Before the date of a mutual savings bank (Law Firm White General Law Office, Attorney Seo-ju, Counsel for defendant-appellant)

National Agricultural Cooperative Federation (Attorney Jin-hun, Counsel for defendant-appellant)

April 24, 2009

Jeonju District Court Decision 2008Gahap18 Decided October 31, 2008

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the court of first instance is revoked. Among the distribution schedule prepared by the above court on December 28, 2007 with respect to the case of an application for auction of real estate (refus) in the Jeonju District Court's 2006 Tasan District Court's 2029, 2007 Mota, 1683 (refusal), 138,100,742 won of the amount of dividends against the plaintiff shall be 804,73,212 won, and 3,41,963,904 won of the amount of dividends against the defendant shall be corrected to 2,775,31,434 won, respectively.

1. Basic facts and relevant regulations;

A. The non-party 1 corporation (the non-party corporation of the judgment) granted a loan of KRW 20,336,00,000 from the defendant (the "Fund loan" hereinafter) to the defendant as a collateral against the loan of KRW 41,000 from the National Housing Fund (the maximum debt amount of KRW 26,436,80,000 as to the above site was set up on March 29, 2005, and on July 21, 2005, the apartment of this case (the 496 households) was completed with respect to the apartment of this case on July 21, 2005, the maximum debt amount of KRW 26,436,80,000 as to the apartment of this case (the "the apartment of this case").

B. Upon receiving a request from Nonparty 1 Co., Ltd. to cancel the first right to collateral security established in the 51 household unit among the apartment buildings of this case, the Defendant cancelled it from July 29, 2005 to September 9, 2005.

C. On September 12, 2005, the non-party 1 corporation obtained a loan of KRW 2 billion for general funds from the defendant (hereinafter “general loan”), and created a joint collateral for 298 households among the apartment of this case (hereinafter “second-class joint collateral security”) with respect to the defendant on September 12, 2005. On the same day, the non-party 1 corporation borrowed KRW 8.6 billion from the plaintiff as a collateral, and created a joint collateral for 280 households among the apartment of this case to the plaintiff.

D. The Defendant again requested for the cancellation of the right to collateral security against 20 households in addition to the non-party 1 corporation's 20 households from September 13, 2005 to October 28, 2005, cancelled the first priority right established with 20 households among the apartment of this case [the household in which the Defendant's right to collateral security was cancelled before the Plaintiff acquired the right to collateral security] and 51 households whose right to collateral security was cancelled (the household in which the Defendant's right to collateral security was cancelled before the acquisition of the right to collateral security) and 20 households (the household in which the Plaintiff acquired the right to collateral security).

E. However, as the non-party 1 corporation did not pay each of the above principal and interest interest of the corporation, the defendant applied for the auction procedure against the non-party 1 corporation among the apartment complexes of this case with the Jeonju District Court around December 2006, 2006, 2006, 2029, 2029, 2007, 1683, 2006, 2006, 20465, 2007, 1690, 2007, 2006, 20526, 2007, 2007, 1898, 40 households with 60 households, 206, 206, 206, 206, 1874, 207, 207, and 50 households with 70 households, 2006, 2083, 281, 2083, etc.

F. In each of the above auction procedures, the Defendant reported the claim of KRW 18,955,820,853 (principal principal 16,420,794,000, interest 2,535,026,853) as the principal and interest of the Fund loan and general loan, and the Plaintiff reported the claim of KRW 8,918,34,781 (principal principal 6,969,39,778, interest 1,948,945,003) as the total principal and interest of the loan and general loan. The auction court completed the distribution of the remaining amount to the Defendant, a senior mortgagee, and the Defendant, a senior mortgagee, based on the above claim amount, distributed dividends to the Plaintiff based on the above claim amount of the Plaintiff’s junior mortgagee based on the lower claim amount. The case related to the distribution schedule is as follows:

① Defendants 3,441, 963, 904 (distribution rate of 18.16%) and 138,100,742 won

② Defendants 3,413,067,505 (18.01%) and 136,941,342 won

③ Defendants 2,997, 660, 189 (Duals) (15.81%) and 132,274,096 won, 206, 2006, 2007, 1896

④ Defendants 4,543, 036, 337 (Amounting to duplicate) and 182,278,696 won

⑤ Defendant 4,560,092,916 (distribution ratio 24.06%) and Plaintiff 263,43,259 won, 263,259 won

G. Meanwhile, the Fund Operation and Management Regulations related to the instant Fund loan (hereinafter “Fund Management Regulations”) are as follows.

