Plaintiff 1 and 2 others (Law Firm Pule, Attorneys Kim Ho-tae et al., Counsel for the plaintiff-appellant)

Defendant 1 and two others (Attorneys Kim Young-young et al., Counsel for the defendant-appellant)

August 29, 2007 (Defendant 1)

September 12, 2007 (Defendant 2 and 3)

Busan District Court Decision 2005Gahap12929 Decided April 18, 2007

1. The part against Defendant 2 in the judgment of the first instance shall be revoked;

2. The plaintiffs' claim against the defendant 2 is dismissed.

3. All of the appeals by the defendants 1 and 3 are dismissed.

4. The plaintiffs and the defendant 2 bear the costs of the lawsuit, and the costs of appeal between the plaintiffs and the defendant 1 and the defendant 3 are borne by the defendant 1 and 3.

1. Purport of claim

With respect to each real estate listed in the separate sheet, the agreement to establish a mortgage between Defendant 1 and Defendant 2 on June 26, 2004 and July 5, 2004, and the agreement to establish a mortgage between Defendant 3 and Nonparty 1 on July 1, 2004 as to each real estate listed in the separate sheet shall be revoked. With respect to each real estate listed in paragraph (10) of the separate sheet prepared by the Busan District Court on November 9, 2006, the amount of dividends of Defendant 1, the amount of dividends of KRW 197,816,788 won for Defendant 1, the amount of dividends of KRW 238,356 won for Plaintiff 2, the amount of dividends of KRW 116,953,425, and KRW 100,530,000 for Plaintiff 2, the amount of dividends of KRW 197,816,787 won for each of the following items shall be corrected as KRW 116,953,000,500.

2. Purport of appeal

The part against the defendant 2 and 3 and the part against the defendant 1 among the judgment of the court of first instance shall be revoked, and the plaintiff's claim against the defendant 2 and 3 and the claim against the defendant 1 falling under the revoked part shall be dismissed.

1. Facts of recognition;

The following facts may be acknowledged, without dispute between the parties, by taking into account the following facts: Gap evidence 1 through 6 (including paper numbers; hereinafter the same shall apply), Eul evidence 4, 10, 19, 20, Eul evidence 1 through 10, each statement of non-party 7 and 1 of the witness of the first instance court, non-party 7 and 1 of the witness of the first instance court, the Busan Metropolitan City Mayor/Do governor of the court of the first instance and the head of Seo-gu, and the whole purport of each fact inquiry as to Eul evidence 22-1 of the evidence of non-party 21 and 23, and the testimony of Non-party 1 of the first instance court and Non-party 8 of the witness of the first instance court are insufficient to reverse it, and there is no other counter-proof.

A. On December 21, 2001, Nonparty 1 agreed to pay to Plaintiff 1 KRW 20 million, KRW 80 million to Plaintiff 2, and KRW 51 million to Plaintiff 3 respectively.

B. On September 21, 2004, Plaintiff 1 and 2 filed a lawsuit against Nonparty 1 as Busan District Court Decision 2004Da84036, Plaintiff 3 filed a claim for the agreed amount against each of the above courts 2004Da90471, and Plaintiff 1 and 2 rendered a judgment on September 21, 2004 that “ Nonparty 1 shall pay to Plaintiff 1 20 million won, 80 million won, and 20% interest per annum from July 20, 2004 to the day of full payment,” and on May 3, 2005, Plaintiff 3 received 51 million won and 20% interest per annum from January 26, 2005 to the day of full payment.”

C. While Nonparty 1 was performing the construction of a new apartment house under the name of "Manbibibib loan" (hereinafter "multi-unit house of this case") on the ground of the Seo-gu, Seo-gu, Busan in order to newly build and sell the apartment house, Seo-gu, Busan (hereinafter "the apartment house of this case"), as to each real estate listed in the separate list, which is the section for exclusive use of the apartment of this case, (hereinafter "each of the real estate of this case"), on June 26, 2004, concluded a mortgage contract with Defendant 1 with the maximum debt amount of KRW 390 million (hereinafter "the first collateral mortgage contract of this case"), and concluded a mortgage contract with Defendant 2 with the maximum debt amount of KRW 275,015,000 on June 28, 2004 (hereinafter "the second collateral mortgage contract of this case") and concluded a mortgage contract with Defendant 1 with the same maximum debt amount of KRW 300 million on July 5, 2004 (hereinafter "the second collateral contract of this case").

