Where a person who has pledged his/her property to secure another person's obligation through the exercise of a security right has lost the ownership of the real estate provided by the person who has pledged his/her property to secure another person's obligation, whether the scope of the person who has pledged his/her property to be claimed to the debtor shall be based on

A real guarantee is an act of establishing a security right on behalf of a person who is not a debtor, and a person who has pledged his/her property to secure another's property is only liable for physical limited liability as a security and does not bear an obligation against a creditor. The guarantor has a right to indemnity against the principal debtor in the case of "when the principal obligation is extinguished due to repayment or other removal" (Articles 441(1), 444(1) and (2) of the Civil Act), whereas a person who has pledged his/her property to secure another's property has a right to indemnity against the debtor in the case of "when the person has lost his/her ownership due to the exercise of the security right" (Article 341 of the Civil

Where a person who has pledged his/her property to secure another person's obligation through the exercise of a security right has lost the ownership of the real estate provided by the person who has pledged his/her property to secure another person's obligation, the scope of compensation for the debtor shall be based on the market price of the real estate at the time when the buyer has paid the purchase price, i.e., the sale price at a price lower than the market price at the time of the loss of ownership due to reasons such as a failure in the auction. In this case, the damages equivalent to the difference between the market price and the sale price of the real estate due to the loss of ownership are incurred to the person who has pledged his/her property to secure another person's obligation due to the execution of a security right

Articles 341, 370, 441(1), and 444(1) and (2) of the Civil Act

[Plaintiff-Appellant] Plaintiff 1 et al. (Law Firm Gyeong, Attorneys Park Jae-soo et al., Counsel for plaintiff-appellant)

Plaintiff (Law Firm Hyeong, Attorneys Kim Jong-hwan et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other (Attorney Lee Young-young, Counsel for the defendant-appellant)

Seoul High Court Decision 2017Na2020010 decided November 1, 2017

The part of the lower judgment against the Plaintiff regarding the ancillary claim against Defendant 1 and Defendant 2 is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. The real guarantee is an act of setting up a security right on behalf of a person who is not the debtor, and a person who has pledged his/her property to secure another's property is only liable for physical limited liability as a security and does not bear an obligation against the creditor. The guarantor has a right to indemnity against the principal debtor in the case of "when the principal obligation is extinguished due to repayment or other removal" (Articles 441(1) and 444(1) and (2) of the Civil Act, while the person who has pledged his/her property to secure another's property has a right to indemnity against the debtor in addition to "where the person has lost his/her ownership due to the exercise of the security right" (Article 341 of

Where a person who has pledged his/her property to secure another person's obligation through the exercise of a security right has lost the ownership of the real estate provided by the person who has pledged his/her property to secure another person's obligation, the scope of compensation for the debtor shall be based on the market price of the real estate at the time when the buyer has paid the purchase price (see Supreme Court Decision 78Da639, Jul. 11, 1978) and not on the basis of the sale price. There are cases where the real estate has been sold at a price lower than the market price at the time of the loss of ownership due to reasons such as failure in the auction procedure. In this case, damages equivalent to the difference between the market price of the real estate due to the loss of ownership and the sale price are incurred by the exercise of a security right due to the debtor's failure to repay his/her obligation, so that

2. The reasoning of the lower judgment and the evidence duly admitted reveal the following facts.

A. On August 8, 2008, the Plaintiff, Nonparty 1, and Defendant 1 purchased from Nonparty 2, 2008, the amount of KRW 2.715 billion for the Seo-gu, Seo-gu, Seo-gu ( Address omitted) orchard 4526 square meters (hereinafter “instant land”). On November 16, 201, Nonparty 1 and Defendant 1 completed the registration of ownership transfer on the share of KRW 1,862/4,526 (hereinafter “Plaintiff’s share”) with respect to the share of KRW 802/4,526 (hereinafter “Plaintiff’s share”).

B. Of the purchase price of the instant land, the Plaintiff assumed the burden of KRW 50 million for the Plaintiff’s share, taxes, and certified judicial scrivener fees. Nonparty 1 and Defendant 1, with the Plaintiff’s consent, borrowed KRW 8.5 million from the Bank of Korea (hereinafter “Korea Bank”) as security of the instant land, and completed the registration of establishment of a mortgage over the instant land on September 10, 2008, Nonparty 3, the mortgagee, the Bank of Korea, and the maximum debt amount of KRW 1.22 million. On September 7, 2012, the debtor was changed to Nonparty 1.

C. Nonparty 1 left Nonparty 4 and Nonparty 5 as his child between the former wife and brought up Defendant 2 after having remarriedd Defendant 1 and Defendant 1. On June 16, 2014, Nonparty 1 died, the inheritor inherited his liability to Nonparty 1’s bank according to the statutory inheritance portion (Defendant 1: 3/9, Defendant 2, Nonparty 4, and Nonparty 5: 2/9), and completed the registration of ownership transfer with respect to Nonparty 1’s share in the instant land.

D. On January 27, 2015, our bank applied for the voluntary auction of the instant land based on the right to collateral security. The appraised value of the instant land is KRW 230,890,000,000 for a single auction period, and the minimum sale price of the instant land was KRW 2,321,838,000 for a single auction period, but was two times, but the instant land was sold at KRW 1.241,000,000 for a single auction period, and the purchaser paid the said sale price on November 10, 2015. The Plaintiff received dividends of KRW 37,532,175 as the owner’s retained earnings at the said auction procedure.

3. Examining the above facts in light of the legal principles as seen earlier, the Plaintiff should be deemed to be able to claim reimbursement according to the Defendants’ share in the inherited portion, based on the amount obtained by subtracting the Plaintiff’s retained earnings from the amount equivalent to the Plaintiff’s share from the amount equivalent to the Plaintiff’s share, based on the minimum sale price of the first auction date, within the scope of market price at the time when the purchaser paid the purchase price for the instant land to the Defendants who inherited Nonparty 1’s debt.

Nevertheless, the lower court determined the scope of the Plaintiff’s indemnity against the Defendants and calculated the amount of indemnity on the basis of the sale price (1.24 billion won) by deeming that the market price of real estate at the time when the Plaintiff lost its ownership was the same as the sale price.

The judgment of the court below is erroneous in the misapprehension of legal principles as to the scope of indemnity following the exercise of the right to secure another’s property and thereby adversely affected the conclusion of the judgment. The plaintiff’s ground

4. Conclusion

The plaintiff's appeal is with merit. The part against the plaintiff as to the defendant 1 and 2 among the conjunctive claim by the court below is reversed, and this part of the case is remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Chang-suk (Presiding Justice)