[1] In a case where the extinctive prescription of the principal obligation is completed, whether the guaranteed obligation is naturally extinguished depending on the subsidiary nature of the guaranteed obligation (affirmative in principle)

[2] The case holding that in a case where Gap corporation, a shopping district seller, entered into a loan business agreement on the part of the part payment loan to Eul bank and decided to jointly and severally guarantee the debt of the buyers, and accordingly, Eul corporation was a joint and several surety for the debt of the loans to Eul bank, and Eul corporation was responsible for all the problems arising therefrom when Gap requested the extension of the maturity of the loan to Eul bank without the individual consent of the buyer, the principal debtor, Eul bank, and thereafter Gap agreed to pay the loan at the time of cancelling the joint sale contract, but Gap corporation continued to pay the loan at the time of extension of maturity without the repayment of the loan, and Eul bank did not take measures such as the interruption of prescription, and Eul bank did not pay the loan at the time of expiration of the prescription period, the court below erred in the misapprehension of legal principles, which held that Eul corporation cannot claim the extinction of the guaranteed debt on the ground of the expiration of the prescription period of the principal debt

[1] Even if the extinctive prescription of a guaranteed obligation is not completed due to the suspension of the extinctive prescription, where the extinctive prescription of the principal obligation is completed, the principal obligation is extinguished due to the completion of the extinctive prescription, and thus, the guaranteed obligation also ceases to exist as a matter

However, in exceptional cases where there are special circumstances to deny the subsidiary nature of the guaranteed obligation, the surety cannot claim the extinguishment of the guaranteed obligation on account of the lapse of the prescription period of the principal obligation. However, in order to deny the subsidiary nature that falls under the essential nature of the guaranteed obligation by recognizing special circumstances, the surety has expressed his/her intent to perform the guaranteed obligation notwithstanding the expiration of the prescription period of the principal obligation, or agreed with the obligee. However, the subsidiary nature of the guaranteed obligation cannot be denied merely on the ground that the surety provided a cause for the lapse of the prescription

[2] In a case where Gap corporation, a shopping district seller, entered into a loan business agreement with Eul bank, agreed to provide several persons with joint and several loans, and accordingly, Byung, a buyer Eul's joint and several surety for the loan to Eul bank, and Gap corporation agreed to request the extension of the maturity of the loan without the individual consent of several buyers who are the principal debtor, and thereafter, Gap corporation agreed to pay all the problems arising therefrom at Eul bank, and the joint and several surety for the loan was responsible for the repayment of the loan, but Eul bank did not repay the loan with the repayment of the maturity and did not take measures such as the interruption of prescription, and Eul bank did not pay Byung's loan due to the expiration of prescription period, the case holding that the court below's decision that Gap bank was responsible for the extension of the guarantee obligation without the consent of the principal debtor bank, and it is hard to see that Gap bank did not have any special reasons for the extension of the prescription period on the ground that it did not have an intent to terminate the prescription period of the principal obligation.

[1] Articles 428 and 430 of the Civil Act / [2] Articles 428 and 430 of the Civil Act

[1] Supreme Court Decision 2010Da51192 Decided July 12, 2012 (Gong2012Ha, 1406)

Seoul Mutual Savings Bank’s bankruptcy trustee (Law Firm Grandmark, Attorneys Yoon Gyeong-chul et al., Counsel for the bankruptcy trustee-appellant)

GMD Co., Ltd. (Law Firm Love, Attorneys Kim Ho-ho, Counsel for the plaintiff-appellant)

Seoul Central District Court Decision 2015Na22426 Decided January 20, 2016

The judgment below is reversed, and the case is remanded to the Seoul Central District Court.

The grounds of appeal are examined.

1. Even if the extinctive prescription of a guaranteed obligation is not completed due to reasons such as suspension of the extinctive prescription, where the extinctive prescription of the principal obligation is completed, the principal obligation is extinguished due to the completion of the extinctive prescription, and thus, the guaranteed obligation also ceases to exist naturally

However, in exceptional circumstances where the subsidiary nature of the guaranteed obligation should be denied, the surety cannot claim the extinguishment of the guaranteed obligation on the ground of the lapse of the prescription period of the principal obligation (see, e.g., Supreme Court Decision 2010Da51192, Jul. 12, 2012). However, in order to deny the subsidiary nature that falls under the essential nature of the guaranteed obligation by recognizing special circumstances, the surety has expressed his/her intent to perform the guaranteed obligation, or agreed with the obligee, notwithstanding the lapse of the prescription period of the principal obligation. However, the subsidiary nature of the guaranteed obligation cannot be denied solely on the ground that the surety provided the cause for the lapse of the prescription period of

2. The lower court acknowledged the following facts based on evidence.

A. On March 5, 2004, the Defendant entered into a loan business agreement with financial institutions, such as Seoul Mutual Savings Bank (hereinafter “Seoul Mutual Savings Bank”), to lend part payments to buyers, and agreed to jointly and severally guarantee the buyer’s obligation to lend to Seoul Mutual Savings Bank.

B. The Nonparty became the principal obligor of each of the instant loans by obtaining a loan from the Seoul Mutual Savings Bank as the buyer on August 13, 2004 and September 1, 2004 or acquiring the status of the buyer on April 5, 2006 and acquiring the status of the buyer on April 5, 2006.

