[1] In a case where a third party purchaser, who acquired an ownership of the mortgaged real estate for which a mortgage was established by making a claim against the debtor as a secured claim, commences rehabilitation procedures for the debtor after acquiring it from the debtor, whether the rehabilitation plan affects the above mortgage (negative), and in a case where the creditor’s rights are forfeited or modified in the rehabilitation procedures, whether the right of the third party purchaser of the forfeited or modified claim may affect the third party purchaser’s right (negative

[2] In a case where a truster created a mortgage on the real estate owned by him/her for the creditor, and a trust contract for real estate was concluded, and rehabilitation procedures commenced for the truster after completing the registration of transfer of ownership based on the trust in the future, whether the rehabilitation plan affects the above mortgage (negative), and in a case where the creditor’s rights are forfeited or changed in the rehabilitation procedure, whether the creditor’s security right to the trusted real estate held against the trustee and the secured claim are affected (negative)

[1] Article 250(2)2 of the Debtor Rehabilitation and Bankruptcy Act provides that the rehabilitation plan does not affect any security provided by any person other than the debtor for rehabilitation creditors or rehabilitation secured creditors. This provision provides that even if the debtor's obligation is exempted or altered according to the rehabilitation plan, the obligation of the surety, etc. shall not be exempted or altered. Here, the term "security provided by any person other than the debtor for rehabilitation creditors or rehabilitation secured creditors" refers to a security right held by a rehabilitation creditor, etc. as the secured claim against the debtor in a third party's property with the claim against the debtor as the secured claim. In light of the aforementioned purport, even in cases where the creditor's rights are forfeited or altered pursuant to Articles 251 and 252(1) of the Debtor Rehabilitation Act, even if the provisions of Article 250(2)2 of the Debtor Rehabilitation and Bankruptcy Act are applied, it does not affect the right of the mortgagee of the forfeited or altered claim. This also applies in cases where a third party purchaser, other than the secured claim, acquires the forfeited or altered right from the debtor.

[2] Where a truster established a mortgage on real estate owned by him/her for a creditor and completed the registration of establishment of a mortgage, and concluded a real estate trust agreement with the trustee, and transferred the ownership of the trusted real estate to the trustee inside and outside of the country by causing a trust in the future, the trustee shall have the same status as the third acquisitor of the mortgaged real estate. Therefore, where rehabilitation procedures for the truster commence thereafter, a mortgage on the trusted real estate falls under the “security provided by any person other than the debtor for the rehabilitation creditor or the rehabilitation secured creditor” under Article 250(2)2 of the Debtor Rehabilitation and Bankruptcy Act and the rehabilitation plan does not affect this. In addition, even if the creditor’s right is forfeited or modified in the rehabilitation procedures, the right to forfeited or altered is limited to the rehabilitation claim or rehabilitation security right held by the truster, and does not affect the security right on the trusted real estate held by the trustee and the secured claim

[1] Articles 250(2)2, 251, and 252(1) of the Debtor Rehabilitation and Bankruptcy Act / [2] Articles 250(2)2, 251, and 252(1) of the Debtor Rehabilitation and Bankruptcy Act; Article 2 of the Trust Act

[1] [2] Supreme Court Decision 2003Da18685 decided May 30, 2003 (Gong2003Ha, 1452) / [2] Supreme Court Decision 2005Da38300 decided April 26, 2007 (Gong2007Sang, 761)

Plaintiff (Seoul Law Firm, Attorney Lee Young-soo, Counsel for plaintiff-appellant)

The bankruptcy debtor, the administrator of the main company for the development of the main company for the development of the main company for the rehabilitation, who is the administrator of the main company for the development of the main company for the rehabilitation of the non-party 1, and the administrator of the main company for the development of the main company for the rehabilitation of the main company for the development of the main company

ENH Co., Ltd.

