In cases where a bankruptcy creditor deducts a bankruptcy claim from a debt borne by the bankruptcy creditor after bankruptcy is declared, whether it constitutes “when the bankruptcy creditor bears the obligation to the bankrupt estate after bankruptcy is declared bankrupt” (affirmative in principle), and whether the same applies to cases where the bankruptcy creditor and the bankruptcy trustee have agreed on the mutual aid of the Housing Lease Protection Act (affirmative in principle)

Article 422 Subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”) provides that “when a bankruptcy creditor bears any obligation to the bankrupt estate after the declaration of bankruptcy,” the grounds for setting-off is prohibited. If a bankruptcy creditor is permitted to set-off any obligation borne by the bankruptcy creditor after the declaration of bankruptcy, it would allow the bankruptcy creditor to repay the amount in preference to other bankruptcy creditors, thereby impairing equity among the bankruptcy creditors, and thus, allowing the creditor to set-off and exercise any bankruptcy claim pursuant to the bankruptcy procedure. Therefore, barring any special circumstance, such legal doctrine applies to cases where a bankruptcy creditor deducts any bankruptcy claim from the obligation borne by the bankruptcy creditor after the declaration of bankruptcy, and it is reasonable to deem that the same applies to cases where the bankruptcy creditor and the bankruptcy trustee agreed to set-off any obligation

Meanwhile, in cases where a housing lessee, who has met the requirements for counterclaim provided for in Article 3(1) of the Housing Lease Protection Act and obtained the fixed date indicated in a lease agreement document, becomes bankrupt, the housing lessee has the right to be paid in preference to junior creditors and other creditors regarding the claims for return of lease deposit, which is a bankruptcy claim, from the proceeds from the realization of the housing (including the site) that belongs to the bankrupt estate under Article 415(1) of the Debtor Rehabilitation Act, and may obtain satisfaction at the auction procedure, etc. of the said housing without resorting to bankruptcy procedures within the scope of preferential repayment right. However, in light of the purport of Article 422 subparag. 14 of the same Act, barring any special circumstance pursuant to the procedure for recovery of the subject matter of separation right provided for in Article 492 subparag. 14 of the same Act, it is reasonable to view that the said lease deposit return claim with the said claims for return of lease deposit and the said agreement is not valid, and the said agreement is

Articles 415(1), 422 subparag. 1, and 492 subparag. 14 of the Debtor Rehabilitation and Bankruptcy Act

Supreme Court Decision 2011Da30963 Decided November 29, 2012 (Gong2017Sang, 312) Supreme Court Decision 2014Da32014 Decided January 12, 2017 (Gong2017Sang, 312)

Attached List of Plaintiffs (Law Firm Seohae, Attorneys Yellow-hwan et al., Counsel for the plaintiff-appellant)

Trustee in bankruptcy, who is a debtor in bankruptcy, and Defendant 1 and six others (Law Firm Han, Attorneys Han-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Na2022821 decided April 27, 2016

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

The grounds of appeal are examined.

1. Article 422 Subparag. 1 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”) provides for “when a bankruptcy creditor bears any obligation to the bankruptcy foundation after the declaration of bankruptcy.” This is to allow a set-off of any obligation borne by the bankruptcy creditor after the declaration of bankruptcy against the bankruptcy creditor. If the bankruptcy creditor grants a set-off against the bankruptcy claim, it would allow the bankruptcy creditor to preferentially repay the amount to the bankruptcy creditor, which would prejudice the fairness among the bankruptcy creditors. As such, the purpose of the aforementioned legal principle is to prohibit set-off and allow the bankruptcy creditor to exercise the bankruptcy claim pursuant to the bankruptcy procedure. Therefore, barring any special circumstance, it is applicable to cases where the bankruptcy creditor deducts any bankruptcy claim from any obligation borne by the bankruptcy creditor after the declaration of bankruptcy (see Supreme Court Decision 2011Da30963, Nov. 29, 2012). Even if the bankruptcy creditor and the bankruptcy trustee agreed on the mutual-aid agreement, it is reasonable

Meanwhile, in cases where a housing lessee goes bankrupt after meeting the requirements for counterclaim provided for in Article 3(1) of the Housing Lease Protection Act and obtaining the fixed date indicated in a lease agreement document, a housing lessee has the right to be paid in preference to junior creditors and other creditors regarding the claim for return of lease deposit, which is a bankruptcy claim, from the proceeds of realizing the housing (including the site) that belongs to the bankrupt estate under Article 415(1) of the Debtor Rehabilitation Act, and can be paid in preference to junior creditors and other creditors. Within the scope of such right to preferential reimbursement, the said housing can be satisfied at the auction procedure, etc. without resorting to bankruptcy procedures (see Supreme Court Decision 2014Da32014, Jan. 12, 2017). However, in light of the purport of Article 422 subparag. 14 of the same Act, barring any special circumstance following the procedure for recovering the object of right to separation provided for in Article 492 subparag. 14 of the Debtor Rehabilitation Act, it is reasonable to deem that the said lease deposit return claim is not valid.

2. Review of the reasoning of the lower judgment and the evidence duly admitted by the lower court reveals the following facts.

