2005Do7288 Violation of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes(Fraud)

by the Supreme Court of Korea

Chief Justice Lee Yong-hoon (Presiding Justice)
Justices Koh Hyun-chul, Kim Yong-dam, Kim Yong-ran, Yang Seung-Tae, Kim Hwang-sik, Park Si-hwan, Kim Ji-hyung, Lee Hong-hun, Park Il-hwan, Kim Neung-hwan(Justice in charge), Jeon Soo-ahn, Ahn Dae-hee

Main Issue

In case where the value of real estate is assessed under the presumption that Article 3 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes applies, whether the monetary amount equivalent to that burdened by a fixed collateral on the real estate should be deducted from the market value of the real estate (affirmative)

Summary of Decision

Majority Opinion

1. The crime of fraud stipulated in Article 347 of the Criminal Act is constituted if the criminal deceives a person to acquire property or property profit (Section 1) or the criminal makes a third party receive property or property profit (Section 2), and it does not matter how much the acquired property or property profit is. But the crime of fraud through the violation of Article 3 of the Aggravated Punishment Act has conditions that are required to constitute the crime, which is that the profit is five hundred (500) million Korean won or more and less than five (5) billion Korean won, and the punishment is aggravated according to the amount, so it shall be applied by strictly and carefully calculating the amount of the profit, so that the principle of balance between crime and punishment is not damaged and that the principle of accountability that punishment shall be based upon accountability is not damaged.
2. Therefore, in calculating the profit of real estate in case its title is transferred through deceit or through a third party in order to apply Article 3 of the Aggravated Punishment Act, if the real estate has no burden, the market price of the real estate shall be the profit, but if the real estate has a completed registration for a fixed collateral or it is seized or attached, unless otherwise mentioned, the profit shall be the amount that is calculated by subtracting the amount of the credit of warranty, the amount of the credit that is executed through seizure and the amount of the claim for the attachment from the market price of the real estate.

Separate Opinion by Justice Kim Yong-dam, Kim Hwang-sik, and Ahn Dae-hee

1. If a person acquires real estate that has a fixed collateral, seizure or attachment on it and says that he will make the payment by taking over the debt, it shall be deemed as just a method to pay for the acquired property or a burden attached to the property, and whether such profit will ultimately be realized or not shall be interpreted not as a constituent of a crime also in the crime of violating the Aggravated Punishment Act through fraud but as an aspect about the assessment of the culpability, so it shall be the credible interpretation that the amount of the real estate also on the premise of the application of Article 3 of the Aggravated Punishment Act shall refer to the objective market price of the real estate with no burden.
2. From the perspective of the majority opinion that the actual market price of the acquired real estate shall be calculated in applying Article 3 of the Aggravated Punishment Act, if the debt that existed at time of the acquisition disappears afterwards in its entirety or partially through the payment of the debtor et al., the actual market price of the real estate goes up, so it becomes a problem whether a different legal provision should be applied according to such situations, and it is hard to suggest a clear criteria about the scope of deduction when there is a joint collateral or if some of the various real estate are acquired, or if there is a provisional disposition or a provisional attachment on the real estate, so the majority opinion shall be deemed inappropriate as it goes against the principle of clarity and causes confusion in a criminal procedure.
3. Therefore, Supreme Court Decision 2003Do1859 delivered on September 5, 2003 that stipulated that a situation where a seizure registration had been completed on real estate that is acquired through deceit shall not be a reason to evaluate the profit acquired by the defendant at a lower amount than the market price of the real estate in calculating the "profit" according to Article 3 of the Aggravated Punishment Act.

Supplementary Opinion to the Majority Opinion by Justice Kim Neung-hwan

1. About the crime of violating Article 3 of the Aggravated Punishment Act through fraud, it is clear that court-delivered sentence is provided differently on the condition that the profit of property shall be five hundred (500) million Korean won or more and less than five (5) billion Korean won, which means that the constituent is different from that of the crime of fraud in accordance with the Criminal Act. If the amount of the profit is part of the constituent, the evaluation and the calculation of the profit should be conducted in an objective and plausible way. But the reality of transactions is that the objective market prices of real estate with burden such as fixed collateral and of the real estate with no burden cannot be the same.
2. As the crime has started by acquiring real estate with a burden of fixed collateral et al., the profit from the real estate shall be the objective market price at the time, which should be the criteria to judge whether Article 3 of the Aggravated Punishment Act shall apply or not and not to consider whether such fixed collateral et al. disappeared afterwards through repayment et al.
3. The majority opinion, if pushed ahead, shall deem that a provisional disposition or provisional registration might be an obstacle to disposition of real estate but not a factor that affects the market price so it shall not be taken into consideration in calculating the profit from the real estate, but other rights mentioned might affect the market price of the real estate depending on the situation, and that collateral provisional registrations shall be treated the same as fixed collateral unless otherwise stipulated. The majority opinion might complicate certain cases in calculating the objective market price of the real estate to be acquired, but even in those cases, it is the natural obligation of the court to put effort into objectively and plausibly calculate the profit from the real estate that is responsible for operating the criminal judicial procedure appropriately, and tolerating a consequence that the principle of balance between crime and punishment or the principle of accountability is damaged only because it is hard to calculate the profit shall not be deemed righteous.
4. The separate opinion that deems the actual amount of the market price of the acquired real estate in the crime of violating the Aggravated Punishment Act through fraud that provides different legal sentences according to the profit of the acquired property not as a constituent of a crime but just as an aspect of the assessment of the culpability causes concerns to lead to levy excessive punishment that goes against the principle of balance between crime and punishment or the principle of accountability, so is hard to agree with.

