Requirements for the crime of evading compulsory execution, and whether the crime of evading compulsory execution may be established if the result detrimental to the creditor is caused, or if the actor obtains any benefit (negative)

Article 327 of the Criminal Act

Supreme Court Decision 2008Do3184 Decided June 26, 2008 (Gong2009Do875 Decided May 28, 2009) Supreme Court Decision 2012Do3999 Decided June 28, 2012 (Gong2012Ha, 1388)

Defendant 1 and one other

Prosecutor

Law Firm Korea, Attorney Lee Ho-ho

Jeonju District Court Decision 2015No842 decided December 28, 2015

The judgment below is reversed, and the case is remanded to the Jeonju District Court.

The grounds of appeal are examined.

1. The summary of the facts charged is as follows.

A. Defendant 1 was appointed as the representative director of Nonindicted Company 1 (hereinafter “Nonindicted Company 1”) on June 14, 2010, and Defendant 2 is the representative director of Nonindicted Company 2 (hereinafter “Nonindicted Company 2”).

B. The victim Nonindicted Co. 3 (hereinafter “Nonindicted Co. 3”) has a claim for loans to Nonindicted Co. 1.

C. Nonindicted Co. 2 had a claim for the construction cost against Nonindicted Co. 1, but received KRW 462,100,000 from Nonindicted Co. 4, the principal contractor of Nonindicted Co. 1 (hereinafter “Nonindicted Co. 4”) after Nonindicted Co. 1’s bankruptcy, out of KRW 968,70,00,00.

D. Nonindicted Co. 2 received a loan with a promissory note of KRW 430,000 at face value and a discount of KRW 304,00,000 at face value, and lent the loan to Nonindicted Co. 1 by using a promissory note of KRW 304,00,000 at face value. However, Nonindicted Co. 2’s loan obligations were fully repaid by Nonindicted Co. 1 or the debtor changed thereto.

E. Nevertheless, around July 23, 2010, the Defendants prepared a written statement stating that “Nonindicted Co. 1 bears the obligation of KRW 2,610,00,000,000 for the construction price against Nonindicted Co. 1 of Nonindicted Co. 2, Ltd., and KRW 734,00,000,000, including interest thereon, shall be KRW 2,641,20,267, including the claim for the discount loan of promissory notes,” and then, “Nonindicted Co. 1 bears the obligation of KRW 2,610,00,00 for the construction price, etc. to Nonindicted Co. 2” (hereinafter “instant written statement”). around August 3, 2010, the Defendants drafted a notarized deed on each of the instant written statements (hereinafter “instant authentic deed”). Defendant 2 received the collection order for the loans and the collection order for Nonindicted Co. 5 (hereinafter “Nonindicted Co. 5”) on August 12, 2010.

F. Accordingly, the Defendants conspired to commit a false obligation with the intent to escape from compulsory execution by Nonindicted Co. 3.

2. Judgment on evasion of compulsory execution related to construction price

A. The crime of evading compulsory execution is established when there is a risk of undermining creditors by concealing, destroying, falsely transferring property, or bearing false debts with the intent to evade compulsory execution under the circumstances in which creditors have shown the intent to bring an action for compulsory execution, provisional seizure, or provisional disposition under the Civil Execution Act in reality. It does not necessarily lead to the result detrimental to creditors or an offender’s profit (see Supreme Court Decision 2008Do3184, Jun. 26, 2008, etc.). In the event a notarial deed of a performance contract with the content that bears false debts is prepared and the claims are seized and collected based on such document are received, the crime of evading compulsory execution is established (see Supreme Court Decision 2009Do875, May 28, 2009).

B. The lower court acquitted Nonindicted Company 1 on this part of the facts charged on the ground that it is difficult to view that the instant letter or notarial deed was prepared due to the intention of Nonindicted Company 1 to bear a false obligation with respect to Nonindicted Company 2, or the intention of Defendant 1 to have Nonindicted Company 1 assume a false obligation with respect to Nonindicted Company 2. The reasons are as follows.

(1) The money distributed to Nonindicted Company 2 on the basis of the instant notarial deed appears to have been used by Defendant 2 or Nonindicted Company 2, and there is no evidence to support that Nonindicted Company 1 or Defendant 1 used or participated in the use of the said dividend.

(2) Even if Defendant 1 prepared each of the instant notes or notarial deeds, it is possible for Nonindicted Company 1 to exercise his right against Nonindicted Company 1, unless there is any particular property in the Nonindicted Company 1, and, when there is any property known to Nonindicted Company 1, it may not exercise his right against the said property. In so doing, there is a possibility that Defendant 1 prepared and held each of the instant notes or notarial deeds on the said property.