Busan High Court Decision 2014Na3511 decided July 23, 2015

The part of the judgment of the court below against Defendant International Assets Trust Co., Ltd. is reversed, and that part of the case is remanded to Busan High Court. The Plaintiff’s rehabilitation debtor’s rehabilitation debtor’s administrator Nonparty 1’s bankruptcy debtor’s administrator Nonparty 1’s bankruptcy debtor’s administrator Nonparty 2’s administrator of the main industrial development company is dismissed, and the appeal against Defendant 1 is dismissed. The costs of appeal between the Plaintiff and Defendant debtor’s bankruptcy debtor’s administrator of the main industrial development company’s main industrial development company’s administrator Nonparty 1’s bankruptcy debtor, who is the administrator of Nonparty 2’s main industrial development company’s lawsuit, are assessed against the Plaintiff including the part resulting from the intervention.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the grounds of appeal against Defendant 1 (hereinafter “Defendant trustee in bankruptcy”) who is the administrator of the Defendant’s debtor’s debtor’s debtor’s debtor’s debtor’s main debtor’s main debtor’s main debtor’s main debtor’s main debtor’s creditor’s main debtor’s creditor’s creditor’s main debtor’s creditor’s creditor

For the following reasons, the lower court determined that the Plaintiff’s lawsuit against the Defendant bankruptcy trustee was unlawful. In other words, the Plaintiff asserted that the cancellation of the registration of the establishment of the creation of the instant neighboring property was unlawful, and sought the cancellation thereof against the Defendant bankruptcy trustee, but the registration of the establishment of the instant neighboring property was cancelled by the entrustment of cancellation to the rehabilitation court pursuant to Article 24 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”). Accordingly, the registration of the restoration should also be commissioned by the court, and there is no benefit

Examining the reasoning of the lower judgment in light of the relevant legal principles, the lower court did not err in its judgment by misapprehending the legal doctrine on the legality of the claim for recovery registration cancelled at the court’s commission.

2. As to the ground of appeal against Defendant International Asset Trust Co., Ltd.

A. Article 250(2)2 of the Debtor Rehabilitation Act provides that the rehabilitation plan does not affect any security provided by any person other than the debtor for rehabilitation creditors or rehabilitation secured creditors. This provision provides that, even if an obligation of the debtor is discharged or modified according to the rehabilitation plan, the obligation of the surety, etc. shall not be discharged or modified. Here, the term “security provided by any person other than the debtor for rehabilitation creditors or rehabilitation secured creditors” refers to a security right in which a rehabilitation creditor, etc. has a claim against the debtor as a secured claim in a third party’s property. In light of the purport of the aforementioned provision, even in cases where a creditor’s right is forfeited or modified pursuant to Articles 251 and 252(1)2 of the Debtor Rehabilitation Act, the same does not affect the right of the mortgagee of the altered claim or the right of the mortgagee to secure another’s property (see Supreme Court Decision 2003Da18685, May 30, 2003). This also holds true in cases where a person other than the debtor’s 20-party who acquired the mortgaged claim before the rehabilitation procedure commenced commenced or the changed claim.

Meanwhile, in the event that a truster established a mortgage on real estate owned by him/her for a creditor and completed the registration of establishment of a mortgage on such real estate, and concluded a real estate trust agreement with the trustee, and transferred the ownership of the real estate domestically and externally to the trustee by causing a trust in the future, the trustee shall have the same status as the third acquisitor of the mortgaged real estate. Therefore, in the event rehabilitation procedures for the truster commence thereafter, the mortgage held by the creditor on the trusted real estate constitutes “security provided by any person other than the debtor for the rehabilitation creditor or the rehabilitation secured creditor” under Article 250(2)2 of the Debtor Rehabilitation Act and does not affect the rehabilitation plan. In addition, even if the creditor’s rights are forfeited or altered during the rehabilitation procedures, the right to forfeited or altered is limited to the rehabilitation claim or rehabilitation security right held by the truster, and does not affect the security right on the trusted real estate held by the trustee and the secured claim (see Supreme Court Decision 2003Da18685, May 30, 200

B. Review of the reasoning of the lower judgment and the record reveals the following facts.

1) The registration of initial ownership was completed on June 23, 2005 with respect to the apartment of the 15th and the 2nd underground floors, which was newly constructed by the Jeju Industrial Development Co., Ltd. (hereinafter “the Jeju Industrial Development”), under the name of the Jeju Industrial Development on the ground of the 15th and the 2nd underground floors. The Jeju Industrial Development entered into a mortgage contract with the Plaintiff on July 29, 2005 in order to secure the Plaintiff’s obligation to pay for the acquisition of KRW 240 million against the Plaintiff, and completed the registration of initial establishment of the instant apartment under the name of the Plaintiff as to the instant apartment.