D. At the time of entering into the instant mortgage agreement, Nonparty 1’s property as the instant real estate and the instant real estate and the instant real estate’s property owned by Nonparty 1 were 1/2 shares out of 80-1 40 m2, Nam-dong, Busan. The instant apartment land’s 465-19 m2 and 376 m2, which is the site of the instant apartment, was sold to Cheongnam-dong, Busan. The value of each of the instant real estate was KRW 30,060,000 (as of January 24, 2005, the value of each of the instant real estate was 100,000,000 won in total as of KRW 1,000,000,000,000,000 won as of KRW 20,000,000,0000,000,000 won as of KRW 1,50,000,000.

E. After that, Defendant 1 applied for a voluntary auction at Busan District Court Decision 2004Ma71545, Dec. 13, 2004 with respect to each of the instant real estate, and the auction procedure was in progress on December 13, 2004. As a result, the sale was conducted on October 18, 2006 at the price of KRW 22,799,000,000. Accordingly, the registration of creation of mortgage in the name of the Defendants as to each of the instant real estate was cancelled on October 19, 206.

F. On November 9, 2006, the above auction court opened a date of distribution and prepared a distribution schedule stating that the amount to be actually distributed shall be KRW 227,697,125, and KRW 2,492,90 among the amount to be actually distributed to the head of Seo-gu Busan Metropolitan City (the issuing authority), and KRW 23,816,78, and KRW 204,027 to the defendant 1 (the mortgagee) and the non-party 6 (the provisional seizure authority), respectively, distribute the amount to KRW 4,183,320 to the head of Seo-gu Busan Metropolitan City (the issuing authority) and the other distribution creditors including the plaintiffs and the defendant 2, and the defendant 3 did not distribute the amount to KRW 29,238,356, the plaintiff 22,165, and KRW 193,530,50,000 among the dividend amount to the defendant 1's dividends, the plaintiffs distributed to the defendant 1 and the defendant 1 and the defendant 30.

2. The assertion and judgment

A. Whether a fraudulent act was committed

(1) Determination of the cause of the claim

According to the above facts, it is reasonable to view that Nonparty 1 entered into the instant collateral security agreement with the Defendants in excess of debt constitutes fraudulent act in relation to general creditors including the Plaintiffs, barring any special circumstances, and Nonparty 1 was aware that it would prejudice general creditors due to the instant collateral security agreement, and the Defendants, which are beneficiaries, were presumed to have been malicious. Further, each establishment registration of mortgage in the name of the Defendants, which was made based on the instant first through third collateral security agreement, was cancelled on the grounds of sale by the voluntary auction of each of the instant real estate. The Plaintiffs were the right to demand distribution. The Defendants were the right to demand distribution, as well as Defendant 2 and Defendant 3, as well as Defendant 1, as they were dissatisfied with the amount of dividends. Accordingly, the Plaintiffs, other than Defendant 1, who received dividends, have sought the cancellation of the instant collateral security agreement, in order to prevent the profits of Defendant 2 and Defendant 3 from acquiring unjust profits by means of objection to distribution.

(2) Judgment on the defendants' assertion

(A) Defendant 1 loaned funds necessary for the new construction of the instant apartment to Nonparty 1, upon receipt of a request from Nonparty 1 to pay for the sale price after completion of construction or to establish a collateral security right, and concluded the instant collateral security agreement with Nonparty 1 by lending KRW 230,127,000 to Nonparty 1 four times from March 18, 2003 to June 30, 204, and thus, it was not known that it would prejudice other creditors. ② At the time, it was best way to enable the construction to continue its new construction by granting the loans to Nonparty 1 in a situation where it is difficult to continue the new construction of the instant apartment house due to the financial difficulties, and ③ it was best way to recover its ability to repay its debt by granting the loans to Nonparty 1, who was in the situation where it was difficult to promote the new construction of the instant apartment house. ③ Since the registration of the preservation of ownership in the name of Nonparty 1 was made and the registration of the establishment of the mortgage in the name of Defendant 1, it could not be considered that the provisional security agreement has reduced between the obligees.

First, Defendant 1, who seems to have been bona fide at the time of entering into the instant collateral security agreement, did not believe that each statement of No. 22-1 and No. 1 and No. 23 is insufficient to recognize it, and there is no other evidence to acknowledge it. Rather, in full view of the statement of No. 1, 9, and No. 21 and the testimony of Non-Party 1 by Non-Party 2, Non-Party 7, Non-Party 7, and Non-Party 8 of the first instance trial witness, the completion of the instant collective housing became difficult due to the financial shortage of Non-Party 1, and Defendant 1 led the creditors’ meetings from October 203 to December 2003, it is recognized that Non-Party 1 was guilty and Non-Party 1 was aware of an excess debt from that time.

