Amount received through an invalid auction falls under unjust enrichment.

Due to invalid sale in violation of Article 20 of the Aggregate Buildings Act, which is a mandatory provision prohibiting the separate disposal of section for exclusive use and right to use site, the amount distributed to the defendant's Republic of Korea

Article 20 of the Act on Ownership and Management of Condominium Buildings

2015 Gohap52868 Undue gains

AA

Republic of Korea, Nam-gu, Incheon Metropolitan City,CC

January 29, 2016

February 18, 2016

1. The Plaintiff, Defendant Republic of Korea’s KRW 00,000,000, and the Defendant’s person as from May 0, 2015,

The Nam-gu Seoul Metropolitan City shall pay 00,000,000 won and the amount equivalent to 15% per annum from April 00, 2015; Defendant BB stock companies shall pay 00,000,000 won and the amount equivalent to 5% per annum from May 0, 2015 to February 00, 2016; and 15% per annum from the next day to the day of full payment.

2. The plaintiff's remaining claims against the defendants are dismissed.

3. One-fifth of the costs of lawsuit is assessed against the Plaintiff, and the remainder is assessed against the Defendants.

4. Paragraph 1 can be provisionally executed.

Defendant Republic of Korea shall pay to the Plaintiff 00,000,000 won for Defendant Nam-gu, Incheon Metropolitan City, and 00,000,000,000 won for Defendant BB Co., Ltd., from August 0, 2009 to the delivery date of a copy of the complaint of this case, 5% per annum for each of the above amounts, and 20% per annum for each of the following day to the date of full payment.

1. Facts of recognition;

The following facts do not conflict between the parties, or evidence A(as referred to above) of Nos. 1 to 4

each entry and the whole of the arguments in Category 1, 2, 5, and 9, including each number; hereinafter the same shall apply), Category 1, 2, 5, and 9

may be recognized in full view of the purpose of this chapter.

(a) New construction of multi-household houses;

1) On July 00, 1990,CC Co., Ltd. (hereinafter referred to as “CC, regardless of whether before or after the mutual change”) purchased between 000-0 and 353.4m2 (hereinafter referred to as “1m2”) in Nam-gu, Incheon Metropolitan City, Nam-dong, and completed the registration of ownership transfer in the name ofCC on August 00, 1990.

2) On July 26, 1990, KK, who was a director ofCC, as a form of FF, was the representative director ofCC, purchased a 217-7 large 353 square meters wide-dong, Nam-gu, Incheon (hereinafter “instant 2 land”) and completed the registration of ownership transfer in the name of KK on August 23, 1990.

3) On the land of this case,CC concluded a construction contract with JJ on September 0, 190 in order to newly construct two multi-household houses with the size of the first and third floors above ground on the land of this case owned by it, and to sell them in lots. JJ started construction of multi-household houses on the land of this case from around that time.

4) On September 3, 1990, KK concluded a construction contract with JJ on September 3, 1990 to newly construct two multi-household houses with the size of the first and third floors underground above the ground surface on the land of this case owned by it. JJ started construction of multi-household houses on the land of this case since around that time.

(b) Establishment of a collateral security;

1) On December 4, 1990,CC and KK completed the registration of the establishment of a neighboring mortgage (hereinafter referred to as the “mortgage of this case”) with respect to the land of this case Nos. 1 and 2 to Defendant BB Co., Ltd. (hereinafter referred to as “Defendant B”), including the maximum debt amount of KRW 000,000,000,000,000,000,000,000 with respect to the land of this case, and thereafter, to Defendant B B, the registration of the establishment of a mortgage (hereinafter referred to as the “additional mortgage of this case”) was additionally completed on December 0, 1990 with respect to the land of this case Nos. 1 and 2 to Defendant B, with the maximum debt amount of KRW 00,000,000,000,000,000 with the debtorCC on March 0, 1991.

2) Meanwhile, in order to obtain loans from Defendant BB as collateral for the instant land Nos. 1, 2, and multi-household houses newly built on the instant land and its ground. As of December 00, 190, the appraisal report prepared at the time stated that, as of December 1, 1990, the percentage of multi-household houses newly built on the instant Nos. 1 and 2 is about 85%, and that, as of December 00, 190, 13 households as of December 13, 190 were subscribed to the said multi-household house, and that the internal construction of the said multi-household house is being completed.

