principles and the facts duly admitted by the court below in light of the above legal principles, the bankrupt was faced with the situation where it is not possible to normally operate the Dong Treasury in the situation where a large amount of illegal investor loan was exceeded due to a large amount of illegal investor loan from the Dong Treasury of Dong (hereinafter “Dong Treasury of Dong”) which is a major shareholder and the Chairperson, and such overseas flight was set off on December 7, 200. Therefore, it is sufficient to view it as suspension of payment under Article 66 (1) of the Bankruptcy Act as an implied expression of the bankrupt's intention to refuse the repayment of the debt generally and continuously. Nevertheless, the court below held that the registration of the establishment of a mortgage of this case does not constitute suspension of payment, and on this ground, the court below erred by misapprehending the legal principles on the suspension of payment under the above Article 66 (1) of the Bankruptcy Act.

However, in order to deny the validity requirement under Article 66(1) of the Bankruptcy Act, the trustee in bankruptcy must prove that the beneficiary's bad faith, i.e., the beneficiary was aware of the suspension of payment at the time of the act meeting the validity requirement. According to the records, there is no evidence proving such bad faith of the Defendants, the beneficiary, and even if the Defendants' bad faith is recognized, it is apparent that the establishment registration of a mortgage of this case completed on December 9, 200 with respect to the bankrupt was an act conducted on November 5, 200 before the bankruptcy was declared against the bankrupt, and therefore, the denial of the validity requirement by the Defendants on the ground that the Defendants knew of the suspension of payment by the bankrupt cannot be permitted pursuant to Article 76 of the Bankruptcy Act.

Therefore, the decision of the court below that rejected this part of the plaintiff's assertion is just and there is no error in the misapprehension of legal principles as to the suspension of payment under Article 66 (1) of the Bankruptcy Act, which affected the conclusion of the judgment.

4. Conclusion

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 on the bench.

Justices Kim Nung-hwan (Presiding Justice)