[1] In a case where a provisional registration was made to secure a payment obligation, whether the Act on Security of Provisional Registration, etc. applies (negative)

[2] Whether an agreement to complete the principal registration when a provisional registration is made to secure a payment obligation for the purchase price is “a weak meaning of transfer for security” (affirmative in principle) / In a case where a “a weak meaning of transfer for security” was made, whether an obligor has a right to demand the settlement of accounts to a creditor actively (negative), and whether the obligor may claim a cancellation of provisional registration and principal registration even after the expiration of the payment period for the obligation (affirmative)

[1] Since the Provisional Registration Security Act (hereinafter “Provisional Registration Security Act”) applies to a case where a promise is made to transfer other property rights with respect to the return of borrowed objects, the Provisional Registration Security Act does not apply to a case where a provisional registration is made to secure a payment obligation.

[2] In cases where the parties agreed to complete the principal registration based on a provisional registration when they completed a provisional registration as to real estate in order to secure the obligation for the purchase price, and if they fail to repay the obligation, it cannot be deemed that there was an agreement on payment in kind, unless there is a special agreement to specify that the obligation is extinguished if they fail to repay the obligation at the due date and that the ownership of the real estate is attributed to the creditor finally and conclusively. It is reasonable to view that the agreement to register the ownership as a means to exercise the security right

In addition, in a case where “a weak meaning of transfer for security” has been taken place, a creditor may return to a debtor the remaining amount after deducting the principal and interest of a claim, etc. from the value of the real estate at the time when the debt becomes due, acquire ownership of the real estate, dispose of the real estate, and appropriate the proceeds from sale to pay the principal and interest of a claim, etc., and return the remaining amount to the debtor (disposition settlement). However, the debtor does not have the right to actively demand the settlement of accounts to the creditor. However, even after the maturity of the debt, the debtor may at any time repay the debt and claim cancellation of the principal

[1] Article 1 of the Provisional Registration Security Act / [2] Article 372 of the Civil Act / [2]

[1] Supreme Court Decision 200Da47682 Decided January 5, 2001 (Gong2001Sang, 427) Supreme Court Decision 2002Da50484 Decided December 24, 2002 (Gong2003Sang, 444) / [2] Supreme Court Decision 84Da933 Decided December 11, 1984 (Gong1985, 204) Supreme Court Decision 93Da4975 Decided May 24, 1994 (Gong194Ha, 1797) (Gong205Da6140 Decided August 24, 2006)

Plaintiff (Counterclaim Defendant) (Law Firm KCEL, Attorneys Hin-wing et al., Counsel for the plaintiff-appellant)

Defendant (Counterclaim Plaintiff)

Seoul Central District Court Decision 2014Na33047, 33054 Decided September 8, 2015

The part of the judgment of the court below concerning the first main claim and the second main claim is reversed, and that part of the case is remanded to the Panel Division of the Seoul Central District Court. The appeal against the Plaintiff (Counterclaim Defendant)'s main claim 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 as to the main claim

A. Whether a provisional registration is a provisional registration is not formally determined by the type of documents received when indicating or registering the registration record, but by the substance of the transaction and the interpretation of the intent of the parties (see, e.g., Supreme Court Decisions 91Da36932, Feb. 11, 1992; 96Da6974, Jul. 30, 1996; 96Da6974, 6981, Jul. 30, 1996). In addition, the court determines whether the assertion of facts is true in accordance with logical and empirical rules based on the ideology of social justice and equity by free evaluation of evidence, taking into account the overall purport of the pleadings and the result of the examination of evidence (Article 202 of the Civil Procedure Act). The fact that the court below duly confirmed that the judgment of the court below did not go beyond the bounds of the principle of free evaluation of evidence, thereby adversely

B. On May 30, 2004, the lower court: (a) concluded a sales contract with the Defendant (Counterclaim Plaintiff; hereinafter “Defendant”) on the first floor No. 101 of Gwanak-gu in Seoul Special Metropolitan City ( Address 1 omitted) owned by the Plaintiff, setting the purchase price as KRW 150 million; (b) completed the registration of ownership transfer on June 30, 2004; and (c) concluded the provisional registration on June 19, 2004 with the Defendant on the premise that the ownership transfer registration was completed for the purpose of securing the payment of the above purchase price; and (d) concluded a provisional registration on June 19, 2004 with respect to the purchase price No. 202, 301, and 302 under the premise that the ownership transfer registration for the Plaintiff’s claim for provisional registration was completed on July 6, 2006, on the premise that the ownership transfer registration for the Plaintiff’s claim for provisional registration was made based on the provisional registration No. 2601,26, supra.

