Legal nature of assumption of an obligation, which is determined by a special method that pays the proceeds of sale under Article 143(1) of the Civil Execution Act (=legal nature of assumption of an obligation)

When a decision of permission for sale of real estate becomes final and conclusive at the auction, the court shall set the time limit for payment of the price and the buyer shall pay the price by the time limit (Article 142(1) and (2), and Article 268 of the Civil Execution Act). Article 143 of the Civil Execution Act provides that the buyer shall assume obligations, one of the special methods of paying the sale price, and the buyer may take over the obligation in lieu of the payment of the sale price if the related creditors consent to the implementation of the distribution schedule within the limit of the sale price, in addition to taking over the real estate obligations in accordance with the terms and conditions of sale (Article 142(1)). In such case, the amount of obligations taken over is limited to the amount of claims to be distributed to the creditor on the date of distribution on the date of distribution, and therefore the amount taken over is fixed only on the date of distribution. If

Pursuant to Article 143(1) of the Civil Execution Act, where a purchaser takes over an obligation in lieu of the payment of the proceeds from sale with the consent of the related creditor, the buyer pays the proceeds from sale in cash and takes effect. The related creditor who has consented to such assumption of obligation shall be deemed to have obtained the satisfaction of the obligation within the scope of the amount of obligation taken over. Therefore, the obligation of an obligor shall be extinguished within the scope of the obligation taken place. Therefore,

Articles 142(1) and (2), 143(1) and (3), and 268 of the Civil Execution Act

Korea Deposit Insurance Corporation (Law Firm Leewon, Attorneys Kim Jae-soo et al., Counsel for the plaintiff-appellant)

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

Seoul High Court Decision 2016Na2046503 decided June 16, 2017

All appeals are dismissed. The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. When a decision on permission for sale of real estate becomes final and conclusive at the auction of real estate, the court shall set the time limit for payment of the price and the buyer shall pay the price by such time limit (Article 142(1) and (2) and Article 268 of the Civil Execution Act). Article 143 of the Civil Execution Act provides that the buyer shall assume the obligation as one of the special methods for paying the sale price, and the buyer may take over the obligation in lieu of the payment of the sale price if he/she approves the execution of the distribution schedule within the limit of the sale price to the extent of the creditor concerned (Article 1). The amount of the obligation to be taken over is limited to the amount of the claim to be distributed to the creditor on the date of distribution on the date of distribution to the extent of the claim to be distributed from the sale price. When the buyer raises an objection against the obligation he/she has taken over, the buyer shall pay

Pursuant to Article 143(1) of the Civil Execution Act, where a purchaser takes over a debt in lieu of the payment of the proceeds from sale with the consent of the related creditor, the buyer shall be deemed to have paid the proceeds from sale in cash and the effect thereof. The related creditor who has consented to the assumption of an obligation shall be deemed to have obtained the satisfaction of the claim within the scope of the amount of the obligation taken over. Therefore, the obligation of the debtor is extinguished within the scope of the obligation taken place.

2. According to the reasoning of the lower judgment and the evidence admitted, the following facts are revealed.

A. Defendant 1: (a) on November 23, 2007, 418 billion won from the Bank of Korea (hereinafter “Korea Bank”); (b) interest rate is “the base interest rate for CD-dong loan +1.33%”; and (c) on November 27, 2008, the due date for repayment was set at 19% per annum; and (d) interest rate for delay was granted a loan (hereinafter “instant loan”); and (e) on November 27, 2007, Defendant 1 completed the registration of the establishment of a mortgage on the debt of the instant loan to the Bank of Korea with respect to the Bupyeong-gu Incheon Metropolitan Government ( Address omitted) (hereinafter “instant commercial building”). Defendant 2 completed on November 30, 2009, the registration of the establishment of a mortgage amounting to 54 billion won (hereinafter “instant commercial building”) with respect to the debt of this case to the Bank of Korea within the maximum of 90 million won.

B. On January 22, 2010, our bank changed the term of redemption to February 24, 2010, the Defendants and the principal of the instant loan to KRW 417 million, and changed the term of redemption to February 24, 2010. As a result, the Incheon District Court requested an auction of real estate rent on the instant commercial building on April 21, 2010 and applied for an auction of real estate rent on April 21, 2010 (hereinafter “instant auction procedure”).

