[1] Purport of the provision of Article 368 of the Civil Act and whether this provision applies to cases where a joint mortgagee receives preferential dividends at an auction executed by another person (affirmative)

[2] The case holding that a joint mortgagee cannot exercise his right to preferential reimbursement in an auction procedure to exercise a security right to other mortgaged real estate in case where he participated in the distribution procedure for some of the mortgaged real estate and receives the total amount equivalent to the maximum debt amount within the scope of the right to preferential reimbursement

[1] The purpose of Article 368(1) of the Civil Act is to coordinate the interests of the owners of each real estate and the next-order mortgagee and other creditors by distributing the responsibility of each real estate to the extent that it does not infringe upon the right of choice of execution and right of preferential reimbursement in the case of simultaneous dividends distributed simultaneously from the proceeds of the entire proceeds of the object of joint mortgage. Paragraph (2) of the same Article is to protect the next-order mortgagee who suffers disadvantage due to the exercise of the right of choice of the joint mortgagee by stipulating the subrogation system in order to first distribute the proceeds of the auction of a part of the real estate which is the object of joint mortgage as the case of simultaneous dividends. This provision is also applicable to joint collateral mortgages, and it is also applicable to cases where the said provisions are applied to cases of joint collateral mortgages, and to cases where the said provisions are preferentially distributed from the auction executed by

[2] The case holding that a joint mortgagee cannot exercise his right to preferential reimbursement in an auction procedure to exercise a security right to other mortgaged real estate in case where he participated in the distribution procedure for some of the mortgaged real estate and received the total amount equivalent to the maximum debt amount within the scope of preferential reimbursement right

[1] Article 368 of the Civil Act / [2] Articles 342, 357(1), 368, and 370 of the Civil Act

Korea Technology Finance Corporation and one other (Law Firm Jeong, Attorneys Park Jae-chul et al., Counsel for the defendant-appellant)

New Bank Co., Ltd. (Law Firm Gyeong & Yang, Attorneys Shin Young-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2004Na40926 delivered on January 28, 2005

The judgment below is reversed and the case is remanded to Seoul High Court.

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

1. The judgment of the court below

Even if ○○ apartment mortgage No. 306, supra (hereinafter “instant real estate”), the lower court determined that the Defendant’s joint collateral security agreement regarding the instant real estate was 60,000 won for the joint collateral and that the joint collateral security agreement was 60,000 won for each of the instant real estate owned by the third parties, and that the Plaintiffs’ joint collateral security agreement was 36,00,000 won for the joint collateral security agreement that was 60,000 won for the remainder of the secured claim that was 60,000 won for the remainder of the secured claim that was 3,000,000 won for the joint collateral security agreement, the lower court rejected the Defendant’s claim that was 60,000 won for the joint collateral security agreement that was 60,000 won for the remainder of the secured claim that was 60,000 won for the joint collateral security agreement to the Defendant regarding the instant real estate that was 3,000,0000 won for the joint collateral security agreement.

2. Judgment of party members

A. A. A mortgage is a right that a creditor is entitled to preferential repayment from the immovable property provided as a security by an obligor or a third party without transferring possession, and that the mortgagee is entitled to preferential repayment from the proceeds from the sale of the mortgaged property to any other creditor. Such preferential repayment right is not only an exercise by the mortgagee’s own means of executing the mortgage but also can be exercised from the proceeds from the sale of the immovable property or the proceeds from the expropriation compensation in accordance with the priority order, instead of preventing the mortgagee from exercising the right.

