[1] In a case where the debtor agreed to transfer the property owned by the debtor to the creditor in relation to the debt, the method of determining whether it is a payment in kind or a security

[2] In a case where the exercise of the right to complete a pre-contract becomes impossible because the subject matter cannot be transferred prior to the declaration of intention of the other party for the completion of the pre-contract after the establishment of the pre-contract, whether the trade becomes effective by the declaration of intention of the pre-contract completion (negative) and the meaning of the impossibility of performance in this case

[1] In a case where the obligor agreed to transfer the property owned by the obligor to the obligee in relation to the obligation, whether it would be transferred as a substitute for the repayment of the previous obligation, or whether it would be transferred as a substitute for the repayment of the previous obligation by reserving and transferring the liquidation procedure later for the security of the previous obligation is a matter of the interpretation of the intent of the parties at the time of the agreement. In a case where there is no clear proof as to this, it should be determined whether it is a security purpose by taking into account various circumstances such as the circumstance and situation leading up to the agreement, the amount of the obligation at the time of the transfer,

[2] Where the exercise of the right to complete a pre-contract becomes impossible because the subject matter cannot be transferred prior to the declaration of intention of the other party for the completion of the pre-contract after the establishment of the pre-contract, the right to complete the pre-contract shall not be exercised, and even if the other party expresses his/her intent of the completion of the pre-contract after the impossibility of performance, the transaction becomes effective. Furthermore, the fact that the performance of an obligation is impossible is not absolute, physical, but rather, a case where the obligee cannot expect the realization of the obligor’s performance in light of the empirical rules or the concept

[1] Articles 105, 372 (Transfer for Security), and 466 of the Civil Act / [2] Articles 390 and 564 of the Civil Act

[1] Supreme Court Decision 2012Da11648 Decided January 16, 2013 / [2] Supreme Court Decision 2000Da22850 Decided January 24, 2003 (Gong2003Sang, 685)

Plaintiff (Law Firm Yang, Attorneys Park Dong-young et al., Counsel for the plaintiff-appellant)

Defendant (Attorney Noh Jeong-soo et al., Counsel for defendant-appellant)

Seoul High Court Decision 2011Na81529 decided January 31, 2013

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

The grounds of appeal are examined.

1. As to the Defendant’s ground of appeal

A. As to the first ground for appeal

(1) In a case where the obligor agreed to transfer the property owned by the obligor to the obligee in relation to the obligation, whether it would be transferred as a substitute for the repayment of the previous obligation, or whether it would be transferred as a substitute for the repayment of the previous obligation by reserving and transferring the liquidation procedure later for the security of the previous obligation is a matter of interpretation of the intent of the parties at the time of the agreement. In a case where there is no clear proof as to this, it shall be determined whether it is the object of the security by taking into account the following: (a) the circumstance and situation leading up to the agreement; (b) the amount of the obligation at the time of the transfer; (c) the value of the subject matter at the time of the transfer; (d) the details of the repayment of the obligation such as interest after the transfer;

(2) Review of the reasoning of the lower judgment, the evidence duly admitted, and the record reveals the following facts.

(A) On November 2004, the Plaintiff and the Defendant decided to adjust the existing obligations owed to the Plaintiff by transferring the “○○○○○○ Scenic Defack” (hereinafter “instant safe store”) to the Plaintiff at the time of the original adjudication that the Defendant leased and operated the store, thereby changing the name of the Defendant and the Si Lease Cases (hereinafter “instant safe store”) into Nena, Inc., Ltd. (hereinafter “the name of December 19, 201 was changed to Nena, and the representative director was the Defendant).

(B) Accordingly, on November 24, 2004, the Plaintiff entered into a lease agreement with the non-party 1 and the non-party 1 of this case on which deposit amount is set at KRW 50 million, monthly rent of KRW 10 million, and from November 25, 2004, the lease period of which is set at 36 months from November 25, 2004, and the deposit amount is to be substituted by the Defendant’s existing deposit amount of KRW 50 million.

(C) The Plaintiff and the Defendant agreed to evaluate the value of the inner point of this case as one billion won (hereinafter “transfer/acquisition agreement”) and transfer/acquisition the same (hereinafter “transfer/acquisition agreement”) on November 29, 2004, and calculated the existing obligation owed by the Defendant and the Si Lease Co., Ltd to the Plaintiff as KRW 950 million and KRW 50 million in total, and agreed to pay the said balance if the Defendant’s unpaid obligation owed to the Plaintiff exceeds KRW 60 million. On December 30, 2004, the Plaintiff and the Defendant transferred all of the deposit, premium, machinery, goods, etc. of the inner point of this case to the Plaintiff on December 1, 2004, and the Plaintiff again transferred the agreement to the Plaintiff during the period of operation (from December 1, 2004 to 17, 2007, 200, 3000,000,0000 won).