C. Around June 29, 2010, the instant loan claim was transferred in sequence to the Korea Ef&A Specialized Asset-backed Securitization Limited Company, and to the Saturdays-2 Savings Bank (hereinafter “Plaintiff bank”) around January 24, 201.

D. On March 28, 2011, Nonparty 1 entered into a repayment agreement with the Plaintiff (hereinafter “instant repayment agreement”). Nonparty 1 assumed the principal and interest of the instant loan by Defendant 1, but paid the amount of KRW 168 million with the repayment agreement. Nonparty 1 participated in the instant auction procedure after paying KRW 168 million as the down payment to the Plaintiff bank on the date of the contract, and subsequently won was awarded a successful bid for the instant commercial building. The sales price is to be paid by means of assumption of obligation as stipulated under Article 143(1) of the Civil Execution Act, and the Plaintiff bank issued a written consent of acceptance of obligation in this case (Article 8(1), (4), and (5) of the instant repayment agreement). In addition, Nonparty 1 paid the remainder within 14 days from the date of the instant auction agreement and paid the remainder after deducting the amount actually received in cash from the down payment agreement from the down payment agreement to the Plaintiff bank (Article 43(1)4 of the instant repayment agreement, and the Plaintiff bank cannot pay the entire amount of the claim for reimbursement to Nonparty 14(2).

E. The instant commercial building was initially the court’s appraisal of KRW 310 million, but on March 29, 201, at the fifth sale date, the highest bidder Nonparty 2 was awarded a bid of KRW 480 million, and on April 5, 2011, the auction court decided to grant a permit for sale.

F. Pursuant to Article 8(4) and (5) of the instant reimbursement agreement, the Plaintiff bank issued a written consent to assume obligations to Nonparty 2. Nonparty 2 submitted the said documents to the auction court and assumed obligations against the Plaintiff bank regarding the amount of dividends out of the principal and interest of the instant loan.

G. On June 8, 2011, the court prepared a distribution schedule that distributes the amount of KRW 2,704,430 in the Incheon Bupyeong-gu, the first priority of the sale price and interest calculated by subtracting the execution cost from the above sale price and interest from the distribution date, and KRW 470,897,885 in the second priority in the Plaintiff bank, the mortgagee of the instant shopping district, the second priority in the Plaintiff bank (hereinafter “instant amount of dividend”). At the time, the amount of credit of the Plaintiff bank at the time, the amount of credit was KRW 417 million in the instant amount of principal and interest KRW 101,102,252 in the sum, KRW 518,102,252 in the instant amount of principal and interest, and was concluded on the same day.

H. Afterwards, Nonparty 1 did not pay the remainder of the repayment agreement amounting to KRW 158 million in the Plaintiff bank (168 million in the repayment agreement - down payment - KRW 168 million in the Plaintiff bank). The Defendants did not repay the instant loan to the Plaintiff bank.

I. 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.

3. The lower court determined as follows based on the foregoing factual basis.

With the consent of the Plaintiff bank, Nonparty 2 acquired the obligation of the instant loan to the Plaintiff bank within the scope of the amount of the sales price, instead of paying the sales price, which is exempt from liability. Of the instant loan to the Plaintiff bank, the part on the dividend amount of the instant loan expired, and Defendant 2 cannot be deemed to have consented to the assumption of obligation. As such, the portion on the dividend amount of the instant loan to Defendant 2’s joint and several liability extinguished together pursuant to the main sentence of Article 459 of the Civil Act. The Defendants jointly and severally agreed to the Plaintiff at KRW 47,204,367 of the outstanding loan amount (518,102,252 as of June 8, 2011, the dividend amount of the instant loan amount of KRW 470,897,885) and damages for delay from the following day after the date of the completion of distribution, and Defendant 2 is obligated to pay within the limit of KRW 99,1200,000.

4. The lower court’s determination is justifiable in light of the foregoing legal doctrine. In so doing, it did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules without exhaust all necessary deliberations, or by misapprehending the legal doctrine on the legal nature of assumption of obligation under Article 143(1) of the Civil Execution Act.

5. The Plaintiff’s appeal is dismissed in entirety as it is without merit. The costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)