[edit] Supreme Court Decision 99Da67079 delivered on February 26, 2002 (Cancellation of Provisional Registration, Etc. of Vessel)

【Main Issues】

[1] Whether facts not consistent with the findings in the related criminal trial may be adopted in a civil trial (affirmative)

[2] In case where a registered right of lease is violated, whether exclusion of interference may be claimed based on such right of lease

【Summary of Decision】

[1] The facts established in the related criminal judgment are important evidence in a civil trial. However, the civil trial is not bound by the finding of facts in the criminal trial, and therefore if there is a reasonable basis on which the finding of facts in the criminal trial cannot be accepted in the civil trial in view of other evidence supplied in the civil trial, the civil court's finding of facts not consistent with the facts established in the criminal trial is not necessarily improper.

[2] A registered right of lease not only entails a right of use but also serves as security for the claim for return of the lease deposit. Upon expiration of the lease term, the right of use is extinguished immediately even without cancellation of the registered right of lease. However, the security right is not extinguished immediately, so that the lessee may refuse a request of the lessor or his successor to cancel the registration of the right of lease even after expiration of the lease term, until the lessee recovers the lease deposit. Accordingly, in case of cancellation of a registered right of lease without cause, the lessee may claim exclusion of interference with the registered right of lease.

【Reference Provisions】 [1] Article 187 of the Civil Procedure Act / [2] Article 621, Paragraph (2) of the Civil Code

【Reference Cases】 [1] Supreme Court Decision 92Da51372 delivered on March 12, 1993 (Gong1993Sang, 1170), Supreme Court Decision 93Da19153 and 19160 delivered on February 8, 1994 (Gong1994Sang, 1001), Supreme Court Decision Nos. 93Da30129 and 30136, March 10, 1995 (Gong1995Sang, 1565)

【Plaintiff, Appellee】 Plaintiff

【Defendant, Appellant】 the defendant 1 and 1 Other (Attorneys Yoo Ki-june and 2 Others, Counsel for defendant and appellant)

【Court of First Instance】 Busan District Court Judgment 97Gahap23580 delivered on September 2, 1998

【Court of Second Instance】 Busan High Court Judgment 98Na10878 delivered on October 14, 1999

【Disposition】 All appeals shall be dismissed. All costs of appeal are assessed against the defendants.

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

1. The facts established in the related criminal judgment are important evidence in a civil trial. However, the civil trial is not bound by the finding of facts in the criminal trial, and therefore if there is a reasonable basis on which the finding of facts in the criminal trial cannot be accepted in the civil trial in view of other evidence supplied in the civil trial, the civil court's finding of facts not consistent with the facts established in the criminal trial is not necessarily improper.

The following facts can be established according to the records:

i) The provisional registration at issue in this case (the Provisional Registration) was effected on August 1, 1996, the day following the date on which the Company became finally insolvent (the Company became preliminarily insolvent on July 31, 1996 and finally insolvent the next day, August 1, 1996).

ii) The debt of the Company toward the defendant 1 comprised a very small part of the total debt amount of the Company.

iii) the defendant 1, the holder of right with respect to the Provisional Registration, is the owner of the Company, and a cousin of the representative director of the Company (the Representative Director).

iv) The Company did not contest the action for permanent registration in this case, so that a default judgment was entered, and was subsequently confirmed due to the Company's failure to file an appeal.

v) The Representative Director explained to the plaintiff that the Provisional Registration was false and delivered a letter of confirmation to that effect to the plaintiff.