Article 21 (Interest Rate on Loan and Method of Repayment)

(2) Public housing funds in units and subsequent housing funds in units, three years for multi-household housing funds, and two years for multi-household housing funds, shall be loaned to a project undertaker by the method of lump-sum repayment in the future of the occupants of the relevant housing or the employees who purchase the relevant housing, and the initial date of the period of loans for occupants and employees shall apply from the date of substitution

(5) Where the funds borrowed pursuant to paragraph (2) have not been refunded to occupants or employees within the lending period, the project undertaker shall repay the loan, and where the occupants or employees apply for the loan following the purchase of the relevant house after the repayment of the loan, the re-loan may be made within the scope of the initial lending terms and conditions.

Article 27 (Acquisition, etc. of Security)

(1) In the event that the president of the Korea Housing and Commercial Bank loans the National Housing Construction Fund, the Korea Housing and Commercial Bank shall establish a first priority mortgage on the site for the construction of the housing and additionally establish a first priority mortgage on the building if the building is completed.

Article 28 (Repayment, etc. of Loans)

(1) Any person who has obtained a loan of the National Housing Construction Fund (including occupants) may repay all or part of the loan amount by dividing it into each household, or redeem it.

Article 35 (Cancellation, etc. of Approval of Financing)

(2) Where a private business entity or a person who has received a fund loan falls under any of the following subparagraphs, the president of the Korea Housing and Commercial Bank may recover the loan at once:

4. Where he has used the loan for other purposes than the housing construction fund.

Article 36 (Exchange of Funds)

(1) When the President of the Korea Housing and Commercial Bank preserves or registers the transfer of ownership of a national housing in the future of the occupants, he/she shall take necessary measures for securing a claim for a loan by creating a first-class collateral security right on the site and building, and shall dispose of the loan to the occupants.

[Reasons for Recognition] The facts without dispute, Gap evidence 1-5, Gap evidence 2-73, Eul evidence 1-1, Eul evidence 1, the purport of the whole pleadings

2. The plaintiff's assertion

A. Part of the Fund loan

In each auction procedure above, the plaintiff asserts that the amount of the fund loans corresponding to the 71 household (or 20 household) in this case should be excluded from the amount of the fund loans reported by the defendant, and based on this, the following points are added.

(1) As to the fact that the act constitutes a new loan or the waiver of a claim

① According to Article 40 of the Housing Act, Article 44 of the Enforcement Decree of the Housing Act, Articles 27(1), 28(1) and 36(1) of the Fund Management Rules, etc., the Defendant, upon the sale of the apartment complex in this case, shall receive 41 million won from the purchaser of the apartment complex, divided by household units, as the obligor, and after the establishment of the right to collateral security with the Defendant as the obligee, shall recover the loans of the household units from the non-party 1 corporation and cancel the right to collateral security of the household. The Defendant, in fact, entered into an agreement on the management of the Fund with the non-party 1 corporation to recover the loans of this case to the non-party 1 corporation and the non-party 1 corporation to whom the purchase price paid to the non-party 1 corporation cannot be arbitrarily withdrawn and used. However, the Defendant, despite the fact that the non-party 1 corporation purchased the loans of this case and the non-party 1 corporation did not actually collect the loans of this case from the Fund.

(2) As to the invalidity of a fund loan and its diversion

① The National Housing Fund that was loaned by Nonparty 1 corporation from the Defendant as “after-sale funds” can not be used for any purpose other than those prescribed in Article 63(1)1 of the Housing Act (national housing construction), and if the Fund was used for any purpose other than its original purpose, it violates the above legal provisions, which are mandatory provisions. ② However, since the sale price corresponding to the fund loan of the instant 71 household was deposited in the joint management account of the Defendant and Nonparty 1 corporation, the Defendant was required to appropriate it for the recovery of the fund loan, so the exclusive agreement on the sale price is null and void in violation of the above provision and the Housing Act management regulations, since it was agreed to use it for another purpose at the request of Nonparty 1 corporation. ③ In addition, Nonparty 1 used part of the fund loan received from the Defendant as the acquisition fund of another apartment site, and as long as it was known that it was useful, the Defendant should have taken measures to recover the fund loan already paid to Nonparty 1 corporation after cancelling the approval of the fund loan, the Defendant’s additional loan management regulations and the Housing Act should be null and void.

