{"id":1951,"date":"2026-09-02T06:30:38","date_gmt":"2026-09-02T06:30:38","guid":{"rendered":"https:\/\/atlaw.kr\/en-blog\/cancelled-mortgage-restoration-consent-south-korea\/"},"modified":"2026-09-02T06:31:13","modified_gmt":"2026-09-02T06:31:13","slug":"cancelled-mortgage-restoration-consent-south-korea","status":"publish","type":"post","link":"https:\/\/atlaw.kr\/en-blog\/cancelled-mortgage-restoration-consent-south-korea\/","title":{"rendered":"The Register Was Clean When You Bought It \u2014 Why the Mortgage Came Back"},"content":{"rendered":"<p><!--  -->\n\n\n\n<!--  --><\/p>\n<p><!-- ATLAS_SEO_BLOCK_START --><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"Article\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/cancelled-mortgage-restoration-consent-south-korea\/#article\",\"mainEntityOfPage\":{\"@type\":\"WebPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/cancelled-mortgage-restoration-consent-south-korea\/#webpage\"},\"headline\":\"The Register Was Clean When You Bought It \u2014 Why the Mortgage Came Back\",\"description\":\"Under South Korean law, a mortgage registration cancelled through a forged power of attorney is void, and a third party who later acquires the property must consent to its restoration regardless of good faith. Supreme Court of Korea 2022Da230769 and 2018Da285328, which allows the buyer to recover damages, are analyzed together.\",\"datePublished\":\"2026-09-02T09:00:00+09:00\",\"dateModified\":\"2026-09-02T09:00:00+09:00\",\"inLanguage\":\"en-US\",\"author\":{\"@type\":\"Person\",\"@id\":\"https:\/\/atlaw.kr\/soyoung-park\/#person\",\"name\":\"Soyoung Park\",\"alternateName\":\"\ubc15\uc18c\uc601\",\"jobTitle\":\"Representative Attorney\",\"worksFor\":{\"@id\":\"https:\/\/atlaw.kr\/#legalservice\"}},\"publisher\":{\"@type\":\"LegalService\",\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"url\":\"https:\/\/atlaw.kr\"},\"about\":[\"Restoration of a cancelled mortgage registration in South Korea\",\"Duty of consent of a third party with a registered interest under Korean law\",\"Article 59 of the Korean Registration of Real Estate Act\",\"Article 46(1)(iii) of the Korean Registration of Real Estate Rules\",\"Absence of public faith in Korean real estate registration\",\"Retroactive priority of a restoration registration in South Korea\",\"Buyer damages and the right to withhold the purchase price under Article 588 of the Korean Civil Act\",\"Supreme Court of Korea 2022Da230769\",\"Seoul Southern District Court 2021Na68054\",\"Seoul Southern District Court 2020Ga-dan243505\",\"Supreme Court of Korea 95Da39526\",\"Supreme Court of Korea 2003Da35567\",\"Supreme Court of Korea 89Daka5673\",\"Supreme Court of Korea 2013Da18011\",\"Supreme Court of Korea 71Da1285\",\"Supreme Court of Korea 69Da2193\",\"Supreme Court of Korea 2013Da28025\",\"Supreme Court of Korea 2018Da285328\"]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"@id\":\"https:\/\/atlaw.kr\/en-blog\/cancelled-mortgage-restoration-consent-south-korea\/#faqpage\",\"inLanguage\":\"en-US\",\"mainEntity\":[{\"@type\":\"Question\",\"name\":\"I checked the register before buying. Can a mortgage that was not there really come back?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. If the cancellation was itself void because it was effected by forgery without the right holder's intent, anyone who registered an interest afterward owes a duty to consent to restoration regardless of good or bad faith (Supreme Court of Korea, September 30, 1997, 95Da39526). Korean law does not give the real estate register public faith, so reliance on the register alone does not protect a buyer. Seoul Southern District Court 2020Ga-dan243505 and its appeal, 2021Na68054, reached the same conclusion, made final by the Supreme Court of Korea on July 28, 2022, 2022Da230769.\"}},{\"@type\":\"Question\",\"name\":\"If the mortgage registration is cancelled, is the mortgage itself gone?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"No. The Supreme Court of Korea held that \\\"registration is a requirement for the creation of a real right and not a requirement for its continuation, so where a registration is cancelled without cause the effect of the real right is not affected at all, and even before the restoration registration is completed the person named in the cancelled registration is presumed to be the lawful right holder\\\" (Supreme Court of Korea, September 30, 1997, 95Da39526). The mortgage remained legally alive; it was merely invisible on the register.\"}},{\"@type\":\"Question\",\"name\":\"Can any cancelled registration be restored?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"No. A registration the right holder cancelled voluntarily cannot be restored. The Supreme Court of Korea held that \\\"where a party has voluntarily filed the cancellation, for whatever reason, a restoration registration is not available\\\" (Supreme Court of Korea, June 26, 1990, 89Daka5673). Restoration is limited to cancellations that were improper for a substantive reason, such as invalidity or rescission of the cause of the cancellation, or for a procedural defect, such as registrar error.