Whether a debtor may set up against a transferee who knows the existence of a special agreement prohibiting the assignment of claims or was grossly negligent when he/she was aware of the existence of such special agreement (affirmative), and the meaning of “serious negligence” as referred to in this context, and who bears the burden of proof of bad faith or gross negligence (=a person setting up against the assignee

Article 449(2) of the Civil Act; Article 288 of the Civil Procedure Act

Supreme Court Decision 2010Da8310 Decided May 13, 2010 (Gong2010Sang, 1123)

Poco Co., Ltd. (Law Firm KEL, Attorneys Dog-dam et al., Counsel for the defendant-appellant)

Hanjin Industries Co., Ltd. (Law Firm Dongin, Attorneys Hong Sung-man et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2010Na125682 decided October 27, 2011

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

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Regarding ground of appeal No. 1

Where a third party takes over a claim from a creditor, the obligor may set up against the assignee who is aware of the existence of a special agreement prohibiting the assignment of the claim, or the assignee who is grossly negligent when he/she was unaware of the existence of such special agreement. The term “ gross negligence” referred to in this context means the absence of knowledge of the existence of such special agreement, even though he/she did not pay considerable attention to the extent required to ordinary persons, if he/she did not pay considerable attention to the existence of such special agreement. The bad faith or gross negligence of a third party shall be asserted and proved by the person who intends to set up against the assignee by a special agreement prohibiting the assignment of claim (see Supreme Court Decision 2010Da8310, May 13, 2010).

The lower court determined that, inasmuch as the instant subcontract agreement (construction cost: KRW 5,281,626,90; construction period: From October 27, 2004 to the Defendant was concluded on October 27, 204, the Plaintiff did not know of the existence of a non-assignment agreement with the Defendant that the non-assignment agreement was concluded on the non-assignment of the instant article, and the Plaintiff did not know of the existence of a non-assignment agreement with the Defendant on October 27, 2004 that the non-assignment agreement was concluded on the non-assignment of the instant article, and the Plaintiff did not know of the non-assignment agreement that the non-assignment agreement was concluded on October 17, 2008. The lower court determined that the Plaintiff did not know of the existence of a non-assignment agreement with the Defendant on the non-assignment of article 150,600,000,000 won, and that the remaining non-assignment agreement was concluded on the non-assignment of article 250,000.

Examining the above legal principles and evidence duly admitted, the above determination by the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the legal principles regarding the special agreement prohibiting the assignment of claims.

2. Regarding ground of appeal No. 2

On October 31, 2008, which was merely after the transfer of part of the claim against the Defendant to the Plaintiff, the lower court, based on the admitted evidence, requested the Defendant to pay 60 million won of the second construction cost to the subcontractor directly. On November 10, 2008, the Defendant, at the Defendant’s conference room, requested the Defendant to transfer 50 million won of the second construction cost, on behalf of the Plaintiff to the non-party 1 and the director non-party 2, who violated the special agreement on the prohibition of assignment of claim under the instant subcontract, and thus, demanded the Defendant to withdraw the assignment of claim and report the result thereof on the ground that the transfer of claim against the Plaintiff was in violation of the special agreement on the prohibition of assignment of claim under the instant subcontract. The Defendant, on December 1, 2008 and on December 11, 2008, requested the Plaintiff to pay 200 billion won of the construction cost directly to the Plaintiff and the Defendant to the non-party 2,600 billion won of the construction cost.

In light of the evidence duly admitted, the above judgment of the court below is just and acceptable. Contrary to the allegations in the grounds of appeal, there were no errors by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or by misapprehending the relevant legal principles

3. As to the third ground for appeal

Even if the lower court erred in the additional judgment that deemed that the Plaintiff’s claim to take over was extinguished due to a set-off agreement and a deposit for repayment, this does not affect the conclusion of the judgment.

4. Conclusion

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 on the bench.

Justices Lee In-bok (Presiding Justice)