Supreme Court: "Lawsuits to Cancel 'Intentional Asset Reduction' Must Be Filed Within 5 Years"

Supreme Court, Seocho-dong, Seoul. Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Daehyun] The Supreme Court has ruled that filing a lawsuit to cancel a fraudulent conveyance five years after legal acts such as inheritance property division agreements is inadmissible. A fraudulent conveyance refers to acts where a debtor intentionally reduces their assets or increases their debt to avoid repayment.

On the 2nd, the Supreme Court's 3rd Division (Presiding Justice Kim Jaehyung) announced that it overturned the lower court's ruling, which had ruled in favor of plaintiff A Loan Company in a lawsuit against debtor's mother B to cancel a fraudulent conveyance, and dismissed the case. Dismissal means concluding the case without examining the merits when the plaintiff lacks the qualification or requirements to file the lawsuit.

Previously, in 2011, B completed an inheritance property division agreement with her children, including C, to inherit her deceased husband's real estate solely. B completed the ownership transfer registration in 2013 based on this agreement.

However, in 2018, A Company, a creditor of C, filed a lawsuit claiming that the inheritance property division agreement between B and C constituted a fraudulent conveyance. C had failed to repay approximately 25 million won in credit card debt to a bank, and A had acquired the claim from the bank.

The first and second instance courts ruled in favor of A. The first instance court pointed out that "the debtor gifted her only asset, the real estate," and that it was a "fraudulent conveyance against the creditor." It ordered the defendant to proceed with the cancellation of the ownership transfer registration.

However, the Supreme Court overturned the lower court's ruling and dismissed the lawsuit. The court stated, "According to Article 406, Paragraph 2 of the Civil Act, a lawsuit to cancel a fraudulent conveyance must be filed within five years from the date of the legal act."

It added, "This lawsuit was filed after five years from the legal act, making it inadmissible, so the lower court's ruling cannot be upheld," and "there are no special circumstances to consider that the inheritance property division agreement occurred on a date different from the date of the registration cause recorded in the registry."

This content was produced with the assistance of AI translation services.