Busan Attorney Referral | Defended a Revocation of a Fraudulent Act and Protected the Client's Rights

The plaintiff, for whom the client received a Busan attorney referral, entered into a commercial lease agreement with a non-party B and executed a notarial deed concerning the return of the lease deposit.

Due to business failure and financial difficulty, the non-party B failed to repay the debt to the plaintiff under the notarial deed, and the plaintiff argued that the non-party B had intentionally disposed of property to harm the plaintiff.

In particular, the plaintiff argued that, because the real estate in this case was the non-party B's sole property and in a state of excess debt, it constituted a fraudulent act, and filed a 🔗revocation of a fraudulent act against the defendant.

The problem was that the real estate in this case had been placed under a title trust by the defendant, who was pursuing a joint business with the non-party B for personal investment purposes.

A fraudulent act means a legal act that harms a creditor, meaning an act of disposing of property in which a debtor intentionally transfers land, a house, deposits, and the like into another person's name, or secretly sells or hides items of property value such as antiques and paintings, hindering the creditor from recovering the debt.

Civil Act Article 406 (Creditor's Right of Revocation)

①Where a debtor performs a legal act the object of which is property rights, knowing that it harms the creditor, the creditor may petition the court for its revocation and restitution. However, this does not apply where the person who benefited from the act or the subsequent acquirer did not know, at the time of the act or the subsequent acquisition, that it harmed the creditor.

By virtue of this creditor's right of revocation, the creditor may petition the court for the revocation of a fraudulent act and restitution, and this is called the right to revoke a fraudulent act.

Through a revocation of a fraudulent act, the creditor may revoke the debtor's act of disposing of property (a sale contract, a gift contract, a contract to set up a mortgage to secure the maximum amount, and the like), restore the property to its state before the disposition, and then carry out compulsory execution against the property returned to the debtor's name to obtain repayment of the claim.

For a revocation of a fraudulent act to be established, the following are required: ▲the creditor must hold a claim ▲the debtor's fraudulent act must exist ▲the debtor's property must become less than the debt as a result of the fraudulent act ▲and whether the debtor was aware that the creditor would suffer harm.

The client who received a Busan attorney referral is a businessperson running a small to medium-sized manufacturing company in Busan, and came to know the non-party B through an acquaintance.

The non-party B proposed a new business item to the client and persuaded the client that, to raise funds in the early stage of the business, the client's real estate needed to be temporarily transferred into the non-party B's name.

Accordingly, based on trust in the non-party B, the client transferred ownership of the real estate in this case into the non-party B's name and intended to take out a loan through this.

However, the business subsequently did not proceed at all, and as the non-party B's financial problems surfaced, the litigation in this case arose.

The Busan attorney argued that the client had merely transferred the title of the real estate to the non-party B for an investment project, and that the non-party B had no actual right to own or dispose of the real estate.

To prove this, the Busan attorney explained in detail the source of the real estate funds and the circumstances of the title trust, and submitted the title trust agreement and documents related to the investment.

The Busan attorney emphasized that, if the title trust is legally recognized, the real estate cannot be subject to the plaintiff's compulsory execution, and that this is a decisive factor that fails to satisfy the requirements for a revocation of a fraudulent act.

The Busan attorney argued that the client had no knowledge at all of the non-party B's debt situation.

In the case of a monetary claim, in most cases it cannot be known unless it is publicly disclosed.

The client who received a Busan attorney referral also had no prior knowledge at all of the non-party B's debt to the plaintiff.

The Busan attorney also pointed out that the plaintiff's argument that the non-party B was in a state of excess debt had not been clearly proven.

Although a state of excess debt is a key requirement for the establishment of a fraudulent act, the attorney also emphasized that there was a possibility that the non-party B had assets beyond the debt relationship with the plaintiff, and that the specific scale of the debt was uncertain.