[1] The applicable law to matters concerning the rights and obligations under the above contract in a case where a ship agency with a place of business in Korea concluded a ship agency contract with a foreign shipowner, etc. and did not select the applicable law separately

[2] The legal nature of the agreement under which a ship agency executes a contract on behalf of the shipowner, etc. to pay the obligations arising out of the contract on behalf of the shipowner, etc. instead of its own property, and whether the payment by the ship agency pursuant to the said agreement constitutes a "third party's repayment"

[3] The meaning of "a person who has a legitimate interest in payment" who can make a legal subrogation under Article 481 of the Civil Code, and whether the performance underwriter constitutes "a person who has a legitimate interest in payment" (affirmative)

[4] In a case where Gap corporation operating a ship agency business in Korea concluded a ship agency contract with Eul corporation which is a ship charterer, Eul corporation shall bear expenses such as navigation expenses incurred at the time of entry and departure of ships, and Gap corporation shall preferentially pay expenses to Eul corporation on behalf of Eul corporation, the case holding that the judgment below erred in the misapprehension of legal principle, although Gap corporation may subrogate Eul corporation's claims, such as navigation expenses, due to payment under the above agreement, on behalf of Eul corporation

[1] In a case where a ship agency with a place of business in the Republic of Korea is entrusted with the management of affairs concerning navigation, etc. for a ship of foreign registry under a ship agency contract with a ship owner in a foreign country, if the parties did not separately choose the applicable law concerning the kinds and effects of claims and debts arising from the ship agency contract, repayment and extinguishment by other means, barring any special circumstance, the Korean law where the ship agency's place of business is presumed to have the most closely connected with the contract under the proviso of Article 26 (2) of the Private International Act shall be the applicable law.

[2] The conclusion of a contract necessary for the navigation of a ship on behalf of a shipowner is usually made in the position of a commercial agent under Article 87 of the Commercial Code. However, a ship agent is not a commercial employee of a shipowner, etc., but an independent merchant pursuing profit independently. In a case where a ship agent, etc., made a payment with a shipowner, etc. by contributing his/her own property on behalf of a shipowner, etc., the legal nature of such contract shall be deemed as a performance acceptance agreement, barring special circumstances. Furthermore, barring special circumstances, it is reasonable to deem that a ship agent’s payment by contributing his/her own property under such performance acceptance agreement constitutes a “third party’s payment” under Article 469 of the Civil Code, barring special circumstances where it is deemed that the payment made by the ship

[3] The "person who has a legitimate interest in payment" who can make a legal subrogation under Article 481 of the Civil Code refers to a person who has a legal interest that must be protected by subrogation by performance. However, in the event that the performance underwriter fails to perform the obligation to the creditor under the performance acceptance agreement with the debtor even though he/she agreed to perform the obligation to the creditor under the performance acceptance agreement with the debtor, he/she shall be held liable for the nonperformance to the debtor and shall suffer special legal disadvantage. Thus, the performance underwriter shall have a legitimate interest in the performance

[4] The case holding that the court below erred by misapprehending the legal principles as to navigation expenses, etc. under Article 481 of the Civil Act, in case where Gap corporation operating a ship agency business in Korea agreed to pay navigation expenses, etc. incurred at the time of entry into and departure from a ship to Eul on behalf of Eul corporation, and Gap corporation agreed to pay navigation expenses, etc. preferentially to the creditors on behalf of Eul corporation, the above agreement shall be deemed as performance acceptance agreement, and further, Gap corporation's payment of navigation expenses, etc. by its own contribution under such performance acceptance agreement constitutes the repayment of "person who has a legitimate interest to pay" under Article 481 of the Civil Act, barring any special circumstance, on the contrary, although Gap corporation's payment of navigation expenses, etc. by subrogation can be subrogated

[1] Article 26(2) of the Private International Act / [2] Article 87 of the Commercial Act, Article 469 of the Civil Act / [3] Article 481 of the Civil Act / [4] Article 26(2) of the Private International Act, Article 87 of the Commercial Act, Articles 469 and 481 of the Civil Act

[3] Supreme Court Decision 63Da251 delivered on July 11, 1963 (No. 11-2, 52) Supreme Court Decision 89Meu24834 delivered on April 10, 1990 (Gong190, 1051)

Gaun Shipping Co., Ltd. (Law Firm Samyang, Attorneys Noh Jeong-soo et al., Counsel for the defendant-appellant)

Alging Cambodia (Bae, Kim & Lee LLC, Attorneys Gangnam-gu et al., Counsel for the plaintiff-appellant)

Escopd Raz ELC

Busan District Court Order 2008Ra421 dated February 19, 2009

The order of the court below is reversed, and the case is remanded to Busan District Court Panel Division.