C. Of the grounds of appeal, the argument disputing the lower court’s fact-finding is merely an error in the selection of evidence and the determination of the value of evidence, which belong to the free evaluation of the fact-finding court. In addition, even when examining the reasoning of the lower judgment in light of the aforementioned legal principles and the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the probative value of disposal documents, interpretation of legal act, the criteria for determining provisional registration of priority preservation and provisional registration of security registration, or by exceeding the bounds

2. As to the ground of appeal on the first preliminary claim

A. Since the Provisional Registration Security Act (hereinafter “Provisional Registration Security Act”) applies to cases where a promise is made to transfer other property rights with respect to the return of borrowed objects, in cases where a provisional registration is made to secure a payment obligation, the Provisional Registration Security Act does not apply (see, e.g., Supreme Court Decisions 2000Da47682, Jan. 5, 2001; 2002Da50484, Dec. 24, 2002).

Meanwhile, in cases where the parties agreed to complete the principal registration based on the provisional registration when they completed a provisional registration as to real estate to secure the obligation for purchase price, and if they fail to repay the above obligation, it cannot be deemed that there was an agreement on payment in kind, unless there is a special agreement to specify that the obligation ceases to exist if they fail to repay the above obligation at the maturity date and that the ownership of real estate belongs to creditors definitely, and it is reasonable to deem that the agreement to register the ownership as a means of the execution of the security right to the above obligation, and the so-called “a weak meaning of transfer for security” as stipulated in the so-called settlement procedure (see, e.g., Supreme Court

In addition, in a case where “a weak meaning of transfer for security” has been taken place, the obligee may return the remaining amount after deducting the principal and interest of the claim, etc. from the value of the real estate upon the expiration of the period for repayment of the obligation to the obligor, acquire the ownership of the real estate, dispose of the real estate, and return the remaining amount to the obligor after appropriating the principal and interest of the claim from the proceeds from the sale of the real estate to the repayment of the principal and interest of the claim, etc. (see, e.g., Supreme Court Decisions 93Da4975, May 24, 1994; 2005Da61140, Aug. 24, 2006).

B. The lower court determined to the following purport with regard to the Plaintiff’s first preliminary complaint seeking the implementation of the principal registration procedure based on the instant provisional registration, which was based on the exercise of security right, based on the grounds indicated in its reasoning.

(1) Since the Defendant’s assertion on the repayment of KRW 163 million on November 6, 2009 is with merit, the Defendant’s claim on the secured debt of this case remains at the rate of 5% per annum from November 7, 2009 to the date of full payment.

Therefore, the plaintiff should pay to the defendant the liquidation amount (the amount calculated by subtracting the amount of the above secured debt from the market price of the real estate in this case) under Article 4(1) of the Provisional Registration Security Act.

(2) In order to implement the principal registration procedure based on the instant provisional registration, two months have passed since the date when the Plaintiff notified the execution of the provisional registration security right, and the period of liquidation under Article 3(1) of the Provisional Registration Security Act has not elapsed. As of the date of closing argument in the lower court, the Plaintiff’s claim for this portion constitutes a lawsuit for future performance.

However, as long as the Defendant cannot be readily concluded that there is no possibility for the Plaintiff to repay the amount of the above secured debt before the period of liquidation expires, it is difficult to view that the Plaintiff is “necessary to claim for interest”. Thus, the Plaintiff’s claim for the first preliminary lawsuit based on provisional registration security right is without merit without further examining.

C. However, examining the reasoning of the lower judgment in light of the aforementioned legal doctrine and the evidence duly admitted, it is difficult to accept the lower judgment on the following grounds.