\"}},{\"@type\":\"Question\",\"name\":\"I genuinely knew nothing about the forgery. Does my good faith count for nothing?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Not in this category. The Supreme Court of Korea held that where the cancellation is void, \\\"a third party with a registered interest owes a duty, regardless of good or bad faith,\\\" to consent (Supreme Court of Korea, September 30, 1997, 95Da39526). An earlier judgment went further, excluding even actual loss from the inquiry: the duty applies \\\"regardless of good or bad faith, and regardless of whether the party suffers loss from the restoration registration\\\" (Supreme Court of Korea, February 24, 1970, 69Da2193). Separately from the duty to consent, claims against the seller and against those responsible for the forgery remain available.\"}},{\"@type\":\"Question\",\"name\":\"I was told there is a Supreme Court case denying a duty to consent based on the third party's good faith.\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"That is Supreme Court of Korea, February 27, 2004, 2003Da35567. In that case, however, the cancellation was made pursuant to the right holder's own declaration of release. The release had been induced by deception, but the intent to release existed. The same judgment stated that 71Da1285 and 95Da39526 stand for the proposition that where a registration is cancelled improperly by means such as forging application documents, without the right holder's intent and without any underlying cause, a third party owes a duty to consent regardless of good or bad faith, and that \\\"the facts of this case differ, and those authorities are not apt to be invoked here.\\\" It does not apply to forged cancellations.\"}},{\"@type\":\"Question\",\"name\":\"These are old judgments. Are they still good law?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. The Supreme Court of Korea confirmed the same standard under the current provision: \\\"A third party with a registered interest within the meaning of Article 59 of the Registration of Real Estate Act means a person who would be exposed to the risk of loss if the restoration registration were made, where that risk is recognized formally from the existing entries in the register\\\" (Supreme Court of Korea, July 11, 2013, 2013Da18011). Article 75 of the former Act became Article 59 in the complete revision of April 12, 2011; only the article number changed.\"}},{\"@type\":\"Question\",\"name\":\"If the lender knew about the unlawful cancellation, can I refuse consent?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"The appellate court in this case said no. The buyers argued that the lender knew or could have known of the unlawful cancellation when it took a new mortgage over the same apartment in July 2017, but the court held that even so, that circumstance is no obstacle whatever to seeking the consent required for restoration (Seoul Southern District Court, April 8, 2022, 2021Na68054). The duty arises from the objective fact that the cancellation is void.\"}},{\"@type\":\"Question\",\"name\":\"What if I refuse to consent altogether?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Restoration still proceeds. Article 46(1)(iii) of the Korean Registration of Real Estate Rules provides that the attachments include, \\\"where the consent of a third party with a registered interest is required, information evidencing such consent or information evidencing that there is a judgment which may be asserted against that party.\\\" A final judgment ordering a declaration of consent substitutes for the consent document. The appellate court in this case rejected the contrary argument on exactly this basis.\"}},{\"@type\":\"Question\",\"name\":\"What priority does the restored mortgage take?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"It reverts to the time of cancellation. A restoration registration produces \\\"retroactively, as of the time of cancellation, the same effect as if no cancellation had occurred\\\" (Supreme Court of Korea, June 26, 1990, 89Daka5673). Here the original priority of April 14, 2017, receipt no. 84556, revives, ranking ahead of security interests and disposition restraints registered after the cancellation.\"}},{\"@type\":\"Question\",\"name\":\"Does consenting mean I lose the property?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Consent itself does not transfer ownership. What is restored is the mortgage; ownership remains. The buyer bears the encumbrance up to the maximum secured amount, and if the borrower defaults the property can be sold at auction. In this case the maximum secured amount was KRW 142.8 million and more than KRW 100 million of the secured claim was still outstanding at the close of argument.