C. The auction procedure for the land Nos. 1 and 2 of this case, and the registration fees for preservation of ownership for multi-household housing, etc.

1) On July 00, 2008, Defendant B filed an application for voluntary auction of real estate on the basis of the instant right to collateral security and the instant additional right to collateral security (the instant auction procedure was completed on July 00, 2008 with respect to the land Nos. 1 and 2.

2) The plaintiff was awarded a successful bid for the land Nos. 1 and 2 in the auction procedure of this case, and on June 15, 2009.

After full payment of KRW 000,000,000 for each purchase price, the ownership of the land of this case No. 1 and 2 on June 00, 2009

The former registration has been completed.

3) Since August 0, 2009, the date of distribution of the above sale price was set on August 0, 2009, Defendant Republic of Korea was paid KRW 00,000,000 to Defendant South-gu Incheon Metropolitan City, KRW 00,000 to Defendant Nam-gu, and KRW 00,000,000 to Defendant B, respectively.

4) After that, at around April 2010,CC sold SS (hereinafter “SS”) a total of 16 households of 16 multi-household houses with the third floor above ground (hereinafter “first multi-household house”) newly built on the instant land, which had not been registered until the time, and around April 2010, KK sold to HH a total of 16 multi-household houses with the third floor above ground (hereinafter “second multi-household house”) newly built on the instant land. HH sold the second multi-household house to LL around April 2010.

5) Next, with respect to the aggregate buildings of 16 households of the first multi-household housing in the instant case, pressure on November 12, 2010

Each registration of preservation of ownership has been made in the name of SS due to the registration request, and each registration of preservation of ownership has been made in the name of LL on June 10, 201 with respect to aggregate buildings of 16 multi-households in the instant case.

(d) Litigation results, etc. of the relevant case;

1) SS and LL, the owner of the instant 1, 2 multi-household housing, acquired the ownership of the instant 1, 2 multi-household housing, and acquired the ownership of the instant 1, 2 multi-household housing. The instant right to collateral security is null and void pursuant to Article 20 of the Act on Ownership and Management of Condominium Buildings (hereinafter “the Act”) due to an act of disposal of the land that goes against the legal fiction of section for exclusive use and right to use the site. The instant auction procedure, which was conducted based on the instant right to collateral security, was also null and void, filed a lawsuit against the Plaintiff on the claim for cancellation of ownership transfer registration for the instant 1, 2 land in the Plaintiff’s name, and againstCC and KK on the claim for ownership transfer registration for the instant 1, 2 land (Seoul Southern District Court 2013Ga0000).

2) In the above lawsuit, the Plaintiff,CC, and KK did not submit a written reply even after receiving a duplicate of the complaint. Accordingly, the above court rendered a judgment that accepted the entire claim of SS and LL on September 0, 2013, and the above judgment became final and conclusive at that time.

3) According to the above final judgment on October 0, 2013, the registration of transfer of ownership completed in the name of the Plaintiff on the land Nos. 1 and 2 of this case was revoked. On the same day, the land No. 1 of this case was registered in the name of SS, and each registration of transfer of ownership was made in the name of LL for the land No. 2

2. Determination as to the cause of action

A. Whether the instant right to collateral security is null and void

1) Article 20 of the Aggregate Buildings Act provides that the right to use site of a sectional owner is subject to the disposition of his/her section of exclusive ownership, and the sectional owner shall not dispose of the right to use site separately from his/her section of exclusive ownership unless otherwise stipulated by the regulations, and the prohibition of separate disposal shall not oppose a third party who has acquired real rights in good faith without registering the purport thereof. The purport of the above provision is to suppress the separation of the section of exclusive ownership from the section of exclusive ownership of an aggregate building and the right to use site from the section of exclusive ownership to the maximum extent to prevent the occurrence of sectional ownership without the right to use site, thereby promoting stability in legal relations as to an aggregate building and reasonable regulation. Thus, the disposal of a site contrary to the unity of the section of exclusive ownership and the right to use site, is invalid (see, e.g.

