[1] Whether a newly constructed building is included in trust property where a trust contract is terminated during the construction of a new building although the land and a newly built building are stipulated in a land trust contract for sale in lots as trust property and the loan obligation for the construction of a new building was agreed to be included in trust property (affirmative)

[2] Whether the exercise of the right of termination by the truster under Article 56 of the Trust Act is restricted solely on the ground that the trustee agreed to receive the trust remuneration from the truster (negative)

[3] Purport of the provision of Article 63 of the Trust Act, and whether the exercise of the trustee's right to claim expenses or remuneration is restricted pursuant to the above provision (negative)

[4] Whether the provisions of Article 44 of the Trust Act, which set forth the requirements for the trustee's exercise of the right to claim compensation and the right to claim compensation, apply to cases where the trust is terminated (negative)

[1] In case where a land owner entrusts land to a real estate trust company, and a real estate trust company constructs a new building on the land and sells it to the real estate trust company, and then collects input expenses and delivers proceeds to the beneficiary, the land and a newly constructed building shall be determined as trust property and sold in lots, and where a trust contract is terminated during the construction of a new building while the loan obligation for new construction was agreed to include the land and a newly constructed building as trust property, the newly constructed building shall also be deemed as included in trust property unless there is any special provision as to the ownership attribution of the building before completion. Accordingly, upon termination of the trust, the trustee shall revert the right to the building under Article 59 or 60 of the Trust Act to the beneficiary, truster

[2] The fact that the trustee agreed to receive the trust remuneration from the truster cannot prevent or restrict the beneficiary and the truster from exercising the right to terminate voluntarily pursuant to Article 56 of the Trust Act.

[3] Article 63 of the Trust Act, which is a provision on accounting upon termination of a trust, declares the legal doctrine that the trustee is naturally obligated to finally calculate the trust affairs, and that when the beneficiary approves such accounting, the trustee is exempted from liability to the beneficiary, and the beneficiary shall not be entitled to transfer the rights other than the final calculation, payment of money, and any other property liability to the trustee, by asserting any content different from the final calculation. In the event that the trust is terminated, it shall not be deemed that the trustee stipulates the requirements for claiming expenses or remuneration.

[4] When the trust is terminated, considering the fact that the truster or beneficiary's obligation to pay remuneration or to pay expenses to the truster or beneficiary and the trustee's duty to transfer the trust property to the beneficiary is concurrently performed, the provisions of Article 44 of the Trust Act shall be deemed to stipulate the requirements for the trustee to claim compensation for expenses or damages, while the trust contract is maintained without termination or termination in the middle. It shall not be deemed to apply to the case where the trust is terminated.

[1] Articles 19, 59, and 60 of the Trust Act / [2] Article 56 of the Trust Act, Article 689(2) of the Civil Act / [3] Articles 42, 43, 50(2), and 63 of the Trust Act / [4] Articles 38, 42, 43, and 44 of the Trust Act, Article 536 of the Civil Act

[3] Supreme Court Decision 2002Da50415 decided Jan. 10, 2003 / [4] Supreme Court Decision 2004Da24557 decided Jun. 9, 2006 (Gong2006Ha, 1253)

Plaintiff (Law Firm Rate, Attorneys Shin Sung-sung et al., Counsel for the plaintiff-appellant)

The bankruptcy trustee of the bankrupt Korea Real Estate Trust Corporation, who is the taking over of the lawsuit of the Korean Real Estate Trust Corporation, was Kim Jin-jin (Attorney Park In-bok)

Seoul High Court Decision 2003Na57217 delivered on December 28, 2004

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Plaintiff’s ground of appeal

A. Article 19 of the Trust Act provides that “The property acquired by a trustee due to the management, disposal, destruction, damage, or any other reason of the trust property shall belong to the trust property.” Thus, in the case where a landowner entrusts a real estate trust company with the construction of a new building on the land, and a real estate trust company collects input expenses after selling it to the real estate trust company, and delivers profits to the beneficiary, the land and a newly constructed building shall be designated as a trust property, and the loan obligations for the construction of a new building shall also be included in the trust property, but the trust contract is terminated during the construction of a new building, unless there is any special provision as to the ownership ownership of the building before the completion of the construction, the newly constructed building shall be deemed as included in the trust property. Accordingly, upon the termination of the trust, the trustee shall transfer the right to the building under construction under Article 59 or 60 of the Trust Act

B. According to the records, the Plaintiff entered into a land trust agreement with the Korean Real Estate Trust Co., Ltd. (hereinafter “former Real Estate Trust Co., Ltd.”) prior to the bankruptcy and agreed to newly construct and sell the instant land owned by the Plaintiff in trust with the company prior to the bankruptcy and collect input expenses from the proceeds therefrom and deliver profits to the Plaintiff on the ground. Under the above contract terms, the instant land and buildings are prescribed as trust property, and loans for new construction of the building are also included in trust property. However, during the process of implementing the trust project, construction of the building is suspended due to the loan of new building construction funds in the process of performing the trust project, and under such circumstances, the Plaintiff, the truster and the Plaintiff, the truster, terminated the trust agreement pursuant to Article 56 of the Trust Act.

