Korea Deposit Insurance Corporation (Law Firm Eiwon, Attorneys Seo-dae et al., Counsel for the plaintiff-appellant)

Defendant 1 and one other (Attorney Lee Im-soo, Counsel for the defendant-appellant)

April 7, 2017

Seoul Central District Court Decision 2016Gahap508190 Decided June 8, 2016

1. Of the judgment of the court of first instance, the part against the Defendants in excess of the amount ordered to be paid below is revoked, and the Plaintiff’s claim corresponding to the revocation part

The Defendants jointly and severally pay to the Plaintiff KRW 47,204,367 and the amount at the rate of 19% per annum from June 9, 2011 to the date of full payment. Defendant 2 shall be paid within the limit of KRW 91,20,000.

2. The defendants' respective remaining appeals are dismissed.

3. Of the total litigation costs, 90% is borne by the Plaintiff, and the remainder is borne by the Defendants, respectively.

1. Purport of claim

Defendants shall jointly and severally pay to the Plaintiff KRW 799,908,821 and KRW 417,00,000,000 per annum from November 24, 2015 to the date of full payment, and Defendant 2 shall be paid within the limit of KRW 91,20,000.

2. Purport of appeal

The judgment of the first instance is revoked. All of the Plaintiff’s claims against the Defendants are dismissed.

1. Judgment on the ground of the Plaintiff’s claim

(a) Facts of recognition;

1) On November 23, 2007, Defendant 1 entered into a credit transaction agreement with the Bank of Korea Co., Ltd. (hereinafter “Korea Bank”) as follows, and accordingly, received a loan of KRW 418,00,000 from Korea Bank (hereinafter “instant loan”).

The credit interest rate (interest rate for delay) on November 27, 2007, which was included in the main text, Defendant 418,000,000 won for general loans for corporate driving on November 27, 2007, shall be 19% per annum on November 27, 2008 +1.33% per annum (19% per annum for not less than 3 months) of the lending amount of loans for the credit items on the date of lending to the

2) On November 27, 2007, Defendant 1 issued to the Bank a joint collateral of KRW 504,000,000 with respect to the Incheon Bupyeong-gu ( Address omitted) owned by oneself (hereinafter “instant real estate”) for the purpose of securing the obligation of the instant loan.

3) On November 30, 2009, Defendant 2 jointly and severally guaranteed the instant loans to the Bank up to KRW 91,200,000.

4) On January 22, 2010, the Defendants and the Bank entered into an additional agreement to change the terms and conditions of credit transactions with each of the following changes on February 24, 2010: (a) the loan amount of the instant loan amount of KRW 417,00,000; and (b) the expiration date.

5) Around June 29, 2010, the instant loan claims were transferred in sequence to Korea EF&A Limited Liability Company Specializing in Ef&A Asset-backed Securitization, and on January 24, 201, to Saturdays-2 Savings Bank Co., Ltd. (hereinafter “Plaintiff Bank”).

6) The Plaintiff Bank extended the expiry date of the instant loan to July 23, 2012, but the Defendants failed to repay the instant loan by the expiration date.

7) On April 30, 2013, the Plaintiff bank was declared bankrupt in Seoul Central District Court 2013Hahap55, and the Plaintiff was appointed as the trustee in bankruptcy of the Plaintiff bank on the same day.

[Ground of recognition] Facts without dispute, entry of Gap evidence 1 to 9, purport of the whole pleadings

B. Determination

Unless there are special circumstances, the Defendants jointly and severally pay to the Plaintiff KRW 417,000,000 and damages for delay thereof, and Defendant 2 is liable to pay up to KRW 91,20,000 to the Plaintiff.

2. Determination as to the defendants' defense

A. Summary of the defendants' assertion

The debt of the instant loan was discharged by Nonparty 1 pursuant to the debt acquisition contract between the Plaintiff bank and Nonparty 1 (the first argument).

The Plaintiff bank issued a certificate of full payment to Nonparty 2 who is the successful bidder in the relevant auction case in accordance with the above underwriting contract, and thus Nonparty 2 took over the instant debt exemption in accordance with Article 143(1) of the Civil Execution Act. Thus, the obligation of the instant loan was extinguished as much as the acquisition amount (the second assertion).

The Plaintiff bank's claim for the instant loan to the Defendants without exercising the right to collateral security constitutes an abuse of rights (Article 3).