C. From July 28, 2005, the Defendant requested Seoul Mutual Savings Bank to extend the maturity of the intermediate payment of the commercial buildings of this case to the Seoul Mutual Savings Bank every six months. The Defendant is responsible for all the problems arising from the notification of the extension of maturity in lieu of the purchaser, who is the principal debtor, without the consent of the Nonparty who is the principal debtor. Accordingly, the Seoul Mutual Savings Bank continued to extend the maturity of each of the loans of this case to the end of August 13, 2009 and September 1, 2009 without the consent of the Nonparty who is the principal debtor.

D. The Defendant agreed with the Nonparty to be responsible for the repayment of each of the loans of this case upon the rescission of each of the sales contracts of this case. On April 17, 2007, the Seoul Mutual Savings Bank notified the Nonparty of the cancellation of each of the sales contracts with the Nonparty.

E. The loan business agreement of this case lost the benefit of the time limit for the loan when the contract for sale in lots was cancelled, and the sales price to be returned by the Defendant to the buyer was appropriated prior to the obligation of loans to the Seoul Mutual Savings Bank. However, even after the cancellation of each contract for sale in this case, the Defendant continued to pay only the interest by extending the maturity with the Seoul Mutual Savings Bank without repaying each of the loans of this case.

F. Meanwhile, even though the Seoul Mutual Savings Bank notified the Defendant of the cancellation of each of the instant sales contracts, it merely demanded the Defendant to bear liability for the extension of maturity, and did not take measures such as interrupting prescription against the Nonparty. Accordingly, on August 13, 2012 and September 1, 2012, the Nonparty’s obligation for each of the instant loans was expired.

3. Based on such factual basis, the lower court determined that the Defendant’s subsidiary nature cannot be asserted as to the Defendant’s guaranteed liability on the ground that: (a) the Defendant expressed in Seoul Mutual Savings Bank the intent to perform the guaranteed obligation regardless of the expiration of the prescription period of the principal obligation, and that the Defendant’s repayment of each of the instant loans is not possible on the ground that, upon the Defendant’s request, the extinctive prescription period for each of the instant loans is expired on the wind that is extended without the Nonparty’s consent; (b) the Defendant agreed on and terminated each of the instant sales contracts with the Nonparty as the Defendant liable for the repayment of each of the instant loans; (c) the Defendant continued to pay the sales amount to be returned to the Nonparty prior to the repayment of the instant loans; and (d) the Seoul Mutual Savings Bank demanded the Nonparty to pay the interest only when it did not take any specific measures to collect the claims against the Nonparty; and (b) the Defendant expressed his intent to perform the guaranteed obligation to the Seoul Mutual Savings Bank without the expiration of the prescription period of the principal obligation.

4. However, it is difficult to accept the above determination by the court below for the following reasons.

A. Examining the above facts in light of the legal principles as seen earlier, since the Defendant concluded a multiple sales contract with the buyer and the buyer jointly and severally guaranteed the loan obligation which is the principal debtor, it is reasonable to view that the Defendant’s act of extending the loan maturity without the consent of the Seoul Mutual Savings Bank and the principal debtor to be responsible for the issues arising therefrom is for the convenience of business operations en bloc rather than expressing the intent that the principal obligation will discharge the guaranteed obligation even if the statute of limitations expires, and it is difficult to view the Defendant’s act of having the Nonparty liable for the repayment of each of the loans of this case against the Nonparty as the obligee’s declaration of intent to the Seoul Mutual Savings Bank.

B. The Defendant requested Seoul Mutual Savings Bank to extend the maturity of a loan without the Nonparty’s consent. After the cancellation of the sales contract, the interest on each of the loans of this case was continuously extended, and accordingly, the Seoul Mutual Savings Bank did not take measures to recover claims against the Nonparty. Accordingly, the Defendant cannot deny the subsidiary nature of the guaranteed obligation solely on the ground that the Defendant provided the cause of expiration of the prescription period of the principal obligation.

C. Therefore, the lower court, based on its stated reasoning, did not deny the subsidiary nature of the guaranteed obligation, but did not deny the Defendant’s request for extension of maturity; whether there were other purposes than the convenience of business process en bloc; whether the Defendant was aware of the fact that Seoul Mutual Savings Bank agreed to be responsible for the repayment of each of the loans of this case upon the rescission of each of the instant sales contract with the Nonparty; whether Seoul Mutual Savings Bank continued to extend maturity despite the loss of the benefit of each of the loans of this case due to the cancellation of each of the instant sales contract; and how Seoul Mutual Savings Bank received only the existing loan interest, not the overdue interest due to the loss of maturity; and determined the subsidiary nature of the guaranteed obligation in accordance with whether the Defendant expressed his intent to perform the guaranteed obligation even if the principal obligation became extinguished.

D. Nevertheless, without examining the aforementioned circumstances, the lower court determined that the Defendant could not assert the extinguishment of the guaranteed obligation on the grounds of the extinguishment of the prescription period of the principal obligation, on the grounds that there were special circumstances in which the subsidiary nature of the guaranteed obligation ought to be denied without examining the aforementioned circumstances. In so doing, the lower court erred by misapprehending the legal doctrine on the subsidiary nature of the guaranteed obligation,

5. Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ki-taik (Presiding Justice)