[edit] Supreme Court Decision 2000Da44348 delivered on February 27, 2001 [Revocation of Fraudulent Act]
【Main Issues】
[1] The characteristic of the exercise period of the creditor's right of revocation and whether the court is obligated to ex officio examine evidence in case there exist no circumstances which make the lapse of such period open to doubt (negative)
[2] What the creditor's awareness of the cause for revocation means in a suit for a creditor's right of revocation, and whether the court can recognize the creditor's awareness of the cause of revocation at the time of the application for provisional seizure solely based on the fact that there existed a registration of collateral security in the name of the beneficiary with respect to the real estate owned by the debtor when the creditor applied for the provisional seizure on such real estate (negative)
[3] How to restitute the fraudulent act upon exercise of the creditor's right of revocation in case when the agreement to create the collective security (keun-mortgage) has been revoked and, the relevant real estate had been successfully won in the bidding process and the full payment price thereof had been made
[4] Where the beneficiary is obligated to compensate for the equivalent value in a suit for the creditor's right of revocation, whether the beneficiary is entitled to request the creditor, who exercised the right of revocation, to pay the pro rata amount equal to beneficiary's claim, or to reject the payment to the creditor of the pro rata amount of distribution by alleging a set-off based on the ground that the beneficiary is one of the creditors of the debtor (negative)
【Summary of Decision】
[1]Because the suit for the creditor's right of revocation must be filed within one year from the time when the creditor became aware of the cause for revocation, the exercise period of the creditor's right of revocation is the period allowed for filing a suit. The court is not obligated to ex officio examine additional evidence to ascertain compliance with the exercise period in case that no circumstances have been discovered which raise doubt as to whether such exercise period has lapsed based on all the litigation materials presented to the court, although the court may ex officio examine evidence to the extent necessary if there is doubt as to compliance with the exercise period.
[2]Because the creditor's awareness of the cause for revocation in a suit for a creditor's right of revocation must require the awareness of the fact that the relevant juristic act would prejudice the creditors rather than the simple awareness of the fact that the debtor conducted the relevant juristic act, it is proper to deem that the creditor, who made a provisional seizure of the debtor's assets, was aware of the fact that the debtor conducted the fraudulent act knowing that such act would prejudice the creditors at the time of the provisional seizure if the creditor made such provisional seizure after becoming aware that the provisional registration had been completed on the debtor's sole property and being confirmed that the debtor had no other properties based on the review of the status of debtor's properties. However, it cannot be deemed that the creditor was aware of the cause for revocation at the time of the application for the provisional seizure solely based on the fact that there existed a registration of collective security (keun-mortgage) in the name of the beneficiary with respect to the real estate owned by the debtor on the certified copy of the register attached to the application for the provisional seizure of the debtor's real estate.
[3]Even though the agreement to create the collective security (keun-mortgage) has been revoked because the creation of the mortgage between the debtor and the beneficiary was deemed a fraudulent act, the acquisition by a successful bidder of the relevant real estate upon full payment therefor after the real estate was successfully won in the bidding process shall not be affected thereby and the restitution as a result of the exercise of the creditor's right of revocation cannot be made by the cancellation of the registration of transfer of ownership in the name of the successful bidder, but can be made by the return of the distribution received by the beneficiary.
[4]Because the intent of creditor's right of revocation is to revoke the fraudulent act between the debtor and the beneficiary in order to preserve the debtor's properties available to the creditors and to restitute from the beneficiary or a subsequent purchaser the properties separated from the debtor's properties for the benefit of all creditors, it would be against such intent to permit the creditor, who is also a beneficiary, to refuse to return the pro rata distribution amount in that it would result in protecting the creditor who has been paid for his own claim and ignoring the interests of other creditors. Therefore, in case that the beneficiary is obligated to compensate to an equivalent value, the beneficiary shall not be entitled to request the creditor, who exercised the right of revocation, to pay the pro rata amount of distribution equal to the beneficiary's claims or to reject the payment to the creditor such pro rata amount by alleging a set-off of the pro rata amount of distribution against the equivalent amount of his claims based on the ground that the beneficiary is one of the creditors of the debtor.
