Seoul High Court Decision 200Na14486 decided May 1, 200

Mez Fire Marine Insurance Co., Ltd. (Law Firm Square, Attorneys Lee-sik et al., Counsel for the plaintiff-appellant)

July 23, 2015

Ulsan District Court Decision 2014Gahap17196 Decided January 14, 2015

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

3. The decision of the court of first instance was made in accordance with the reduction of claims in the trial as follows.

The defendant shall pay to the plaintiff 1,623,674,724 won with 6% interest per annum from March 17, 2014 to July 15, 2014, and 20% interest per annum from the next day to the day of complete payment.

1. Purport of claim

The defendant shall pay to the plaintiff 1,623,674,724 won with 6% interest per annum from March 17, 2014 to July 15, 2014, and 20% interest per annum from the next day to the day of complete payment (the plaintiff has reduced his claim in the trial).

2. Purport of appeal

The judgment of the first instance is revoked, and the plaintiff's claim is dismissed.

1. Basic facts

(a) Insurance contracts and occurrence of insurance accidents;

1) The bankrupt Sejong Heavy Industries Co., Ltd. (hereinafter “Stact Heavy Industries”) is a company for shipbuilding business, etc., and the defendant is a company for insurance business, etc.

2) Around 2008, Sejong Heavy Industries concluded a shipbuilding insurance contract with the Defendant with respect to the vessels, such as SKHI-H.1187 Vessels (hereinafter “1187 Vessels”). On September 17, 2010, SHI-H.1198 Vessels (hereinafter “1198 Vessels”).

3) On September 17, 2010, when a 1187-ray 1187, which was under construction in the Sejong Heavy Industries, was entering the Orart Shipbuilding Co., Ltd., an accident that was damaged by having contacted with the Dok because the electric defense propellor was not paid. On April 7, 2011, the 1198-ray was a fire that occurred in the engine room and was damaged.

4) On March 6, 2014, a new damage adjusting company: (a) notified the Defendant that the insurance proceeds of the 11187 Line were KRW 1,205,58,409, and the insurance proceeds of the 1198 Line were KRW 580,78,720.

(b) Bankruptcy of the light industry;

1) On April 20, 201, Sejong Heavy Industries applied for commencement of rehabilitation procedures (Ulsan District Court 201 Gohap10) on April 20, 201, and the decision on commencement of rehabilitation procedures was made on May 19, 201 and was announced on the same day.

2) On February 24, 2012, the Ulsan District Court rendered a decision to discontinue rehabilitation procedures for the Sejong Heavy Industries, and on March 12, 2012, declared bankruptcy for the Sejong Heavy Industries (the lower court lower court 2).

C. The defendant's acquisition of claims

1) On July 2, 2010, a creditor financial institution’s joint management proceeding under Articles 4 and 5 of the Corporate Restructuring Promotion Act, etc. was commenced by a resolution of the first creditor financial council on July 2, 2010. On June 25, 2010, the Defendant participated in the creditor financial institution’s creditor financial institution’s financial institution’s balance of the advance refund guarantee (hereinafter “RG”) as of June 25, 2010, equivalent to KRW 26,337,00,000.

2) On July 29, 2010, the Council of Creditor Council passed a resolution as set forth in attached Table 1 at the third resolution of July 29, 2010 (hereinafter “Resolution of July 29, 2010”).

3) Thereafter, in the Ulsan District Court on April 20, 201, the reason why the Sejong Heavy Industries applied for commencement of rehabilitation procedures was defective, and the financial institutions providing advance refund guarantee discontinued joint shipbuilding and carried out the settlement of profits and losses in accordance with the resolution of July 29, 2010. However, 1198 vessels, which decided to make joint shipbuilding, did not have been built yet, so that it would not implement the settlement of profits and losses and continue joint shipbuilding of 1198 vessels, and concluded a joint shipbuilding agreement with the following contents on June 16, 201.

(3) The Export-Import Bank of Korea, the principal creditor bank of the Export-Import Bank of Korea, has to pay the corresponding amount of the debt and distribute it to the RG agency, the amount of the settlement of profits and losses is fixed in the future. The amount of the settlement of profits and losses is determined and notified by the Export-Import Bank of Korea of the amount of the settlement of profits and losses in cash to the RG agency, the amount of the settlement of profits and losses is fixed.

