2014Da82118 Revocation of Fraudulent Act

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Busan High Court Decision 2014Na2655 decided October 29, 2014

April 23, 2015

Of the judgment of the court below, the part concerning cancellation of mortgage contract and the claim for restitution of the original status is reversed, and that part of the case is remanded to Busan High Court. The remaining appeal is dismissed.

The grounds of appeal are examined.

1. Regarding cancellation of the contract to establish a mortgage and the claim for restitution of the original state

(1) If a mortgage contract between the debtor and the beneficiary is fraudulent, it would be contrary to the purport of Article 406(1) of the Civil Act to allow a beneficiary to receive dividends as a mortgagee even if the mortgage contract was cancelled due to the acquisition of ownership by another person during the auction procedure following the execution of the mortgage. Therefore, in order to prevent the beneficiary from holding such unlawful profits, the creditor who was damaged due to the establishment registration of the mortgage has a benefit to seek cancellation of the mortgage contract (see Supreme Court Decision 97Da8687, Oct. 10, 1997). Meanwhile, in the event the debtor sells real estate during an auction procedure due to fraudulent act, and the debtor who was the mortgagee paid the secured debt to the beneficiary with the repayment of the secured debt, it is reasonable to deem the above repayment to have priority over the ordinary creditor with the execution of the right to preferential reimbursement of the mortgage, barring any special circumstance. Therefore, it is unreasonable to have the beneficiary obtain the benefit of cancellation of the registration of the establishment of the mortgage as well as with the cancellation of the mortgage.

(2) According to the reasoning of the judgment of the court of first instance as cited by the court below and the records, ① the Plaintiff leased KRW 100 million to C on December 7, 2005 without fixing the due date for payment as interest rate of KRW 100 million; ② C entered into the instant mortgage contract with the Defendant on December 9, 2010 with regard to the real estate listed in the attached list of the court below (hereinafter “the instant real estate”); and on the same day, the Defendant completed the registration of establishment of the instant real estate; ③ on March 19, 2012, the Defendant applied for voluntary auction based on the establishment of the instant real estate to Busan District Court Dong Branch E; ③ on March 20, 2012, the decision of voluntary auction was issued by the court of first instance on March 20, 201; ④ sold the instant real estate to the New Construction Co., Ltd. on May 7, 2012; and ⑤ withdrawn the instant real estate from the sale price to the Defendant on July 21, 201207.

Examining the aforementioned facts in light of the legal principles as seen earlier, if the instant mortgage agreement between the Defendant and C constitutes a fraudulent act, even though the cancellation of the registration of the establishment of the instant mortgage, the Defendant is undergoing a voluntary auction procedure due to the execution of a fraudulent act, even if the registration was cancelled.

Since C received KRW 200 million from the proceeds of the sale of the real estate of this case which is the object of the right to collateral security in return for the cancellation of the registration of the establishment of the right to collateral security and cancelled the registration of the establishment of the right to collateral security, the plaintiff, the creditor, has the interest to seek the cancellation

(3) Nevertheless, without examining whether the instant mortgage contract constitutes a fraudulent act, the lower court determined that there was no benefit to seek cancellation of the instant mortgage contract solely on the ground that the instant mortgage contract was already terminated at the time of filing the instant lawsuit and the cancellation of the registration of the establishment of the said mortgage had already been completed at the time of filing the lawsuit. In the event that the instant mortgage contract was revoked on the ground that it was a fraudulent act, the lower court did not further determine whether the claim for compensation is recognized as restitution. In so determining, the lower court erred by misapprehending the legal doctrine on the benefit of protection of rights and failing to exhaust all necessary deliberations

2. Examining the record as to the cancellation of a debt repayment contract as of July 2, 2012 and the subsequent claim for restitution, the lower court is justifiable to dismiss the claim for cancellation of a debt repayment contract as of July 2, 2012 and the subsequent claim for restitution. In so doing, the lower court did not err by misapprehending the legal doctrine on the requirements for establishing a fraudulent act.

3. Conclusion

Therefore, the part of the judgment of the court below regarding the cancellation of mortgage contract and the claim for restitution of the original status shall be reversed, and that part of the case shall be remanded to the court below for further proceedings consistent with this Opinion. The remaining appeal shall be dismissed. It is so decided as per Disposition by the assent

Justices Park Sang-hoon

Justices Kim Jae-tae

Chief Justice Cho Jae-hee