Therefore, where each section of exclusive ownership of an aggregate building has independence in structure and use, and only the land which became the object of the right to use the site of an aggregate building has been registered after the sectional ownership was established with respect to a section of exclusive ownership of an aggregate building, the right to collateral security is null and void in violation of Article 20 of the Aggregate Buildings Act (referring to Supreme Court Decision 2012Da18038 Decided July 25, 2013, etc.).

2) The facts that the first apartment house and the second multi-household house newly built on the land of this case, which were newly built on the land of this case, are the first apartment house and the second multi-household house of this case with the third floor above the ground, and the 32 households with the third floor above the ground, as of December 0, 190, around 190 when the mortgage of this case was established, the fair ratio of the first and second multi-household house of this case was about 85%, and as of December 00, 190, the 1 and the second apartment house of this case were subscribed to the second multi-household house as of December 13, 190. The fact that the first and the second apartment house of this case were in progress at the time was being newly built on the land of this case and made efforts to newly construct the second multi-household house of this case, which is its ownership, to acquire the second multi-household house of this case, by newly constructing the apartment house of this case and making efforts to sell it to the second apartment house of this case.

3) According to the above facts, with respect to the land Nos. 1 and 2 of this case, the section for exclusive use of the first and second multi-household houses newly constructed on the land Nos. 1 and 2 of this case at the time of December 1990, which was established with the right to collateral security of this case, has independence in structure and use, and it is recognized that there is a separate act. Thus, with respect to the land Nos. 1 and 2 of this case, the right to divided ownership ofCC with respect to each section for exclusive use of the first multi-household house of this case was already established on December 0, 190 with respect to each section for exclusive use of the second multi-household of this case and the right to divided ownership of the second multi-household house of this case with respect to each section for exclusive use of the second multi-household of this case had already been established on the land of this case as the owner of the land of this case, which is the land of multi-household No. 1 of this case. 1 of this case.

Defendant B asserts that the primary purchaser of the second multi-household house in this case isCC, and the owner of the second multi-household house in this case is KK. At the time of establishment of the instant multi-household mortgage,CC did not acquire the right to use the site for the second land in this case, which is the site of the instant multi-household house in this case. However, there is insufficient evidence to acknowledge thatCC is the primary purchaser of the second multi-household house in this case, and there is no other evidence to acknowledge it.

According to the above argument by Defendant BB, althoughCC is the original acquisitor of the second multi-household house in this case, the right to use the site is not only the ownership, but also superficies, lease on a deposit basis, lease, and other non-title rights, as well as the right to use the site. In light of the above-mentioned facts and the relation between KK andCC (at that time, KK was a director ofCC, the representative director ofCC was FF) which is the owner of the second land, it is reasonable to deem that KK, the owner of the second land in this case, consented to the possession and use of the second multi-household land in order to own each part of the second multi-household house in this case. Accordingly, at the time of establishing the right to use the second multi-household house in this case, KK acquired the right to use the second multi-household house in this case to own each part of the second multi-household house in this case as to the second multi-household land in this case.

4) Therefore, the instant right to collateral security established only on the land Nos. 1 and 2, which became the object of the right to use the site of the instant 1 and 2 multi-household housing, is an act of disposal of the land that goes against the unity of the section for exclusive use and the right to use the site, and thus

B. Establishment of a claim for return of unjust enrichment

1) Even though the right to collateral security has been invalidated or extinguished, if the decision to commence the auction becomes final and conclusive after the auction procedure was conducted, this is an invalidation procedure and decision made based on the invalid or extinguished collateral security (see, e.g., Supreme Court Decision 2011Da68012, Jan. 12, 2012). Furthermore, even if the purchaser paid in full the sale price, the purchaser who did not acquire ownership due to the invalidation of the auction procedure may file a claim with the creditor for return of the amount he/she received dividends out of the auction price (see, e.g., Supreme Court Decision 2003Da59259, Jun. 24, 2004).

2) Examining the instant case, the instant auction procedure was conducted based on the invalid collateral security, and the Plaintiff did not acquire the ownership of the land Nos. 1 and 2 even after full payment of the sale price in the said auction procedure. Barring any special circumstance, the Defendants are liable to return each dividend received by them to the Plaintiff in the instant auction procedure to unjust enrichment.

