[edit] Supreme Court Decision 2001Da26774 delivered on November 13, 2001 [Damages]

【Main Issues】

[1] Whether or not there exists a proximate causal relationship between the execution of a provisional injunction against disposal of real estate and delay in disposal of the relevant real estate (affirmative with qualification)

[2] Whether or not any damage can be recognized in case of delay in disposal of a property subject to an improper provisional injunction against disposal, due to the execution of such provisional injunction (negative with qualification)

[3] A case which held that in case of a delay in disposal of a multi-unit housing that has been newly built for the purpose of sale in lots, due to the execution of an improper provisional injunction against disposal, damages equivalent to the interest on the disposal price thereof at the statutory interest rate is ordinary damage

【Summary of Decision】

[1] In case where a provisional injunction against disposal of a real estate is executed, it cannot be said that it becomes legally impossible to dispose of the real estate since the effect of such injunction only has a relative effect. Nevertheless, a person who desires to purchase the real estate would have to accept the risk that he might not be able to acquire title to the real estate, and thus absent special circumstances, it is possible that disposal of the real estate would become extremely difficult due to the execution of provisional injunction against disposal. Accordingly, if it can be shown that there was a provisional injunction against disposal of a certain real estate, that such real estate could not be disposed of while the execution of the provisional injunction was in progress, and that there is a possibility that such failure of disposal was caused by such execution of provisional injunction in view of the transactions relating to other real estates in the vicinity, there should be deemed to exist a proximate causal relationship between the provisional injunction against disposal and the delay in disposal of the relevant real estate, absent allegation and proof by the applicant of the provisional injunction that the failure to dispose of the real estate was caused by circumstances for which the applicant of the provisional injunction is not responsible, i.e. causes other than delay in execution of the provisional injunction.

[2] In case of delay in disposal of a property subject to an improper provisional injunction against disposal, due to the execution of such provisional injunction, which results in damages to the owner, the applicant of the provisional injunction would be liable for such damage. If the owner of the real estate at the time of execution of the provisional injunction uses and benefits from such real estate, then any damage arising out of delay in liquidation of the real estate would be set off by the gains from the continued use and benefit of the real estate even if there was a delay in disposal of the real estate, so that there was ultimately no damage arising out of delay in disposal of the real estate. If, however, the damage arising out of delay in liquidation of the real estate exceed the gains from continued use and benefit of the real estate, such damage should be deemed a special damage.

[3] In case where land is purchased and a multi-unit housing is newly built thereon for the purpose of sale in lots, but the disposal thereof is delayed due to an improper provisional injunction against disposal, it is difficult to consider that economic gains sufficient to set off the damage due to the delay in disposal would have been generated through use and benefit of the real estate during such period. Accordingly, out of the damages incurred during the period of delay in disposal due to the execution of provisional injunction, at least the amount equivalent to the interest on the disposal price of the real estate at the statutory interest rate is ordinary damage.

【Reference Provisions】 [1] Articles 393 and 750 of the Civil Code, and Article 714 of the Civil Procedure Act / [2] Articles 393 and 750 of the Civil Code, and Article 714 of the Civil Procedure Act / [3] Articles 393 and 750 of the Civil Code, and Article 714 of the Civil Procedure Act

【Reference Cases】 [1] Supreme Court Decision 98Da21366 delivered on September 22, 1998 (Gong1998Ha, 2558), Supreme Court Decision 2000Da58132 delivered on January 19, 2001 (Gong2001Sang, 525)

【Plaintiffs, Appellants】 Lee Won-kyu and 2 others (Attorney Park Chun-shik, Counsel for plaintiffs-appellants)

【Defendant, Appellee】Yoon Hyuk-joong (Attorney Koh Young-so, Counsel for defendant-appellee)

【Court of First Instance】 Seoul District Court Judgment 2000Gahap 26895 delivered on November 3, 2000

【Court of Second Instance】 Seoul High Court Judgment 2000Na59885 delivered on April 18, 2001

【Disposition】 The decision of the court below shall be reversed and remanded to the Seoul High Court.

【Reasoning】 The grounds for appeal are examined as follows.

1. The facts properly adopted by the court below are as follows:

A.The plaintiffs purchased lots 3-2 and 3-65, Chungpa-dong 1 Ga, Yongsan-gu, Seoul for the purpose of sale in lots, and newly constructed multi-unit housing consisting of 19 units thereon, for the purpose of sale in lots, and effected registration of the plaintiffs' joint title thereto on March 11, 1998.

B.On July 23, 1998, the defendant applied for a provisional injunction against disposal with respect to 8 units listed in the Attachment to the decision of the court below (the real estate), out of the said multi-unit housing, against the plaintiffs. On July 29, 1998, the Seoul District Court issued an order of provisional injunction against disposal of the real estate by order 98Kahap2495, and on July 30, 1998, the registration of the provisional injunction was effected with respect to each unit of the real estate.

C. Thereafter, decision against the defendant was confirmed in the action on merits, and each of the registrations of provisional injunction of the defendant with respect to the real estate was canceled as the plaintiffs prevailed in the action in objection to provisional injunction.

