[1] The standard period for which the holder of a security interest in provisional registration becomes entitled to preferential reimbursement through the exercise of the security right (=the time when the amount assessed is notified of the amount assessed by the creditor), and in a case where the amount of the liquidation amount assessed by the creditor is less than the amount of the liquidation amount duly assessed, whether the notification of the exercise of security

[2] Where a principal registration based on a provisional registration for security has been made in violation of Articles 3 and 4 of the Provisional Registration Security Act, the validity of the principal registration, and where the principal registration has been made pursuant to an invalid special agreement unfavorable to the debtor, the validity of the principal registration (negative)

[1] According to Articles 3 and 4 of the Provisional Registration Security Act, in order for a person who has a provisional registration security right to acquire ownership of secured real estate by exercising a security right under a security contract, he/she shall notify the obligor, etc. of the appraised value of the liquidation amount after the due date of the claim. The appraised value of liquidation amount refers to the amount calculated by subtracting the amount of secured claim (the original, interest, penalty, compensation for delay, execution cost) at the time of the notification from the value of secured real estate at the time of the notification. As such, the scope of secured claim, such as interest or compensation for delay, etc. that the person who has a provisional registration security right would be reimbursed for repayment through the exercise of a security right, shall be determined at the time of notification. A creditor shall be sufficient to notify the appraised value of the liquidation amount which he/she has subjectively assessed,

[2] Where a principal registration based on provisional registration is made in violation of Articles 3 and 4 of the Provisional Registration Security Act, this registration shall be null and void. Even if the principal registration was made by a special agreement between the person holding the provisional registration and the debtor, if the special agreement is null and void as it is unfavorable to the debtor, the principal registration shall be null and void.

[1] Articles 3 and 4 of the Provisional Registration Security Act / [2] Articles 3 and 4 of the Provisional Registration Security Act

[2] Supreme Court Decision 99Da41657 delivered on June 11, 2002 (Gong2002Ha, 1605)

Plaintiff (Appointed Party)

Defendant (Attorney Lee Hong-hoon, Counsel for the defendant-appellant)

Busan District Court Decision 2013Na13235 Decided January 21, 2015

Of the part against the Defendant in the lower judgment, the part ordering payment exceeding KRW 34,579,940 is reversed, and that part of the case is remanded to the Busan District Court Panel Division. The Plaintiff (Appointed Party)’s appeal is dismissed.

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

1. As to the ground of appeal by the Plaintiff (Appointed Party)

The court below dismissed the claim for damages on the ground that the evidence presented by the plaintiff (appointed party) alone constituted the plaintiff (appointed party) and the designated party 2 (hereinafter referred to as the "appointed party") in collusion with the non-party 1, etc., or it is insufficient to recognize that the defendant forged the protocol, etc. prior to the filing of the lawsuit.

The Plaintiff (Appointed Party)’s ground of appeal is nothing more than the purport of disputing the selection of evidence and fact-finding, which belong to the lower court’s full power as a fact-finding court, and it is difficult to view it as a legitimate ground of appeal. Furthermore, even if examining the records in light of the above fact-finding and judgment, the lower court did not err by exceeding

2. As to the Defendant’s ground of appeal

According to the reasoning of the judgment below, the court below acknowledged the following facts: (1) the defendant, on January 29, 2008, set the interest rate of KRW 150 million to the plaintiffs on 50 million per month, purchased the real estate of this case to secure this interest rate of KRW 290 million, and paid KRW 150 million per annum; (2) the provisional registration of this case was completed on September 28, 2008 with the date of completion of sale as the date of completion of sale; (3) the defendant delivered a certificate of personal seal impression and a certified copy of resident registration to the defendant every three months; (4) the defendant completed the registration of ownership transfer as of March 29, 201; and (5) the sale of the real estate of this case to the plaintiffs on March 29, 201; and (4) the defendant completed the registration of ownership transfer as of KRW 300 million on March 29, 201; and (5) the sale on March 29, 2011>

Furthermore, the lower court determined that: (a) the principal registration of this case, which the Defendant completed without going through the procedures prescribed in Articles 3 and 4 of the Provisional Registration Security Act (hereinafter “Provisional Registration Security Act”); and (b) based on the presumption of the real estate registration, was concluded on December 29, 2010 between the Plaintiffs and the Defendant, as the ground for the principal registration of this case, according to the presumption of the real estate registration; and (c) thus, in calculating the liquidation amount to be paid to the Plaintiffs, the interest amount of KRW 115,132,634 out of the principal loan amount of the provisional registration of this case was incurred only for the period from May 20, 2010 to December 29, 2010, from the next day.

However, we cannot accept the above determination by the court below for the following reasons.

According to Articles 3 and 4 of the Provisional Registration Security Act, in order for a person who has a security interest in a provisional registration to acquire ownership of real estate for security purpose by exercising a security right under a security contract, he/she shall notify an obligor, etc. of the appraised value of the liquidation amount after the due date of the claim. The appraised value of liquidation amount refers to the amount calculated by subtracting the amount of the secured claim at the time of the notification from the value of real estate for security purpose at the time of notification (the original, interest, penalty, damages for delay, expenses for execution). As such, the scope of secured claim, such as interest or damages that the person who has a security interest in a provisional registration is preferentially reimbursed through the exercise of a security right, shall be determined at the time of the notification. The creditor shall be sufficient to notify the appraised value of the liquidation amount which he/she has subjectively assessed, and even

Where a principal registration based on a provisional registration for security has been made in violation of each of the above provisions, the principal registration is null and void, and even if the principal registration was made by a special agreement between the person holding the provisional registration and the debtor, if the special agreement is null and void as unfavorable to the debtor, the principal registration is still null and void (see Supreme Court Decision 9Da41657 delivered on June 11, 2002, etc.).

Examining the foregoing legal doctrine in light of the facts acknowledged by the lower court, since the Defendant sent a notice of liquidation amount to the Plaintiffs on February 24, 2012, the amount of the secured claim, including interest or damages for delay, which the Defendant would be preferentially reimbursed through the execution of the instant provisional registration security right, should be determined as at the time of the above notification, and this does not change even if the Defendant erred by including interest exceeding the interest rate under the Interest Limitation Act and notified the Defendant thereof. In addition, the instant registration is null and void because it did not go through the liquidation procedure under the Provisional Registration Security Act, and the sales contract of December 29, 2010, which was the cause thereof, was unfavorable to the obligor, and thus, the secured claim of the instant provisional registration is not extinguished due to such an agreement

Nevertheless, solely for reasons indicated in its holding, the lower court erred by misapprehending the legal doctrine regarding Articles 3 and 4 of the Provisional Registration Security Act, thereby adversely affecting the conclusion of the judgment. The grounds of appeal assigning this error are with merit.

3. Conclusion

Of the part of the lower judgment against the Defendant, the part ordering payment exceeding KRW 34,579,940, which is within the scope of the final appeal is reversed, and that part of the case is remanded to the lower court for further proceedings consistent with this Opinion. The Plaintiff’s final appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

[Attachment] List of Appointeds: Omitted

Justices Lee In-bok (Presiding Justice)