(D) In accordance with the agreement of this case, the Plaintiff: (a) received from the Defendant all business assets, such as the store, security deposit, premium, machinery, goods, etc.; and (b) on September 1, 2005, the Plaintiff evaluated the value of Nonparty 2 and the store of this case as KRW 1 billion; and (c) concluded a partnership agreement on the store of this case as to the store of this case by setting the period from December 1, 2004 to November 30, 2007; and (d) concluded a partnership agreement on the store of this case by setting the period from December 1, 2004 to November 30, 2007. The Plaintiff also operated the store of this case as Nonparty 2 and the store of this case by July 18, 2007.

(E) On August 7, 2007, the lessor Nonparty 1 filed a lawsuit against the Plaintiff on the grounds that the said lease contract was terminated on the grounds that the rent of at least 2,007Da290278, Seoul Central District Court 2007Kadan29078 was overdue, etc., and sought the delivery of the store at the safe point of this case. On August 25, 2007, the Plaintiff agreed with Nonparty 1 on the said lease with the lessor 1, and notified the Defendant on October 22, 2007 that the period of operation of the safe point of this case terminated as of November 30, 2007, and that the acquisition price was paid in KRW 1 billion.

(F) On the other hand, after the termination of the above lease contract between the plaintiff and the non-party 1, the non-party 1 divided the inner store of this case into 66.16 square meters, ① on August 25, 2007, the non-party 3, who is the plaintiff's living together, leased the deposit amount of 50,000,000 won, monthly rent of 6,000, and from August 25, 2007 to August 24, 2009, to the non-party 4, who is the wife of the non-party 3, 00,000, monthly rent of 6,000,000, and rent of 0,000 won to the non-party 1,000,000 won for the same purpose from August 25, 200, 200 to 0.6,010,000 won for the lease period of 20,005.

(3) According to the above facts, the following circumstances are revealed.

In order to settle the existing debts of KRW 950 million to the Plaintiff, the Plaintiff and the Defendant entered into the instant agreement with the Defendant and the Defendant with the view to transferring the entire business property (hereinafter “instant safe store business”) including the right of lease of the instant safe store that the Defendant leased and operated in the store, to the Plaintiff at KRW 1 billion.

According to the agreement of this case, the Plaintiff was transferred from the Defendant to operate the instant bus store for three years, and may dispose of the instant bus store business to a third party. In fact, the Plaintiff was operating the instant bus store solely by taking over the instant bus store business from the Defendant pursuant to the agreement of this case, but operated the instant bus store with Nonparty 2 and the instant bus store with Nonparty 2.

In addition, according to the agreement of this case, both the plaintiff and the defendant may terminate the contract of transfer and takeover after the expiration of the three-year operating period, and in such a case, the defendant again takes over the business of this case at one billion won. Such re-acquisition is a re-sale with the content that the plaintiff and the defendant would re-transfer and take over the business of this case at one billion won of the safe store business. The agreement between the plaintiff and the defendant to the effect that the re-purchase can be concluded by cancelling the contract of transfer and takeover constitutes a pre-sale promise and the right of completion is granted to each party.

However, in the event that the Plaintiff and the Defendant exercise the right to conclude a repurchase after the lapse of the 3-year operating period at the time of the instant agreement, the Plaintiff and the Defendant agreed to re-assign the border point of this case to the finalized amount of KRW 1 billion, and did not conclude any agreement as to the procedure for settling the existing debt in the event that the Plaintiff disposed of the instant safe store business to a third party. The said re-assigning promise is merely the promise to purchase the instant safe store business at KRW 1 billion, but does not provide for the repayment of the existing debt amount of KRW 950 million, and it is difficult to view that the existing debt continues to exist after the instant agreement.

In addition, there is no circumstance that the Defendant paid part of the principal or interest on the existing obligation to the Plaintiff after the agreement of this case.

(4) Examining the above circumstances and the intent of the Plaintiff and the Defendant at the time of the instant agreement in light of the aforementioned legal principles, it is reasonable to deem that the instant agreement is a substitute payment contract under which the Plaintiff and the Defendant deemed to be extinguished, and that the Defendant’s existing debt 950 million won against the Plaintiff is a substitute payment contract under which the Plaintiff and the Defendant evaluated the instant safe store business as one billion won, and the Defendant finally transferred the instant safe store business to the Plaintiff instead of paying the existing debt 950 million won.

(5) Nevertheless, the lower court erred by misapprehending that the instant agreement was concluded for the purpose of securing the Plaintiff’s claim against the Defendant solely on the ground that the right to conclude the resale agreement was granted as above in the instant agreement, and rejected the Defendant’s assertion that the instant agreement was an accord and satisfaction contract.

