The time to determine the secured claim of the right to collateral security which takes precedence over the seizure procedure (=the time of full payment of purchase price)

Article 587(2) of the Civil Procedure Act or Article 605 of the Civil Procedure Act, which is a provision on the effective period for supplementing the amount of claims by failure to submit a statement of claims, is not applicable mutatis mutandis to the procedure for prompt satisfaction of claims by an administrative agency. Since the right to collateral registered prior to the seizure in the procedure for the public sale of the attached property, in lieu of extinction due to the public sale, the right to obtain allocation according to the order of priority, a mortgagee who intends to collect delinquent taxes on the real estate which has priority over the national taxes, shall be deemed as having already been identified by the prior mortgagee. Thus, even if the amount of senior collateral obligation increases at any time after the procedure for disposition on default, if the increased amount of senior collateral obligation is within the maximum amount of the maximum amount of claims of the right to collateral security, it cannot be deemed that the mortgagee suffers unexpected damages, whereas in such case, the prior mortgagee cannot be deemed as having been extinguished when the successful mortgagee applied for a disposition on collateral security within the extent of loss or damage to the safety of the transaction.

Articles 48, 61, and 77 of the National Tax Collection Act; Article 357 of the Civil Act; Article 587(2), 605, and 608 of the Civil Procedure Act

[Plaintiff-Appellant] Plaintiff 1 and 1 other (Law Firm Domin, Attorneys Park Jong-soo et al., Counsel for plaintiff-appellant)

Industrial Bank of Korea (Law Firm Shin & Yang, Attorney Kang Jae-hoon, Counsel for defendant-appellant)

The Director of the Pacific District Office

Seoul High Court Decision 2001Nu3923 delivered on July 20, 2001

The appeal is dismissed. The costs of appeal are assessed against the defendant.

We examine the grounds of appeal.

1. On the first ground for appeal

Article 587(2) of the Civil Procedure Act or Article 605 of the Civil Procedure Act, which is a provision on the effective supplement of the amount of claims due to a failure to submit a statement of claims, is a procedure for the prompt satisfaction of tax claims by an administrative agency, shall not apply mutatis mutandis to the distribution procedure in a disposition on default. The right to collateral security registered prior to seizure in the public sale procedure of the attached property, in lieu of the extinction due to the public sale of the attached property, is naturally entitled to the distribution according to the order of priority (see Supreme Court Decision 98Du10578, Dec. 11, 1998).

Therefore, a taxation right holder who intends to collect delinquent taxes on the real estate which has priority over the national taxes shall be deemed to have been identified by the senior mortgagee as the value of the security equivalent to the maximum debt amount of the senior mortgagee. Thus, even if the amount of the secured debt is increased at any time after the commencement of the procedure for disposition on default, if the increased amount of the secured debt is within the maximum debt amount of the senior mortgagee, then such increased amount of the secured debt cannot be deemed to have suffered unexpected damages. On the other hand, it is reasonable to allow the senior mortgagee to make maximum use of the secured value identified by the senior mortgagee to the extent that it does not harm the safety of transaction, even if he/she did not file a request for auction.

From this point of view, in cases where a junior mortgagee files an application for auction, the claim secured by the senior mortgagee shall be determined when the successful bidder pays the successful bid price in full (see Supreme Court Decision 9Da26085, Sept. 21, 199). In addition, even in cases where a mortgagee takes a disposition on default, the claim secured by the senior mortgagee shall be determined when the collateral expires, i.e., the purchase price is paid in full., when the secured claim by the senior mortgagee is paid in full.

The judgment of the court below to the same purport is just and there is no error in the misapprehension of legal principles as to the time when the secured debt is determined, as otherwise alleged in the ground of appeal.

2. On the second ground for appeal

As long as the secured claim of the instant right to collateral is specified at the time of full payment of purchase price, even if the Plaintiff’s loan, which was made before full payment after the date of seizure, was set up a pledge right to the claim of the Plaintiff’s deposit, and thus secured by the instant right to collateral security.

The judgment of the court below to the same purport is just and there is no error of misconception of facts as alleged in the grounds of appeal.

3. Therefore, the appeal is dismissed, and all costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Jin-hun (Presiding Justice)