[1] Whether the execution deposit under Article 40 (2) 4 of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects or Article 248 (1) of the Civil Execution Act may be made only on the ground of seizure under the disposition on default under the National Tax Collection Act (negative)

[2] Where an unlawful execution deposit is made with respect to the claim for compensation under the Act on the Acquisition of Land, etc. for Public Works and the Compensation therefor, and the distribution procedure is carried out, whether if the mortgagee of the real estate expropriated a demand for distribution in the above distribution procedure, it may be deemed that the right of subrogation has been legitimately exercised (affirmative)

[3] In a case where the execution deposit made with respect to the claim for compensation under the Act on the Acquisition of Land, etc. for Public Works and the Compensation therefor does not meet the requirements, the requirements to correct the defects of the execution deposit and to take effect

[4] In a case where the distribution schedule was prepared to exclude the mortgagee who exercised the right of subrogation before the payment of the dividend after the report of the reason for deposit based on an unlawful execution deposit, whether the said mortgagee may file a lawsuit of demurrer against the distribution (affirmative)

[1] Articles 247, 248(1) and (4) of the Civil Execution Act, Article 40(2)4 of the Act on Acquisition of and Compensation for Land, etc. for Public Works / [2] Articles 342 and 370 of the Civil Act / [3] Articles 2 subparag. 5 and 40(2)4 of the Act on Acquisition of and Compensation for Land, etc. for Public Works / [4] Article 154 of the Civil Execution Act

[1] Supreme Court Decision 2004Da20326 decided Apr. 12, 2007 (Gong2007Sang, 668)

Bankrupt Mutual Savings and Finance Company Co., Ltd. and one other (Law Firm Digital Ballast, Attorney Choi Jae-Gyeong, Counsel for the bankruptcy)

Korea

Seoul High Court Decision 2006Na3945 decided August 11, 2006

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

The grounds of appeal are examined.

1. A project operator cannot make an execution deposit under Article 40(2)4 of the Act on Acquisition of and Compensation for Land, etc. for Public Works Projects (hereinafter “Public Works Compensation Act”) or Article 248(1) of the Civil Execution Act on the sole ground of seizure under a disposition on default under the National Tax Collection Act. Thus, even if a project operator made an execution deposit on the sole ground of seizure due to a disposition on default, and the project operator reported the reason for deposit to a court pursuant to Article 248(4) of the Civil Execution Act, it shall not be deemed that the completion period to demand a distribution under Article 247(1) of the Civil Execution Act arrives due to a report on such reason for deposit and the interruption of demand for distribution thereafter takes effect (see Supreme Court Decision 2004Da20326, Apr. 12, 2007).

Under Articles 370 and 342 of the Civil Act, a mortgagee may exercise the subrogation right by attaching the money to be received by the mortgagee due to the loss of, damage to, or expropriation of the mortgaged property before the payment or delivery thereof. Thus, in a case where an enforcement deposit lacking the requirements as above with respect to the compensation claim under the Public Works Compensation Act is made, and the distribution procedure is carried out based on, the mortgagee of the expropriated real estate subject to a seizure and collection order with regard to the right to claim the payment of deposit before the dividend is paid after the report of the reason for deposit by the project implementer, if the mortgagee of the mortgaged real estate subject to the expropriation demands a distribution in the above distribution procedure

In addition, even if the execution deposit made with respect to compensation claims under the Public Works Compensation Act is not satisfied, if the owner of the expropriated real estate or the creditor related to compensation claims such as related persons under Article 2 subparagraph 5 of the Public Works Compensation Act confirms the defects of the execution deposit, and the distribution has been made according to the order of priority by participating in the distribution procedure conducted on the basis of the execution deposit and the demand for distribution has been made to the creditors related to compensation claims.

Therefore, in a case where the distribution schedule was prepared to exclude the mortgagee who exercised the right of subrogation before the payment of the dividend after a report on the reason of deposit based on the deposit for execution that failed to meet the above requirements, the said mortgagee may file a lawsuit of demurrer against the distribution against the junior creditor who received the dividend amount equivalent to the amount that he could have received.

2. Examining the record in light of the above legal principles, since the project executor of this case made a deposit for execution pursuant to Article 40(2) of the Public Works Compensation Act and Article 248(1) of the Civil Execution Act on the ground that there was a seizure by several recommendations on the claim for compensation for losses for the land of this case, the above execution deposit does not take effect because it does not meet the requirements. Accordingly, even if the project executor of this case made a report of the reason to the court on April 15, 2003 under Article 248(4) of the Civil Execution Act on April 15, 2003 upon the above execution deposit, it does not take effect as the completion period to demand the distribution under Article 247(1) of the Civil Execution Act. Thus, if the plaintiff, who is a mortgagee, was subject to a seizure of the right to demand the payment of the deposit of this case on April 24, 2003, which was subject to a collection order, he shall exercise the right to subrogation in the distribution procedure.

Therefore, although the court below is somewhat different in its purport, it is just in its conclusion to accept part of the plaintiff's claim on the grounds that the completion period to demand a distribution does not have an effect as the completion period to demand a distribution, and that the plaintiff's right is reasonable to relieve in the procedure to raise a distribution, and there is no error of law by misunderstanding legal principles as to the time

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

Justices Yang Sung-tae (Presiding Justice)