Jinju civil lawyer, “Suit for cancellation of fraudulent act, response strategy must be developed according to position”

As real estate transactions occur frequently in daily life, problems accompanying them are constantly occurring. One of the representative cases where a contract can be canceled by a third party after a real estate transaction, but one that is unfamiliar to the general public, is the issue of ‘cancellation of contract due to fraudulent activity.’

Under civil law, a fraudulent act refers to a legal act by which a debtor reduces his or her general assets in order to avoid repayment of debt. A frequently occurring fraudulent activity is to conceal, destroy, or transfer property as if it belonged to another person using forms such as selling, donating, providing collateral, or dividing property.

In this case, the creditor may file a lawsuit to cancel the fraudulent act against the beneficiary or previous acquirer in order to recover the property stolen by the debtor pursuant to Article 406 of the Civil Act. At this time, the requirements for establishing a fraudulent act are that the creditor must have a claim, the debtor must perform a legal act of concealing property even with the knowledge that it will harm the creditor, and the debt, that is, debt, must be greater than the debtor's assets due to the fraudulent act.

Changhee Lee, a civil lawyer at Daeryun Law Firm, advised, "Creditors must carefully examine the requirements for filing a fraudulent act and a cancellation lawsuit and prepare for the lawsuit. In order to win, they will need the help of a professional lawyer who understands the trends in Supreme Court rulings related to fraudulent acts and has extensive relevant experience," and advised, "A fraudulent act cancellation lawsuit must be filed within one year from the date of knowledge of the fact or five years from the date of the legal act."

On the other hand, regarding a good-intentioned transferee involved in a fraudulent act cancellation lawsuit, he explained, "If the person is unfairly subjected to a fraudulent act cancellation lawsuit, the person concerned will fall into great confusion. It is most important to persuade the judiciary with the help of an expert who can logically organize and argue his/her position on the case."

He continued, “The key is to prove that the transferee is a buyer in good faith,” and emphasized, “We will need to thoroughly prepare evidence of the circumstances of the purchase, such as the fact that the transaction was carried out through normal procedures because the seller was not aware of the seller’s debt overdraft or there were no special circumstances to suspect the transaction.”

Meanwhile, attorney Changhee Lee of Daeryun Law Firm is a civil attorney certified by the Korean Bar Association and is handling real estate-related lawsuits, fraudulent act cancellation lawsuits, dividend objection lawsuits, and development fee burden lawsuits.

Reporter Lim So-ra mail00@asiae.co.kr

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