C. Scope of return of unjust enrichment

The Plaintiff sought unjust enrichment against the Defendants for the payment of each dividend received by them in the instant auction procedure and damages for delay thereof, and claimed the starting date from August 0, 2009, which is the day following the date on which the distribution schedule was prepared in the instant auction procedure.

In light of the above, in return of unjust enrichment, a bona fide beneficiary is liable within the existing limit and a malicious beneficiary is obligated to return the interest he received. However, there is no evidence that the Defendants knew that the auction procedure of this case is null and void. However, Article 749(2) of the Civil Act provides that when a bona fide beneficiary loses, a bona fide beneficiary shall be deemed to be a malicious beneficiary from the time the lawsuit was filed, and the time the lawsuit was filed under the above provision shall be interpreted to be when the duplicate was delivered to the Defendants in light of Article 749(1) of the same Act. Thus, in this case where the Defendants lost, the Defendants shall be deemed to be a bona fide beneficiary from the date when the duplicate of the complaint of this case was delivered to the Defendants.

Therefore, Defendant Republic of Korea is obligated to dispute the existence and scope of each of the instant performance obligations against Defendant B from May 7, 2015, when the duplicate of the complaint of this case was delivered to Defendant Republic of Korea. Defendant Nam-gu, Incheon Metropolitan City, from April 30, 2015, when the duplicate of the complaint of this case was served to Defendant Nam-gu, Incheon Metropolitan City; Defendant BB, from May 0, 2015, when the duplicate of the complaint of this case was served to Defendant B, to dispute over the existence and scope of each of the performance obligations of this case from May 0, 2015, when the duplicate of the complaint of this case was served to Defendant B, to pay 5% per annum under the Civil Act until February 00, 2016, and 15% per annum under the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings from the next day to the day of full payment, and to pay each of the above statutory interest and delay damages.

3. Determination on Defendant BB’s defense of extinctive prescription

A. Defendant BB’s defense

The Plaintiff’s claim for the return of unjust enrichment against Defendant BB occurred on August 00, 2009 upon receipt of dividend by Defendant BB. The aforementioned claim for the return of unjust enrichment occurred based on loan transaction agreement between Defendant BB andCC, which constitutes a commercial activity, and ought to be subject to the five-year extinctive prescription in accordance with Article 64 of the Commercial Act. However, the Plaintiff filed the instant lawsuit on April 00, 2015 when five years elapsed from August 00, 2009, and thus, the Plaintiff’s claim for the return of unjust enrichment against Defendant BB had already expired.

B. Determination

Article 64 of the Commercial Act shall apply or apply mutatis mutandis to claims arising out of commercial activities as well as claims corresponding thereto. However, Article 64 of the Commercial Act does not apply to cases where there is no reasonable ground to deem that there is a need to promptly resolve such claims to the same extent as that of commercial transactions, and the extinctive prescription period is ten years pursuant to Article 162(1) of the Civil Act (see Supreme Court Decision 2002Da64957, 64964, Apr. 8, 2003).

According to the examination, the Plaintiff’s unjust enrichment claimed against Defendant BB does not seek the return of unjust enrichment arising from the loan transaction agreement between Defendant BB andCC, which is a commercial activity, rather than seeking the return of unjust enrichment arising from the loan transaction agreement between Defendant BB, and Defendant B B’s claim for unjust enrichment by receiving the money from the Plaintiff out of the amount paid as the proceeds of the sale from the instant auction procedure, which was null and void, is merely seeking a return of unjust enrichment arising from a reason different from the loan transaction agreement between Defendant BB andCC. Therefore, it does not need to be promptly resolved to the same extent as the commercial transaction relationship. Accordingly, Article 64 of the Commercial Act does not apply to the Plaintiff’s claim for return of unjust enrichment against Defendant B, and the statute of limitations period is ten years pursuant to Article 162(1) of the Civil Act.

4. Conclusion

Thus, the plaintiff's claim of this case against the defendants is justified within the scope of each above recognition.

It shall be accepted, and each remaining claim shall be dismissed as it is without merit, and it is so decided as per Disposition.