In the case of physical guarantee, whether a special law for the protection of guarantor applies (negative)

In light of the purpose of the Special Act on the Protection of Guarantor (hereinafter “Surety Protection Act”) and the language and text of Article 2 subparag. 1 and subparag. 2 of the Surety Protection Act, the Surety Protection Act is only applicable to cases where a surety is borne pursuant to Article 429(1) of the Civil Act, and it does not apply to physical guarantee which takes responsibility within the limit of security for another person’s obligation.

Article 1, Article 2 subparagraphs 1 and 2 of the Special Act on the Protection of guarantors

Plaintiff (Appointed Party) (Attorney Shin-chul et al., Counsel for the plaintiff-appellant)

Defendant (Attorney Kim Jong-dae, Counsel for defendant-appellant)

Changwon District Court Decision 2013Na3723 decided October 21, 2014

The appeal is dismissed. The costs of appeal are assessed against the plaintiff (appointed party) and 2.

The grounds of appeal are examined.

1. As to the forgery of a document establishing a mortgage and the non-existence of a secured claim

According to the reasoning of the judgment below, the court below determined that the defendant forged the contract to establish the mortgage of this case at the time of original adjudication or did not exist the secured debt of this case at the time of the existence of the secured debt of this case. In light of the relevant legal principles and records, the above judgment of the court below is just and acceptable, and it did not err by exceeding the bounds of the principle of free evaluation of evidence in violation

2. As to the assertion on the application of the special law for the protection of guarantors

Article 1 of the Special Act on the Protection of Surety (hereinafter “Surety Protection Act”) provides for the purpose of contributing to the settlement of a credit society by preventing any economic and mental damage of a guarantor, and establishing a reasonable practice of guarantee contract for monetary obligations, which takes place without compensation, by providing for special cases concerning guarantee under the Civil Act. Article 2 Subparag. 1 of the Act provides that “A guarantor means a person who bears a guaranteed obligation under Article 429(1) of the Civil Act” and Article 2 Subparag. 2 of the Act provides that “A guarantee contract means a contract between a guarantor and a guarantor who, regardless of its form or name, fails to perform a monetary obligation to a creditor”.

In light of the above purpose and text of the Surety Protection Act, the Surety Protection Act is only applicable to the case of bearing a guarantee obligation under Article 429(1) of the Civil Code, and it does not apply to the physical guarantee which takes responsibility within the limit of the security for the other person's obligation.

In this case, the court below was just in rejecting the Plaintiff’s assertion that the mortgage contract of this case was null and void on the premise that the mortgage contract of this case constitutes a guarantee agreement under the Guarantee Contract under the Surety Protection Act, and did not err by misapprehending the legal principles on the subject of application of the Surety Protection Act.

3. Conclusion

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

[Attachment] List of Appointeds: Omitted

Justices Kim Shin (Presiding Justice)