vi) On the 9 high seas fishing vessels owned by the Company (Vessels) on which the Provisional Registration was effected in the name of the defendant 1, a mortgage had already been registered in an amount far exceeding the claim it secures, so that the Vessels in effect had no value as collateral (value as collateral from which a preferential payment can be obtained by enforcement of the security right). On the other hand, it appears that the Vessels had a substantial value if they are operated while enforcement of the security right is delayed, taking advantage of the difficulty in such enforcement [the plaintiff executed a lease agreement with the Company with respect to only 4 of the Vessels (the Subject Vessels), at a lease deposit amount of 80 million won]. The alleged claim of the defendant 1 secured by the Provisional Registration was only 150 million won, and thus it is contrary to common sense that the Company has effected the Provisional Registration on all of the Vessels as security for that claim. In addition, having effected the Provisional Registration, the defendant 1 would naturally have tried to obtain a permanent registration based on the Provisional Registration as soon as possible, so as to obtain satisfaction of its claim by securing operation rights with respect to the Vessels, and conducting fishing operations (as explained above, the Vessels effectively had no value as collateral and therefore the Provisional Registration in itself did not serve as security for the claim at all). Nevertheless, the defendant 1 did not take any measures for that purpose for nearly one year until it brought the suit against the Company, demanding that procedures required for the permanent registration be taken.

In light of the above facts, it can be said that at the time of effecting the Provisional Registration, the Company and the defendant 1 had no intention of securing the above claim in effecting the Provisional Registration. As such, contrary to the findings in the judgment rendered in the criminal action against the defendant 1 for evasion of enforcement, etc. the Provisional Registration and permanent registration were false registrations effected by collusion between the Representative Director and the defendant 1, for the sole purpose of changing the name of owner under the register to the defendant 1, in order to evade execution by creditors of the Company, and are therefore registrations that are void ab initio as having no effect even to the extent of securing the above claim. As such, the registration of title transfer in the name of the defendant company, based on the said registrations, is also void ab initio. Accordingly, the determination of the court below to the same effect was acceptable and was not affected by any misapplication of legal principles or the violation of the rules of evidence on false expression, as alleged in the grounds for appeal.

2. A registered right of lease not only entails a right of use but also serves as security for the claim for return of the lease deposit. Upon expiration of the lease term, the right of use is extinguished immediately even without cancellation of the registered right of lease. However, the security right is not extinguished immediately, so that the lessee may refuse a request of the lessor or his successor to cancel the registration of the right of lease even after expiration of the lease term, until the lessee recovers the lease deposit. Accordingly, in case of cancellation of a registered right of lease without cause, the lessee may claim exclusion of interference with the registered right of lease.

According to the records, Plaintiff had a claim for return of lease deposit against the Company in the amount of USD 545,608, based on the lease agreements with respect to the Subject Vessels (the defendants argue to the effect that upon entering into the said lease agreements, the plaintiff agreed to pay a monthly lease in the amount of 1,000 won together with 1/2 of the profits from operation of the Vessels, but the plaintiff did not pay such amounts at all and therefore the outstanding lease amounts have been fully deducted from the lease deposit, and there is no remaining amount of lease deposit, but there is no evidence in the records to prove such agreement for payment of lease). Accordingly, insofar as the security right attached to the subject right of lease was unlawfully violated due to cancellation of the subject right of lease in the name of the plaintiff, as a result of the void Provisional Registration and permanent registration on the Subject Vessels in the name of the defendant 1, the plaintiff is entitled to claim exclusion of interference with the right of lease. The decision of the court below to the above effect is acceptable, and was not affected by any misunderstanding of legal principles on interest in action for cancellation of registration or violation of the rules of evidence which affected the decision, as asserted in the grounds for appeal. Supreme Court Decision 98Da31301 delivered on September 17, 1999, cited in the grounds for appeal, does not apply to this case which involves different issues. In that case, the chonse right had expired. While the mortgagee on the chonse right had not obtained an attachment, collection or assignment order from the court with respect to the claim for return of the lease deposit, other creditors of the chonse right holder obtained provisional attachment or attachment orders, together with collection orders, with respect to the claim for return of the lease deposits. Thereupon, the lessor deposited the remaining lease deposit for execution in accordance with Article 581, Paragraph 1 of the Civil Procedure Act.

3. All appeals shall be dismissed, and all costs of this appeal are assessed against the losing parties. Accordingly, it is hereby decided as per the Disposition. This decision is delivered with the assent of all Justices who reviewed the appeal.

Justices Byun Jae-seung (Presiding Justice)

Song Jin-hun

Yoon Jae-sik

Lee Kyu-hong (Justice in charge)

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