4) On October 10, 201, the Export-Import Bank of Korea determined and notified the final amount of credit and the amount of settlement contributions, as shown in attached Form 2, to Defendant, the Korea Trade Insurance Corporation, the interesting National Fire and Marine Insurance Corporation (hereinafter referred to as the “interest fire”), and the Seoul Guarantee Insurance Co., Ltd. (hereinafter referred to as the “Seoul Guarantee Insurance”).

5) On October 20, 201, the Defendant acquired the instant claim for loans under a loan agreement (the maturity date June 28, 2012), which was made on June 28, 201, against the interesting industry, from the fire of the interesting country, for the interesting industry, KRW 1,799,976,793 (hereinafter “the instant claim for the transfer of the amount”), and notified the interesting industry of the said assignment of the said claim. In addition, the Defendant completed the report on the change of the name of the claim to the rehabilitation court around that time.

D. Defendant’s notice of set-off

On March 28, 2014, the Defendant issued a notice to the Plaintiff on March 28, 2014, stating that the Plaintiff’s insurance claim 1,786,377,129 and damages for delay thereof based on each of the above insurance contracts against the Defendant are several claims against the Plaintiff, and that the Defendant’s additional insurance premium 115,199,976,793 under the insurance contract against the Plaintiff on the 11187 Line among the principal claim for the instant transfer money claim and the insurance premium claim amounting to KRW 115,191,653, the total amount of KRW 115,915,168,446, and damages for delay thereof is offset against the equal amount of the claim by the original and the Defendant’s damages for delay.

[Ground of recognition] Facts without dispute, Gap evidence Nos. 1 through 7, Eul evidence Nos. 1 through 19 (including paper numbers), the purport of the whole pleadings

2. Determination as to the cause of action

A. We examine the following facts: (a) the Defendant concluded each dry insurance contract with the Sejong Heavy Industries on September 17, 2010 for the 11187 Line; and (b) on September 17, 2010 for the 1198 Line; (c) the occurrence of each insurance accident on April 1198 Line; (d) the occurrence of each insurance contract on April 18, 201; (e) the new adjustment company’s insurance money on March 6, 2014 for the 1,205,58,409 KRW 1,588,409; and (e) the Defendant calculated each insurance money on 1198 Line as the insurance money on 1198 Line; and (e) notified each of the Defendant.

B. According to the above facts, the defendant is obligated to pay to the plaintiff a total of KRW 1,786,377,129 under each of the above insurance contracts (i.e., KRW 1,205,58,409 + KRW 580,788,720) minus KRW 162,705 (i.e., KRW 1,623,674,724 (i.e., KRW 1,786,37, 129) and delay damages therefrom, barring special circumstances.

3. The defendant's defense and the plaintiff's defense

A. Defendant’s defense and Plaintiff’s defense

The plaintiff's insurance claim against the defendant was extinguished within the amount equal to the claim in this case due to the defendant's declaration of set-off. However, the plaintiff re-claimed that the claim in this case was acquired by the defendant with knowledge that there was a decision to commence rehabilitation for the Sejong Heavy Industries, and therefore, it constitutes a set-off claim under the main sentence of Article 422 subparagraph 4 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter "Rehabilitation Act").

B. Relevant legal principles

1) According to Article 6(1) and (4)1 of the Debtor Rehabilitation Act, where a decision to discontinue rehabilitation procedures is confirmed after authorization is granted for the rehabilitation plan for a debtor who has not been declared bankrupt, when it is deemed that the debtor is a cause for bankruptcy, the court shall declare bankruptcy ex officio when it recognizes that the debtor is a cause for bankruptcy, and where the debtor is declared bankrupt, when the payment suspension or bankruptcy is not applied before the declaration of bankruptcy in the application of the provisions of Part III (Bankruptcy Procedures), the application for the suspension of payment or the application for

2) Furthermore, according to the main sentence of Article 422 subparag. 4 of the same Act, if a debtor declared bankrupt acquires a bankruptcy claim with knowledge that the debtor's payment suspension or bankruptcy petition had been filed, such claim may not be offset.

