1. Overview of the Case

On October 1, 2018, the application for compulsory real estate auction was entered for some of the shares in the disputed real estate (the “Real Estate”). On December 15, 2020, the registration for compulsory real estate auction was entered for some of the other shares. With the above two compulsory auction registration entries, one other real estate discretionary auction registration entry, and various attachment registrations being established for the Real Estate, our client purchased the Real Estate on May 30, 2022 on the condition that the seller would cancel all encumbrances, including security interest, attached to the Real Estate with the interim payment to be made by the client to the seller for the Real Estate.

The seller, while suspending compulsory execution through a decision to suspend compulsory execution, filed a lawsuit against the creditors who applied for compulsory real estate auctions, and partially won the lawsuit at the court of first instance. (Execution procedures for some shares were suspended in the situation where a decision to permit the sale had been finally confirmed.) However, the seller lost the case at appeal, and the Supreme Court of Korea dismissed the seller’s appeal without deliberation on October 27, 2022. It was conclusively entered that the seller lost the case. Due to the dismissal of the appeal, the suspension of compulsory execution was lifted, and accordingly, the auction procedure was proceeded with. The client’s acquisition of ownership of part of the Real Estate became imminent. Despite the client’s repeated request, however, the seller kept demanding the client to make all the balance payment and refused to make a deposit and file a lawsuit to preserve its right against execution of the real estate compulsory execution procedures.


2. Our role

Our attorneys in charge of the case first made a deposit for redemption of the claim underlying the two compulsory auction procedures for the client who was the purchaser wishing to secure a complete ownership of the Real Estate by canceling the real estate compulsory auction entries made against the Real Estate. Then, on behalf of the seller, they filed a lawsuit to appeal the claim made by the creditors who had applied for the compulsory auctions, on the basis of the discharge of debt by the redemption deposit. At the same time, they obtained and submitted a decision to suspend the compulsory execution to the relevant execution court, which eventually prevented a purchaser from acquiring ownership of part of the Real Estate through a compulsory auction. In the lawsuit filed to appeal the claim made by the creditors, the defendants argued that some costs were omitted in the compulsory auction costs. Against this argument, our attorneys collected the deposit, and made a deposit again by adding the allegedly omitted costs to the deposit for the client.

The creditors withdrew their applications for a compulsory auction after receiving the increased deposit. The real estate compulsory execution entries were canceled upon the request made by the execution court on the basis of the creditors’ withdrawal. Meanwhile, as the real estate compulsory execution entries were normally canceled, our attorneys who achieved the goal of the lawsuit withdrew the appeal on behalf of the client. The defendants who were creditors who had filed for compulsory execution agreed with the withdrawal, but the seller who participated in the appeal as an independent party or supplementary participant filed an appeal to the withdrawal, arguing that the sale and purchase agreement with the client had been canceled by refusal to perform the agreement.

The judge who first proceeded with the appeal declared that the lawsuit was closed by the defendant’s agreement to our attorneys’ withdrawal. The judge who later proceeded with the case confirmed that the creditors’ claim against the seller under their claim for execution was extinguished by the redemption deposit, and issued a decision to recommend conciliation to the effect that the creditors would not file any application for compulsory execution on the basis of their right to execution. All the three parties made no appeal against the decision, and the case was closed by recommendation of conciliation.


3. Significance of the Case

Even though the creditor who applied for the compulsory real estate auction received full payment of the claim amount from the debtor and submitted a withdrawal of auction application, after the purchase report is made, the withdrawal has no effect without the consent of the person reporting the purchase of real estate at the highest price or the purchaser (pursuant to Article 93.2 of the Civil Execution Act). In the case of a compulsory auction of real estate, when the debtor files a lawsuit to object to the compulsory auction claim (in accordance with Article 44 of the Civil Execution Act), receives a decision to suspend execution from the court on the merits, and then receives a favorable judgment on the merits and sends the original copy of the judgment to the execution court as a cancellation document pursuant to Article 49(1) of the Civil Execution Act, the auction procedure will be canceled even without the above consent. (In the case of a voluntary auction, the auction cancellation method varies depending on whether the creditor applying for the auction who is repaid the full amount of the secured debt cancels its interest in collateral (i.e., keun-mortgage) underlying the auction application.)

The key issue is how the buyer of the real estate should respond if the execution debtor, like the seller in this case, does not file an appeal or a lawsuit for redemption deposit. On the basis of the general legal principle that a creditor can subrogate a debtor to file a suit for performance or confirmation related to the right to be subrogated, as well as a suit for objection to a third party or objection to claim, our attorneys made arguments based on lower courts’ precedents to the effect that the purchaser has the right to claim a transfer of complete ownership of the property free from encumbrances and that the need for preservation can be granted where the client as purchaser seeks exclusion of execution power on behalf of the seller as execution debtor. They were able to overcome the seller’s refusal to cooperate and helped the purchaser to acquire complete ownership. For this reason, this case can be said to have great practical significance.


□ Attorneys in charge: Son Heung-soo and Yoo Jeong-min