When the principal and interest of a debt is repaid within a certain period as another property right is transferred by way of the liquidation of existing debts, the interpretation of an agreement to return such property.

Articles 105 and 372 of the Civil Act / [Transfer for Security]

Supreme Court Decision 97Da4005 Decided April 10, 1998 (Gong1998Sang, 1273) Supreme Court Decision 2006Da79254 Decided May 29, 2008

Korean Incorporated Co., Ltd.

Plaintiff 2

UN Tech Construction Co., Ltd. (Attorney Han Han-chul, Counsel for the defendant-appellant)

Seoul Central District Court Decision 201Na37420 decided May 25, 2012

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

The grounds of appeal are examined.

If an agreement was made to redeem the principal and interest of an obligation within a certain period of time as the transfer of other property rights is made by way of arranging existing debts, barring any other special circumstances, it shall be interpreted that a transfer agreement was made between the parties to transfer the property for the purpose of collateral and to pay the principal and interest through the process of settlement by exercise of security rights unless repayment is made within the due date (see, e.g., Supreme Court Decisions 97Da4005, Apr. 10, 1998; 2006Da79254, May 29, 2008).

According to the reasoning of the judgment below and the evidence duly admitted by the court below, on October 5, 2004, the defendant, who is the contractor of ○○ apartment construction, issued and delivered three promissory notes representing 21,086,000,000 in total face value for the payment of unpaid construction costs to the Plaintiff Korea Construction Co., Ltd. (hereinafter "Plaintiff Co., Ltd.") which is the subcontractor of the relevant reinforced concrete construction, and between Plaintiff 2, the representative director of the Plaintiff Co., Ltd. and Plaintiff 2, who is the representative director of the Plaintiff Co., Ltd., prepare and deliver to Plaintiff 2 a written contract for the sale of ○○ apartment 501 (hereinafter "the apartment of this case"), but if the defendant pays the above amount at the due date, the contract of this case is invalid.

Examining these facts in light of the legal principles as seen earlier, it is reasonable to deem that the instant apartment was transferred between the Plaintiff 2 and the Defendant for the purpose of securing the Defendant’s construction cost and the obligation of bills, and the security transfer agreement between the Plaintiff 2 and the Defendant to receive the principal and interest through the settlement process by exercising the security right if the repayment is not made within the due date. Therefore, the Plaintiff 2 may exercise the right to claim for ownership transfer registration pursuant to the above security transfer agreement against the Defendant, and it is not possible to claim for the implementation of the ownership transfer registration procedure

Nevertheless, the court below held that the agreement of this case constitutes a pre-contract for payment in substitutes, and held that the defendant is obligated to implement the registration procedure for ownership transfer on October 5, 2004 with respect to the 5/6 share of the apartment of this case to Plaintiff 2 on the grounds of sale on October 5, 2004. The court below erred in the misapprehension of legal principles as to the interpretation of the agreement of this case, and the ground of appeal pointing

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Yong-deok (Presiding Justice)