[1] Whether the exercise of the right of retention against the principle of good faith is allowed by the parties to a transaction, such as intentionally writing the right of retention and unfairly using the status as the highest priority security right of the right of retention (negative)

[2] Whether a creditor who acquired possession of an object after a security right such as a mortgage can claim a civil lien against the mortgagee, etc. (affirmative in principle)

[3] In a case where Gap corporation et al. concluded a new hotel construction contract with Eul and completed the construction work, but Eul did not complete the construction cost, Byung corporation loaned money to Eul and completed the registration of the establishment of a neighboring establishment of the above hotel, and Byung corporation et al. thereafter claimed the exercise of the right of retention in the voluntary auction procedure applied by Byung company while Gap et al. possessed Eul's hotel by delivery from Eul, the case holding that the judgment below erred in the misapprehension of legal principles, which held that Gap corporation's exercise of the right of retention constitutes a violation of the principle of good faith merely because Gap corporation et al. was delivered a hotel from Eul upon Eul's application, recognizing that the voluntary auction

[1] Articles 2 and 320(1) of the Civil Act / [2] Article 320(1) of the Civil Act / [3] Articles 2 and 320(1) of the Civil Act

[1] Supreme Court Decision 201Da84298 Decided December 22, 2011 (Gong2012Sang, 168) / [2] Supreme Court Decision 64Da1977 Decided March 30, 1965 (No. 13-1, 87) Supreme Court Decision 2008Da70763 Decided January 15, 2009 (Gong2009Sang, 158)

Interest and life Insurance Co., Ltd.

SPS security system and 10 others (Attorneys Choi Young-young et al., Counsel for the defendant-appellant)

Supreme Court Decision 2009Da60336 Decided March 20, 2014

Daejeon High Court (Cheongju) Decision 2014Na667 decided July 8, 2014

The part of the lower judgment against the remaining Defendants except Defendant 10 is reversed, and that part of the case is remanded to the Daejeon High Court. Defendant 10’s appeal is dismissed. The costs of appeal between the Plaintiff and Defendant 10 are assessed against Defendant 10.

The grounds of appeal are examined.

1. The lower court: (a) concluded a construction contract with Nonparty 1 for each of the construction works, including new construction of the instant building, civil engineering, packing, etc., on each of the instant land; (b) concluded a contract with Defendant 10 to supply goods to Nonparty 2; (c) supplied 5,240,00 won to Nonparty 1 for each of the instant real estate at the request of Nonparty 20,000,000 won; and (d) completed the auction procedure with Defendant 10,000,000 won for each of the instant real estate at the time of 10,000 won; and (d) concluded a contract with Nonparty 2 for sale of each of the instant real estate at the time of 206,000 won to Nonparty 1; and (e) completed the auction procedure with Defendant 10,000 won for each of the instant real estate at the time of 20,000 won; and (e) completed the auction procedure with Defendant 16,000 won for each of the instant real estate.

Based on the above findings of fact, the court below affirmed the judgment of the court of first instance, which is all accepted by the defendants' claims seeking confirmation of the non-existence of a lien on each of the instant real estate, in light of the following circumstances: (a) the defendants acquired possession of each of the instant real estate; (b) the financial status of Nonparty 1; (c) the relationship between the defendants and Nonparty 1; and (d) the plaintiff's progress until the plaintiff applied for a voluntary auction on each of the instant real estate; and (c) the defendants were handed over the instant real estate from Nonparty 1, on the ground that the defendants were fully aware of the commencement of the voluntary auction procedure on each of the instant real estate at the plaintiff's request, which is a mortgagee; and (d) the defendants' assertion of a lien on each

2. The above determination by the lower court is difficult to accept.

In relation to the lien system, the parties to the transaction intentionally forged the lien for their own interest, thereby using the status as the top priority security interest in the lien unfairly and distort the concept of the law relating to the overall order of security rights. Therefore, considering the specific circumstances of individual cases comprehensively, the exercise of the lien for abuse of the lien system, which is assessed contrary to the principle of good faith, cannot be allowed (see Supreme Court Decision 2011Da84298, Dec. 22, 2011).

However, in light of the facts established by the court below, the court below determined that the Defendants’ exercise of the right of retention against the Plaintiff was against the principle of good faith on the ground that the Defendants, except for Defendant 10 (only those holding the claim for the purchase price of goods), knew that the auction procedure for each of the instant real estate was immediately commenced upon the Plaintiff’s request, and that each of the instant real estate was delivered by Nonparty 1. However, the court below’s determination that the above Defendants’ exercise of the right of retention against the Plaintiff was contrary to the principle of good faith is difficult on the ground that the Defendants’ exercise of the right of retention against the Plaintiff. However, in a case where the creditors, even though a claim regarding the subject matter occurred, prior to the acquisition by possession of the right of collateral, such as a mortgage, were established and the creditors acquired possession of the subject matter after the acquisition by the right of collateral security, barring any other circumstances, the creditors can claim against the mortgagee, etc. (see Supreme Court Decisions 64Da1977, Mar. 30, 1965; 2008Da763, Jan. 15, 2009).

Nevertheless, without examining more specifically the grounds for recognizing the violation of the good faith, the lower court determined that the Defendants’ exercise of the right of retention, except Defendant 10, solely based on the above circumstances, constituted a violation of the good faith principle. In so doing, the lower court erred by misapprehending the legal doctrine on the violation of the good faith principle in connection with the exercise of civil lien, or by failing to exhaust all necessary deliberations

3. However, with respect to Defendant 10, the lower court: (a) cited the Supreme Court Decision 2010Da57350 Decided February 28, 2013, the lower court deemed that Defendant 10’s exercise of the right of retention constitutes a violation of the good faith principle on the same grounds as the rest of the Defendants; and (b) based on such reasoning, determined that the Plaintiff’s claim for confirmation of non-existence of the right of retention against the said Defendant was justifiable, on the ground that “the above Defendant is merely a commercial lien holder; and (c) the commercial lien holder cannot oppose the purchaser who acquired real estate in the course of voluntary auction based on the preceding mortgagee or the preceding mortgage.”

The lower court’s determination that “Defendant 10, as a commercial lien holder, cannot assert the right of retention on each of the instant real estate against the Plaintiff as a prior mortgagee,” was that the Defendant did not assert any of the grounds for appeal, and did not appear to have any particular error in the said determination itself, and therefore, the lower court’s conclusion against the said Defendant is justifiable without any need to further examine other points.

4. Accordingly, the part of the judgment of the court below against the Defendants other than Defendant 10 is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. Defendant 10’s appeal is dismissed, and the costs of appeal between the Plaintiff and the above Defendant are assessed against the Defendant who lost. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Sang-hoon (Presiding Justice)