(1) (A) The provisional registration of this case constitutes a provisional registration for security to secure the Defendant’s obligation to purchase money against the Plaintiff, and thus, the Provisional Registration Security Act does not apply.

According to the reasoning of the judgment below and the records, the defendant is deemed to have agreed to complete the principal registration based on the provisional registration of this case in a case where the above purchase price obligation is not paid by the due date, and this constitutes "a weak meaningful security agreement" and thus, the plaintiff may immediately claim the defendant to implement the principal registration procedure based on the provisional registration of this case in order to enforce the provisional registration security right without following the liquidation procedure prescribed in the Provisional Registration Security Act as long as the secured claim of this case exists, and the defendant cannot refuse to comply with the principal registration procedure on the ground that there is no right to demand the plaintiff to actively settle this case

(B) If so, the court below should properly examine the value of the real estate of this case and the secured claim amount of the provisional registration of this case, and (1) where the value of the real estate of this case falls short of the secured claim amount of the provisional registration of this case, the court below shall accept the principal registration claim based on the completion of settlement of attribution based on the provisional registration of this case. (2) If the value of the real estate of this case exceeds the secured claim amount of the provisional registration of this case, the court below should have accepted the principal registration claim based on the plaintiff's exercise of security right based on the provisional registration of this case. However, the court below erred by misapprehending that the provisional registration of this case applies to the exercise

(2) In addition, according to the reasoning of the lower judgment and the purport of Gap evidence Nos. 4, 12-1, 2, and 13-1 through 3, the following circumstances are revealed.

1) On October 29, 2009, the Defendant, at the Plaintiff’s initiative, sold to Nonparty 1 the said KRW 202 No. 163 million. Nonparty 1 paid to the Plaintiff the purchase price of KRW 110 million on November 6, 2009, and on November 20, 2009, set up a collateral security right of KRW 53 million with respect to the remainder of KRW 53 million.

2) Meanwhile, around July 24, 2003, the Defendant borrowed KRW 100 million from Nonparty 2, who is the Plaintiff’s deceptive act, to secure this, and completed the registration of the establishment of a mortgage on the land of approximately KRW 30 million, the maximum debt amount of KRW 130 million, the mortgagee, Nonparty 2, and the debtor’s Defendant’s neighboring mortgage (hereinafter “the registration of the establishment of a mortgage on the land of this case”). On November 6, 2009, the Plaintiff was cancelled on the day on which he received the above KRW 110 million from Nonparty 1, the registration of the establishment of a mortgage on the land of this case was terminated due to the termination of the registration of the establishment of a mortgage on the land of this case.

(B) The Plaintiff asserted that KRW 1.5 million, out of the money received from Nonparty 1, was paid for the repayment of the above loan to Nonparty 2, and accordingly, the registration of the establishment of the instant site, which is the site of the instant site No. 202, was terminated, and that the said money should not be recognized as the repayment of the secured debt of the instant provisional registration. Such circumstances are consistent with the Plaintiff’s assertion.

(C) If so, the lower court should not easily dismiss the Plaintiff’s assertion, and should have deliberated more on the registration of creation and termination of the instant resort mortgage on the instant site, and on whether the Plaintiff is entitled to receive the above loan on behalf of Nonparty 2, etc., and should have determined with regard to whether the Plaintiff’s assertion can be rejected. However, the lower court concluded that the Plaintiff’s assertion is groundless without properly deliberating on the above circumstances and these circumstances.

D. Therefore, the court below erred in the misapprehension of legal principles as to the scope of application of the Provisional Registration Security Act, which affected the conclusion of the judgment by failing to exhaust all necessary deliberation or by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules. The ground of appeal pointing this out

3. Conclusion

As long as the Plaintiff’s appeal as to the claim of the preliminary lawsuit is accepted, it is unnecessary to examine the remainder of the grounds of appeal as to the claim of the preliminary lawsuit. Thus, the judgment of the court below is omitted. Of the judgment below, the part concerning the claim of the preliminary lawsuit and the claim of the secondary lawsuit are reversed, and the case is remanded to the court below for a new trial and determination. The appeal as to the Plaintiff’s claim of the preliminary lawsuit is dismissed. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim So-young (Presiding Justice)