C. Determination

In light of the above facts, it is reasonable to deem that the Plaintiff’s mining claim 1,79,976,793 won was transferred to the Defendant on October 20, 201, and the transfer date was notified to the Gwangju Heavy Industries on the same date. The fact that the maturity date of the instant mining claim was June 28, 2012, and the insured amount to be paid by the Defendant on March 6, 2014 was determined as above. According to the above facts, it is reasonable to deem that the above insurance claim 20 days from March 6, 2014, which became due date of maturity of 10 days from March 16, 201 (see Article 658 of the Commercial Act) and that the Defendant’s application for the commencement of rehabilitation procedures of the rehabilitation procedure of the No. 24 industry was no longer for the first time prior to the commencement of rehabilitation procedure of the rehabilitation procedure of the No. 201 industry, which became final and conclusive on March 16, 2014.

3. Judgment on the defendant's re-defense

A. The defendant's second defense

Since the Defendant acquired the instant claim for the amount of the transfer money in accordance with the resolution of July 29, 2010 from the Heung National Fire, the cause for acquiring the instant claim for the transfer money is the resolution of July 29, 2010. The time of the above resolution is prior to ascertaining that the Defendant had suspended payment or filed a petition for bankruptcy of the Gwangju Heavy Industries, and since it constitutes one year prior to the date of the declaration of bankruptcy, set-off against the instant claim for the transfer money in accordance with subparagraph 2 (b) and (c) of subparagraph 2 of Article 422 of the Debtor Rehabilitation Act, which applies mutatis mutandis under subparagraph 4 of Article 422 of the Debtor Rehabilitation Act, is allowed

B. Relevant legal principles

1) Article 145 Subparag. 2 Subparag. 2(b) of the Debtor Rehabilitation Act allows exceptionally offset against “any obligation borne by any rehabilitation creditor or any rehabilitation secured creditor due to any cause arising before it becomes known that an application for suspension of payment or commencement of rehabilitation procedures has been filed.” Here, “the cause” refers to the case where: (a) it is directly and severally intended to cause a creditor to bring about a specific set-off expectation; and (b) it is recognized that the rehabilitation creditor’s trust in relation to the security effect of set-off is worth protecting the creditor (see Supreme Court Decision 2013Da20513, Sept. 24, 201

2) However, considering that the proviso of Article 145 subparag. 2(b) and the proviso of Article 422 subparag. 2(b) of the same Act exceptionally allow a set-off in order to protect the legitimate set-off period of creditors existing prior to the obligor’s crisis, each of the above provisions uses the same language and text “the causes arising before the obligor’s crisis,” and there are no reasonable grounds to interpret the same language and text within the same Act, it is reasonable to interpret the same legal relationship as falling under “the cause” under Article 422 subparag. 2(b) of the same Act to the effect that Article 145 subparag. 2(b) of the same Act does not apply mutatis mutandis to cases where the obligor acquired new claims with the knowledge of the so-called crisis of the obligee’s payment suspension or bankruptcy application, Article 422 subparag. 2 subparag. 4(b) of the same Act cannot be deemed to have been applied mutatis mutandis to cases where the obligor acquired the said bankruptcy claim with the knowledge of the obligor’s bankruptcy claim exemption or non-performance.

3) Meanwhile, Article 422 subparagraph 2 (c) of the same Act, which applies mutatis mutandis pursuant to the proviso to subparagraph 4 of Article 422 of the same Act, appears to be “one year prior to the date on which bankruptcy is declared,” which appears to be “one year prior to the date on which the bankruptcy is declared,” in view of the fact that the legislators have little relevance with the declaration of bankruptcy and there is no reasonable ground to interpret the same language within the same provision, in light of the fact that, as alleged by the Defendant, if the offset satisfies only the standard point of time set in subparagraph 3 (c) of the same Article on the grounds of safety of transaction, it is possible to abuse bankruptcy proceedings to meet the above standard point of time; and that the above subparagraph 2 (b) and (c) use the same language as “the cause arising before,” and there is no reasonable ground to interpret the same language differently within the same Article.

C. Determination

In full view of the following circumstances, comprehensively taking account of the facts of the above recognition and the purport of the evidence No. 21-2 as well as the entire arguments, it is difficult to view that the resolution of July 29, 2010 constitutes a direct act of causing an offset against the obligation to pay insurance proceeds to the Defendant, or that there was a legitimate trust worth protecting the Defendant’s security effect by the above resolution. Thus, the above resolution does not constitute “the causes arising before” as stipulated in Article 422 subparag. 4 (proviso), 2 (b), and (c) of the Debtor Rehabilitation Act, and thus, the Defendant’s re-appeal is groundless.

