Where a person who has been granted the right of representation for creation of a security has created a security by his/her own name after transferring ownership in his/her name, the effect of such security

In a case where the Nonparty borrowed money on behalf of the Plaintiff from another and received a certificate of the authority to create a security right to real estate and received a certificate of the personal seal impression on behalf of the Plaintiff, the Defendant’s lending money to the Nonparty and the establishment of a security right to the real estate was believed to be the Nonparty as the Nonparty’s real owner, not to mention that the Nonparty believed to be the Nonparty’s real owner, but not to be the Nonparty’s agent. As such, the Nonparty cannot be said to have neglected to the effect that the Nonparty consented to or neglected (including the external formation of a false ownership transfer) with the knowledge of the fact that he consented to the registration of the ownership transfer in that name. Therefore, the said security right under the name of the Defendant cannot be said to be valid by analogy of Articles 126 and 108 of the Civil Act

Articles 126 and 108 of the Civil Act

Attorney Choi Jong-gu, Counsel for the defendant-appellant

[Defendant-Appellant] Defendant 1 and 3 others

Seoul High Court Decision 79Na3606 delivered on May 14, 1980

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. In its reasoning, the judgment below held that the non-party is not entitled to protection by the expression agency system even if the non-party is the defendant in good faith and without negligence, since the non-party was granted the right of representation for the creation of a security right to real estate in question by the plaintiff and was not entitled to transfer ownership to him, and since the non-party transferred this right in his name and created a security right to the defendant in his own name, the non-party is not entitled to protection by the expression agency system. However, in light of the spirit of the expression agency system ( particularly Article 126 of the Civil Code) and Article 108 (2) of the Civil Code, if the plaintiff was involved in the process of creating a false appearance of the transfer registration of ownership in the above non-party by issuing a certificate of reduction of registration, etc., if the appearance of the non-party was made in good faith and without negligence, the non-party's right to protection of the defendant's right to ownership in the future, which is the same kind of right as that of the plaintiff's intention, can not be justified.

2. In original, the expression agency system under the Civil Act is intended to protect a third party without fault in good faith and to maintain the safety of transaction, and further to maintain the credibility of the agency system, in the event that there is a appearance such as a string of power of representation, in spite of the absence of power of representation, and the principal is responsible for the occurrence of such appearance when he gives rise to a certain degree of cause.

However, as seen above, the judgment below interpreted the expression agency system, in particular, Article 126 of the Civil Act, and Article 108 of the Civil Act concerning the false conspiracy. According to the records, as recognized by the court below, it is clear that the defendant lent money to the non-party who believed the non-party to be a true owner of the real estate and created a security right to such real estate, and that the non-party is not believed to be the plaintiff's agent, but it is evident that the non-party made a provisional registration of the transfer of ownership and the establishment of a security right to the defendant only in the name of the non-party and 20 days, but it is evident that the non-party made a provisional registration of the transfer of ownership and the establishment of a security right to the non-party only in the name of the non-party. However, in the case of the non-party's registration of the transfer of ownership, there is no evidence that the plaintiff allowed or neglected to know it in the non-party's name in the registration of the transfer of ownership, it cannot be inferred to interpret the transfer of ownership to the non-party.

Nevertheless, the judgment of the court below is reversed and remanded, since there is an error of law by misunderstanding the legal principles as to expression representation, false representation, and excessively expanded interpretation of the system of expression representation or false representation, which the court below concluded as above, and it is reasonable to discuss this issue.

This decision is delivered with the assent of all participating judges, and it is so decided as per Disposition.

Justices Jeon Soo-hee (Presiding Justice)