[1] Whether the litigation requirements, such as the interest in confirmation, are subject to ex officio investigation by the court (affirmative), and whether it should be considered in the final appeal in a case where the litigation requirements are not satisfied or the defect is cured after the closing of arguments by the court

[2] In a case where a right of retention was claimed in an auction procedure but owned real estate or collateral was sold, whether there is a legal interest between the owner of the right of retention and the mortgagee who extinguished the right of retention and the right of collateral seeking confirmation of non-existence

[3] In a case where a lien is not asserted in an auction procedure, whether there is a legal interest for a mortgagee-mortgage to seek confirmation of the non-existence of a lien (affirmative), and whether there is a legal interest for an owner, other than a debtor, to seek confirmation of the non-existence of a

[1] A lawsuit for confirmation is permissible when there is infinite and danger in the Plaintiff’s rights or legal status, and obtaining a judgment of confirmation is the most effective and appropriate means of resolution of the dispute. Furthermore, even if the parties do not assert as the matter of ex officio investigation, the court should investigate and determine ex officio the litigation requirements, and if the litigation requirements are not satisfied after the closing of argument at the fact-finding court or the defect thereof is cured, the court of final appeal

[2] Considering that there exists a legal interest in seeking confirmation of the non-existence of each right of retention against a mortgagee as to collateral in an auction procedure, there is a ground that a lower price is offered at a lower price due to the assertion of a right of retention and thus the amount of dividend of the mortgagee is at a risk of decrease. This also applies where the owner seeks confirmation of the non-existence of a right of retention in an auction procedure regarding the real estate owned by him/her. In cases where the ownership of the real estate or collateral owned by him/her was sold during the auction procedure, but the ownership of the real estate

[3] In a case where the right of retention is not asserted in the auction procedure, even if the right of retention was extinguished by the sale of collateral and the transfer of ownership, the creditor may be forced to be held liable for warranty pursuant to Articles 575 and 578(1) and (2) of the Civil Act from the buyer who was unaware of the existence of the right of retention, and such risk is caused by unstable legal status of the creditor. As such, the creditor of the right of collateral as the creditor of the right of retention has a legal interest to seek confirmation of the non-existence of the right of retention in order to eliminate the above apprehension. On the other hand, the owner who is not the debtor is not liable for warranty

[1] Article 250 of the Civil Procedure Act / [2] Article 320 of the Civil Act, Article 250 of the Civil Procedure Act / [3] Articles 320, 575, and 578 of the Civil Act, Article 250 of the Civil Procedure Act

[1] Supreme Court Decision 2007Da69407 Decided December 14, 2007, Supreme Court Decision 2016Da231198 Decided September 28, 2018 / [2] Supreme Court Decision 2004Da32848 Decided September 23, 2004, Supreme Court Decision 2013Da99409 Decided March 10, 2016 (Gong2016Sang, 566)

Won Heavy Industries et al. (Attorneys Lee Young-chul et al., Counsel for the plaintiff-appellant)

Defendant (Guwon Law Firm, Attorneys Y Young-gu et al., Counsel for the defendant-appellant)

Daejeon High Court (Cheongju) Decision 2019Na1207 decided May 21, 2019

The judgment of the court below is reversed, and the case is remanded to Daejeon High Court.

The grounds of appeal are examined.

1. Judgment on ground of appeal No. 1

A. A. A lawsuit for confirmation is permissible when the Plaintiff’s right or legal status is in danger and the obtaining of a judgment of confirmation is the most effective and appropriate means of resolution of the dispute (see, e.g., Supreme Court Decision 2007Da69407, Dec. 14, 2007). Moreover, even if the parties do not assert the litigation requirements, such as the benefits of confirmation, the court shall investigate and determine ex officio and determine the litigation requirements. In a case where the litigation requirements are not satisfied or the defects are cured after the closing of argument at the trial court, the court shall also consider them in the final appeal (see Supreme Court Decision 2016Da231198, Sept. 28, 2018).

B. The record reveals the following facts.

1) As the owner of each of the instant real estate, the Plaintiff Primary Heavy Industries Co., Ltd. (hereinafter “Plaintiff Primary Heavy Industries”) sought confirmation of the non-existence of a lien against the Defendant who claimed a lien on each of the instant real estate as the mortgagee on each of the instant real estate.

2) On April 10, 2019, before the closing of the argument in the lower judgment, the promotion of each of the instant real estate was made to the debtor on April 10, 2019, and the registration of creation of a new mortgage by the Plaintiff Dong Heavy Industries was commenced by means of a collateral security (hereinafter “instant auction procedure”) with the Plaintiff Dong Heavy Industries as the creditor, and the development of the limited company (hereinafter “instant auction procedure”) acquired the ownership of each of the instant real estate in the auction procedure. The development of the limited company in the above auction procedure acquired the ownership of each of the instant real estate, and the registration of transfer of ownership in the name of supplementary development was made on April 11, 2019, and at the same time, the registration

3) On May 13, 2019, after the closing of argument in the lower judgment, Plaintiff Han Heavy Industries filed an application for resumption of argument on the ground that the development of the supplementary industry in the instant auction procedure acquired ownership in full and in full. The development of the supplementary industry applied for the resumption of argument on the ground that he succeeded to the right to the instant real estate on the 15th day of the same month.

C. Considering that there exists a legal interest in seeking confirmation of the non-existence of each right of retention on collateral to a mortgagee, the right of retention has been asserted in an auction procedure and bid at a lower price, thereby causing a risk of a decrease in the amount of dividends of the mortgagee’s right of retention (see, e.g., Supreme Court Decisions 2013Da99409, Mar. 10, 2016; 2004Da32848, Sept. 23, 2004). The same applies to a case where the owner seeks confirmation of the non-existence of a right of retention on the real estate owned by the mortgagee at an auction procedure. If the ownership was lost or extinguished due to the sale of the real estate or collateral owned by the right of retention, the owner and mortgagee have no legal interest in seeking confirmation of the non-existence of the right of retention.

Meanwhile, Article 575 of the Civil Act provides, “If the object of the sale becomes the object of the right of retention and the buyer was unaware thereof, the buyer may rescind the contract only if it is impossible for the buyer to achieve the objective of the contract. In other cases, the buyer may only claim damages.” Articles 578(1) and 578(2) of the same Act provides, “(i) In the case of an auction, the successful bidder may demand the debtor to cancel the contract or reduce the price in accordance with the preceding eight Articles.” (ii) In the case of paragraph (1), if the debtor has no capacity, the successful bidder may demand the debtor to return all or part of the price to the creditors who received the payment. If the right of retention is not asserted in the auction procedure, even if the right of retention was extinguished due to the sale of collateral and transfer of ownership, the creditor may be subject to the warranty liability under each of the above provisions from the buyer who was unaware of the existence of the right of retention, and such risks are unstable in legal status of the creditor. Therefore, the mortgagee, who is the creditor, has no legal interest in seeking confirmation of the existence of the right.

D. Therefore, the lower court should have ex officio examined whether the Defendant asserted or reported the right of retention in the instant auction procedure, regardless of the party’s assertion, and whether the Plaintiff Primary Industries succeeded to the secured obligation of the instant right of collateral, and should have determined whether there is a benefit in confirmation of the absence of the right of retention by the Plaintiffs. Nevertheless, the lower court erred by misapprehending the legal doctrine on the benefit of confirmation, which is the litigation requirement of confirmation, and failing to exhaust all necessary deliberations, thereby adversely affecting the conclusion of the judgment.

2. Conclusion

Therefore, without further proceeding to decide on 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

Justices Lee Ki-taik (Presiding Justice)