[1] Whether the state can exercise its right by subrogation over a third party's claim against the taxpayer for the preservation of tax claims (affirmative)

[2] In a case where Gap corporation, which is a trust company, concluded a trust contract for real estate management for security trust with Eul corporation, and disposed of real estate based on the trust contract, and the state, the tax payer of Eul corporation, requested for the payment of the settlement money claim against Eul corporation on behalf of Eul corporation, on the ground that "the pertinent tax notified until the disposal money was received" under the trust contract was stipulated to be preferentially settled by the beneficiary, etc., the case holding that in light of all the circumstances, "the pertinent tax including the property tax notified until the disposal money was received" as stipulated in the trust contract means only the pertinent tax imposed on Gap corporation, which is the trustee, in relation to the trust property, since Eul corporation did not have the corresponding settlement money claim against Eul corporation, and therefore, the State

[1] Even though a taxpayer does not have sufficient means to repay his/her tax liability, it is necessary to secure and preserve the general property of the taxpayer through the exercise of creditor's subrogation right if the taxpayer fails to realize a third party's right. Article 28(1) of the Framework Act on National Taxes provides for the payment notice, demand or peremptory notice of payment, request for delivery, seizure as a cause suspending the extinctive prescription of a tax claim, and separate provision from Article 28(3)5 of the Civil Act provides for "the period during which the lawsuit is pending by filing a creditor subrogation lawsuit pursuant to Article 404 of the Civil Act." The State's exercise of the right by subrogation of a taxpayer against a third party by meeting the requirements for creditor subrogation does not allow the third party who is not liable to pay taxes to bear or guarantee the tax liability, and thereby, the establishment of a tax claim or the scope of exercise thereof does not extend arbitrarily. Meanwhile, Article 41(2) of the National Tax Collection Act provides for the obligee who is the delinquent taxpayer within the scope of the amount in arrears when the director of the tax office notifies the obligee's subrogation claim and the grounds of subrogation claim.

[2] In a case where Gap corporation, which is a trust company, concluded a trust contract for real estate management for security trust with Eul corporation, and disposed of real estate based on the trust contract, and the pertinent tax notified until the disposal price was received was stipulated in the trust contract to be settled preferentially against Eul corporation by priority beneficiary, the case holding that in a case where Eul corporation filed a claim for the payment of the settlement money claim against Eul corporation by subrogation against Eul corporation, the tax payer of Eul corporation, the purpose, contents of the trust contract, and the property tax imposed on the trust property after the trust is the truster, not the "right arising from the trust before the trust" under Article 22 (1) of the Trust Act, and such property tax is not included in the "right arising from the trust business" under the trust contract, since it means only the pertinent tax imposed on Eul corporation, which is the trustee, and it cannot be deemed that Eul corporation includes the pertinent tax imposed on Eul corporation, which is the truster, as well as the pertinent tax imposed on Eul corporation.

[1] Article 28(1) and (3)5 of the Framework Act on National Taxes; Article 41(2) of the National Tax Collection Act; Article 404 of the Civil Act / [2] Article 404 of the Civil Act; Article 22(1) of the Trust Act

Republic of Korea (Law Firm Lee & Lee, Attorneys Kim Jong-hoon et al., Counsel for the plaintiff-appellant)

Korea Asset Trust Co., Ltd. (Law Firm Democratic, Attorneys Jeong Byung-hun et al., Counsel for the defendant-appellant)

Seoul Central District Court Decision 2017Na1027 Decided September 13, 2017

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

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

1. The lower court dismissed the instant preliminary claim on the ground that: (a) the Plaintiff’s exercise of subrogation right against the Defendant on the grounds of the content of the instant trust agreement concluded between the Defendant and the World World Co., Ltd. (hereinafter “Nonindicted Co., Ltd”) and the Defendant, a taxpayer, would result in realizing the final satisfaction of a tax claim from a person who is not liable to pay taxes under a private contract or procedure, and thus, cannot be permitted in light of the principle of no taxation without law.

2. (1) Even though a taxpayer does not have sufficient means to pay his/her tax liability, it is necessary to secure and preserve the general property of the taxpayer through the exercise of the creditor’s subrogation right if the taxpayer fails to realize a third party’s right. Article 28(1) of the Framework Act on National Taxes provides for a tax payment notice, urging or demand notice of payment, request for delivery, seizure as the cause suspending the extinctive prescription of the tax claim, and separate provisions from those of Article 28(3)5, “The period during which a lawsuit is pending by a creditor subrogation pursuant to Article 404 of the Civil Act” does not run. The State’s exercise of the right by subrogation against a third party by fulfilling the requirements for a creditor subrogation does not require the third party who is not liable to pay taxes to bear or guarantee the tax liability, and thereby, the establishment of the tax claim and the scope of its exercise is not arbitrarily expanded. In addition, Article 41(2) of the National Tax Collection Act provides that “When the director of the tax office notifies the delinquent amount within the scope of the delinquent amount, the obligee’s subrogation claim and the grounds of subrogation claim are different from the obligee.

(2) However, according to the reasoning of the lower judgment and the record, the instant trust agreement is a trust agreement entered into between the lending financial institution and the Si construction project as a priority beneficiary for the purpose of securing loan claims against the lending financial institution of the non-party company, construction cost claims, etc., and Article 15(1) of the instant trust agreement provides that “The trust agreement of this case includes taxes and public charges on real estate and trust profits, maintenance and management expenses, financial expenses, and all other expenses necessary for the performance of trust affairs, and losses incurred due to the trustee’s non-liability in the performance of trust affairs shall be borne by the truster.” Article 6 of the instant special agreement provides that “Tax and accounting matters related to the trust property shall be handled by the truster’s responsibility.” This is based on the premise that the truster bears the burden. Property tax imposed on the trust property after the trust agreement of this case does not fall under “right arising from the trust cause before the trust,” as stipulated in Article 22(1) of the Trust Act, and such property tax is not included in “property tax imposed on the trust property.”

(3) Therefore, since the non-party company did not have a claim equivalent to the pertinent tax amount against the defendant pursuant to Article 22 (1) 2 of the Trust Contract of this case, the conclusion of the court below's dismissal of the instant preliminary claim seeking the payment of the above amount of settlement deposit by subrogation of the non-party company is just, and it cannot be said that the misapprehension of the legal principles as seen earlier affected

3. 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 Min You-sook (Presiding Justice)