(1) According to the above resolution, the difference between the amount of final credit of “R/G agencies” and “total amount of credit” of “R/G agencies” prior to the date of the settlement of profit and loss is “amount of settlement of profit and loss,” and the difference between the “amount of final credit after the settlement of profit and loss” of the pertinent R/G agencies is “amount of settlement of profit and loss.” The amount of “amount of settlement of profit and loss” calculated as above is + the amount of settlement of profit and loss should be received from the R/G agencies where the “amount of settlement of profit and loss” is (+) to which the “amount of settlement of profit and loss” is equivalent to the amount of credit corresponding to subparagraph (-) and pay money equivalent to the amount of such credit. Considering the following aspects, it is difficult to conclude that at the time of the above resolution, the “amount of settlement of profit and loss” becomes final and conclusive, and whether the Defendant will take over the credit from

i) At the time of the above resolution, it was not determined for what kind of the vessel would be used to cover new funds for a joint shipbuilding vessel. Since the vessel subject to guarantee by the RG agencies is different, the "final Credit Amount" of R/G agencies depending on the vessel subject to new funds input and the size of input.

ii) According to the above resolution, when the owner of a ship requests the performance of R/G, the financial institution which entered into the R/G contract for the ship ordered by the owner of the ship must implement it. As such, the “final amount of claims” of R/G institutions vary depending on which the owner of a ship under joint shipbuilding is entitled to request the performance of R/G performance.

iii) According to the above resolution, the disposal proceeds of a joint shipbuilding shall be repaid in preference to the financial institution performing the R/G as above, if disposed of before the base date of the settlement of profits and losses. Therefore, the “final claim amount” of the financial institution performing R/G differs depending on when the base date of the settlement of profits and losses is determined.

iv)The plan for the settlement of profits and losses which was examined by the Export-Import Bank of Korea around May 201 at that time shall include that the defendant, the Export-Import Bank of Korea, the interested country fire and the Seoul Guarantee Insurance shall pay the settlement money and shall acquire the bonds from the Korea Trade Insurance Corporation.

v) If R/G, the amount of the settlement of profits and losses under the above resolution, is multiple, the Export-Import Bank of Korea shall determine to which R/G “amount of the settlement of profits and losses” (+) would take over from any R/G, whichever is (-) the amount of the settlement of profits and losses. The Export-Import Bank of Korea, upon notification of the final settlement contribution on October 10, 201, determined that “amount of the settlement of profits and losses” would take over all the amount of claims corresponding to (-) only from (i) the Export-Import Bank of Korea and the interest country fire, the Defendant shall take over the entire amount of claims corresponding to (ii) from the interest country fire.

② The Plaintiff’s claim claims occurred due to the occurrence of insurance accidents set forth in the insurance contract concluded between the Defendant and the Sejong Heavy Industries, and the Defendant’s claim for the transfer of this case, which the Defendant intends to take as the automatic claim for set-off, is arising from the settlement agreement between R/G agencies, including the Defendant. Therefore, it is difficult to deem that there was a legitimate expectation for the Defendant to set-off the Plaintiff’s claim against the Defendant.

4. Conclusion

A. Ultimately, the Defendant is obligated to pay to the Plaintiff the amount of KRW 1,623,674,724 as well as damages for delay calculated by each of the annual rates of 20% as stipulated in the Commercial Act from March 17, 2014 to July 15, 2014, which is the delivery date of a copy of the complaint in this case, from March 6, 2014, the insurance amount that the Defendant is obligated to pay to the Plaintiff pursuant to Article 658 of the Commercial Act, to the Plaintiff, from March 17, 2014, which is the delivery date of a copy of the complaint in this case.

B. If so, the plaintiff's claim is reasonable, and the judgment of the court of first instance is just, and the defendant's appeal is dismissed as it is without merit, but the decision of the court of first instance is delivered with the decision of the court of first instance as it is modified by the reduction of the plaintiff's claim at the court of first instance, and it is so decided as per Disposition 3.

[Attachment Omission]

The judge Lee Jong-won (Presiding Judge)'s meritorious deeds;