【Reference Provisions】 [1] Paragraph 2 of Article 406 of the Civil Act, Article 124 of the Civil Procedure Act / [2] Paragraph 2 of Article 406 of the Civil Act / [3] Paragraph 1 of Article 406 of the Civil Act, Articles 663, 727 and 728 of the Civil Procedure Act / [4] Paragraph 1 of Article 406 and Articles 407 and 492 of the Civil Act
Article 406 of the Civil Act (Creditor's Right of Revocation) (1) If the debtor has performed any juristic act which has a property right for its subject, with the knowledge that it would prejudice the creditor, the creditor may file a suit to the court for its revocation and restitution of its original status; provided, that this shall not apply in a case where a person who has derived a benefit from such act or a subsequent purchaser was, at the time of the act or of the purchase, unaware of the fact that it would prejudice the creditor.
(2) The suit mentioned in the preceding paragraph shall be filed within one year from the time when the creditor became aware of the cause for revocation, or within five years from the time when the juristic act was done.
Article 124 of the Civil Procedure Act (Necessity of Pleadings) (1) The parties shall conduct pleadings in the court in regard to the litigation; provided, that with respect to the case to be concluded by a ruling, the court shall determine whether or not any pleadings are to be held.
(2) In case where any pleading is dispensed with under the proviso of paragraph (1), the court may examine the parties, interested persons and other reference persons.
(3) The provisions of paragraphs (1) and (2) shall not apply to the case where otherwise provided in this Act.
Article 663 of the Civil Procedure Act (Bidding) (1) The court may, ex officio or upon request of the interested persons, order the bidding in lieu of the auction before the public notification of date of auction.
(2) The provisions of the foregoing articles shall apply mutatis mutandis to the provision of paragraph (1) above.
Article 727 of the Civil Procedure Act (Effect of Acquisition of Real Estates by Full Payment of Price) A successful bidder's acquisition of real estates upon full payment of price therefor shall not be affected by an extinguishment of the security right.
Article 728 of the Civil Procedure Act (Provisions Applicable Mutatis Mutandis) The provisions of Article 600 through 666 shall apply mutatis mutandis to an auction procedure for exercising the security right to real estates.
Article 407 of the Civil Act (Effect of Revocation by Creditor) The revocation and restitution of its original status according to the provisions of the preceding Article shall take effect for the benefit of all creditors.
Article 492 of the Civil Act (Requisite for Set-off) (1) If two persons are bound to each other by obligations whose subject is of the same kind and both of which have become due, each obligor may make a set-off to the extent of the amount corresponding to that of his obligation; provided, that this shall not apply where the nature of the obligations does not so permit.
(2) The provisions of the preceding paragraph shall not apply to cases where the parties have declared an intention to the contrary; provided, that such declaration of intention cannot be so set up against a third person acting in good faith.
【Plaintiff, Appellee】 Shin Hyun-rae
【Supplementary Intervenor】 Lee Young-hwa
【Defendant, Appellant】 Shin Dong-ho (Attorney Lim Hyung-wook, Counsel for defendant and appellant)
【the Court of the First Instance】 Seoul District Court Judgment 98Gadan262073 delivered on September 14, 1999
【the Court of the Second Instance】 Seoul District Court Judgment 98 Na78368 delivered on July 6, 2000
【Disposition】 The appeal shall be dismissed. All costs of appeal shall be assessed against the defendant.
【Reason】 1. On the first ground for appeal
Because the suit for the creditor's right of revocation must be filed within one year from the time when the creditor became aware of the cause for revocation and the exercise period of the creditor's right of revocation is the period for filing a suit, the Court must reject the suit for the creditor's right of revocation filed after the expiration of such period after the ex officio examination as to compliance with exercise period.
Therefore, the court is not obligated to ex officio examine additional evidence to ascertain compliance with the exercise period in case that no circumstances have been discovered which raise doubt as to whether such exercise period has lapsed based on all the litigation materials presented to the court, although the court may ex officio examine evidence to the extent necessary if there is doubt as to compliance with the exercise period. (See Supreme Court Decision 95Da50875 delivered on May 14, 1996.)
In considering the above, because the creditor's awareness of the cause for revocation a creditor's right of revocation must require the awareness of the fact that the relevant juristic act would prejudice the creditors rather than the simple awareness of the fact that the debtor conducted the relevant juristic act, it is proper to deem that the creditor, who made a provisional seizure of the debtor's assets, was aware of the fact that the debtor conducted the fraudulent act knowing that such act would prejudice the creditors at the time of the provisional seizure if the creditor made such provisional seizure after becoming aware that the provisional registration had been completed on the debtor's sole property and being confirmed that the debtor had no other properties based on the review of the status of debtor's properties. However, it cannot be deemed that the creditor was aware of the cause for revocation at the time of the application for the provisional seizure solely based on the fact that there existed a registration of collective security (keun-mortgage) in the name of the beneficiary with respect to the real estate owned by the debtor on the certified copy of the register attached to the application for the provisional seizure of the debtor's real estate. (See Supreme Court Decision 99Da2515 delivered on April 9, 1999, Supreme Court Decision 2000Da15265 delivered on June 13, 2000, etc.)