A. He had received support from the National Housing Fund, and constructed the first apartment of the 746 households in the land readjustment project zone of the land rearrangement project zone of the defendant Jinjin-gu, the land rearrangement project association, and the second apartment of the 1,579 households in the ordinary village of the 1,579 households (hereinafter “second apartment”), and the third apartment of the ordinary village of the 827 households in the ordinary village of the 827 households (hereinafter “the apartment of this case”).

B. He recruited the lessee of the instant apartment as a rental business operator by setting a mandatory rental period of five years, and at the time of the public announcement of the tenant recruitment, he included the term fixed date stipulated in Article 3(1) of the Housing Lease Protection Act after entering into a lease contract with the lessee, and the term “the terms and conditions for the conversion into parcelling-out” in the Housing Lease Protection Act.

The plaintiffs (However, in the case of some plaintiffs, the predecessor or the purchaser of rental housing from the lessee; hereinafter the same shall apply) leased a part of the second apartment house (hereinafter the "house of this case") at around that time, and paid the relevant lease deposit (hereinafter the "lease deposit of this case").

C. Pursuant to Article 21 of the Rental Housing Act amended by Act No. 8966 of Mar. 21, 2008, which came into force on April 25, 2008, the council of lessees’ representatives of the second apartment complex, which was a constructed rental house, filed an application for approval of pre-sale conversion conversion (hereinafter “approval for pre-sale conversion”) with the head of Ulsanbuk-do, directly related Gu on July 4, 2008, and obtained approval for pre-sale conversion as KRW 117,038,571 and KRW 28,000,000, KRW 100,877,283.

D. On January 21, 2010, Defendant 1, etc. (hereinafter “Defendant trustee in bankruptcy”) entered into an agreement on the conversion of the second apartment unit into sale (hereinafter “instant agreement”) with the council of lessees’ representatives of the second apartment unit and Defendant Pyeongtaek Chang-gu in bankruptcy (hereinafter “Defendant trustee in bankruptcy”) by setting additional contributions to pay the second apartment unit sale conversion price, and the main contents are as follows.

(1) The Defendant trustee in bankruptcy shall implement the procedure for conversion for sale in lots after receiving an agreement on conversion for sale in lots from the lessee who files an application for conversion for sale in lots of the apartment of this case (as KRW 32 square 131,400,000 and KRW 115,00,000,000, hereinafter “instant agreement”).

(2) However, the lessee shall deposit only the amount calculated by deducting the amount of loans related to the National Housing Fund from the “instant agreed amount” and the amount of the lease deposit returned to the lessee’s ordinary creative building in the account of the bankrupt’s estate’s deposit.

E. Accordingly, the Plaintiffs, who is the lessee of the second apartment, concluded a sales contract with Defendant bankruptcy trustee for each of the instant housing individually with the purchase price, and agreed to substitute the instant lease deposit as the instant lease deposit, the remainder as the loan from the National Housing Fund, and pay the remainder as the intermediate payment.

F. Since then, the defendant bankruptcy trustee received the intermediate payment from the plaintiffs, and completed the registration of ownership transfer regarding the housing of this case in the future of the plaintiffs.

3. We examine these facts in light of the legal principles as seen earlier.

A. The Plaintiffs’ claim to return the lease deposit of this case against Defendant bankruptcy trustee constitutes bankruptcy claims arising under the lease agreement prior to the declaration of bankruptcy regarding the right to lease of this case. Meanwhile, the Plaintiffs bear the obligation to pay the purchase price to Defendant bankruptcy trustee in accordance with the agreement of this case, but this constitutes grounds for prohibition of offsetting bankruptcy claims under Article 422 subparag. 1 of the Debtor Rehabilitation Act, which is the obligation to be borne after the declaration of bankruptcy regarding the right to lease of this case. Furthermore, it cannot be said that the first priority distribution under the procedure for realization and distribution of the bankruptcy estate was made with only the instant agreement for preferential conversion of the constructed rental housing under the Rental Housing

Therefore, even if the Plaintiffs were to have preferential payment right under Article 415(1) of the Debtor Rehabilitation Act, the lease deposit of this case cannot be deducted from the down payment under the Housing Lease Protection Act, unless other special circumstances exist, and this part of the mutual aid agreement is null and void.

B. Meanwhile, the part which exceeds the pre-sale conversion price stipulated in the above approval among the agreed amount agreed to pay for the second apartment for the conversion of ownership in lots is null and void. However, it is clear that the remaining agreed amount alone does not exceed the pre-sale conversion price, as stated in the attached Table 2 of the judgment of the court of first instance, as if the payment of the agreed amount is not recognized as effective, as seen above, does not exceed the above pre-sale conversion price. Thus, the Plaintiffs’ claim for return of unjust enrichment on the premise that the agreed amount exceeded the pre-sale conversion price is paid, cannot be accepted.

C. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the requirements under Article 422 subparag. 1 of the Debtor Rehabilitation Act and the validity of a juristic act violating the aforementioned provisions, thereby failing to exhaust all necessary deliberations or by exceeding the application of the Act on

4. Therefore, all appeals are 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.

[Attachment] List of Plaintiffs: omitted

Justices Park Sang-ok (Presiding Justice)