(3) As to the defendant's breach of trust or violation of social order

The defendant's loan to the non-party 1 corporation was scheduled to be refunded as part payments to the occupants, and through this procedure, the loan to the non-party 1 corporation was repaid automatically. The defendant did not take a refund procedure with respect to the 71 household of this case and did not allow the buyers to receive a new loan from the defendant and pay the part payments, and the paid amount also did not use it for the collection of the fund loan and let the non-party 1 corporation use it for other purposes. This series of acts by the defendant are not only the act of breach of trust that causes damage to the interests of the truster of the fund (the Ministry of Construction and Transportation as the State or the person in charge of management) in collusion with the non-party 1 corporation, but also it is null and void because it is contrary to social order. Accordingly, the fund loan to the non-party 71 household of this case should be excluded from the amount of credit of the defendant.

(4) As to the need to protect subordinate mortgagees

① The Plaintiff acquired subordinated mortgage by evaluating the value of each household’s collateral by reliance on the Defendant’s joint mortgagee’s repayment or cancellation of the repayment as originally scheduled in connection with the loan. The Defendant violated the Plaintiff’s interest in trust that it would conduct business in a normal way by committing an act contrary to the Fund Management Regulations or the practice on the recovery of loans from the Fund. ② In addition, according to the provisions of Article 368(2) of the Civil Act, where part of the real estate which is jointly mortgaged is distributed first, the mortgagee may be paid the entire amount of the claim, but the mortgagee may exercise the right of preference on behalf of the Plaintiff to the extent of the amount that the mortgagee would have received the payment from the auction of other real estate if the mortgagee distributes the real estate at the same time. Accordingly, the mortgagee’s right of subrogation should be protected as a kind of expectation even before the joint mortgagee is paid. Therefore, since the joint mortgagee was paid most of the secured debt after the joint mortgagee’s repayment, the mortgagee’s right of subrogation cannot be seen as being infringed upon by the said mortgagee’s right of subrogation of the real estate without the mortgagee’s consent.

B. Ordinary loan portion

(1) As to the collection of the secured claim

The defendant extended general funds to the non-party 1 corporation, and acquired the second priority right on the 298 generation out of the apartment of this case. Among them, the 67 generation claims were recovered, and the 2nd generation voluntarily withdrawn the auction. Thus, the defendant should have reported only 1,603,000,000 won with general loans corresponding to the above 229 generation out of the above 29 generation of apartment of this case except the above 69 generation (household 7,00,000) among the above 298 generation of this case. Thus, since the defendant reported the difference of 1,89,000,000 won x 229 generation, it should be excluded from the defendant's claims amounting to 290,000 won.

(2) As to the need to protect subordinate mortgagees

For the same reason as seen earlier, the Plaintiff cannot set up against the Plaintiff with the cancellation of the Defendant’s right to collateral security against the 67 households of the instant apartment after the acquisition of subordinated collateral security.

3. The judgment of this Court

A. Part of the Fund loan

(1) As to the fact that the act constitutes a new loan or the waiver of a claim

In full view of the purport of arguments in Gap evidence Nos. 2 through 73, 75, and 77, the apartment of this case: ① the Government provides low-interest funds for the homeless citizens; KRW 41 million per household is loaned to the non-party 1 corporation; the second intermediate payment is KRW 41 million without distinction by type and floor; the intermediate payment can be replaced with the amount of loans provided to the bank by the non-party 1 corporation; the payment of down payment and intermediate payment is paid to the bank account of the non-party 1 corporation established; ② the defendant entered into a deposit account management agreement with the non-party 1 corporation on April 6, 2005; ② the non-party 1 corporation is subject to the restriction on entering into the down payment and deposit account of the non-party 1 corporation; ③ the non-party 1 corporation was unable to use the funds in the process of acquiring the funds from the non-party 1 corporation's bank loan and managing the funds for other purposes, as prescribed by the agreement of the defendant 1 corporation.

However, the above facts alone do not mean that the Defendant newly granted a loan equivalent to the amount of the 71st generation fund loan to the 1st generation company after collecting the 71st generation fund loan of this case or waived the claim for the 71st generation fund loan of this case. Rather, according to the above facts of recognition and the fund management rules, the debtor of the fund loan is the 1st generation company, which is the construction project owner of the apartment of this case, and the 1st generation is also the redemption entity of the loan, and the 1st unit of the apartment loan is also the 1st unit company, and the 1st unit purchaser of the apartment house of this case pays the purchase price to the 1st unit of the 7th generation to the 1st unit of the loan in the deposit account jointly managed by the 1st unit of this case. Since the 1st unit of the apartment house of this case used the 7th unit loan of this case for another purpose without using the 1st unit of the fund loan of this case to repay the loan to the 1st unit of the fund. Therefore, it still exists.

