The purport of Articles 578 and 580(2) of the Civil Act that stipulate special provisions concerning "auction" with respect to a seller's warranty liability, and whether the "auction" under each of the above Articles means only the sale performed by the State or agency against the buyer's will pursuant to law (affirmative)

Articles 570 through 584 of the Civil Act provide for the seller’s warranty liability and Articles 578 and 580(2) of the Civil Act provide for the special provisions on “auction.” Although the Civil Act’s special provisions are similar to the sale and purchase, the sale and purchase is concluded by the agreement between the parties, while the sale and purchase are made by a court, which is a State agency, regardless of the seller’s intent, and the sale and purchase of property rights are transferred. Due to such special characteristics, it is necessary to reasonably coordinate the interests of the creditors, debtors, and buyers involved in the auction procedure and to promote stability in the auction procedure implemented by the State agency. Therefore, applying the provisions on the warranty liability premised on general sale and purchase to auction is unreasonable. Accordingly, the “auction” as referred to in Article 578 of the Civil Act and Article 580(2) of the Civil Act should be construed to mean only the sale and purchase act performed by the State or an institution acting on behalf of the State or the right holder regardless of its intention under the National Tax Collection Act.

Articles 578 and 580(2) of the Civil Act

Seoul High Court Decision 201Na14466 decided May 1, 201

Internet Office, Inc.

Suwon District Court Decision 2014Na3635 decided October 16, 2014

The judgment of the court below is reversed, and the case is remanded to the Gu Government District Court.

The grounds of appeal are examined.

1. According to the reasoning of the judgment below, the court below rejected the plaintiff's assertion that the plaintiff, an intermediary wholesaler under the Act on Distribution and Price Stabilization of Agricultural and Fishery Products (hereinafter "Agricultural & Fishery Products Act"), purchased the instant party right through an auction conducted by the defendant, a wholesale market corporation, and held warranty liability on the ground that there is a defect in the present party. The court below rejected the plaintiff's assertion on the ground that Article 580 (2) of the Civil Act does not apply to the warranty liability of Article 580 (1) of the Civil Act as long as the plaintiff purchased the instant party right as "auction" as alleged by the plaintiff, even if the defendant constitutes a commission agent under the Commercial Act

2. However, we cannot agree with the judgment of the court below for the following reasons.

A. Review of the reasoning of the lower judgment and the record reveals the following facts.

(1) The Defendant was a stock company established for the purpose of consignment sale of fruits, vegetabless, etc., and was designated as a wholesale market corporation by the opener of the former Agricultural and Fishery Products Wholesale Market, and the Plaintiff was granted permission as an intermediary wholesaler for the purpose of wholesale and retail business of agricultural products.

(2) On January 25, 2013, the Defendant listed the party position entrusted by the shipper at the former Agricultural and Fishery Products Wholesale Market and put it at an auction. On the same day, the Plaintiff was awarded a successful bid in the amount of KRW 26,628,00 in total of KRW 317 boxes on the same day.

(3) The Plaintiff considered the instant root contained in the box indicated as “domestic acid” and received a successful bid in the Republic of Korea (import watch can be sold only in cleaned condition). Meanwhile, on the same day, the Plaintiff purchased from the Defendant as an auction on the import watch, the winning bid price per 1kg of the import watch was remarkably lower than 950 won per 1kg of the instant root.

(4) The Plaintiff sold part of the root of this case to a third party. After that fact, the fact that the root of this case was China and was partially returned to the Plaintiff. On May 31, 2013, the Plaintiff: (a) disposed of 148 gamblings in custody or returned to the National Agricultural Products Quality Management Service; and (b) issued a certificate of content that the Plaintiff sought compensation, etc. for damages therefrom to the Defendant.

