In the case where the validity of the registration of the right to collateral security established on the real estate is at issue, on which welfare facilities for older persons are installed and operated, DR & AJU represented the defendant bank who held the collateral security right and successfully drew remand at the trial on an appeal (refer to Supreme Court Precedent Report dated November 15, 2018). 

The plaintiff installed and operated the welfare facilities for older persons at the real estate the plaintiff owned upon reporting the installation of the welfare facilities in accordance with the old Welfare of Older Persons Act. The plaintiff granted the right to collateral security on the above real estate to the defendant bank in favor of a third party who received loan for corporate facility from the defendant.

Afterwards, the plaintiff made a claim for cancellation of the registration of the right to collateral security, arguing the full text of Article 22(1), [Table 4], (2)(a) of the Enforcement Decree of the old Welfare of Older Persons Act (“Provision of the Enforcement Decree”) in connection with Article 35(3) of the previous Welfare of Older Persons Act (“Provision of the Mother Law”) that prohibits the establishment of the right to collateral security on the real estate where the welfare facilities for older persons are installed is a compulsory provision.

The trial court and the appeal court interpreted the Provision of the Enforcement Decree as a compulsory provision and thus held that invalidated the right to collateral security in violation of the compulsory provision.

DR & AJU represented the bank at a trial at the Supreme Court and made an argument that the Provision of the Enforcement Decree is not a compulsory provision and has no impact on the validity of the contract for establishing the right to collateral security by providing reasonable evidence as follows: (i) While the Provision of the Enforcement Decree is set out in the form of attached Table of the Enforcement Decree in connection with the provision of the Mother Law, the Private School Act and the Social Welfare Services Act, prohibit similar acts to the acts prohibited by the Provision of the Enforcement Decree in those Acts as opposed to the Mother Law. Therefore, the above Provision of the Enforcement Decree should be viewed differently; and (ii) It is difficult to predict that the validity of an act prohibited by the Provision of the Enforcement Decree will be set forth as facilities standard in Article 22(1), [Table 4], (2)(a) of the Enforcement Degree of the previous Welfare of Older Persons Act in connection with the Mother Law. As such, if the Provision of the Enforcement Decree was interpreted as a compulsory provision, it should be outside the scope of the Mother Law.

The Supreme Court quoted DR & AJU’s argument as above and reversed the decision from the lower court after reviewing this case for more than 3 years.