Although we could infer, according to the plaintiff's exhibit 1 (certified copy of register) submitted by the plaintiff to the court of first instance, that the plaintiff was aware that the debtor Roh Hee-sook and the defendant entered into a contract to establish the right to collateral security (keun-mortgage) based on the fact that the registration for the establishment of the right to collateral security (keun-mortgage) due to the contract delivered on June 28, 1996 has been completed with respect to the register of real estate in this case prior to the plaintiff's application for the provisional seizure with respect to the real estate in this case on or about October 28, 1997. It cannot be a reason to raise doubt that the plaintiff was aware of the fact that the establishment of the right to collateral security (keun-mortgage) was a fraudulent act after being confirmed that Roh Hee-sook had no other properties based on the review of her properties at the time of application for such provisional seizure and there existed no other records to suggest that the plaintiff was aware of the fraudulent act examined in the case on or after one (1) year prior to the date of the plaintiff's filing of this suit.
Therefore, there is no illegality of incompleteness in deliberation as asserted as a ground for appeal although the court below did not ex officio examine the evidences in order to determine whether the period of filing suit under Paragraph 2 of Article 406 of the Civil Act has lapsed.
2. On the second ground for appeal
Even though the agreement to create the collective security (keun-mortgage) has been revoked because the creation of the mortgage between the debtor and the beneficiary was deemed a fraudulent act, the acquisition by a successful bidder of the relevant real estate upon full payment therefor after the real estate was successfully won in the bidding process shall not be affected thereby and the restitution as a result of the exercise of the creditor's right of revocation cannot be made by the cancellation of the registration of transfer of ownership in the name of the successful bidder, but can be made by returning the distribution received by the beneficiary.
According to the records, Ji Yang-soon, the successful bidder, acquired title to the real estate upon full payment of the bidding price by acquiring the claims of the defendant and setting off the bidding price against such ground for appeals of the defendant on July 21, 1998 and, thus, the acquisition of ownership by Ji Yang-soon cannot be affected by the fact that the contract to establish the right to collateral security (keun-mortgage) is revoked as a fraudulent act and the registration of the transfer of ownership in the name of Ji Yang-soon does not have to be cancelled for the restitution of such a fraudulent act.
Therefore, the decision of the court below to order the defendant to return the amount equal to the pro rata amount of portion of Roh Hee-sook among the distribution amount received by the defendant based on the collateral security (keun-mortgage) in this case as ground for appealed by the plaintiff shall be justified and there was no reversible error in matters of law as to the misinterpretation of legal principles or inconsistency or deficiency in the reasoning as alleged in the grounds for appeal.
3. On the third ground for appeal
Because the intent of creditor's right of revocation is to revoke the fraudulent act between the debtor and the beneficiary in order to preserve the debtor's properties available to the creditors and to obtain restitution, from the beneficiary or a subsequent purchaser, of the properties unduly segregated from the debtor's properties, for the benefit of all creditors, it would be against such intent to permit the creditor, who is a beneficiary, to refuse to return the pro rata distribution amount in that it would result in protecting the creditor who has been paid for his own ground for appeal and ignoring the interests of other creditors. Therefore, in case that the beneficiary is obligated to compensate to an equivalent value, the beneficiary shall not be entitled to request the creditor, who exercised the right of revocation, to pay the pro rata amount of distribution equal to his ground for appeals or to reject the payment to the creditor such pro rata amount by alleging a set-off of the pro rata amount of distribution against the equivalent amount of his claims based on the ground that the beneficiary is one of the creditors of the debtor.
Therefore, the decision of the court below to order the defendant to return the amount equivalent to the amount of the plaintiff subject to the provisional seizure among the distribution amount received by the defendant based on the collateral security (keun-mortgage) with respect to the share of Roh Hee-sook shall be justified. Additionally, there is no reversible error in matters of law of misinterpretation of legal principles as asserted as the ground for appeal.
4. Therefore, all appeals shall be dismissed and all costs of the appeal shall be assessed against the losing party. It is so ordered per Disposition with the assent of all Justices who reviewed the appeal.
Justices Park Jae-yoon (Presiding Justice)
Suh Sung
Yoo Ji-dam (Justice in charge)
Bae Ki-won
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