The grounds of reappeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the ground for reappeal concerning legal subrogation of ship agency

A. (1) Where a ship agency with a place of business in Korea is entrusted with the management of affairs concerning navigation, etc. on a ship of foreign registry under a ship agency contract with the owner of foreign registry, if the parties did not separately choose the governing law on the kinds and effects of claims and debts arising from the ship agency contract, repayment and extinguishment by other means, barring any special circumstance, the Korean law where there is a place of business of the ship agency presumed to be the most closely related to the contract under the proviso of Article 26(2) of the Private International Act shall be the governing law of the Republic of Korea.

In addition, it is ordinarily the position of a commercial agent as stipulated in Article 87 of the Commercial Act to conclude a contract necessary for navigation of a ship on behalf of a shipowner, etc.. However, a ship agent is not a commercial employee of a shipowner, etc., but an independent merchant pursuing profit independently, and operates his/her own business under his/her own name. In cases where a ship agent, etc., provided that the ship agent, etc., by contributing the debt incurred from such contract to the ship owner, etc. on behalf of the shipowner, etc., the legal nature of such contract shall be deemed as an performance acceptance agreement unless there are special circumstances. Furthermore, it is reasonable to view that the payment made by the ship agent by contributing its own property under such performance acceptance agreement constitutes a "third party repayment" under Article 469 of the Civil

(2) Meanwhile, “a person who has a legitimate interest in payment” who can make a legal subrogation pursuant to Article 481 of the Civil Act refers to a person who has a legal interest that must be protected by subrogation as a matter of course by performance (see, e.g., Supreme Court Decisions 63Da251, Jul. 11, 1963; 89Meu24834, Apr. 10, 199). However, in a case where the performance underwriter fails to make the performance despite having agreed to perform the obligation to the creditor pursuant to the performance acceptance agreement with the obligor, he shall be held liable for the nonperformance to the obligor and shall be placed in a position to suffer special legal disadvantage. Thus, the performance underwriter shall have a legitimate interest in making the performance.

Therefore, if a ship agency contributes its property to the creditor in accordance with the performance acceptance agreement with the shipowner, etc. and pays the debt incurred from the contract that the ship agency entered into on behalf of the shipowner, etc., the ship agency is naturally subrogated to the claim that the creditor has against the shipowner, etc., unless there are special circumstances.

Supreme Court Decision 77Da1679 Decided May 23, 1978 cited by the court below is related to the case where a ship agency pays a port entry fee, etc. as a shipowner's agent, and it is not appropriate to invoke it differently from this case.

B. Examining the reasoning of the order of the court below and the record, the re-appellant who applied for an auction to enforce a maritime lien on the ship of this case is a corporation operating a ship agency in Korea. The other party who filed an objection against the decision to commence the auction of this case is a foreign corporation which is the owner of the ship of this case. The debtor is a foreign corporation with the domicile at Washington-ju, and the ship of this case is a charterer of the ship of this case. The ship of this case was a mother, and the re-appellant entered into a ship agency contract with the debtor. The ship of this case. The plaintiff agreed to pay the debtor expenses, such as navigation expenses, etc. incurred at the time of entry and departure of the ship of this case, on behalf of the debtor. The re-appellant agreed to pay the debtor first, from February 28, 2006 to July 30, 2006, the plaintiff paid the ship's entry and departure fees, anchorage fees, pilotage fees, pilotage fees, pilotage fees, towing fees, towing fees, lecture fees, etc. of this case on behalf of the debtor.