As the Plaintiff bank issued a certificate of full payment to Nonparty 2 in the relevant auction case and did not receive a dividend, the Defendants suffered losses from losing an opportunity to repay the amount equivalent to the above dividend amount. The Defendants set off the damage claim equivalent to the above dividend amount against the Plaintiff bank and the claims for the instant loan (Claim 4).

B. Provisions of the Civil Execution Act

(3) In cases of paragraphs (1) and (2), when a purchaser has raised an objection against the amount of debts acquired by him/her or dividends to him/her, the purchaser shall pay the price equivalent thereto until the date of distribution expires, if the related creditors have given consent to the implementation of the distribution schedule within the limit of the proceeds of sale, in addition to accepting the burden of real estate in accordance with the terms and conditions of sale.

(c) Fact of recognition;

The following facts may be acknowledged, either in dispute between the parties or in full view of the descriptions of Gap evidence of Nos. 9, 16 through 18 (including the number number; hereinafter the same shall apply), Eul evidence of No. 1 to 4, and the whole purport of the pleadings:

1) On April 21, 2010, Incheon District Court Decision 2010 another District Court Decision 20244 decided April 21, 2010, the auction procedure for the instant real estate (hereinafter “instant auction procedure”) commenced.

2) Around April 30, 2010, the appraiser of the above court assessed the instant real estate as KRW 311,000,000 in total.

3) On March 28, 2011, the Plaintiff bank and Nonparty 1 entered into a contract to assume obligations (hereinafter “instant contract to assume obligations”) with the Plaintiff bank. Of the content, the parts related to the instant case are as follows.

(1) Article 1 (Definition of Terms and Conditions 4) (1) of the Civil Execution Act shall be paid at least 0 per cent of the total amount of the bonds entered in the contract (attached Form 1) and the amount of the obligation taken over by Eul (excluding sub-party 1) pursuant to Article 8 of the present contract for the debtor. (2) The term "debtor" means the security right described in the statement of mortgage (attached Form 2) to secure the obligation to underwrite, and (3) Eul agrees that all of the terms and conditions relating to the obligation to underwrite and the security right shall be borne by the court and shall not be paid at least 0 per cent of the total amount of the repayment agreement and at least 0 per cent of the total amount of the contract. (4) The amount of the contract shall be paid at least 0 per cent of the total amount of the contract to be paid at least 10 per cent of the total amount of the contract and the amount of the contract to be paid at least 20 per cent of the total amount of the contract to be paid at least 5 per cent of the contract.

4) The repayment agreement amount to Defendant 1 as stipulated in Article 3 of the instant contract for debt acquisition was KRW 168,000,000 (including contract amount of KRW 16,80,000). Nonparty 1 paid the down payment to the Plaintiff bank around the date of the said contract.

5) On March 29, 2011, the instant real estate was sold to Nonparty 2, the highest bidder, at KRW 480,000,00 on the five-time sale date (minimum sale price of KRW 74,617,000), which was the five-time sale date. Nonparty 2 obtained permission from the above court on April 5, 201.

6) On June 8, 2011, the aforementioned court prepared a distribution schedule that distributes dividends of KRW 470,897,885, out of the principal amount of interest (=interest of KRW 417,00,000 + interest of KRW 101,102,252) at the Plaintiff bank, which is a mortgagee of the instant real estate (order 2). The said court completed the distribution schedule on the same day.

7) Meanwhile, around that time, pursuant to Article 8(4) and (5) of the Agreement on the Assumption of Obligation, the Plaintiff bank provided to Nonparty 2 a written consent to assume debt, and Nonparty 2 submitted it to the above court, and took over the obligation of the instant loan in lieu of payment of the sales price equivalent to the above dividend amount. Accordingly, the above court did not actually pay the above dividend amount to the Plaintiff bank.

8) On March 12, 2012, Nonparty 2 completed the registration of ownership transfer based on the sale by voluntary auction on June 8, 2011.

D. Determination as to the first argument

Article 2 of the debt acquisition contract of this case provides that the transaction under the above contract is terminated in which the non-party 1 actually pays the full amount of the repayment agreement to the Plaintiff bank, and that the Defendants is exempted from the obligation equal to the claim subject to acceptance. The fact that the non-party 1 paid the down payment of KRW 16,800,000 to the Plaintiff bank as the down payment of KRW 168,000,000 to the Plaintiff bank is as seen earlier.