Second, in full view of the statements in Eul evidence No. 9 and the testimony of non-party 7 of the first instance trial witness, 227,987,00 won out of 230,127,00 won lent to non-party 1 before the conclusion of the instant contract for the first instance collateral security, and the remainder of 2,140,000 won was lent to the non-party 1 as expenses for the creation of the right to collateral security around June 26, 2004, it cannot be deemed that Defendant 1 entered into the instant contract for the first instance collateral security for the purpose of restoring its ability to repay its debt by providing additional funds to the non-party 1 in a situation where it is difficult for the non-party 1 to continue the new construction and sale of collective housing due to the financial difficulties.

Third, although the non-party 1 was in excess of his/her obligation and the non-party 1 was insufficient to fully repay his/her obligation to the creditors, the offering of each of the real estate of this case as security to the defendant 1, a specific creditor under the first collateral security contract of this case would result in the reduction of joint security against other general creditors. It does not change on the ground that the registration of preservation of ownership in the name of non-party 1 as to each of the real estate of this case and the registration of establishment in the name of defendant 1, for a period of more than one month, other creditors including the plaintiffs, including the plaintiffs

Defendant 1’s above assertion is without merit.

(B) Defendant 2 asserts that, upon receiving a contract or subcontract from Nonparty 1 on June 2002, Defendant 2 concluded a second collateral security agreement with Nonparty 1 on behalf of the said construction business operator, as the construction business operator, including himself, completed the construction work, such as painting and asphalt packing of the instant apartment building, and did not receive the construction cost, Defendant 2 asserted that the said construction business operator entered into the second collateral security agreement on behalf of the said construction business operator.

The contractor of the real estate construction has the right to claim the creation of mortgage on the real estate in order to secure the claim for remuneration under Article 666 of the Civil Act. This is the case where the contractor agrees to vest the ownership of the completed building in the contractor in the original condition, taking into account the completion of the object with the contractor's cost and effort, so the contractor is able to receive the payment of the construction cost preferentially from the object in fact. Under the above provision, the act of the owner of new real estate to provide the contractor with the real estate as security for the claim for the construction cost cannot be deemed a fraudulent act unless there are special circumstances. Moreover, since the new real estate owned by the obligor could have become the obligor's active property with the contractor's effort, even if the contractor recognizes the right to preferential payment,

Comprehensively taking account of the overall purport of the arguments in the statements No. 6-4 and No. 1 to No. 9, Nonparty 1 and Nonparty 11, 12, 13, 14, 15, 16, etc. among the new construction works of the instant apartment, Defendant 2 and Nonparty 1 were awarded a contract for the part of painting, outer walls, retaining walls, civil engineering, lighting, lighting, electric power, windows, windows, waterproofs, waterproofs, and interior timbering construction, etc. among the construction works of the instant apartment building, and they did not receive a total of KRW 275,015,000 from December 2001 to June 2002. Accordingly, Defendant 2, upon delegation from the remainder of the construction works, requested Nonparty 1 to set up a maximum debt amount of each of the instant construction works, and concluded the instant mortgage agreement with the contractor as KRW 275,00,000,000.

According to the above legal principles and the facts of recognition, the second collateral security contract of this case is to secure the claim for the construction cost held by the contractors of each of the new real estate construction works of this case in accordance with Article 666 of the Civil Act, and it does not constitute a fraudulent act as it is reasonable in light of the maximum debt amount and the amount of the construction cost claim.

(C) On June 2002, Defendant 3 supplied Nonparty 1 with a household equivalent to KRW 79 million in total. On June 30, 2002, Defendant 3 entered into a contract with Nonparty 1 to purchase real estate of this case in lieu of the payment of the remainder of KRW 69 million and pay KRW 64 million in difference with the sale price. Defendant 3 entered into a contract with Nonparty 2 to exercise a lien by means of leasing it to Nonparty 2 and constitutes a legitimate right holder, which constitutes a contract for the third collateral security of this case. This is based on the contractor’s right to demand mortgage under Article 666 of the Civil Act, and Defendant 3 did not have any intention to do so.

First, in order for Defendant 3 to exercise the right of retention on the real estate 10 of this case, there must be a relation between Defendant 3 as the preserved claim occurred in relation to the subject matter, and there should be a relation between them. However, there is no evidence to acknowledge this differently.