In light of the above, it is reasonable to view that a building newly constructed in the name of a trustee under the instant trust contract is also included in the trust property. As such, upon termination of the trust contract, the company prior to bankruptcy has the obligation to revert the right to the building under Article 59 of the Trust Act to the Plaintiff, the beneficiary.

Nevertheless, the court below determined that the building before completion is not included in the trust property to be reverted to the beneficiary upon termination of the trust. The court below erred in the misapprehension of legal principles as to the scope of return of trust property at the time of termination of the trust, which affected the conclusion of the judgment. The plaintiff's ground of appeal

2. As to the Defendant’s ground of appeal

A. Regarding ground of appeal No. 1

Article 56 of the Trust Act provides that "a truster or his/her heir may terminate at any time any trust to which the truster receives all trust benefits. In this case, the provisions of Article 689 (2) of the Civil Act shall apply mutatis mutandis." Article 689 (2) of the Civil Act provides that "if one of the parties concerned terminates a contract at a time disadvantageous to the other party without any inevitable reason, he/she shall compensate for the damages caused by the termination of the contract." Thus, the trustee who agreed to receive trust fees from the truster cannot prevent or restrict the truster and the truster from exercising his/her right of termination pursuant to the provisions of Article 56 of the Trust Act.

In the same purport, the court below is just in holding that the trust contract of this case was terminated by the exercise of the right of termination under Article 56 of the Plaintiff’s Trust Act, which is the truster and beneficiary, and there is no error in the misapprehension of legal principles as to the requirements for the exercise of the right of termination under Article 56

B. As to the grounds of appeal Nos. 2 through 4

(1) Article 63 of the Trust Act provides that "where a trust is terminated, the trustee shall make the final calculation of the trust affairs and obtain the approval of the beneficiary. In this case, the provisions of Article 50 (2) shall apply mutatis mutandis." Article 50 (2) provides that "if the trustee is replaced, the liability for the transfer of the trust affairs and the transfer of the affairs to the former trustee shall be deemed to be exempted: Provided, That this shall not apply where there is an unlawful act." Article 63 of the Trust Act provides that "if the trust is terminated, the trustee has a natural obligation to make the final calculation of the trust affairs, and if the beneficiary approves the calculation, the trustee shall be exempted from liability to the trustee, and the beneficiary shall not be deemed to have any right other than the final calculation, payment of money, or other property liability, other than the final calculation, by asserting any content different from the final calculation (see Supreme Court Decision 2003Da5015, Jan. 10, 2003).

Meanwhile, Article 38 of the Trust Act provides that "if the trustee fails to properly manage the trust property, causes loss, reduction or any other damage to the trust property, or disposes of the trust property in violation of the principal place of the trust, the truster, his heir, beneficiary or other trustee may claim compensation for damages or recovery of the trust property against the trustee." Article 42 (1) provides that "the trustee may, in receiving compensation for taxes, public charges and other expenses borne with respect to the trust property, or losses incurred to him without negligence, exercise his right preferentially to other rights-holders in order to perform the trust affairs." The main text of Article 43 provides that "the trustee may claim compensation from the beneficiary or provide reasonable security to the beneficiary," and Article 43 provides that "if the beneficiary receives remuneration from the trust property, the provisions of the preceding Article shall apply mutatis mutandis to remuneration from the beneficiary." Article 442 of the Trust Act provides that "The trustee shall not be deemed to have terminated the trust property's obligation to reimburse or terminate the trust property at the same time unless the trustee performs the trust property's obligation or duty to reimburse the trust property."

(2) In light of the above legal principles and records, when the plaintiff terminated the trust contract of this case and sought a transfer of trust property to the company before bankruptcy, which is the trustee, the defendant defense that the plaintiff could not respond to the plaintiff's claim until he received or received remuneration and expenses pursuant to the trust contract of this case. The plaintiff re-claimed that the plaintiff suffered losses because the company before bankruptcy incurred losses due to the plaintiff's failure to perform his duty as the trustee. The defendant's defense includes the purport of both the transfer of trust property of the company before bankruptcy and the plaintiff's simultaneous performance of the duty to reimburse the plaintiff's remuneration and expenses. Meanwhile, the trust contract of this case is lawfully terminated (Article 4 of the Trust Act is not applicable and it cannot be deemed that the trustee's exercise of the right to claim remuneration and expenses is limited by Article 63 of the Trust Act). In this case, the court below should have deliberated on whether the truster's or beneficiary's duty to pay remuneration and expenses to the trustee and the trustee's duty to transfer trust property to the beneficiary. Thus, the court below should have reviewed the plaintiff's right to claim compensation and its amount.

Nevertheless, under different premise, the court below rejected the defendant's defense on the ground that the company prior to bankruptcy or the defendant did not obtain the plaintiff's approval by calculating the final amount of the trust affairs and did not compensate for damages caused by the improper management of the trust affairs. Thus, the court below erred by misapprehending the legal principles on Articles 44 and 63 of the Trust Act, which affected the conclusion of the judgment. The ground of appeal on this point is with merit.

3. Therefore, 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 Park Si-hwan (Presiding Justice)