In a case where a secured party, other than a security, is deemed more favorable to receive a reimbursement of security than the exercise of a security right, and the reorganization program is approved after reporting his/her right as a security and becomes final and conclusive without objection, whether the secured party is allowed to exercise the security right outside the reorganization procedure (negative

A security under the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) refers to a claim for property against a person other than a company arising from a cause arising prior to the commencement of a reorganization claim or reorganization procedure, which is within the scope secured by a security right existing in company property at the time of the commencement of a reorganization procedure. Thus, even if a reorganization company entered into a contract to acquire the secured property owned by a third party prior to the commencement of a reorganization procedure, as long as the registration of ownership transfer is completed after the commencement of the reorganization procedure, the secured party cannot be regarded as a security holder because the property was not a company property at the time of the commencement of the reorganization procedure. However, even though the secured party was aware of the transfer of ownership after the commencement of the reorganization procedure, the secured party cannot be regarded as a security holder, considering that it is more favorable for the secured party to receive the payment under the reorganization plan to report his own right as a security

Article 112 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005), Article 123 (see current Article 141 of the Debtor Rehabilitation and Bankruptcy Act), Article 2 of the Civil Act

KP Specialized Co., Ltd. (Attorneys Lee Chang-sik et al., Counsel for the defendant-appellant)

The administrator of the third party, who is a corporate restructuring company, (Attorney Hwang Yong-sik, Counsel for defendant-appellant)

Seoul Central District Court Order 2006Ra648 dated February 5, 2007

The reappeal is dismissed.

The grounds of reappeal are examined.

The old Company Reorganization Act (repealed by the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) refers to a claim for property against a person other than a company arising from a cause arising prior to the commencement of a reorganization claim or reorganization procedure, and the scope of secured right existing on company property at the time of commencement of a reorganization procedure. Thus, even if a reorganization company entered into a contract to acquire the secured property owned by a third party prior to the commencement of a reorganization procedure, if the reorganization company entered into the registration of ownership transfer after the commencement of the reorganization procedure, the secured party cannot be regarded as a security holder because the property was not a company property at the time of commencement of the reorganization procedure. However, even if the secured party was aware of the fact of the transfer of ownership after the commencement of the reorganization procedure, the secured party cannot be seen as a security holder, judging that the secured party was treated as a security more than the exercise of the security right, and the receiver of the reorganization company did not raise any objection thereto.

According to the facts duly admitted by the court below and the records, it was necessary to increase the company's assets for the purpose of normalization and repayment of debts before the commencement of reorganization proceedings on February 18, 1998. The real estate of this case, which was provided as physical collateral to the Gyeonggi Bank for the purpose of Sejong, etc. was donated to its owner at the time of commencement of reorganization proceedings, but the ownership transfer registration was completed on May 1, 1998. The aggregate of the amount of security established on the real estate of this case was KRW 8,762,50,000, and the appraisal value was 587,850,000,000,000, which was 200,000,000 won after the commencement of reorganization proceedings on the real estate of this case. The value of the real estate of this case was 20,000,000 won after the commencement of reorganization proceedings on May 15, 1998.

In the same purport, the decision of the court below that revoked the decision of the court of first instance and dismissed the application for voluntary auction of the re-appellant by revoking the above decision of the court of first instance, is just in its conclusion, and there is no error of law that affected the conclusion of the judgment due to misunderstanding of legal principles as to the former Company Reorganization Act

Therefore, the reappeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Hwang-sik (Presiding Justice)