[1] In a case where a worker exercises the right to preferential payment of a wage claim against the employer's property where a junior mortgagee exists, whether the right to preferential payment of a wage claim may be excluded or restricted to the extent that the worker's intentional or negligent act may infringe on the expectation of subrogation of a junior mortgagee (negative)

[2] In a case where an employee’s selective exercise of the right to preferential payment of wage claims can be assessed as an abuse of right, whether the right to preferential payment of wage claims is excluded or limited to the extent of infringement of the expectation of subrogation of junior mortgagee (affirmative)

[1] Article 485 of the Civil Act may not apply to a case where a worker exercises a right to preferential payment of a wage claim against the employer’s property where a junior mortgagee exists. This is because Article 485 of the Civil Act is a specially prepared provision in order to effectively protect the right to demand reimbursement and the right to expectation for subrogation arising from a contribution made by a person who has a legitimate interest in repayment. Therefore, it is inappropriate to apply mutatis mutandis where the occurrence of a right to demand reimbursement is not anticipated. If an analogical application is recognized, if an employee separately conducts an auction procedure against the employer’s property, then the employee would suffer an disadvantage that the right to preferential payment is excluded within the scope of a right to demand payment, in accordance with the amount of share of liability for the pertinent property, if the daily auction procedure is in progress, according to the amount of individual auction procedure to which the right to demand reimbursement is apportioned.

[2] Under the intent of workers in collusion with the right holder, etc. on other property of the employer to have a legitimate expectation as to subrogation of subordinated mortgagee, in cases where the workers have renounced the right to preferential payment of wage claims that could have been easily exercised on other property of the employer, which is not the object of subordinated mortgage, and where the workers’ selective exercise of right to preferential payment of wage claims can be deemed as abuse of rights because it is unreasonable to allow them to exercise their right to preferential payment of wage claims only on the part of the employer’s property, the right to preferential payment of wage claims may be excluded or restricted to the extent of infringement of the

[1] Article 485 of the Civil Act, Article 37 of the Labor Standards Act / [2] Articles 2 and 368 of the Civil Act, Article 37 of the Labor Standards Act

[2] Supreme Court Decision 2002Da48399 decided Dec. 10, 2002 (Gong2003Sang, 351)

Han Bank Co., Ltd. (Law Firm Democratic, Attorneys Yoon Jin-young et al., Counsel for the defendant-appellant)

Korea Labor Welfare Corporation

Seoul High Court Decision 2005Na20073 delivered on October 28, 2005

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

The grounds of appeal are examined.

In cases where part of the real estate owned by the employer was sold first and the wage creditor was given preferential payment in accordance with the preferential payment right in the auction price and where the lower-ranking mortgagee of the real estate sold at the auction was at a disadvantage than the simultaneous distribution of wage claims from the real estate owned by the employer pursuant to Article 368(1) of the Civil Act, the latter part of Article 368(2) of the Civil Act shall apply mutatis mutandis to the case where the lower-ranking mortgagee who was at a disadvantage as above is at a same time apportioned from the real estate owned by the employer, and if the wage creditor was at a disadvantage as above, the lower-ranking mortgagee who was at a disadvantage may receive the payment from the other real estate in preference to other real estate auction proceeds (see Supreme Court Decision 2002Da48399,

However, as above, the latter part of Article 368(2) of the Civil Act applies mutatis mutandis to cases where a junior mortgagee is expected to subrogate the right to preferential payment of wage claims in an auction procedure against other real estate owned by the employer, even if the subordinate mortgagee is expected to have the right to preferential payment of wage claims, this may not apply to cases where the collateral is lost or reduced due to the obligee’s intentional or negligent act, thereby recognizing exemption to the extent to which the obligee would have protected the right to expect legal subrogation. Article 485 of the Civil Act is not applicable to cases where a special provision is established for the enhancement of protection of the right to demand reimbursement and the right to expect subrogation arising from the repayment of the amount of contribution made by a person who has legitimate interest in repayment. Therefore, if the right to preferential payment is acknowledged by analogy, it is inappropriate to apply without delay to cases where a junior mortgagee is found to have a right to preferential payment of employer’s property separately within the extent of his/her share of liability, which would result in the disadvantage of the employer’s right to preferential payment of wage claims within the limit of 4th workers’s statutory intent of the Labor Standards.

However, under the intent of the employee to make a reasonable expectation about subrogation of subordinated mortgagees in collusion with the right holder of other property of the employer, in cases where the employee waivers his/her right to preferential payment of wage claims that could have been easily exercised against other property than the object of subordinated mortgage, and in cases where the employee’s selective exercise of right to preferential payment of wage claims to the part of the employer’s property has reached the extent of abuse of rights as much as it is unreasonable in the social life as it is difficult for the employee to easily exercise right to preferential payment of wage claims, the right to preferential payment of wage claims can be excluded or restricted to the extent that the legitimate expectation of subrogation of subordinated

According to the evidence duly admitted by the court below, when the defendant paid the employees of the bankrupt company APS company on behalf of the workers' preferential right to payment of wage claims in various auction procedures where the above company's real estate was separately in progress after the payment of overdue wages to the employees of the bankrupt company, it is acknowledged that the demand for distribution was excluded from the dividends because it did not comply with the completion period for demand for distribution due to failure to verify the progress of the auction procedures on some auction procedures, and there is no reason to believe that the defendant abused the exercise of the workers' preferential right to payment of wage claims and violated the legitimate expectation of subrogation of the plaintiff's preferential right to payment of wage claims.

According to the above legal principles and the above facts, we cannot accept the plaintiff's assertion that if the defendant demanded a distribution in a part of the auction procedure, he could have received the distribution, he should exclude the right to preferential payment against the plaintiff as much as he could have received the distribution, and it is reasonable that the court below rejected the plaintiff's argument,

The court below did not err in the misapprehension of legal principles as to the duty of a person with preferential right to payment of wages and the protection of a subordinate mortgagee's expectation right.

All the grounds of appeal are dismissed.

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing plaintiff. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Hyun-chul (Presiding Justice)