Second, in order for Defendant 3 to acquire the right to demand mortgage under Article 666(a) of the Civil Act, it should be applicable to the contractor of the real estate construction. The written evidence No. 16 alone is insufficient to recognize that Defendant 3 entered into a contract with Nonparty 1 on the completion of work in relation to the supply of the said household and the payment of remuneration therefor, and its contents constitute the real estate construction work, and there is no other evidence to recognize it. Rather, according to the written evidence No. 1, Defendant 3 was a person who operates the “(trade name omitted) furniture” with Nonparty 1 on June 2002, it is recognized that Defendant 3 entered into a contract with Nonparty 1 to sell the price of KRW 79 million.

Third, even if Defendant 3 concluded a sales contract in lieu of satisfaction of the claim against Nonparty 1 and concluded the third collateral security contract of this case to secure it, it cannot be deemed that the third collateral security contract of this case does not constitute a fraudulent act on the ground that Defendant 3 is a legitimate right holder, even though Nonparty 1 is in excess of its obligation and its property is insufficient to repay all obligations to the creditors, offering the 10 real estate of this case as security to Defendant 3, a specific creditor, by the third collateral security contract of this case, would result in the reduction of joint security against other general creditors and would prejudice their interests.

Fourth, in light of the testimony of Non-Party 7 of the first instance trial witness, it is insufficient to recognize that Defendant 3 acted in good faith at the time of entering into the third collateral security contract of this case only with the descriptions of evidence Nos. 11, 14, and Ma1 to 3, and there is no other evidence to acknowledge this otherwise.

Defendant 3’s above assertion is without merit.

(b) Scope of revocation of fraudulent act and methods of reinstatement;

In the event that a mortgage contract is cancelled as a fraudulent act, if another person acquires ownership and the registration of creation of a mortgage was cancelled, it is impossible to return the original property, so it is inevitable to order the beneficiary to return dividends by means of compensation for value. If a beneficiary receives dividends due to the termination of dividends, the distribution schedule is finalized, but the beneficiary has not been actually paid dividends due to the creditor's provisional disposition prohibiting the payment of dividends, the creditor shall order the transfer of the dividend payment claim and the notification of the transfer of the claim. However, if the creditor was present on the date of distribution and raised an objection on the distribution portion of the beneficiary, the creditor may file a lawsuit of demurrer against distribution as a restoration jointly with the lawsuit of revocation of fraudulent act. In this case, the mortgage contract shall be cancelled only to the extent that other creditors other than the creditor did not obtain the satisfaction of the creditor's claim without considering the existence of the creditor's claim, and only to the extent so, the amount of dividends shall be deleted and corrected as the amount of dividends of the creditor (see Supreme Court Decision 2003Da6200, Jan. 27, 2004).

As seen earlier, the Plaintiffs have interest in preventing Defendant 3 from distributing dividends. Accordingly, the third collateral security agreement of this case should be entirely revoked. Meanwhile, according to the above facts, the Plaintiffs were to be revoked within the scope of KRW 29,238,356, KRW 116,953,425, KRW 525, and KRW 197,191,781 (= KRW 29,238,356 + KRW 116,953,424 + KRW 5,000 + KRW 51,00). As such, the amount of dividends of this case, which was composed of KRW 395,00,000, KRW 397,197, KRW 1981, KRW 2965, KRW 19685, KRW 197, KRW 25085, KRW 2985, KRW 197, KRW 2500, KRW 5005, KRW 197,581975, KRW 29857,5085.

3. Conclusion

Therefore, within the scope of KRW 197,191,781, the contract for the third collateral security of this case was entirely revoked, and the remaining claims against Defendant 2 are dismissed without any justifiable reason. Since the part of the judgment of the court of first instance against Defendant 2 is unfair and thus unfair, the part of the judgment against Defendant 2 is about KRW 625,07, KRW 238,356, Plaintiff 1’s dividends amount of KRW 116,953,424, and Plaintiff 3’s dividends amount of KRW 51,00,00,000, respectively, shall be corrected. Thus, the plaintiffs’ claims against Defendant 3 shall be accepted for the reasons of the above recognition, and the part of the judgment against Defendant 2 shall be revoked, and the part of the judgment against Defendant 2 shall be dismissed, as it is without any justifiable reason.

[Attachment List omitted]

Judges highest (Presiding Judge) and Lee Jin-soo