Whether Article 368(1) of the Civil Act applies to the case where a subordinated mortgage is established on the existing mortgaged property before the joint mortgaged property is added to a specific joint collateral security (affirmative)

Article 368(1) of the Civil Act provides that, in cases where a mortgage has been created on several immovables with the same claim as security, if the proceeds of the auction are to be distributed at the same time, the apportionment of the claim shall be determined in proportion to the proceeds of the auction of each immovables. In cases of so-called simultaneous dividends distributed at the same time from the proceeds of the entire proceeds of the auction of the object of joint mortgages, the above provision aims to coordinate the interests of the owners on each real estate and the next-order mortgagee and other creditors by allocating the responsibility for each real estate to the extent

On the other hand, the parties can add the object of the joint collateral security by registering that the object of the joint collateral security is not only the time of establishment of the initial collateral security but also the time of establishment of the joint collateral security. In such a case, Article 368(1) of the Civil Act applies to the case where the subordinated collateral security is established on the existing object before the joint collateral security is added

Article 368(1) of the Civil Act

Supreme Court Decision 97Da51650 Decided April 24, 1998 (Gong1998Sang, 1452) Supreme Court Decision 2005Da14502 Decided October 27, 2006 (Gong2006Ha, 1991)

Hansung Co., Ltd. (Law Firm Squa, Attorneys Lee Jae-in et al., Counsel for the plaintiff-appellant)

Infant Error Co., Ltd. (Bae & Yang LLC, Attorneys Ansan-sung et al., Counsel for the defendant-appellant)

Gwangju High Court Decision 2012Na2991 decided April 25, 2013

The appeal is dismissed. The costs of appeal are assessed against the defendant.

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

Article 368(1) of the Civil Act provides that, in cases where a mortgage has been created on several immovable properties with the same claim as collateral, if the proceeds of the auction are to be distributed at the same time, the apportionment of the claim shall be set in proportion to the proceeds of the auction of each immovable property. In cases of so-called simultaneous dividends distributed at the same time from the proceeds of the entire proceeds of the auction of the object of joint mortgages, the purport of the above provision is to coordinate the interests of the owners of each immovable property and the next-order mortgagee and other creditors by allocating the responsibility for each immovable to the extent that it does not infringe upon the right of choice of the joint mortgagee and the right of preferential reimbursement. This applies to joint collateral mortgages (see Supreme Court Decision 2005Da14502, Oct. 27, 2006). Meanwhile, the parties may add the object of joint collateral mortgages by registering not only at the time of the establishment of the initial collateral collateral but also after the establishment of the joint collateral mortgages. As such, Article 368(1) of the Civil Act applies to the existing collateral Security prior to the joint collateral.

In light of the above legal principles and the records, the court below was just in determining the amount of dividends of the plaintiff and the defendant on the premise that Article 368 (1) of the Civil Code is applied to the case where the joint collateral security was created for the real estate Nos. 1 and 2 as the Industrial Bank of Korea on July 21, 2009, and the joint collateral security was created with regard to the same real estate on the 29th of the same month by designating the mortgagee as the plaintiff, and on December 10, 2010, the joint collateral security was established with regard to the same real estate on the 29th of the same month, and the joint collateral security was additionally established with respect to the real estate Nos. 3 and 9 in order to secure the same secured claim as the joint collateral security of the Industrial Bank of Korea.

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.

Justices Yang Chang-soo (Presiding Justice)