(2) As to the invalidity of a fund loan and its diversion

The purpose of the Housing Act is to contribute to the residential stability and the improvement of residential standards for the people by prescribing matters concerning the construction, supply, and management of housing necessary for a pleasant residential life, and the raising, operation, etc. of funds therefor, and according to such legislative purpose, Article 60(1) of the Housing Act provides that the Government shall establish the National Housing Fund in order to secure funds necessary to efficiently implement a comprehensive housing plan and to ensure the smooth supply thereof. Article 63(1) of the Housing Act provides that the use of the National Housing Fund shall not be operated for purposes other than those of the construction of national housing, such as construction of national housing. In light of such legislative purpose, Article 63(1) of the Housing Act provides that Article 63(1) of the Housing Act shall be a mandatory provision, and Article 35(2)4 of the Fund Management Regulations provides that if a person who has received a fund loan uses a loan for purposes other than for housing construction

In this case, first of all, there is no evidence suggesting that the non-party 1 corporation used the fund loan for purposes other than the construction of the apartment in this case, or that the defendant was aware of such circumstances. Even if the non-party 1 corporation used the fund loan for purposes other than the construction of the apartment in this case, it cannot be viewed that the defendant's loan itself becomes null and void since it would be a ground for the temporary recovery of the fund loan already made. Furthermore, the so-called exclusive agreement as asserted by the plaintiff is merely an issue of the use of the purchase price, not the National Housing Fund itself, and it does not necessarily be viewed that the plaintiff's loan is null and void. Furthermore, even if the above exclusive agreement is null and void, it does not automatically be considered that the corresponding amount has been repaid or treated. In this case, under the judgment that there is sufficient collateral value for the fund loan already used for the construction of the apartment in this case, the defendant can not be viewed as having consented to the repayment of the fund loan for other purposes without using it directly, and it cannot be viewed as having violated the purport of the defendant's loan No. 1 or 6.

(3) As to the defendant's breach of trust or violation of social order

On the other hand, as seen earlier, the Defendant’s first scheduled procedure related to the recovery of the Fund loan of this case, namely, the fact that the number of buyers of this household did not recover the Fund loan from the purchase price paid to the joint management account of the Defendant and the non-party 1 corporation, but the first priority mortgage was cancelled. However, on the other hand, the Defendant entered into a deposit account management agreement with the non-party 1 corporation and used the sale price paid by several buyers for the repayment of the Fund loan in principle, but, depending on the case, it could be used for other purposes. Even if the Defendant cancelled the mortgage of this case 71 household at that time, it was possible to take such measures according to the judgment that there was sufficient security for the collection of the Fund loan even if the mortgage was cancelled, and in fact, the Defendant received the outstanding loan amount in each auction procedure for the apartment house of this case, and received it in full, and in light of these various circumstances, it cannot be seen that the Defendant did not immediately recover the loan of this case from the purchase price of the funds of this case and did not violate social order relation with the truster.

Furthermore, the Plaintiff was at the trial and used for other purposes than the housing construction, and the Fund loan of the instant apartment was additionally implemented at a fixed and high rate without cancelling approval for the Fund loan and taking measures to recover it despite the Defendant being aware of such fact. As such, the Plaintiff asserts that the Fund loan of this case violates Article 63(1) of the Housing Act, which is a mandatory provision, or that the loan itself is null and void as it is an act of breach of social order as it is an act of breach of trust by the Defendant. However, this assertion is contrary to the Plaintiff’s assertion that the Fund loan of this case was used for the housing construction purpose, and it was allowed for the buyer to use it for other purposes without using it in the repayment of the Fund loan, since it was used for the housing construction purpose, and the buyer thereafter paid the sale price to the deposit account of the non-party 1 corporation, and thus, it is inconsistent with the Plaintiff’s assertion that it constitutes

Therefore, the plaintiff's above assertion is without merit.