2. The plaintiffs argue that if they had sold the real estate in lots, they could have repaid the loans of financial institutions secured by the land, which they had assumed from the landowners in order to purchase the above land, with the proceeds thereof, and that they could have recovered the investments they had additionally made to purchase the land, but that due to the execution by the defendant of the improper provisional injunction against disposal, the plaintiffs could not sell the real estate in lots, as a result of which they incurred damages of having to continue paying interest on the loans of financial institutions, and inability to recover their additional investment amounts. On these bases, the plaintiffs primarily claim compensation for the interest paid to the financial institutions while the provisional injunction was being executed as well as the interest accrued at the statutory rate on the amount they have additionally invested as the purchase price for the land, and alternatively demand compensation in the amount equivalent to the interest accrued at the statutory rate per annum on the price of the real estate.

The court below dismissed the plaintiffs' claim on the following grounds: The defendant obtained a provisional injunction order upon the plaintiffs against disposal of the real estate, and completed registration of the provisional injunction, but lost in the litigation on the merits. Consequently, the defendant is liable in tort for damages incurred by the plaintiffs due to the execution of the provisional injunction. However, there is no evidence to show that it has become impossible to dispose of the real estate only due to execution of the provisional injunction. Also, the damage of interest cost due to the inability to dispose of the real estate, resulting from the execution of the provisional injunction, is a special damage and therefore the defendant would be liable for such damages only if it had foreseen or could have foreseen such damage. However, there is no evidence to show that this was the case.

3. However, we find it difficult to accept the determination of the court below for the following reasons:

A. In case where a provisional injunction against disposal of a real estate is executed, it cannot be said that it becomes legally impossible to dispose of the real estate since the effect of such injunction only has a relative effect. Nevertheless, a person who desires to purchase the real estate would have to accept the risk that he might not be able to acquire title to the real estate, and thus absent special circumstances, it is possible that disposal of the real estate would become extremely difficult due to the execution of provisional injunction against disposal. Accordingly, if it can be shown that there was a provisional injunction against disposal of a certain real estate, that such real estate could not be disposed of while the execution of the provisional injunction was in progress, and that there is a possibility that such failure of disposal was caused by such execution of provisional injunction in view of the transactions relating to other real estates in the vicinity, there should be deemed to exist a proximate causal relationship between the provisional injunction against disposal and the delay in disposal of the relevant real estate, absent allegation and proof by the applicant of the provisional injunction that the failure to dispose of the real estate was caused by circumstances for which the applicant of the provisional injunction is not responsible, i.e. causes other than delay in execution of the provisional injunction.

In this case, where the plaintiffs claim that they suffered the damages equivalent to interest costs as a result of delay in the sale in lots of the Real Estate due to the execution of the defendant's improper provisional injunction, the primary issue is not whether or not the disposal of the real estate became legally impossible due to the execution by the defendant of the provisional injunction, but whether or not the execution by the defendant of the provisional injunction operated as an obstacle that substantially hindered the disposal of the real estate, thereby delaying disposal of the Real Estate. Nevertheless, the court below simply determined that there was no evidence to show that it became impossible to dispose of the real estate solely due to the execution of the provisional injunction, and did not go on to determine whether the execution by the defendant of the provisional injunction operated as an obstacle that substantially hindered the disposal of the real estate, thereby delaying disposal of the real estate. Accordingly, the determination of the court below was improper in failing to fully conduct the necessary review, due to a misunderstanding of the legal principles on proximate cause. Accordingly, the argument in the grounds for appeal raising this point is justified.

B. In case of delay in disposal of a property subject to an improper provisional injunction against disposal, due to the execution of such provisional injunction, which results in damages to the owner, the applicant of the provisional injunction would be liable for such damage. If the owner of the real estate at the time of execution of the provisional injunction uses and benefits from such real estate, then any damage arising out of delay in liquidation of the real estate would be set off by the gains from the continued use and benefit of the real estate even if there was a delay in disposal of the real estate, so that there was ultimately no damage arising out of delay in disposal of the real estate. If, however, the damage arising out of delay in liquidation of the real estate exceed the gains from continued use and benefit of the real estate, such damage should be deemed a special damage. (See Supreme Court Decision 2000Da58132 delivered on January 19, 2001.)

However, in this case, the plaintiffs purchased the land and built a 19-unit housing thereon for the purpose of sale in lots. Accordingly, if the disposal of the Real Estate, comprising 8 of those 19 units, is delayed due to the provisional injunction against disposal, it is difficult to consider that economic gains sufficient to set off the damage due to the delay in disposal would have been generated through use and benefit of the real estate during such period. Accordingly, out of the damages incurred during the period of delay in disposal due to the execution of provisional injunction, at least the amount equivalent to the interest on the disposal price of the real estate at the statutory interest rate should be considered ordinary damage, insofar as proximate causal relationship is recognized between the execution of the provisional injunction and the delay in disposal of the real estate.

Nevertheless, the court below determined that even the damage sought by the plaintiffs as alternative claim is a special damage, and dismissed all claims of the plaintiffs. The judgment of the court below was therefore clearly improper as being premised on a misunderstanding of the legal principles on scope of damage, and the argument in the grounds for appeal raising this point is valid.

4. Accordingly, the decision of the court below shall be reversed and remanded to the court below for retrial and determination. It is hereby decided as per Disposition. This decision is delivered with the assent of all Justices who reviewed the appeal.

Justices Lee Kang-kook (Presiding Justice)

Cho Moo-jeh

Lee Yong-woo (Justice in charge)

Kang Shin-wook

This is a legal document in the public domain according to Korean Copyright Law.