Supreme Court: "If a lien-holder unlawfully rents out a house, 'Lien Extinction Claim' is possible"

Court: "Lien Extinction Claim, Sanction for Lien Holder's Breach of Duty of Care"

The Supreme Court has ruled that an owner who purchased a house unlawfully leased by a lienholder can exercise the 'right to request the extinction of the lien.'

The Supreme Court's 3rd Division (Presiding Justice No Jeong-hee) announced on the 24th that it overturned the lower court's ruling, which had dismissed the lawsuit filed by Company A against lienholder Mr. B and others for the delivery of the building, and remanded the case to the appellate court.

Since 2006, Mr. B had exercised a lien on an apartment unit in Busanjin-gu, Busan, due to a construction payment claim and had been occupying it. However, from 2007 to 2012, Mr. B leased the property to a third party without the permission of the then owner.

Article 324 of the Civil Act stipulates that a lienholder cannot use, lend, or provide the liened property as collateral without the debtor's consent, and if the lienholder violates this, the debtor can request the extinction of the lien.

In May 2018, Company A purchased the apartment on which Mr. B was exercising the lien and filed claims for delivery of the property and restitution of unjust enrichment equivalent to the benefits of use.

The first trial ruled against the plaintiff, but the second trial ordered payment of the remaining construction cost balance of about 250 million won, excluding amounts already repaid, and simultaneously ordered Mr. B to deliver the property to Company A. However, the right to request the extinction of the lien was not recognized.

However, the Supreme Court's judgment differed. The court stated, "The request for extinction of the lien is a sanction against the lienholder's breach of the duty of care as a good manager and is a provision to protect the debtor or the owner of the liened property," and ruled that "unless there are special circumstances, a third party who acquires ownership of the liened property after a lease in violation of Article 324, Paragraph 2 of the Civil Act may also request the extinction of the lien."

This content was produced with the assistance of AI translation services.