[Breaking] Supreme Court Plenary Session Changes Previous View: Disposing of Vehicle Provided as Transfer Collateral Is Not Breach of Trust

Supreme Court Grand Bench.
Photo by Supreme Court

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that disposing of a vehicle provided as collateral transfer to a third party does not constitute breach of trust.

The Supreme Court en banc (Presiding Justice Lee Heung-gu) overturned the lower court's ruling that recognized guilt for breach of trust and imposed a fine of 300,000 won, and remanded the case to the Seoul Northern District Court during the appeal hearing of Mr. A's breach of trust case held on the afternoon of the 22nd.

Until now, the Supreme Court held the position that if a debtor who entered into a collateral transfer contract for movable property such as a vehicle, which requires registration or title transfer, disposes of it arbitrarily, breach of trust is established. However, on this day, the Court changed this view.

In other words, the Supreme Court previously considered that a debtor who provided movable property requiring registration or title transfer as collateral transfer was a person managing another's affairs in relation to the creditor and thus subject to breach of trust. However, the Court changed its stance, stating that the debtor fulfilling obligations under the collateral transfer contract pertains to managing their own affairs, not managing another's affairs.

Mr. A was indicted for breach of trust after selling his van, which he had provided as collateral transfer to secure unpaid company debts and even prepared a notarized document for, to a third party for 2.45 million won contrary to the agreement. The first and second trials had previously sentenced Mr. A to a fine of 300,000 won.

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