B. The main sentence of Article 32 of the Agricultural Products Act provides that "the wholesale market corporation shall sell and sell agricultural and fishery products in the wholesale market by means of auction, bidding, fixed price sale, or free sale." According to the above facts, the defendant, a wholesale market corporation, is a person who runs the business of listing agricultural and fishery products entrusted by the shipper on the wholesale market and selling them in its name and on the shipper's account, and is a commission agent under the Commercial Act. Therefore, the defendant is liable to directly acquire the right of the plaintiff who purchased the instant party pursuant to Article 102 of the Commercial Act and bears the obligation, and if there is a defect in the party part of the object of sale, he is liable to directly, and Article 69 of the Commercial Act, which is a special provision for liability for warranty

C. On the premise of this, we examine the judgment of the court below that the provision on the warranty liability is not applicable because the plaintiff purchased the right to the "auction".

(1) Articles 570 through 584 of the Civil Act provide for the seller’s liability for warranty, and Articles 578 and 580(2) of the Civil Act provide for the special provisions on “auction.” The purport of the said special provisions is that the sale and purchase is similar to the sale and purchase, but the sale and sale is concluded by the agreement between the parties, while the sale and sale is conducted by a court, which is a state agency, regardless of the intent of the debtor in the position of the seller, and the sale and sale is distinct. Due to such special characteristics, it is necessary to reasonably coordinate the interests of the creditors, debtors, and buyers involved in the auction procedure and to promote stability in the auction procedure implemented by the state agency. Therefore, applying the provision on the liability for warranty premised on a general sale and sale to auction is unreasonable. Accordingly, the “auction” as referred to in the Civil Act and Article 580(2) of the Civil Act should be construed to mean only the sale and sale of the property regardless of the intention of the right holder, such as an auction or public sale under the National Tax Collection Act.

(2) In the past, the Supreme Court held that, like compulsory execution under the Civil Execution Act (see, e.g., Supreme Court Decisions 91Da21640, Oct. 11, 1991; 2002Da70075, Apr. 25, 2003), or auction for exercising a security right (see, e.g., Supreme Court Decision 87Da2641, Apr. 12, 198), a court, a state agency, has regarded as subject to the above special provisions under the Civil Execution Act, and that, in Supreme Court Decision 2012Da45207, Feb. 13, 2014, “a public auction under Article 578 of the Civil Act includes a public auction conducted by the Korea Asset Management Corporation as proxy under Article 61 of the National Tax Collection Act, which is a state agency under the National Tax Collection Act, as it sells property under the Civil Execution Act, regardless of the taxpayer’s intent to sell it.

As such, the Supreme Court has set the premise of applying the above statutory provisions to the effect that an auction under Articles 578 and 580(2) of the Civil Act refers only to an act of selling an object regardless of the intention of the holder of the right to object under the law. Although the Supreme Court has not explicitly stated the meaning of auction under each of the above statutory provisions, it is merely because there was no need to make a defined interpretation due to the lack of any particular difference in the meaning of auction so far, and so long as it is obvious that the Supreme Court has made the above interpretation on the premise of applying each of the above statutory provisions, it shall also be deemed as the "decision of the Supreme Court on the interpretation of statutes".

(3) However, according to the above facts, the defendant does not put the present situation over auction regardless of the shipper's intention, but sells it by means of auction, which is one of the multiple sale methods under the Agricultural Procedure Act, according to the entrustment of the shipper's sale as a commission agent under the Commercial Act. Thus, in light of the judgment of the Supreme Court, the auction of this case cannot be deemed to constitute "auction" under Article 580 (2) of the Civil Act, which applies the special provisions for warranty liability.

Therefore, the lower court should have determined whether the Plaintiff’s assertion of the liability for warranty exists by examining whether there was any defect that could not be immediately discovered in the vicinity of the instant case on the premise that Article 69(a) of the Commercial Act is first applied, and whether there exists a special agreement between the Plaintiff and the Defendant, etc., which restricts or excludes the application of the liability for warranty, along with whether the Plaintiff sent such notice at the time of the enemy. Nevertheless, the lower court rejected the Plaintiff’s assertion solely on the ground that the Plaintiff purchased the instant party by means of “auction”, the lower court erred by misapprehending the legal doctrine of the Supreme Court under Article 3 subparag. 2 of the Trial of Small Claims Act.

The ground of appeal pointing this out is with merit.

3. Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Poe-young (Presiding Justice)