In a case where a debtor in excess of his/her debt borrowed money from a third party and purchased the house and provided the house as a security for the loan, the case holding that the joint security of the existing creditors cannot be deemed to have decreased through a series of acts conducted within a short period, and only such act of security should not be deemed to constitute a fraudulent act by separating it from the act

Article 406 of the Civil Act

Korea Technology Finance Corporation (Law Firm LLC, Attorneys Jeongyang-yang et al., Counsel for the defendant-appellant)

Defendant

Seoul Western District Court Decision 2008Na4906 Decided November 27, 2008

The judgment of the court below is reversed, and the case is remanded to the Seoul Western District Court Panel Division.

We examine the grounds of appeal.

The court below found on March 26, 2006 that the non-party, who was liable for reimbursement to the plaintiff, purchased the house of this case from the Park Jong-dae on March 26, 2006 and completed the registration of ownership transfer on April 7, 2006, and completed the registration of ownership transfer on the same day, and completed the registration of ownership transfer claim by entering into a promise with the defendant on April 10, 2006 with regard to the house of this case as a collateral for the debt of KRW 35 million borrowed from the defendant who is a relative, and concluded a promise to sell the house of this case with the defendant on April 10, 206 and completed the registration of ownership transfer claim on April 11, 2006. The court below held that the non-party's act of entering into the ownership transfer claim registration on the sole property of the non-party and completed the ownership transfer claim registration on the ground of such promise constitutes a joint security act by the creditor, including the plaintiff.

However, according to the Defendant’s argument, the Nonparty borrowed KRW 35 million from the Defendant to raise funds to purchase the instant house, while the Nonparty borrowed KRW 35 million from the Defendant with the funds raised therefrom, and completed the registration of transfer of ownership by paying the purchase price of the instant house with the funds raised therefrom, and completed the registration of transfer of ownership, and completed the registration of the establishment of a neighboring mortgage in the name of the said bank and the right to claim ownership transfer in the name of the Defendant with respect to the instant

Unless there exist any special circumstances, the act of an obligor, who was in excess of his/her obligation, providing real estate as collateral to one of the creditors, constitutes a fraudulent act in relation to other creditors, barring special circumstances. However, if the Nonparty borrowed money from the Defendant and used it as collateral for purchasing the instant house, and provided the instant house newly acquired through such circumstance as collateral for the Defendant, barring any other special circumstances, the joint collateral of the existing creditors cannot be deemed reduced through a series of acts conducted within a short period, and in such a case, only the Nonparty’s act of offering collateral against the Defendant should not be deemed as a fraudulent act.

Nevertheless, without examining and confirming whether the Defendant’s assertion is true or not, the lower court concluded that the Nonparty’s act of offering collateral to the Defendant constitutes a fraudulent act. In so doing, the lower court erred by misapprehending the legal doctrine on fraudulent act and failing to exhaust all necessary deliberations, thereby affecting the conclusion of the judgment.

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 Ahn Dai-hee (Presiding Justice)