[1] The meaning of "when the obligation becomes due" under Article 492 (1) of the Civil Code

[2] The method of compensating for a set-off in cases where interest or delay damages on a set-off occurs on a set-off claim or on a set-off claim before the set-off point

[3] In a case where Gap, after receiving the attachment and assignment order against Eul's claim for the refund of the purchase price of land against Byung, sought the payment of the full amount, etc. against Byung, Byung's claim for return of profits from use against Eul as an automatic claim, the case holding that the court below erred by misapprehending the legal principles in the judgment below which offsets the principal of the purchase price refund claim against Eul by the method of deducting the total amount of the principal and interest of the purchase price refund claim from the total amount of the automatic claim from the principal and interest of the purchase price refund

[1] Where both parties assume an obligation for the same kind of purpose, if both parties are due, each obligor may set off against an equal amount (Article 492(1) of the Civil Act). Article 492(1) of the Civil Act refers to the time when the obligee is entitled to claim performance to the obligor, and it does not refer to the time when the obligor becomes liable for delay of performance.

[2] The declaration of intention of set-off is deemed to have been extinguished as to an equal amount when each obligation can be set off (Article 493(2) of the Civil Act). In the event of declaration of intention of set-off, the obligation is retroactively extinguished as to an equal amount at the time of set-off, and thus, the calculation of the difference in both claims arising from set-off or appropriation of set-off should be based on the time of set-off. Therefore, where interest or delay damages have occurred on the passive claim before that time, the calculation of the difference in both claims or appropriation of set-off should be based on the time of set-off. Therefore, where interest or delay damages have been incurred on the passive claim

[3] The case holding that the judgment below erred in the misapprehension of legal principles, such as a set-off of the total amount of claims for refund of the purchase price, in case where Gap sought a set-off claim against Byung after Gap received an order of seizure and assignment of the claim for refund of the purchase price of land Eul against Byung, Byung sought payment of the entire amount of claims for refund of Eul, Byung's claims for refund of the purchase price, which were passive claims, occurred from the date of cancellation of the sale and purchase contract, and Byung's automatic claims occurred in order from the time of cancellation of the sale and purchase contract, and both claims are set-off when the automatic claims are all due, and they are set-off when both claims are due, the interest or delay damages incurred as of the set-off date shall be extinguished, and the principal shall be extinguished if the principal of the passive claims is partially extinguished, and without any objection as to the remaining principal, there was no objection as stipulated in Article 548 (2) of the Civil Act from the day following the set-off date, even if the principal of the claim for refund of the purchase price becomes extinct as of the principal.

[1] Article 492(1) of the Civil Act / [2] Articles 479(1), 492, 493, and 499 of the Civil Act / [3] Articles 479(1), 492, 493, and 499 of the Civil Act

[1] Supreme Court Decision 81Meu10 decided Dec. 22, 1981 (Gong1982, 214) / [2] Supreme Court Decision 2005Da8125 decided Jul. 8, 2005 (Gong2005Ha, 1303)

Plaintiff

Defendant

Suwon District Court Decision 2017Na5830 decided March 29, 2018

The judgment of the court below is reversed, and the case is remanded to the Gu Government District Court.

The grounds of appeal are examined.

1. Factual basis

According to the reasoning of the lower judgment, the following facts are revealed.

A. On June 9, 2001, the Defendant purchased the instant land from the Korea Agricultural and Rural Infrastructure Corporation (hereinafter “Korea Agricultural and Rural Community Corporation”) for KRW 140,00,000,000 in total, and paid the amount calculated by adding interest of KRW 4.5% per annum to the sales amount from January 2002 to 2021.

On July 6, 2001, the Defendant registered the transfer of ownership with respect to the instant land, and registered the establishment of a neighboring mortgage, which amounts to 176,400,000 of the maximum debt amount, in order to secure the obligation to pay the purchase-price.

B. On April 16, 2002, the Nonparty concluded the instant sales contract with the Defendant to purchase the instant land in KRW 146,000,000. The Nonparty paid the Defendant the sum of the down payment and the intermediate payment to the Defendant on the date of the contract, and received the instant land, and instead paid the remainder of KRW 120,000,000 on an annual installment payment to the Korea Rural Community Corporation, the Nonparty decided to register the ownership after July 9, 2008.

On June 22, 2005, the Nonparty filed a provisional registration of the right to claim the transfer of ownership on the instant land due to the pre-sale agreement.

C. The Nonparty paid the installment from 2003 to 2008, and the Korea Rural Community Corporation applied for an auction for the enforcement of the right to collateral security on the instant land around September 2009. On December 21, 2009, the Defendant repaid to the Korea Rural Community Corporation KRW 91,810,060, the total amount of the installment remaining after adding the principal, interest and overdue interest to the principal, interest and overdue interest. The Korea Rural Community Corporation withdrawn the application for auction.

D. The Nonparty filed a lawsuit against the Defendant seeking the implementation of the procedure for ownership transfer registration based on the above provisional registration. On January 21, 2011, the appellate court rendered a judgment dismissing the Nonparty’s claim on the grounds that the instant sales contract was rescinded around June 9, 2009 due to the Nonparty’s delinquency in payment of the installment (or the District Court Decision 2009Na14143), and the said judgment was dismissed and finalized on May 13, 201 (Supreme Court Decision 201Da18895).

