Whether Article 368(1) of the Civil Act applies to a case where a real estate owned by a debtor who is the object of a joint mortgage and a real estate owned by a person who has pledged his/her property to secure another's property are sold at the same time (negative) and

Article 368(1) of the Civil Act which provides that "where a mortgage has been created on several real estate as security for the same claim, if a mortgage is created on several real estate at the same time, the share of the claim shall be determined in proportion to the proceeds of the auction of each real estate shall be in proportion to the proceeds of the auction of the real estate owned by the debtor." Thus, it is reasonable to deem that Article 368(1) of the Civil Act which provides that "if a mortgage is created on several real estate as security for the same claim, if the proceeds of the auction are distributed at the same time, the share of the claim shall be determined in proportion to the proceeds of the auction of the real estate owned by the debtor, the auction court shall preferentially distribute the proceeds of the auction of the real estate owned by the debtor, and only if there is a shortage, the auction court shall pay dividends in addition to the proceeds

Articles 368(1), 481, and 482 of the Civil Act

Supreme Court Decision 93Da25417 delivered on May 10, 1994 (Gong1994Sang, 1638) Supreme Court Decision 2007Da78234 Delivered on April 10, 2008

Plaintiff

Defendant 1 and 6 others (Law Firm Young-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2007Na79697 decided May 8, 2008

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

We examine the grounds of appeal.

1. Article 368(1) of the Civil Act which provides that "where several real estate have been mortgaged as security by the same claim, if part of the real estate is owned by the debtor, and the part is owned by the person who has pledged the property to secure the property at the same time, it shall be deemed that Article 368(1) of the Civil Act which provides that "in consideration of the fact that the person who has pledged the property to secure the property to secure the property is in a position to exercise the security right to the real estate owned by the debtor by subrogation under Articles 481 and 482 of the Civil Act, if the proceeds of the auction are distributed at the same time to the same claim, it shall be determined in proportion to the proceeds of the auction of each real estate, it shall not apply (see Supreme Court Decisions 93Da25417, May 10, 1994; 2007Da78234, April 10, 200

Therefore, in such cases, the auction court should preferentially distribute the real estate owned by the debtor to the joint mortgagee from the auction price of the real estate owned by the debtor, and additionally distribute the real estate owned by the surety to the auction price only when there is a shortage.

2. According to the evidence duly examined by the court below and the court of first instance, the joint collateral mortgage was established in the name of Nonparty 2 with respect to the land owned by Nonparty 1 (hereinafter “real estate No. 1”) 70-39, 70-44 and the land No. 70-8, 70-43 (hereinafter “the instant real estate No. 2”) owned by the plaintiff who is the property pledged to secure another’s property (hereinafter “the instant real estate No. 2”), with respect to each real estate No. 1 in this case, the priority mortgage was established individually in the name of the gold Village Agricultural Cooperative), and with respect to each real estate No. 1 in this case, the registration of the establishment of a mortgage in the name of Defendant 1, the seizure registration in the name of the other Defendants, and the provisional attachment registration in the name of the other Defendants. However, upon Nonparty 2’s application, the public auction procedure was conducted in the name of the government district court of Yangyang-gu, Seoul Special Metropolitan City around 2005ta.

In light of the above legal principles, the auction court should have distributed the real estate of this case No. 1, which is owned by the debtor, to Nonparty 2, who is a joint collateral mortgagee, preferentially and additionally distributed the real estate of this case No. 2, which is owned by the surety, from the auction price of this case, only when there is a shortage.

Nevertheless, the court below determined that the auction court distributed the amount divided in proportion to the auction price of each of the instant real estate to Nonparty 2, a joint collateral mortgagee, and that the remaining auction price of the instant real estate was justifiable in preparing a distribution schedule with the content of distributing in sequence the above real estate to the Defendants, a subordinate right holder with regard to the said real estate. In so doing, the court below erred by misapprehending the legal principles as to the scope of application of Article 368(1) of the Civil Act, which affected the conclusion of the judgment. The grounds for appeal assigning this error are with merit

3. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Sung-tae (Presiding Justice)