Appellant (Non-party 1) (Law Firm Changwon, Attorney Yellow-hun, Counsel for defendant-appellant)

Changwon District Court Order 201Ma10521 dated January 6, 2012

1. The decision of the first instance shall be revoked;

2. The case is remanded to the court of first instance.

1. Decision on permission for sale, etc.;

According to the records of this case, the following facts are recognized.

A. Nonparty 2 (hereinafter “debtor”) owned 51,208/65,00 shares [the share No. 3 4.049/32.5 (hereinafter “the share No. 3”) in the copy of the register of the real estate of this case + shares No. 6,358/65,000 (hereinafter “share No. 14”) in the 3 and No. 14,00 shares in the 18,752/65,00 (hereinafter “the share No. 14”) in Changwon-si’s counter North Korea (hereinafter “the real estate of this case”). The debtor set up a collateral security claim against the appellant as KRW 270,00,000 with respect to the share No. 3 and No. 1414, Mar. 8, 2007; KRW 200,000; and KRW 40,000,000 for each share as to the share No. 14.

The appellant purchased shares of 3, 14 and 18 from the debtor on May 2, 2008, and completed the registration of ownership transfer on the same date.

On the other hand, 6,358/65,00 of the shares in 18 was sold to Nonparty 3 at a voluntary auction on March 6, 2008. Accordingly, the shares in Nonparty 2 owned in 18 was reduced to 30,394/65,000 shares.

B. On April 21, 2008, Pursuant to the Changwon District Court Order 2008Kadan2559 on the provisional seizure order of April 21, 2008, the Changwon District Court completed the provisional seizure registration of shares Nos. 3, 14, and 18, and was rendered a favorable judgment on September 10, 2008 by filing a lawsuit on the merits with the Changwon District Court 2008Kadan2991. The judgment became final and conclusive on October 1, 2008. The purpose of the registration of the provisional seizure was to change the shares No. 14 and 18 among the real estate of this case into the shares of this case on December 9, 2010. The creditor of the non-party 5 (hereinafter referred to as the "creditor") (hereinafter referred to as the "creditor") was transferred from the final and conclusive judgment of June 13, 2011.

C. On June 28, 2011, the creditor filed an application for compulsory auction of real estate shares of 43,110/65,000 shares, including shares of 14 shares and shares of 18 shares before reduction, among the instant real estate, on June 28, 201, and the judicial assistant officer rendered a decision to commence auction of the above 43,110/65,000 shares on June 29, 201. Thereafter, on the ground that shares of 6,358/65,00 shares were already sold to Nonparty 3 through voluntary auction before the decision to commence the auction of this case, the creditor was corrected as the remaining 36,752/65,00 shares, excluding those of the subject matter of auction (hereinafter “subject matter of auction of this case”).

D. On December 9, 201, the judicial assistant set the minimum sale price of the instant real estate at KRW 183,448,650, and issued an order to sell the instant auction subject matter. On December 28, 2011, Nonparty 4, a co-owner of the instant real estate, reported the preferential purchase of the instant auction subject matter at the same price as the highest purchase price, and the judicial assistant decided to allow the sale price of the instant real estate at KRW 183,448,650 on January 4, 2012 to Nonparty 4. On January 5, 2012, the appellant filed an immediate appeal on the ground that the appeal constitutes a case where it is impossible to expect the remainder stipulated in Article 102 of the Civil Execution Act, but the court of first instance decided to authorize the sale of the instant auction subject matter by the judicial assistant on January 6, 2012.

2. Summary of grounds for appeal;

Of the auction objects of this case, the appellant acquired ownership after acquiring the right to collateral security. However, the appellant’s right to collateral security is not extinguished due to confusion since there had already been a provisional seizure of Bosung-U.S. Before acquiring the ownership. Of the minimum sale price of the auction objects of this case, the amount equivalent to the share No. 14 out of KRW 183,448,650 is approximately KRW 31,736,137. The said amount is less than KRW 510,000,000 (=230,000,000 + 240,000,000,000) which takes precedence over the creditor’s claim, so it constitutes a case where there is no possibility of remaining. However, since the court of first instance did not take the procedure under Article 102 of the Civil Execution Act and conducted the auction procedure, the decision to permit the sale of this case should be revoked by unlawful means.

3. Determination

(a) Status of appellant;

In principle, in cases where the ownership of any article and other real rights belong to the same person, such limited real rights shall be extinguished by confusion, but in cases where it is deemed necessary to maintain such limited real rights for the benefit of the principal or a third person, it shall not be extinguished by confusion pursuant to the interpretation of the proviso of Article 191(1) of the Civil Act (Supreme Court Decision 98Da18643 delivered on July 10, 1998).

As seen earlier, after the appellant acquired the right to collateral security and thereafter acquired the ownership, the appellant acquired the right to collateral security. If the appellant’s right to collateral security becomes extinct due to confusion, the provisional attachment obligee obtains unjust benefits, while the appellant is causing unreasonable consequences. Accordingly, in accordance with the above legal principles, the appellant’s right to collateral security does not extinguish as a confusion notwithstanding the acquisition of ownership thereafter, and the appellant still holds the status of the mortgagee who takes precedence over the creditor.

(b) Whether it constitutes an absence of chance to remain;

1) Article 102(1) of the Civil Execution Act provides, “If the court recognizes that there will remain no surplus if all of the immovables preceding the claim of the execution creditor and the procedural expenses are reimbursed at the minimum sale price, it shall be notified to the execution creditor.” Paragraph (2) provides, “If the execution creditor pays the expenses and expenses under Paragraph (1) within one week from the date of receipt of the notification of Paragraph (1) and requests the execution creditor to purchase at his/her price if there is no adequate bid at that price, the court shall revoke the auction procedure.” This provision prevents the execution creditor from being forced to recover the investment at a time contrary to his/her will, and the preferential creditor is a provision to protect the execution creditor and the execution creditor.

The subject matter of auction of this case is 36,752/65,000 shares in total, including 6,358/65,00 shares in 14 shares and 30,394/65,00 shares in 18 shares in 18 shares in the subject matter of auction of this case. However, there is a difference between 14 shares and 18 shares in legal relations concerning the priority order of the right to share, as the subject matter of auction of this case was established only with respect to shares in 14 shares in this case.

Considering the legislative intent of Article 102 of the Civil Execution Act as seen earlier, when determining whether the appellant, who is the mortgagee of a right to collateral security against the share No. 14 out of the subject matter of the auction of this case, is forced to recover the investment at the time contrary to his intention, the share No. 14 should be treated as an object of auction separate from the share No. 18.

2) The minimum sale price of the subject matter of the auction of this case is KRW 183,448,650 (the actual sale price is the same as the actual sale price) and about 17.3% of the share of approximately 14 shares (=6,358/65,00 shares ± 36,752/65,00 shares ± 100 shares of the subject matter of the auction of this case). Thus, the amount to be distributed to the appellant, who is the mortgagee of the right to collateral security against the share of 14 out of the minimum sale price, is about 31,736,137 won (= 183,448,650 won x 17.3%). Since the above amount falls short of 510,00,000 won in total of the maximum debt amount of the appellant, who is the right to collateral security, which takes precedence over the creditor, and thus, it constitutes a case where there is no possibility of remaining under Article 102 of the Civil Execution Act.

4. Conclusion

Therefore, the appeal of this case is with merit, and the decision of the court of first instance is revoked and the case is remanded to the court of first instance. It is so decided as per Disposition.

Judges Ohovah-man (Presiding Judge)