E. On the basis of the authentic deed of a monetary loan agreement, the Plaintiff was issued an order for seizure and assignment of claims two times as follows. ① On August 23, 2013, the Plaintiff received an order for seizure and assignment of claims against the Nonparty’s Defendant regarding KRW 50,023,140 among the claims for refund of the purchase price, and the said order was served on the Defendant on August 27, 2013, and became final and conclusive on September 17, 2013. ② On November 11, 2013, the Plaintiff received an order for seizure and assignment of claims against KRW 68,308,431 among the claims for return of the purchase price, and the said order was served on the Defendant on November 13, 2013, and became final and conclusive on November 26, 2013.

F. The Nonparty primarily filed a lawsuit against the Defendant seeking payment of KRW 216,693,360 as a result of the implementation of the procedure for the registration of ownership transfer based on the instant sales contract and the restitution to the original state following the cancellation of the instant sales contract. On January 28, 2015, the first instance court dismissed all Nonparty’s claims. ① The instant sales contract was rescinded around June 9, 2009; ② the Nonparty had a claim for refund of KRW 80,620,000 for the purchase price already paid by the Nonparty to the Defendant; ② the Nonparty had a claim for reimbursement of KRW 80,620,000 for the ancillary claim, but the said claim was entirely entirely paid to the Plaintiff (or Seoul High Court Decision 2015Na7987). The instant judgment was dismissed and final and conclusive (Supreme Court Decision 2016Da63477).

2. Whether there is a misapprehension of legal principles as to the retroactive effect of offset (ground of appeal No. 1)

A. In a case where both parties assume an obligation for the same kind of purpose, if both parties are due, each obligor may set off against an equal amount (Article 492(1) of the Civil Act). Article 492(1) of the Civil Act means that the time when the obligee is entitled to claim the performance of the obligor, and the time when the obligor becomes liable for the performance of the obligation (see Supreme Court Decision 81Meu10, Dec. 22, 1981).

A declaration of intention of offset shall be deemed to have expired with respect to an equal amount when each obligation can be offset (Article 493(2) of the Civil Act). In a case where a declaration of intention of offset is made, the obligation becomes extinct with respect to an equal amount retroactively from the time of offset. As such, the calculation of the difference in both claims arising from offset or appropriation of offset shall be based on the time of offset. Therefore, in a case where interest or delay damages on the passive claim have occurred prior to that time, the calculation of the difference in both claims or appropriation of offset shall be based on the time of offset. Therefore, in a case where interest or delay damages on the passive claim have occurred prior to that time, after calculating the interest or delay damages on the passive claim up to that time of offset, the original shall be retired with the automatic claim first by retiring the interest or

B. The lower court determined as follows.

Since the sales contract of this case was cancelled due to the non-party's default, the non-party is entitled to receive a total of KRW 80,620,000 for the purchase price already paid from the defendant to its original state and interest calculated at the rate of 5% per annum from the date of payment pursuant to Article 548 (2) of the Civil Act.

Therefore, barring any special circumstance, the Defendant is obligated to pay damages for delay from May 1, 2015 to the Plaintiff, a total of KRW 123,571,224 out of the total amount of principal and interest of the claim for refund of the purchase price incurred until April 30, 2015, and KRW 118,331,571 of the total amount of principal and interest of the claim for refund of the purchase price incurred until April 30, 2015.

The Defendant expressed his intent to offset against the amount equal to that of the claim for refund of the purchase price by using multiple claims against the Nonparty or the Plaintiff as the automatic claim. The Defendant may set off part of the claim, namely, the claim for return of profits from use, the claim for damages incurred by the Defendant in order to withdraw auction as requested by the Korea Rural Community Corporation, the claim for damages arising from the Defendant’s temporary payment of the purchase price due to the Nonparty’s nonperformance of obligation, the claim for litigation costs against the Nonparty, the amount of litigation costs against the Plaintiff, and the amount

As of April 30, 2015, when the duplicate of the application for the instant payment order was served on the Defendant, KRW 118,331,571 of the Plaintiff’s entire claim and the total amount of the Defendant’s automatic claim set-off in the order of principal and interest, the Plaintiff’s entire claim remains KRW 43,541,656 of the principal.

C. However, the lower judgment is difficult to accept for the following reasons.

The Plaintiff’s claim for the refund of the purchase price, which is a passive claim, accrued on June 9, 2009, when the instant sales contract was rescinded, and the Defendant’s automatic claim occurred in sequence from the time when the sales contract was rescinded. Since both claims are set-off when both claims occur, the interest or delay damages incurred on the basis of the set-off date shall be extinguished, and the principal shall be extinguished if any balance exists. If the principal of the passive claim is partially extinguished, there is no interest as stipulated in Article 548(2) of the Civil Act from the day immediately following the date of set-off, and only the remainder of the principal shall be raised.

The court below shall examine the fulfillment period of each automatic claim and calculate the principal, interest, or delay damages of the passive claim as of the set-off date, and terminate it in the order of the interest, delay damages, and principal of the passive claim as the automatic claim.

Nevertheless, the lower court, without examining whether the principal of the claim for refund of the purchase price, which is a set-off date, ceases to exist, and set off the total amount of the claims on the premise that the interest calculated at the rate of 5% per annum from the date of payment pursuant to Article 548(2) of the Civil Act to April 30, 2015, the duplicate of the application for the instant payment order, which was served on the Defendant, continues to occur from the date of payment to April 30, 201

The judgment of the court below is erroneous in the misapprehension of legal principles as to the retroactive effect of a set-off and failing to exhaust all necessary deliberations, which affected the conclusion of the judgment.

3. Conclusion

The judgment of the court below is reversed without examining the remaining grounds of appeal, 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 Dong-won (Presiding Justice)