Therefore, since the transaction according to the debt acquisition contract of this case has not been terminated, the fact that the above contract was concluded between the Plaintiff bank and the Nonparty 1 cannot be deemed to have been discharged from the obligation of this case, and there is no other evidence to acknowledge this differently. The Defendants’ first assertion cannot be accepted.

E. Judgment on the second argument

In light of the interpretation of Article 143(1) and (3) of the Civil Execution Act, it is reasonable to deem that, as long as the sales price equivalent to the acquisition amount is deemed to have been paid, in relation to the debtor or the owner of the object of auction (hereinafter “debtor, etc.”) the acquisition amount has been paid to the dividend creditor who consented to the acquisition amount, the special payment of the sales price under Article 143(1) of the Civil Execution Act requires the consent of the debtor, etc. and only the consent of the dividend creditor is required. ④ In accordance with the above Article 143(1) of the Civil Execution Act, it is reasonable to view that, inasmuch as the purchaser has paid the sales price by acquiring the ownership of the object of auction by acquiring the ownership of the object of auction from the dividend creditor, the claim for distribution has not been paid or that the above acquisition amount is an overlapping obligation, etc., if it is deemed that there is no unreasonable result in the debtor’s assumption of obligation without any consideration that would result in the debtor’s loss of the object of auction.

According to the above facts, upon the consent of the Plaintiff bank pursuant to the above provision, Nonparty 2 acquired the debt of this case against the Plaintiff bank in lieu of payment equivalent to the above dividend amount. Accordingly, the above dividend amount out of the loan of this case against Defendant 1 was extinguished, and the above dividend amount out of Defendant 2’s joint and several liability amount was also extinguished pursuant to the main sentence of Article 459 Section 1 of the Civil Code (the above debt acquisition contract of this case was concluded to prevent damage to the persons concerned due to the successful bid of the real estate of this case, and the defendants knew of the fact that the contract of this case was concluded to prevent the damage of the persons concerned, and even if the above defendants knew of the fact that the debt acquisition contract of this case was concluded, it cannot be deemed that Nonparty 2 acquired the debt of this case with the debt of this case or Defendant 2 consented to the debt acquisition of Nonparty 2 pursuant to the proviso of the above provision).

The obligations of Defendant 1’s instant loans were extinguished in an amount equivalent to KRW 470,897,885 of the principal and interest of loans as of June 8, 201, which is the date of the completion of distribution, as of June 8, 201, and the amount equivalent to KRW 518,102,252, which is 470,204,367, which is the difference. Ultimately, the Defendants jointly and severally paid to the Plaintiff damages for delay at the rate of KRW 47,204,367, which is the rate of 19% per annum from June 9, 2011 to the date of full payment, and Defendant 2 is obligated to pay within the limit of KRW 91,20,00,00, which is the rate of 91,200. The Defendants’ second assertion can be recognized.

F. Determination on the argument Nos. 3 and 4

As seen earlier, the Plaintiff bank did not actually receive dividends from Nonparty 2 by preparing a written consent of debt acceptance at the auction procedure of this case. However, such circumstance alone does not constitute abuse of rights, and there is no other evidence to acknowledge the claim of this case. In addition, as seen earlier, the Plaintiff bank granted Nonparty 2 a written consent of debt acceptance to Nonparty 2 by giving Nonparty 2 a written consent of debt acceptance to Nonparty 2. As seen earlier, it cannot be deemed that the Defendants suffered loss from loss of the opportunity to be exempted from the above dividend amount. The Defendants’ 3 and 4 cannot be recognized in entirety.

3. Conclusion

Thus, the plaintiff's claim against the defendants shall be accepted within the above recognized scope, and the remaining claims shall not be accepted, and each claim shall be dismissed. Since the part against the defendants ordering payment in excess of the above recognized scope of the judgment of the court of first instance is unfair with different conclusion, it shall be revoked partially by the defendants' appeal, and the plaintiff's claim corresponding to the revoked part shall be dismissed. Each remaining appeal by the defendants shall be dismissed. It is so decided as per Disposition

Judges Egrh-man (Presiding Judge)

1) A surety for the obligation of the former obligor or the security furnished by a third person shall be extinguished by virtue of assumption of the obligation, unless the surety or the third person has given consent thereto.