Reference Provisions

1. Article 3(1) of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes
2. Article 347 of the Criminal Act

Article 3 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (Aggravated Punishment of Specific Property Crime)

(1) Any person who commits the crime as prescribed in Article 347, 350, 351 (limited to the habitual crime as prescribed in Articles 347 and 350), 355 or 356 of the Criminal Act, shall, if the value of the goods or profits on property which he gains or has another person gain (hereinafter referred to as an "amount of profit") is five hundred million won or more, be punished as follows:

1. If the amount of profit is five billion won or more, he shall be punished by imprisonment for lifetime or not less than five years;

2. If the amount of profit is not less than five hundred million won but less than five billion won, he shall be punished by imprisonment for a definite term of three or more years; and

Article 347 of the Criminal Act (Fraud)

(1) A person who defrauds another, thereby taking property or obtaining pecuniary advantage from another, shall be punished by imprisonment for not more than ten years or by a fine not exceeding twenty million won.

(2) The preceding paragraph shall apply to a person who, by the methods of the preceding paragraph, causes a third person to take property or to obtain pecuniary advantage from the latter.

Reference Case

Supreme Court Decision 2003Do1859 delivered on Sep. 5, 2003

• Defendant: Defendant

• Appellant: Defendant

• Counsel: Attorney Kim Ki-suk

• Judgment of the court below: Busan High Court Decision 2005No332 delivered on Sep.14, 2005

Disposition

The appeal shall be dismissed.

Reasoning

This is to judge the Reasons for Appeal.

1. On Article 1 of the Reasons for Appeal

According to the record, the court below compiled the selected evidence and recognized that the defendant never signed any agreement with the Korea First Bank Seo Myon Branch to get a loan with each of the land in this case as collateral and never had a capability to pay the rest of the amount but deceived the victims as if there had been such agreement or capability, which is understood as justifiable, and there is no violation of the law such as violating the rule of evidence selection, as argued in the Reasons for Appeal.

2. On Article 2 of the Reasons for Appeal

A. Article 3 Section 1 of the Act on the Aggravated Punishment, etc. of Specific Economic Crimes (hereinafter referred to as the "Aggravated Punishment Act") stipulates, "In case of a person who commits the crime stipulated in Article 347 of (Fraud), Article 350 (Threat), Article 351 (limited to habitual criminals of Article 347 and Article 350), Article 355 (Embezzlement and Malfeasance) or Article 356 (Embezzlement and Malfeasance in Office) of the Criminal Act, if the addition to the property profit that has been gained through the criminal activity or through a third party (hereinafter referred to as the "profit") is five hundred (500) million Korean won or more, he shall receive aggravated punishment in accordance with the following category." Paragraph 1 stipulates, "If the profit is five (5) billion Korean won or more, he shall receive a life sentence or a sentence of five (5) or more years in prison." Paragraph 2 stipulates, “"If the profit is five hundred (500) million Korean won or more and less than five (5) billion Korean won, he shall receive a sentence of three (3) or more years in prison. " Meanwhile, Section 2 of the same Article stipulates, "In the case of Section 1, a fine in the amount that is same or less than the profit shall be levied as well. " Compared to the above provisions, the crime of fraud stipulated in Article 347 of the Criminal Act is constituted if the criminal deceives a person to acquire property or property profit (Section 1) or the criminal makes a third party receive property or property profit (Section 2), and it does not matter how much the acquired property or property profit is. But the crime of fraud through the violation of Article 3 of the Aggravated Punishment Act has conditions that are required to constitute the crime, which is that the profit is five hundred (500) million Korean won or more and less than five (5) billion Korean won, and the punishment is aggravated according to the amount, so it shall be applied by strictly and carefully calculating the amount of the profit, so that the principle of balance between crime and punishment is not damaged and that the principle of accountability that punishment shall be based upon accountability is not damaged.

