In a case where a joint mortgagee participated in the auction procedure requested by a third party on a part of the real estate which is the subject real estate and received the preferential distribution, the time when the secured debt of the right to collateral security on the relevant real estate becomes final (=when the purchaser pays the sale price), and whether the secured debt of the right to collateral security on the remaining real estate is also finalized at the same time

In a case where a joint mortgagee participated in an auction procedure requested by a third party on a part of the immovable property, and receives preferential dividends, the secured debt of the right to preferential reimbursement on the relevant real property shall be determined at the time when the right to preferential reimbursement is extinguished, i.e., when the purchaser has paid the proceeds of the sale; however, the secured debt of the right to collateral concerning the remaining immovable property shall not be determined unless other finalized causes have occurred, such as the termination of the basic transaction or the declaration of bankruptcy against the debtor or the person who has pledged the right to collateral. The mere fact that the joint mortgagee participated in the auction procedure requested by a third party and received preferential dividends cannot be deemed as the termination of the basic transaction between the creditor and the debtor. While the basic transaction continues, it is necessary to allow the joint mortgagee to use the secured debt value of the remaining immovable property to the maximum extent possible, and as such, even if the amount of the secured debt increases after the amount of the secured debt is limited to the amount of the joint mortgagee’s right to preferential reimbursement on the remaining immovable property, the scope of the joint mortgagee’s right to preferential reimbursement is limited to the maximum debt amount, thereby resulting in unexpected damages.

Articles 357(1) and 368 of the Civil Act; Article 91(2) of the Civil Execution Act

Supreme Court Decision 99Da26085 Decided September 21, 1999 (Gong1999Ha, 2200) Supreme Court Decision 2005Da14502 Decided October 27, 2006 (Gong2006Ha, 1991) Supreme Court Decision 201Da68012 Decided January 12, 2012

Plaintiff

Defendant 1 and one other

Daegu High Court Decision 2014Na4676 decided July 21, 2015

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

The grounds of appeal are examined.

1. Where a joint mortgagee has participated in the auction procedure requested by a third party on some of the immovables, and has received preferential dividends, the secured debt of the right to collateral of the right to collateral of the pertinent immovables shall be finalized only when the secured debt of the right to collateral ceases to exist, i.e., when the purchaser has paid the proceeds of the sale (see Supreme Court Decision 9Da26085, Sept. 21, 1999). The secured debt of the right to collateral of the remaining immovable property shall not be finalized unless other finalized causes have occurred, such as termination of the basic transaction or bankruptcy against the debtor or the person who has pledged the right to collateral. The mere fact that the joint mortgagee has received preferential dividends by participating in the auction procedure requested by the third party cannot be deemed to have terminated the basic transaction between the creditor and the debtor, and even if the basic transaction continues, it is necessary to permit the increase or decrease of the secured debt or replacement of the secured debt so that the joint mortgagee may use the remaining secured debt value of the right to collateral of the remaining immovable property as much as possible during the auction procedure for the remaining immovable property.

2. Review of the reasoning of the first instance judgment as cited by the lower court and the evidence duly admitted reveals the following facts.

A. On December 23, 2005, the North Korean Agricultural Cooperative (hereinafter referred to as the “North Korean Agricultural Cooperative”) loaned KRW 350 million to Nonparty 1, and concluded a contract establishing a mortgage in writing (hereinafter referred to as “instant contract”) with Nonparty 1 and Nonparty 2 on each of the real estate listed in the separate sheet owned by Nonparty 1 (hereinafter referred to as the “each of the instant land”) and five parcels of land and five ( Address 1 omitted) land and the building on each of the land owned by Nonparty 2 (hereinafter referred to as “○○ Dong land, etc.”) with respect to the land and five ( Address 1 omitted) land and the building on each of the land owned by Nonparty 2 (hereinafter referred to as “the real estate owned by Nonparty 2”), with the mortgagee Nonparty 1 as the North Korean Agricultural Cooperative, the debtor as Nonparty 1, and the maximum debt amount as KRW 490,00,000,000, each of the credit card transactions to be borne at present and in the future for the North Korean Agricultural Cooperative.

According to the instant contract to establish a collateral security (hereinafter “instant mortgage”) the Daegu District Court received on December 23, 2005, No. 82661 as joint collateral with respect to each of the instant land, ○○ Dong-dong land, etc. on the same day and completed the registration of the establishment of a collateral security (hereinafter “the instant establishment of a collateral security”) under the name of the Agricultural Cooperatives, under the title of the Daegu District Court No. 8261, Dec. 23, 2005.

B. On August 18, 2006, Nonparty 3, a junior collateral security holder, applied for a voluntary auction (hereinafter “instant auction procedure”) against the land, etc., Nonparty 3, a junior junior collateral security holder, was preferentially distributed KRW 367,501,969, in total, on March 26, 2007, with the instant collateral security (hereinafter “instant auction procedure”), and on December 23, 2005, Nonparty 3 was preferentially distributed KRW 367,501,969, in total, with respect to Nonparty 1, based on the instant collateral security (instant collateral security).

C. On October 31, 2007, 2000 won was additionally loaned to Nonparty 1 as security. On March 25, 2011, 201, the Plaintiff transferred the instant right to collateral to the Defendants on March 28, 2011 upon receiving the Defendants’ payment of KRW 11,883,586, total of the principal and interest and expenses incurred from Nonparty 1’s loan of KRW 80,000,000. On the same day, the Plaintiff completed the additional registration of the transfer of collateral in the name of the Defendants regarding the registration of the establishment of collateral.

3. Examining the above facts in light of the legal principles as seen earlier, it is determined as follows. Even if the North Korea Agricultural Cooperative actively participated in the auction procedure of this case applied by Nonparty 3 with respect to the land, etc., and was paid the full amount of the secured debt of this case, which existed at the time, the basic transaction of the secured debt of this case with respect to each of the instant land is not terminated. Thus, the secured debt of this case with respect to each of the instant land is not finalized, and there is no other evidence to deem that the secured debt of this case with respect to each of the instant land was finalized at that time.

In addition, since the amount preferentially apportioned during the instant auction procedure is less than the maximum debt amount of the instant mortgage, it is reasonable to view that the instant right to collateral security remains reduced to the maximum debt amount less the maximum debt amount, and thereafter, the amount of the instant right to collateral security was added as the secured debt by lending KRW 80,000,000 to Nonparty 1 on October 31, 2007.

4. Nevertheless, the court below erred by misapprehending that the secured debt of this case concerning each of the instant land was fully determined upon payment of the sale price at the auction procedure of this case concerning ○○ Dong land, etc., and held that the instant secured debt was fully repaid at the auction procedure of this case, and thus, the Plaintiff may file a claim for cancellation of the registration of the establishment of the instant secured mortgage concerning each of the instant land. Therefore, the court below erred by misapprehending the legal principles on the confirmation of the secured debt of the joint secured mortgage, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

5. Therefore, without examining the remaining grounds of appeal, we reverse the judgment below, and remand the case 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 Park Sang-ok (Presiding Justice)