In case where a custodian takes over the litigation procedures concerning the property of a debtor for rehabilitation, whose custodian has been interrupted pursuant to the former part of Article 59(2) of the Debtor Rehabilitation and Bankruptcy Act, whether the other party's right to demand a reimbursement against the debtor for the litigation costs, including the litigation costs when the debtor for rehabilitation has performed the lawsuit before the receiver takes over the lawsuit (affirmative)

In cases where litigation procedures concerning the property of a debtor for rehabilitation suspended under the former part of Article 59(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”), in cases where the other party won the lawsuit, the right to demand reimbursement of the litigation costs against the debtor for rehabilitation shall be deemed priority claims, including not only the litigation costs after the custodian took over the litigation procedures, but also the litigation costs when the debtor performs the lawsuit before the custodian takes over the lawsuit, under the latter part of Article 59(2) of the Debtor Rehabilitation Act.

Article 59(1) and (2) of the Debtor Rehabilitation and Bankruptcy Act

Re-Appellant (Appointed Party)

Seoul High Court Order 2016Ra20798 dated August 17, 2016

The order of the court below is reversed, and the case is remanded to Seoul High Court.

The grounds of reappeal are examined.

1. Article 59(1) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “ Debtor Rehabilitation Act”) provides that “when a decision is made to commence the rehabilitation procedures, the proceedings relating to the debtor’s property shall be interrupted.” Article 59(2) of the same Act provides that “The custodian or the other party may take over the proceedings unrelated to any rehabilitation claim or rehabilitation security right among the proceedings suspended pursuant to paragraph (1). In such cases, the debtor’s right to claim litigation costs against the debtor shall be a priority claim.” In cases where the other party takes over the proceedings concerning the debtor’s property suspended pursuant to the former part of Article 59(2) of the Debtor Rehabilitation Act, the litigation costs for the right to claim against the debtor shall be deemed a priority claim, including not only the litigation costs after the custodian takes over the proceedings, but also the litigation costs when the debtor took over the proceedings prior to the custodian’s taking over the proceedings.”

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

A. UAWC Co., Ltd. (hereinafter “NAWC”) filed a lawsuit seeking payment of the agreed amount and damages (hereinafter “instant principal lawsuit”) with the applicant and 11 others, the Seoul Central District Court 2013Gahap82550, and the applicant filed the lawsuit as the designated party of the said Defendants. On August 22, 2014, the said court filed an appeal with the said Defendants. At the same time, the applicant received share certificates representing the common share of 1,263,401 shares of CBC issuance from UAC and the non-applicant, and at the same time, issued a UAWC judgment ordering UAWC to pay KRW 378,335,50 to UAWC KRW 378,350.

B. On October 30, 2014, UNWC filed an application for commencing rehabilitation procedures with the Suwon District Court 2014 Gohap54, and received a decision on commencing rehabilitation procedures on November 19, 2014, the appellate procedure of the instant case was suspended. Thereafter, the respondent, who is the administrator of UNWC, took over the said litigation procedures, but both parties were deemed to have been withdrawn on June 30, 2015 pursuant to Article 268(4) of the Civil Procedure Act on the grounds that both parties did not appear on two occasions on the date for pleading. Accordingly, the first instance judgment of the instant case became final and conclusive as is, the first instance judgment of the instant case.

C. On January 22, 2016, the applicant filed the instant application against the respondent seeking confirmation of the amount of litigation costs of the first instance trial of the instant case.

3. We examine the above facts in light of the legal principles as seen earlier.

A. The principal lawsuit of this case is a lawsuit seeking payment of the agreed amount and damages against the applicant, etc., and is not related to rehabilitation claims or rehabilitation security rights. Pursuant to the main text of Article 59(2) of the Debtor Rehabilitation Act, the respondent, who is the administrator of the debtor debtor, takes over the lawsuit of this case. As such, in the event the applicant, who is the other party to the lawsuit of this case, won the lawsuit of this case in the principal lawsuit of this case, the claim for reimbursement against the debtor debtor, as well as the litigation costs after the respondent took over the lawsuit of this case pursuant to the latter part of Article 59(2) of the Debtor Rehabilitation Act, shall be deemed public interest claims including not only the litigation costs after the respondent took over the lawsuit of this case, but also the litigation costs when the debtor debtor, UNWC, including the first instance court of this case, had taken over the lawsuit of this case before the respondent takes over the lawsuit of this case. This shall be deemed to have taken over the appellate lawsuit of this case as the withdrawal of the appeal of this case, and thus, it shall not be deemed to have any other public interest claims of this case.

B. Nevertheless, on the premise that the litigation costs of the first instance court on the merits of this case fall under the rehabilitation claim, the lower court determined that the instant application seeking the confirmation of the forfeited litigation costs is unlawful, inasmuch as the applicant’s right to demand reimbursement was forfeited at the time when the authorization for the rehabilitation plan is decided, as the applicant was unable to participate in the rehabilitation procedure for Natn&C C, by failing to file an application for the final claim inspection judgment within one month from the last day of the inspection period, etc.

4. Therefore, the order of the court below is reversed and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)