Therefore, in calculating the profit of real estate in case its title is transferred through deceit or through a third party in order to apply Article 3 of the Aggravated Punishment Act, if the real estate has no burden, the market price of the real estate shall be the profit, but if the real estate has a completed registration for a fixed collateral or it is seized or attached, unless otherwise mentioned, the profit shall be the amount that is calculated by subtracting the amount of the credit of warranty, the amount of the credit that is executed through seizure and the amount of the claim for the attachment from the market price of the real estate.

The opinion in Supreme Court Decision 2003Do1859 delivered on September 5, 2003 that purported that the situation where a seizure registration had been completed on real estate that is acquired through deceit shall not be a reason to evaluate the profit acquired by the defendant at a lower amount than the market price of the real estate shall be amended within the scope that goes against the legal reasoning.

B. According to the above legal reasoning and the record, the market price of each of the land in this case with no burden is 1.646 billion Korean won, and the maximum amount of the credit of the fixed collateral on each of the above land is 1.020 billion Korean won, which is less than the amount of the credit of warranty, so the court below, in calculating the amount of each of the land in this case acquired by the defendant, subtracted the maximum amount of the credit, not the amount of the credit of warranty, from the market price of each of the above land and deemed that the rest which is 6 26 million Korean won is the profit and applied Article 3 Section 1 Paragraph 2 of the Aggravated Punishment Act, which is justifiable and not in violation of the law such as misunderstanding the legal reasoning, as argued in the Reasons for Appeal.

3. Conclusion

Wherefore, the appeal shall be dismissed and this decision is delivered as stipulated in the disposition with the assent of all Supreme Court Justices involved, except for the separate opinions of Supreme Court Justice Kim Yong Dam, Supreme Court Justice Kim Hwang Shik and Supreme Court Justice Ahn Dae Hee on the judgment on Article 2 of the Reasons for Appeal. There is a supplementary opinion of Supreme Court Justice Kim Neung Hwan to the majority opinion.

4. The separate opinions of Supreme Court Justice Kim Yong Dam, Supreme Court Justice Kim Hwang Shik and Supreme Court Justice Ahn Dae Hee are as follows.

A. We agree with the majority opinion that in the crime of fraud as the violation of the Aggravated Punishment Act, there shall be appropriate balance between the crime and the punishment by strict and careful calculation of the amount of the acquired property or property profit in applying the Act as the punishment of the crime is aggravated according to the profit.

But we cannot agree with the opinion that if the real estate has a completed registration for a fixed collateral or it is seized or attached, unless otherwise mentioned, the profit shall be the amount that is calculated by subtracting the amount of the credit of warranty, the amount of the credit that is executed through seizure and the amount of the claim for the attachment from the market price of the real estate.

B. On calculating the profit according to Article 3 Section 1 of the Aggravated Punishment Act due to a fraud, the Supreme Court of Korea judged, "Even if some of the price has been paid, the profit shall not be the remainder after subtracting the payment from the value of the acquired property but the entire property that has been acquired" (refer to Supreme Court decisions 2000Do1899 delivered on July 7, 2000, 2005Do5774 delivered on October 28, 2005, 2006Do7470 delivered on January 25, 2007, et al.) and "The "profit" stipulated in Article 3 Section 1 of the Aggravated Punishment Act shall be the sum of the profit of the property that has been illegally acquired through the criminal act or through a third party and it does not matter if such profit will eventually be realized or if there is any condition or burden attached to it." (Refer to Supreme Court Decision 90Do1815 delivered on October 16, 1990)

From the perspective of such decisions, if a person acquires real estate that has a fixed collateral, seizure or attachment on it and says that he will make the payment by taking over the debt, it shall be deemed as just a method to pay for the acquired property or a burden attached to the property, and whether such profit will ultimately be realized or not shall be interpreted not as a constituent of a crime also in the crime of violating the Aggravated Punishment Act through fraud but as an aspect about the assessment of the culpability, so it shall be the credible interpretation that the amount of the real estate also on the premise of the application of Article 3 of the Aggravated Punishment Act shall refer to the objective market price of the real estate with no burden. Therefore, Supreme Court Decision 2003Do1859 delivered on September 5, 2003 that stipulated that a situation where a seizure registration had been completed on real estate that is acquired through deceit shall not be a reason to evaluate the profit acquired by the defendant at a lower amount than the market price of the real estate in calculating the "profit" according to Article 3 of the Aggravated Punishment Act.

Provided, that Article 3 Section 1 of the Aggravated Punishment Act simply aggravates the punishment according to the amount of the profit which is problematic in accordance with the legislative policy, but the majority opinion that deems the actual market price not as an aspect of the assessment of the culpability but as a constituent of a crime in applying Article 3 of the Aggravated Punishment Act is not justifiable.