C. However, the lower court’s determination is difficult to accept for the following reasons.

In light of the reasoning of the lower judgment and the following facts admitted as evidence, the Defendants conspired with Nonindicted Company 1 to escape creditors’ compulsory execution against Nonindicted Company 1, including Nonindicted Company 3, while Nonindicted Company 1 is likely to be subject to compulsory execution from creditors, and can be deemed as having committed a false obligation with the intent to avoid compulsory execution against Nonindicted Company 1.

(1) Around April 10, 2006, Nonindicted Co. 1 contracted the construction of a 4-1 block apartment unit in the Militarysan Land Development Zone with Nonindicted Co. 4, and Nonindicted Co. 2 subcontracted the construction of electric and telecommunications equipment (hereinafter “instant construction”). Nonindicted Co. 1, while performing the said construction, suspended the said construction on September 10, 207, and the subcontractors of Nonindicted Co. 1, including Nonindicted Co. 2, filed a claim for the payment of the construction price with Nonindicted Co. 4 by organizing a bond list.

(2) After the Nonindicted Company 1’s default, Defendant 2 paid the benefits to Nonindicted Company 1’s employees, etc. to Nonindicted Company 6, etc., and ordered them to work in the course of performing the obligation group.

(3) On December 4, 2007, Nonindicted Co. 2 entered into an agreement on the settlement of the construction cost to be paid by Nonindicted Co. 4 and Nonindicted Co. 1. On January 4, 2008, Nonindicted Co. 4 received KRW 462,10,000 out of the construction cost of KRW 968,70,000 from Nonindicted Co. 4. Nevertheless, Nonindicted Co. 2 filed a lawsuit against Nonindicted Co. 1 on December 4, 2007 against the Jeonju District Court 207Gahap8425, which agreed on the construction cost of Nonindicted Co. 1 with Nonindicted Co. 4 and the right of retention. Nonindicted Co. 6 did not submit a written reply with respect to the obligation for the payment of the construction cost. On February 14, 2008, Nonindicted Co. 1 rendered a final and conclusive judgment of KRW 2968,700,00 (hereinafter “instant damages for delay”).

(4) On January 21, 2008, the rehabilitation procedure commenced on July 17, 2009, and the decision of abolition was finalized on July 17, 2009. On September 27, 2008, the rehabilitation case (former District Court 2007 Gohap10), where the administrator of Nonindicted Company 1 was appointed as the Si and 725,03,950 out of the claim for construction payment of this case, the rehabilitation secured creditor list, 243,66,050 won, which was entered as rehabilitation right, was prepared as rehabilitation claim list. The administrator of Nonindicted Company 1 filed a lawsuit against Nonindicted Company 2 on June 22, 2009 regarding the claim for construction payment as the representative director of the former District Court 2009Kahap5345, which was before the rehabilitation procedure was discontinued, and the court of first instance rendered a favorable judgment against Nonindicted Company 161, 2016.

(5) Meanwhile, Nonindicted Co. 3 applied for a payment order seeking the payment of loans to Nonindicted Co. 1 and acquired the executive title on July 17, 2009.

(6) Defendant 1 knew that Nonindicted Co. 2 received part of the claim for construction price against Nonindicted Co. 1 from Nonindicted Co. 4, even though he was aware of the fact that he was liable for the total amount of KRW 2,610,000,000 for the principal and interest of Nonindicted Co. 2, Defendant 1 prepared and delivered the instant notarial deed around July 23, 2010, and around August 3, 2010.

(7) Prior to the issuance of the instant order of seizure and collection, the Korea Workers’ Compensation and Welfare Service, other creditors of Nonindicted Company 1, and Nonindicted Company 7, upon receipt of the order of seizure and collection as to the claim against Nonindicted Company 5, were concurrently seized. Nonindicted Company 2 was distributed in the distribution procedure, based on the instant order of seizure and collection based on the instant order of seizure and collection.

D. In so determining, the lower court erred by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the legal doctrine on evasion of compulsory execution, thereby adversely affecting the conclusion of the judgment. The Prosecutor

3. Judgment on evasion of compulsory execution with respect to discount loans of promissory notes

A. The lower court upheld the first instance judgment that acquitted the Defendant of this part of the facts charged on the following grounds.

(1) As long as Nonindicted Company 1 repaid the debt equivalent to the amount of the loan in the discount of notes to Nonindicted Company 2, or the debt of Nonindicted Company 2 is not extinguished due to its own contribution, Nonindicted Company 1 shall continue to bear the debt of the loan in the Nonindicted Company 2.

(2) Defendant 1 was not aware of the fact that, at the time of the preparation of the instant notes or notarial deeds, the liabilities for loans, which are discountd by Nonindicted Company 2, were repaid, or that the obligor was changed.

B. Examining the reasoning of the lower judgment in light of the record, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on evasion

4. Scope of reversal

The part of the judgment of the court below regarding the evasion of compulsory execution related to construction cost should be reversed on the grounds as seen above. However, this part is in a relationship with the evasion of compulsory execution related to the discount loan of promissory notes, and thus, the entire

5. Conclusion

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)