On the other hand, the term "mortgage" means a mortgage established by reserving only the maximum amount of the claim to be secured and reserving the determination of the obligation in the future. In this case, the extinction or transfer of the obligation until the debt to be secured is not affected by the mortgage, so in order to exercise the right to preferential payment as the right to preferential payment as the right to collateral, the right to preferential payment as the right to preferential payment is required to be determined, and there is no difference from the mortgage. In this case, the right to preferential payment of the right to preferential payment of the right to collateral is to be repaid in preference to the general creditor or junior secured creditor in accordance with the Civil Act or the Commercial Act and other Acts within the scope of the maximum amount of the debt, and the same applies to the joint collateral, and thus the right to preferential payment of the joint collateral is

Therefore, a person who intends to acquire a subordinate mortgage to a real estate on which a senior priority mortgage has been established shall be deemed to be the common right-holder’s share of the secured value equivalent to the maximum debt amount of the joint collateral mortgage out of the proceeds from the sale of the entire immovable property subject to a senior priority mortgage and take into account only the remainder of the secured value into account. This is a natural result according to the fundamental purpose of the mortgage system under the Civil Act seeking the efficient utilization of assets by allowing a large number of mortgages with regard to the same real property

B. In light of these legal principles, the judgment of the court below is not acceptable in the following respect.

(1) First of all, if the judgment of the court below is based on the determination of the court below, the joint mortgagee may repeatedly distribute the amount equivalent to the maximum debt amount from the proceeds from the realization of each joint collateral security, if he/she does not perform the auction by himself/herself, (in cases of a extremely, the equivalent amount of the maximum debt amount may be repeatedly apportioned as to the proceeds from the realization of each joint collateral security. Accordingly, it would result in an unreasonable result in an unexpected loss to a person who has acquired

(2) Meanwhile, Article 368(1) of the Civil Act provides that "where a mortgage has been created on several immovables as collateral for the same claim, if the proceeds of the auction are to be distributed at the same time, the apportionment of the claim shall be determined in proportion to the proceeds of the auction of each such immovables." Paragraph (2) of the same Article provides that "If the proceeds of the auction of some of the immovables mentioned in the preceding paragraph are to be distributed first, the mortgagee may obtain payment of the whole amount of such claim from the proceeds of the auction of other immovables. In this case, the mortgagee of the auction of the immovables may exercise the right of priority by subrogation to the extent of the amount that the mortgagee can receive payment from other immovables in accordance with the preceding paragraph." Thus, if several immovables which are the joint mortgage are the object of the joint mortgage are auction at the same time, the joint mortgagee shall have a significant interest in the auction of each immovable, but Article 368(1) of the Civil Act provides that if the proceeds of the auction of each immovable are to be distributed to the joint mortgagee at the same time as the proceeds of the auction are not so-called joint mortgagee's interest.

Article 368 of the Civil Act applies to the case of joint collateral mortgages, and also applies to the case where a joint collateral mortgagee executes an auction by himself/herself, as well as to the case where a joint collateral mortgagee receives dividends from an auction executed by another person. However, the purport of Article 368 of the Civil Act is to be excluded in that the joint collateral mortgagee receives dividends equivalent to the maximum debt amount from the auction of a part of the immovable property, which is the object of joint collateral mortgages executed by another person, for the reason that it does not have been executed even though he/she was paid the full amount out of the maximum debt amount, from the auction of a part of the immovable property, which is the object of joint collateral mortgages executed by the other person, the joint collateral mortgagee is entitled to receive dividends within the scope of the remaining secured debt preferentially to the general creditor

(3) In addition, if the object of the joint collateral security is owned by the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the property of the

C. Thus, even if the defendant inevitably received dividends by participating in the distribution procedure for the expropriation compensation in accordance with the legal principle of subrogation as the land which is the object of joint collateral was expropriated, the defendant who received the total amount equivalent to the maximum debt amount within the scope of his right to preferential reimbursement in the distribution procedure cannot assert again the right to preferential reimbursement as a joint mortgagee in the voluntary auction procedure for the real estate of this case. Therefore, the court below erred by misapprehending the legal principle on the right to preferential reimbursement of joint collateral, which affected the conclusion of the judgment. The plaintiffs' appeal pointing this out is with merit.

3. 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 Kim Nung-hwan (Presiding Justice)