In addition, from the perspective of the majority opinion that the actual market price of the acquired real estate shall be calculated in applying Article 3 of the Aggravated Punishment Act, if the debt that existed at time of the acquisition disappears afterwards in its entirety or partially through the payment of the debtor et al., the actual market price of the real estate goes up, so it becomes a problem whether a different legal provision should be applied according to such situations, and it is hard to suggest a clear criteria about the scope of deduction when there is a joint collateral or if some of the various real estate are acquired, or if there is a provisional disposition or a provisional attachment on the real estate, so the majority opinion shall be deemed inappropriate as it goes against the principle of clarity and causes confusion in a criminal procedure.

D. However, according to the record, on the premise that the acquired amount by the defendant shall be deemed to be the sum of the objective market prices of each of the land in this case, the court below applied Article 3 Section 1 Paragraph 2 of the Aggravated Punishment Act because it only permitted the amount that is calculated by subtracting the debt from the maximum amount of the fixed collateral on each of the land in this case and deemed the amended price as the acquired amount by the defendant, which is justifiable and the appeal shall be dismissed. So, we agree with the conclusion of the majority opinion that has the same purport, but we do not agree with the majority opinion because if the acquired property is real estate, the profit stipulated in Article 3 of the Aggravated Punishment Act shall be the objective market price of the real estate.

5. The supplementary opinion by Supreme Court Justice Kim Neung Hwan to the majority opinion is as follows.

A. As the majority opinion stipulates, about the crime of violating Article 3 of the Aggravated Punishment Act through fraud, it is clear that court-delivered sentence is provided differently on the condition that the profit of property shall be five hundred (500) million Korean won or more and less than five (5) billion Korean won, which means that the constituent is different from that of the crime of fraud in accordance with the Criminal Act. Nevertheless, the separate opinions deem the amount of the profit also in the crime of violating the Aggravated Punishment Act through fraud only as an aspect of assessment of the culpability shall not be deemed plausible.

If the amount of the profit is part of the constituent, the evaluation and the calculation of the profit should be conducted in an objective and plausible way. But the reality of transactions is that the objective market prices of real estate with burden such as fixed collateral and of the real estate with no burden cannot be the same. The majority opinion purports that judging whether Article 3 of the Aggravated Punishment Act shall be applied or not by calculating the objective market price of real estate fits the principle of the balance between crime and punishment or the principle of accountability, and does not purport to approach from the perspective of what the actual profit amount would be that has been or will be paid by the criminal.

B. Supreme Court Decision 90Do1815 delivered on October 16, 1990 suggested by the separate opinion stipulates about the crime of violating the Aggravated Punishment Act through threat, "The profit acquired by threat shall be calculated at time of the crime and any change in the situation afterwards shall not be take into consideration," which should be applied to the crime of violating the Aggravated Punishment Act through fraud. Therefore, as the crime has started by acquiring real estate with a burden of fixed collateral et al., the profit from the real estate shall be the objective market price at the time, which should be the criteria to judge whether Article 3 of the Aggravated Punishment Act shall apply or not and not to consider whether such fixed collateral et al. disappeared afterwards through repayment et al. So, the concern expressed in the separate opinion that the majority opinion brings about a problem that a different legal provision might have to apply if there is a change in the situation afterwards is deemed to stem from misunderstanding the purport of the majority opinion.

C. Concerning the provisional disposition or provisional registration as pointed out in the separate opinion, the majority opinion, if pushed ahead, shall deem that a provisional disposition or provisional registration might be an obstacle to disposition of real estate but not a factor that affects the market price so it shall not be taken into consideration in calculating the profit from the real estate, but other rights mentioned might affect the market price of the real estate depending on the situation, and that collateral provisional registrations shall be treated the same as fixed collateral unless otherwise stipulated. The majority opinion might complicate certain cases in calculating the objective market price of the real estate to be acquired, but even in those cases, it is the natural obligation of the court to put effort into objectively and plausibly calculate the profit from the real estate that is responsible for operating the criminal judicial procedure appropriately, and tolerating a consequence that the principle of balance between crime and punishment or the principle of accountability is damaged only because it is hard to calculate the profit shall not be deemed righteous.

The separate opinion that deems the actual amount of the market price of the acquired real estate in the crime of violating the Aggravated Punishment Act through fraud that provides different legal sentences according to the profit of the acquired property not as a constituent of a crime but just as an aspect of the assessment of the culpability causes concerns to lead to levy excessive punishment that goes against the principle of balance between crime and punishment or the principle of accountability, so is hard to agree with.

As above, I hereby express the opinion as supplementary to the majority opinion.

Source

• Supreme Court Full Bench Decision 2005Do7288 Delivered on April 19, 2007, Supreme Court Library of Korea