(4) As to the need to protect subordinate mortgagees

(A) First of all, as to whether the Defendant infringed the Plaintiff’s trust, the entries in Gap evidence 74 (the content of loans for the second apartment house in the IFK) are insufficient to acknowledge it, and there is no other evidence to acknowledge it otherwise. Rather, as seen earlier, the Defendant merely consented to the buyer’s payment of the purchase price paid by the buyer to use the funds for other purposes pursuant to the deposit account management agreement with the non-party 1 corporation, to the extent that it does not immediately recover the fund loans and does not infringe on the security value of the fund loans, and it is difficult to view that the Defendant lost the Plaintiff’s trust as the third party and infringed his interest. Furthermore, even if the Defendant’s act constituted a tort and thereby caused losses arising therefrom, such circumstance does not constitute a lawsuit of demurrer against distribution, but rather, it can be calculated the Plaintiff’s damages amount to be determined by the instant distribution schedule.

(B) Next, as to whether cancellation of the Defendant’s right to collateral security (20 households among the 71 households of this case) made after the Plaintiff acquired subordinated mortgage constitutes waiver of the right to expectation of the Plaintiff, which is subordinate mortgagee, was considered to have infringed on the right to collateral security. However, as to the loan, the Defendant and the non-party 1 corporation were obligated to cancel the Plaintiff’s right to collateral security in accordance with the agreement with the non-party 1 corporation as a matter of course, if the purchaser paid the purchase price corresponding to the fund loan or paid the purchase price to the non-party 1 corporation, the purchaser deposited the fund loan of the pertinent household into the deposit account of the non-party 1 corporation, in principle, it is used to recover the fund loan in principle. However, in this case, the fact that the Defendant and the non-party 1 corporation agreed to use the fund for another purpose after consultation with the Defendant and the non-party 1 corporation, as long as the purchaser paid the purchase price of the relevant household to the deposit account of the non-party 1 corporation, it cannot be seen that the Defendant’s right to collateral ownership was cancelled.

B. Ordinary loan portion

(1) As to the collection of the secured claim

We examine whether the balance of the Defendant’s general loan (i.e., KRW 7,000,000) claimed by the Plaintiff is KRW 1,603,00,000 claimed by the Plaintiff (i.e., KRW 7,000,000 x 229 households). Rather, according to the evidence evidence No. 1, it can be recognized that the Defendant’s general loan against the Defendant of Nonparty 1 corporation after October 17, 2006 remains without paying the principal amount of KRW 1,89,00,000. Thus, the Plaintiff’s above assertion is without merit.

(2) As to the need to protect subordinate mortgagees

In this regard, this part of the plaintiff's assertion is without merit, as seen earlier in relation to the fund loan.

4. Determination on the application for resumption of pleading

The Plaintiff filed an application for an order to submit documents with the Defendant and an application for the witness against Nonparty 2 (representative director of Nonparty 1 Company) to the effect that Nonparty 1 used the instant fund loans for purposes other than housing construction, etc.

However, as seen earlier, in the process of recovering the Fund loans to the 71st generation of this case after being used for the purpose of the construction of the apartment complex of this case, the Defendant did not immediately have the non-party 1 corporation repay the Fund loans with the sale price of the buyers, and only the remaining apartment units with the remaining apartment units have sufficient value of collateral, and temporarily suspended the repayment of the Fund loans by allowing the use of the sale price for other purposes within the original loan period under the deposit account management agreement entered into with the non-party 1 corporation for other purposes. Thus, this case does not fall under the case of using the Fund loans for other purposes than the construction of housing. Even if the non-party 1 corporation used the Fund loans of this case for other purposes, this case does not fall under the case itself, which is used for other purposes than the construction of housing. Even if it used the Fund loans of this case for other purposes, this is merely a reason for the Defendant to cancel the approval of the Fund loans and thus, it does not affect the amount of credit of the Defendant. Accordingly, even if the purport of proof upon the Plaintiff’s’

Therefore, we cannot accept the plaintiff's application for resumption of argument.

5. Conclusion

Therefore, the plaintiff's claim of this case shall be dismissed as it is without merit, and the judgment of the court of first instance shall be just, and the plaintiff's appeal shall be dismissed as it is without merit.

Judges Yellow-Hahn (Presiding Judge)

1) After the amendment of the Fund Management Regulations, its subject was changed from the Korea Housing and Commercial Bank to the Fund trustee.

Note 2) 11,562,00,000 = 20,336,00,000 = 496 households ¡¿ 41,00,000) - KRW 8,774,00,000 (=214 households ¡¿ 41,000,000)