In case where a ship, for which an auction procedure to exercise a security right is in progress upon a request of a maritime lien holder, transfers the secured debt to another person by fraudulent act, and thereafter such request for auction is withdrawn due to the extinguishment of the secured debt due to a subsequent repayment, whether the amount of compensation for the equivalent value due to the exercise of a right of revocation should be deducted in calculating the amount of compensation for rehabilitation (affirmative), and

In a case where a juristic act concerning a certain object constitutes a fraudulent act, in principle, the fraudulent act shall be revoked and the registration of transfer of ownership shall be cancelled, but where it is impossible or considerably difficult to return originals, compensation equivalent to the value of the object of the fraudulent act shall be ordered as performance of the duty to restore the property. In such a case, compensation for value shall be ordered within the extent of establishment of the fraudulent act as joint collateral of general creditors. As such, in a case where an object in the auction procedure to exercise the security right is transferred to a fraudulent act and the registration of creation of mortgage is cancelled by subsequent repayment, etc., and the request for auction has been withdrawn, not only the amount of the secured claim of the mortgage but also the amount of execution expenses that may have been preferentially reimbursed at the auction procedure shall be deducted from the value of the object. This legal principle applies to a case where a vessel, who is in progress with an auction procedure to exercise the security right upon the request of the mortgagee, has been transferred to a fraudulent act and the claim secured by a maritime lien has been extinguished by subsequent repayment, and thus, the amount of expenses to be deducted at the time of execution shall be calculated.

Article 406 of the Civil Code, Article 777 of the Commercial Code

Supreme Court Decision 98Da41490 Decided September 7, 1999 (Gong1999Ha, 2066) Supreme Court Decision 2003Da60891 Decided October 14, 2005, Supreme Court Decision 2007Da2919 Decided July 26, 2007 (Gong2007Ha, 1366)

Han Young Shipping Corporation

Seoul High Court Decision 200Na14488 delivered on May 1, 200

Busan High Court Decision 2007Na14728 Decided March 12, 2008

All appeals are dismissed. The costs of appeal are assessed against each party.

We examine the grounds of appeal.

1. Plaintiff’s ground of appeal

In cases where a juristic act concerning a certain object constitutes a fraudulent act, in principle, the fraudulent act shall be revoked and the order shall be issued to restore the object of the fraudulent act itself, such as the cancellation of the registration of the transfer of ownership. However, in cases where it is impossible or considerably difficult to return originals, compensation equivalent to the value of the object of the fraudulent act shall be ordered as performance of the duty to restore if it is impossible or considerably difficult to do so. Such equivalent compensation is ordered to compensate for value within the scope of the establishment of the fraudulent act because it becomes common creditors' joint security (see Supreme Court Decision 2007Da29119, Jul. 26, 2007, etc.). Thus, in cases where the object of the auction procedure for exercising the security right is transferred to a fraudulent act and the registration of creation of a mortgage is cancelled by subsequent repayment, etc. and the request for auction is withdrawn, not only the value of the object of the mortgage but also the amount of expenses for execution that the ship could have been paid preferentially at the auction procedure upon the request of the mortgagee, the above legal principle applies likewise to cases where a request for auction is withdrawn.

In addition, the value of compensation in this case shall be calculated by deducting the execution cost that could have been preferentially reimbursed from the value of the article at the time of the conclusion of the fact-finding trial, which is the time of revocation of the fraudulent act (see Supreme Court Decision 98Da41490, Sept. 7, 199, etc.). In deducting the execution cost amount, if the execution cost at the time of the conclusion of the fact-finding trial has increased more practically than that at the time of the fraudulent act, all of them must be deducted (see Supreme Court Decision 2003Da60891, Oct. 14, 2005).

The lower court determined that, after comprehensively taking account of the admitted evidence, in calculating the scope of revocation of the fraudulent act of this case and the amount of compensation for value thereof, the Defendants, the beneficiaries and subsequent purchaser, should deduct the amount of the secured claim of the maritime lien on complete restriction and the expenses incurred in relation to the repair, preservation, and disposal of the vessels arising from the auction procedure of this case, which was paid by the Defendant Dadong International Co., Ltd., the subsequent purchaser, from the market price of the instant vessel.

In light of the above legal principles, the judgment of the court below is just, and there is no error in the misapprehension of legal principles as to compensation for value or in violation of the rules of evidence.

2. As to the Defendant’s ground of appeal

In light of the records, after compiling the evidence as stated in its holding, the court below acknowledged the facts as stated in its holding, and determined that the secured obligation of the Nonparty’s right to collateral security established on the ship of this case was extinguished before the sales contract of this case, which is a fraudulent act, and thus, it does not constitute the subject of deduction from the compensation for value. There is no illegality of misapprehending the legal principles as to the right to collateral security or the compensation for value, as otherwise alleged in the grounds of appeal, and the Supreme Court

3. Therefore, all appeals are dismissed, and the costs of appeal are assessed against each party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Nung-hwan (Presiding Justice)