Therefore, in so determining, the lower court erred by misapprehending the legal doctrine on the interpretation of a payment contract and a disposal document, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

B. As to the grounds of appeal Nos. 2 and 3

(1) Where the exercise of the right to complete a pre-contract becomes impossible because the subject matter cannot be transferred prior to the declaration of intention of the other party for the completion of the pre-contract after the establishment of the pre-contract, the right to complete the pre-contract shall not be exercised, and even if the other party expresses his/her intent of completion of the pre-contract after the impossibility of performance, the transaction becomes effective. Furthermore, the performance of an obligation is not simply absolute and physical impossible, but rather a case where the obligee cannot expect the realization of the obligor’s performance in light of social experience rules or transaction concept (see Supreme Court Decision 200Da22850, Jan. 24, 2003).

(2) We examine the above facts in light of the above legal principles.

(A) In the event that the Plaintiff exercises the right to complete a contract pursuant to the unilateral promise for re-sale as stipulated in the instant agreement, the Plaintiff and the Defendant concluded this contract with the intent to transfer and take over the instant safe store business at KRW 1 billion. Therefore, the Defendant is obligated to pay the Plaintiff the acquisition price of KRW 1 billion, while the Plaintiff is obligated to transfer the instant safe store business to the Defendant, and such both parties’ obligation to perform are in a relationship of simultaneous performance, as it is in a relationship of performance with the Defendant with the Defendant in a quid pro quo. However, on November 30, 2007, the Plaintiff was notified of the termination of the lease agreement by failing to pay the rent twice or more times prior to the declaration of intention for the completion of re-sale as of November 30, 2007, and thereafter, was deprived of the status of the lessee by concluding the lease agreement with the lessor 1 and the store of the instant safe store.

(B) Meanwhile, the Plaintiff asserts to the effect that, by borrowing the names of Nonparty 3, Nonparty 4, and Nonparty 5, the lessor and Nonparty 1 entered into each of the above lease agreements with respect to the 66.16 square meters portion among the stores within the boundary of the instant case, and that he/she has continued to operate the instant border business as a substantial lessee.

However, after the termination of the above lease contract with the Plaintiff in the first instance court, Nonparty 1: (a) claimed that Nonparty 3 was found after the termination of the lease contract with the Plaintiff; and (b) requested that only part of the store in the instant case be leased, and (c) leased on August 25, 2007 the part of 66.116 square meters out of the store in the instant case to Nonparty 3; (b) he testified that Nonparty 3 and the subsequent lessee is aware that he is the actual operator of the store in the instant case; (c) did not recognize the Plaintiff’s right of lease; and (d) Nonparty 3, Nonparty 4, and Nonparty 5 stipulated each lease contract (No. 4, No. 5, No. 5, No. 8), which is the disposal document, as the lessee, it is reasonable to deem that the lessee of the 66.16 square meters portion among the store in the instant case, was successively changed to Nonparty 3, Nonparty 4, and Nonparty 5 in sequence.

(C) In addition, after the termination of the above lease contract with the Plaintiff, the lessor Nonparty 1 leased out the part of 3.4 square meters of the store of this case to Nonparty 6 on October 1, 2007 for the purpose of a pharmacy, and the size of the store of this case was reduced to 1/3. Accordingly, in light of the circumstances where it appears that the inside facilities, machinery, and goods of the store of this case were considerably reduced, the purpose of the re-sale cannot be achieved because it is difficult to view that the present business of the store of this case maintains the identity with the previous store of this case under the social norms.

(D) In full view of the above circumstances, ① the Plaintiff lost the right to lease the store of this case after the establishment of the promise for re-sale with respect to the store of this case after the promise for re-sale was made, and thereafter the Plaintiff did not obtain the said right to lease in relation to Nonparty 1 by the date of closing argument in the lower court. ② Since the size of the store of this case was reduced to 1/3, it is difficult to view that the present store of this case remains identical to the previous store of this case as the business property of this case is considerably reduced, and therefore, it is difficult to view that the present store of this case remains identical to the previous store of this case. ③ Ultimately, the Plaintiff cannot transfer the business of this case to the Defendant and thus, the exercise of the right to re-sale was impossible

Therefore, even if the Plaintiff expressed his intent to complete the repurchase agreement after the impossibility of performance, it is not effective to re-sale. Therefore, the Plaintiff cannot claim against the Defendant for the performance of KRW 1 billion of the acquisition price at the location of the instant case.

(3) However, the lower court determined that the Plaintiff’s exercise of the right to conclude the re-purchase agreement of this case was erroneous to have established the re-trade of this case at the time of the Plaintiff’s exercise of the right to conclude the re-sale agreement, by recognizing that the right to conclude the re-sale agreement of this case was possible by recognizing that the right to conclude the re-sale agreement of this case can be exercised where the Defendant can be transferred to the Defendant without any change to the extent that it is difficult to recognize the identity of the identity of the society. However, unlike the foregoing as seen above, the right to operate and dispose of the location points

Therefore, in so determining, the lower court erred by failing to exhaust all necessary deliberations or by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

2. Conclusion

Therefore, the judgment 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 So-young (Presiding Justice)