In cases where a creditor exercises his/her right as a reorganization creditor with respect to the total amount of claims held at the time of commencement of reorganization proceedings, whether a future creditor who made a subrogation for a part of such claims may exercise in subrogation the creditor's right in proportion to the repayment ratio, although there is no satisfaction of the creditor's total amount

According to Article 108 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), where several persons are liable to perform in full, if reorganization proceedings are commenced in respect of all or some of them, a creditor may exercise his right as a reorganization creditor in each reorganization proceeding as to the total amount of the claims he holds at the time of the commencement of the reorganization proceedings. Thus, in the reorganization proceedings commenced for a person liable to perform in full, a creditor who exercises his right as a reorganization creditor with respect to the total amount of the above claims, even if he is paid part of the claims from a person liable to perform in full after the commencement of the reorganization proceedings, may still exercise his right as a reorganization creditor with respect to the total amount of the above claims, unless he obtains the satisfaction of the total amount of the claims from a person liable to perform in full, who is liable to perform in full, at the rate of the total amount of the claims he has acquired the rights of a creditor under Article 10 (2) of the former Company Reorganization Act.

Article 108 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) (Article 126 (1) of the current Debtor Rehabilitation and Bankruptcy Act) and Article 110 (2) of the former Company Reorganization Act (Article 126 (4) of the current Debtor Rehabilitation and Bankruptcy Act)

Plaintiff (Law Firm Jeong-dong International Law, Attorneys Seo Dong-hee et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm Rate, Attorneys Shin Sung-sung et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2007Na127039 decided August 1, 2008

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. According to Article 108 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), where several persons are liable to perform the whole amount of claims (hereinafter referred to as "all persons liable to perform the whole amount of claims"), where reorganization proceedings are commenced in respect of all or some of them, a creditor may exercise his/her right as a reorganization creditor in each reorganization proceeding as to the total amount of claims he/she holds at the time of commencement of the reorganization proceedings. Thus, in the reorganization proceedings commenced in respect of the whole amount of claims, a creditor who exercises his/her right as a reorganization creditor in respect of the whole amount of the above claims may exercise his/her right as a reorganization creditor in each reorganization proceeding, unless he/she obtains satisfaction of the total amount of claims from the other obligor, even if he/she is paid part of the claims from the other obligor

Therefore, it is interpreted that Article 110 (2) of the former Company Reorganization Act, which provides that when a person who has a right to future indemnity against the reorganization company makes performance to a creditor who has exercised a reorganization claim at the time of commencement of reorganization proceedings, he/she shall obtain an obligee’s right according to the ratio of the amount of performance, is interpreted as a provision that, in cases where a creditor obtains a satisfaction of the total amount of the above claim, either by repayment of the total obligor holding a right to future indemnity or by repayment, repayment, repayment, etc. of the reorganization company, the obligor

2. According to the reasoning of the lower judgment and the record, the Defendant’s reorganization plan approved on August 20, 1998 provides that “if a security holder or reorganization creditor, after the date of the preparation of the reorganization plan on January 1, 200, executes a security right created by a third party’s property, or receives payment by subrogation from a surety, surety, or any third party and uses it for the repayment of the portion to be performed by the reorganization company after the alteration of a right among the reorganization securities or reorganization claims, the principal, progress and interest, and the amount of the final repayment in order from the scheduled date of repayment of the reorganization plan to the reverse order.” (hereinafter “instant provision”), if a surety, etc., has acquired a right to indemnity by subrogation of a company’s obligation after the date of approval of the reorganization plan on August 20, 1998, the payment shall be made on the due date under the reorganization plan for the reorganization securities and reorganization claims extinguished by subrogation within the scope of the reorganization securities and reorganization claims to be performed by the reorganization company.”

In full view of the legal principles as seen in Paragraph (1) and the structure of the above reorganization program and the contents of the provisions of this case, the provision of this case is one of the methods of repayment for reorganization securities and reorganization claims (including securities) and it is reasonable to interpret the provision under the premise that subrogation is permitted in cases where a future right holder who paid a debt by the reorganization company is subrogated for reorganization claims of an obligee, which is modified by the reorganization plan, and where an obligee obtains satisfaction for the total amount of the original claim, it is reasonable to interpret the provision under the premise that subrogation is permitted in cases where an obligee obtains satisfaction for the total amount of the original claim. In other words, it cannot be deemed that the provision under the premise that the obligee can exercise the obligee’s right by subrogation immediately, regardless of whether the obligee obtains satisfaction for the total amount of the claim.

The lower court’s determination that construed the instant provision to the same purport is justifiable, and did not err by misapprehending the interpretation of the instant provision, contrary to what is alleged in the grounds of appeal.

3. The court below rejected the plaintiff's assertion that, under the provisions of Article 110 (2) of the former Company Reorganization Act, if a guarantor with future right to indemnity has discharged part of the claim, the obligee's right is acquired according to the ratio of performance, and in this case, the guarantor and obligee can exercise their right against the reorganization company in the same order of equal priority. Such decision of the court below is just, and there is no violation of law by misunderstanding the legal principles as to Article 110 (2) of the former Company Reorganization Act.

4. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Hong-hoon (Presiding Justice)