[1] Whether the validity of the principal registration based on the provisional registration for security, which was made without undergoing the liquidation procedure in violation of Articles 3 and 4 of the Provisional Registration Security Act (negative) and whether the principal registration is effective as a transfer for security with the weak meaning of the principal registration (negative), and whether the principal registration becomes effective registration in accordance with the substantive legal relations after completion of the liquidation procedure later (affirmative)

[2] In a case where the principal registration completed on the basis of the provisional registration for collateral security is null and void, whether the debtor, etc., who is the person who has the provisional registration for collateral security, holds the ownership of, and the right to use and profit from, the real estate for collateral security (affirmative), and in a case where the debtor, by entering into a lease agreement with the creditor on the real estate for collateral security, pays a rent to the creditor or allows the lessee, who enters into a lease agreement with him/her, to pay a rent to the creditor, whether it

[1] Article 3 of the Provisional Registration Security Act (hereinafter “Provisional Registration Security Act”) provides that in order for a creditor to acquire ownership of real estate for security by exercising a security right under a security contract, the appraised value of the liquidation amount under Article 4 of the same Act shall be notified to the debtor, etc. after the due date of payment. This notification shall specify the appraised value of the real estate as at the time of notification and the amount of claims under Article 360 of the Civil Act, and the period of liquidation shall expire two months from the date of receipt of notification. Article 4 of the Provisional Registration Security Act provides that the creditor shall pay the liquidation amount after deducting the value of the secured claim from the value of the real estate as at the time of notification, and if the provisional registration of security is completed, the liquidation amount shall be acquired after the due date, and if the provisional registration of security is completed, the principal registration according to the provisional registration may be requested against the debtor, etc., and if the principal registration of security is completed in violation of the above provisions and this registration is null and void, even if the principal registration of security is made within the effective period of provisional registration under the Special Registration Act.

[2] In a case where the principal registration completed on the basis of a provisional registration for collateral security is null and void, ownership of real estate for collateral security is held by an obligor, etc. who is the person who has established a provisional registration for collateral security, and one of the rights of ownership is also the person who has established a provisional registration for collateral security. Therefore, in a case where an obligor entered into a lease agreement with a creditor on real estate for collateral security, and paid a rent to a creditor or made a lessee under a lease agreement with the debtor pay a rent to a creditor, and thus the obligee receives a rent, the said rent should be deemed as having been appropriated for the repayment of the secured obligation, unless there are special circumstances making it difficult to deem that the said rent was appropriated for the repayment of the secured obligation.

[1] Articles 3 and 4 of the Provisional Registration Security Act / [2] Articles 3 and 4 of the Provisional Registration Security Act

[1] Supreme Court Decision 92Da20132 delivered on January 25, 1994 (Gong1994Sang, 790) Supreme Court Decision 99Da41657 delivered on June 11, 2002 (Gong2002Ha, 1605)

Plaintiff (Attorney Choi Han-han et al., Counsel for the plaintiff-appellant)

Defendant (Law Firm Lee & Lee, Attorneys Kang Jong-ho et al., Counsel for the defendant-appellant)

Incheon District Court Decision 2017Na61655 decided November 28, 2018

The judgment below is reversed, and the case is remanded to the Incheon District Court Panel Division.

The grounds of appeal are examined.

1. A. Article 3 of the Provisional Registration Security Act (hereinafter “Provisional Registration Security Act”) provides that in order for a creditor to acquire ownership of real estate for the purpose of security by exercising a security right under a security contract, the appraised value of the real estate under Article 4 of the same Act shall be notified to the debtor, etc. after the due date of payment, and such notification shall specify the appraised value as at the time of notification and the amount of claims under Article 360 of the Civil Act, and the period of liquidation shall expire two months from the date of receipt of notification. Article 4 of the Provisional Registration Security Act provides that the creditor shall pay the liquidation amount after deducting the value of the secured claim from the value of the real estate as at the time of notification, and if the transfer of ownership is already completed, the ownership of the real estate shall be acquired after the due date, and if a special agreement is contrary to this provision and unfavorable to the debtor, etc., it shall be null and void from the date of notification to the debtor as at the time of notification, and it shall not be deemed null and void from the date of notification of provisional registration 20.

B. In a case where the principal registration completed on the basis of a provisional registration for collateral security is null and void, the ownership of the real estate for collateral security is owned by the obligor, etc., who is the person who has established the provisional registration for collateral security, and one of the rights of ownership, also by the person who has established the provisional registration for collateral security. Therefore, in a case where the obligor entered into a lease agreement with the obligee on real estate for collateral security, and made the obligee pay a rent to the obligee or made the lessee under a lease with the obligor pay a rent to the obligee, barring any special circumstance, if the obligee and the obligor agreed to treat the said rent as separate from the repayment of the secured obligation, or otherwise, it is difficult to deem that the said rent was appropriated for the repayment of the secured obligation.

2. A. According to the reasoning of the lower judgment, during the proceeding of the instant lawsuit, the lower court: (a) calculated the principal and interest of secured debt borne by the Plaintiff against the Defendant on or around April 25, 2017, or around that time, based on the Plaintiff’s assertion, on the basis of the following: (a) KRW 808,006,378, in total; (b) only KRW 33,990,520, which was paid before the completion of the principal registration, shall be appropriated for repayment; and (c) the rent that the Defendant received from the Plaintiff or other lessees after the completion of the principal registration shall not be deemed to be appropriated for repayment of secured debt; (d) therefore, the principal and interest of secured debt borne by the Defendant against the Defendant is more than the market value (751,94,700,00,000,08,06,378,390, and 520,000,000 won, which were subject to provisional registration, and thus, was justified by the Plaintiff’s appeal.

B. However, in light of the aforementioned legal principles, even if the Defendant completed the principal registration of the instant real estate based on a provisional registration, insofar as the ownership or the right to use and benefit therefrom was not followed by the procedures stipulated in Articles 3 and 4 of the Provisional Registration Security Act, the Plaintiff, as the obligor. Therefore, the rent that the Defendant received from the Plaintiff’s side or other lessees after the completion of the principal registration, in principle, was appropriated for the repayment of the secured obligation, regardless of its title. In order to deem that the rent was not appropriated for the repayment of the secured obligation, the lower court should have deliberated and determined whether there were special circumstances, such as the agreement to treat the rent separately from the repayment of the secured obligation.

Nevertheless, solely on the grounds stated in its reasoning, the lower court determined that the Defendant acquired the ownership of the instant real estate by exercising the security right, on the ground that the money that the Defendant received as rent was not appropriated for the repayment of the principal and interest of the secured obligation, separate from the repayment of the principal and interest of the secured obligation.

Such judgment of the court below is erroneous in the misapprehension of legal principles as to the attribution of a right to use and benefit from real estate which is the object of a provisional registration and the calculation of liquidation procedures or liquidation amount under the Provisional Registration Security Act, and failing to exhaust all necessary deliberations, thereby adversely affecting the judgment.

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 Kim Jae-hyung (Presiding Justice)