2) Afterwards, the development of main industry entered into a real estate security trust agreement with the Defendant International Asset Trust Co., Ltd. (hereinafter “Defendant International Asset Trust”) on which most of the instant apartments including the instant building and its site are trusted to the Defendant International Asset Trust. On June 24, 2008, the registration of ownership transfer based on the name of the Defendant International Asset Trust was completed in the name of the Defendant International Asset Trust.

3) On November 18, 2009, the Changwon District Court decided to commence rehabilitation proceedings for the development of the Jeju Industrial Complex. The Plaintiff reported the principal and interest of the loan as rehabilitation claims in the rehabilitation proceedings, and the amount of KRW 240,000,000,000,000,000 as the rehabilitation claims, which became final and conclusive as KRW 240,000,000.

4) On July 26, 2010, the above court decided to authorize the instant rehabilitation plan for the Jeju Industrial Development. The main contents of the instant rehabilitation plan are ① the apartment complex and its site for debt repayment, ② the rehabilitation security right shall be repaid at 100% of the principal and interest prior to the commencement of the contract, ② the rehabilitation security right shall be repaid at 10% of the interest prior to the commencement of the contract, ③ the rehabilitation right shall be repaid at 18% of the principal and interest prior to the commencement of the contract, and the interest shall be exempted from the commencement of the contract, ④ the rehabilitation security right shall continue to exist in the previous order with the rehabilitation security right, and the security right not recognized as the rehabilitation security right shall be extinguished. The decision to authorize the instant rehabilitation plan was finalized on December 14, 201 after the immediate appeal and reappeal.

5) Meanwhile, on May 4, 201, upon the termination of a real estate security trust agreement, the registration of ownership transfer was completed on the instant building under the name of the Jeju Industrial Development, based on which the trust property was reverted. On June 7, 2013, the said custodian filed an application for cancellation of the registration of the right to collateral security, which was not recognized as a rehabilitation security right with the above court for selling the instant apartment and its site in accordance with the instant rehabilitation plan, and upon the commission of the said court, the registration of ownership transfer was cancelled on July 12, 2013.

6) On August 19, 2013, the custodian sold the instant building to the Intervenor assisting the Defendant, and on September 10, 2013, the registration of ownership transfer in the name of the Intervenor assisting the Defendant and the registration of ownership transfer in the name of the Defendant International Asset Trust based on the trust was completed.

C. We examine these facts in light of the legal principles as seen earlier.

After the Jeju Industrial Development established a mortgage on the instant building owned by it for the Plaintiff and completed the registration of creation of a neighboring mortgage on the instant building, it concluded a real estate trust agreement, and completed the registration of ownership transfer caused by a trust in the future of the Defendant International Asset Trust. Accordingly, the Defendant International Asset Trust holds the same status as the third acquisitor of the mortgaged real estate. Since rehabilitation procedures were commenced for the Jeju Industrial Development, the Plaintiff’s mortgage on the instant building constitutes “security provided by any person other than the debtor for rehabilitation creditors or rehabilitation secured creditors” under Article 250(2)2 of the Debtor Rehabilitation Act, and thus does not affect the instant rehabilitation plan. Furthermore, even if the rehabilitation procedures were to include the forfeited or modified rights of the Plaintiff under Articles 251 and 252(1) of the Debtor Rehabilitation Act, the forfeited or modified rights are limited to the rights of the Plaintiff against the Jeju Industrial Development. This does not affect the security rights on the instant building held against the Defendant International Asset Trust and the secured claims thereof. This does not change even if the instant building after the approval decision on the instant rehabilitation plan was rendered again attributable ownership to the Jeju Industrial Development.

D. Nevertheless, the lower court determined otherwise on the grounds stated in its reasoning that the registration of the establishment of a mortgage in the instant case was lawfully cancelled due to the implementation of the rehabilitation plan finalized. In so doing, the lower court erred by misapprehending the legal doctrine on the validity, etc. of the rehabilitation plan, thereby adversely affecting the conclusion of the judgment

3. Conclusion

Therefore, the part of the judgment of the court below regarding the international asset trust of the defendant is reversed, and that part of the case is remanded to the court below for a new trial and determination. The plaintiff's appeal against the defendant bankruptcy trustee is dismissed, and the costs of appeal between the plaintiff and the defendant bankruptcy trustee are assessed against the plaintiff including the costs of appeal due to the supplementary participation. It is so decided as per Disposition by

Justices Kwon Soon-il (Presiding Justice)