Examining these facts in light of the legal principles as seen earlier, it is reasonable to view that the re-appellant entered into a contract necessary for entry and departure of the ship of this case on behalf of the debtor pursuant to the ship agency contract concluded with the debtor, and further agreed to perform the obligation to pay navigation expenses of this case, etc. of this case on behalf of the debtor instead of the debtor is a performance acceptance agreement. Furthermore, the re-appellant’s repayment of the obligation by his own contribution to the creditor of port expenses, etc. of this case, such as Busan Port Corporation, etc. under the performance acceptance agreement constitutes the repayment of the "person who has a legitimate interest to pay" under Article 481 of the Civil Act, barring any special circumstance. Thus, the re-appellant shall

Nevertheless, the court below rejected the re-appellant's assertion on the subrogation of maritime lien on the ground that the re-appellant cannot be deemed to have a legal obligation to bear navigation expenses, etc. of this case in relation to Busan Port Corporation, etc., and that the re-appellant's failure to pay navigation expenses, etc. of this case on behalf of the debtor does not constitute a person who has a legitimate interest in paying navigation expenses, etc. of this case. In so determining, the court below erred by misapprehending the legal principles on statutory subrogation as stipulated in Article 481 of the Civil Act, which affected the conclusion of the judgment. The ground for reappeal pointing

2. As to the ground of reappeal on the misapprehension of legal principle as to statutory appropriation of performance

A. In a case where a debtor bears several obligations for the same kind of obligation to the same creditor, if the parties do not designate the obligation to be appropriated for the repayment, the statutory appropriation of obligation is made pursuant to Article 477 of the Civil Act. In particular, according to Article 477 subparag. 4 of the Civil Act, in a case where the order of statutory appropriation of obligation is identical, each obligation shall be appropriated for the repayment of each obligation in proportion to the amount of obligation. Therefore, according to the above proportional appropriation of obligation, if there is an agreement on the designation of appropriation of obligation which is more favorable to himself or the parties, or if there is an agreement on the designation of appropriation of obligation than the legal effect arising from the statutory appropriation of obligation according to the proportional appropriation of obligation, or the claim that the pertinent obligation was fully appropriated for the pertinent obligation in the order of priority in the statutory appropriation of obligation, it shall be liable to assert and prove such fact (see Supreme Court Decisions 83Da1560, Jan. 31, 1984; 93Da4938, Feb. 22,

B. According to the reasoning of the order of the court below and the record, the debtor remitted US dollars to the re-appellant who met the claim amount such as navigation expenses of this case, etc. during the time when the claim for navigation expenses of this case occurred, the re-appellant entered claims such as navigation expenses of this case against the debtor as the secured claim for maritime lien on February 6, 2007 and applied for an auction to exercise the security right on the ship of this case. The debtor on March 16, 2007, and the debtor on the part of the re-appellant sent a notarized letter to the re-appellant stating that "I will not have the ability to pay for the outstanding amount of the plaintiff's credit. I will use this document as evidence that you cannot recover the outstanding amount to receive from the above two companies."

In light of these facts, it is reasonable to view that the Re-Appellant had a claim other than the claim of this case, etc., and even around March 16, 2007, after the Re-Appellant's application for auction of this case, the outstanding amount remains. Thus, it is insufficient to fully pay the Re-Appellant's debt including navigation expenses of this case, etc., which the debtor remitted to the Re-Appellant at the time of the application for auction of this case.

C. On the other hand, according to the above legal principles, the court below should first examine whether the obligor’s obligation owed to the re-appellant, etc. after the application for auction of this case, such as navigation expenses, etc. of this case, and whether the obligor remitted to the re-appellant, was designated, appropriated, or appropriated for the repayment of any claim, by clarifying the specific payment terms and conditions of US$30,000,000 which the obligor remitted to the re-appellant. If it is difficult to recognize the designated appropriation or appropriation for agreement, the court below should make a legal appropriation appropriation in proportion to each claim amount, in cases where the obligor’s obligation owed to the re-appellant after the application for auction of this case was filed, and it is difficult to set the appropriation or appropriation

Nevertheless, without examining the above matters, the court below determined that the re-appellant's preferential appropriation of US$30,00,00 which was remitted from the obligor to other claims, such as navigation expenses of this case, etc., should be deemed to have been paid in full with the money that was remitted. In so doing, the court below erred by misapprehending the legal principles on statutory appropriation of performance and failing to exhaust all necessary deliberations, which affected the conclusion of the judgment. The grounds for re-appeal pointing this out are with merit.

3. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of reappeal, the order 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 Sang-hoon (Presiding Justice)