\"}},{\"@type\":\"Question\",\"name\":\"Can the claimant sue the wrong party in a restoration case?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. The holder of a registration that cannot coexist on the register with the registration to be restored is not a proper defendant to a consent claim but a party whose registration must first be cancelled, and a consent claim against that holder is unlawful for lack of standing (Supreme Court of Korea, July 11, 2013, 2013Da18011). Here, however, the registration to be restored was a mortgage and the defendants held ownership transfer registrations, which coexist, so a consent claim was correct.\"}},{\"@type\":\"Question\",\"name\":\"Is there a Supreme Court case applying this rule to a mortgage specifically?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Yes. In Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335, a lender's own loan officer forged a power of attorney in the lender's name and cancelled a mortgage registration. The court found no error in the holding that a person who acquired ownership after the cancellation is a third party with a registered interest and owes a duty to declare consent. The buyer there had purchased the apartment three days after the cancellation and still did not avoid the duty.\"}},{\"@type\":\"Question\",\"name\":\"What happens if the property is auctioned while the lawsuit is pending?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Both claims lose their legal interest. The Supreme Court of Korea held that where \\\"an auction procedure was conducted over the mortgaged real property on the application of another mortgagee or other right holder, the decision approving the sale became final, and the purchaser paid the sale price in full, the mortgage cancelled without cause is also extinguished\\\" (Supreme Court of Korea, December 11, 2014, 2013Da28025). This creates a deadline for the secured lender and may supply a defense for the buyer.\"}},{\"@type\":\"Question\",\"name\":\"If I have to consent, do I simply absorb the loss?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"No. The Supreme Court of Korea reversed a judgment dismissing a buyer's damages claim. The lower court had held that no loss arises until the buyer loses ownership or pays the maximum secured amount on the debtor's behalf, but the Supreme Court held that the buyer \\\"has actually suffered loss by paying, in reliance on an unlawfully created entry in the register, a purchase price it was not required to pay in law or under the contract\\\" (Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335). Had the mortgage remained on the register, the buyer could have withheld payment up to the maximum secured amount. Note that the lender was the proper defendant there because the forger was its employee; where the forger is the borrower, the defendant differs.\"}},{\"@type\":\"Question\",\"name\":\"How do I check for this risk before buying property in South Korea?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Obtain the certified copy of the register including cancelled entries rather than currently valid entries only, so that previously cancelled security interests are visible. Pay particular attention where ownership transferred shortly after a security interest was cancelled, where ownership changed hands repeatedly over a short period, or where a mortgage securing a long-term loan was released soon after drawdown; ask the seller for the repayment record and the financial institution's release documentation. Adding a representation and warranty on the lawfulness of any prior cancellation, with termination and damages provisions, is also advisable.\"}},{\"@type\":\"Question\",\"name\":\"A lender has just discovered its mortgage was cancelled by forgery. What comes first?\",\"acceptedAnswer\":{\"@type\":\"Answer\",\"text\":\"Identify every party currently holding a registered interest, then bring a single action seeking performance of the restoration procedure from the party named in the cancellation and declarations of consent from all third parties with registered interests. Running the criminal track in parallel matters: in this case the borrower's confession and conviction for forgery of a private document and uttering, and false entry in an authenticated original deed and uttering, were decisive for the civil proof. Check as well whether an auction is pending, since full payment of the sale price extinguishes the mortgage. Because the number of interested parties grows with delay, routine monitoring of registration changes on collateral is the more fundamental safeguard.\"}}]}<\/script><br \/>\n<script type=\"application\/ld+json\">{\"@context\":\"https:\/\/schema.org\",\"@type\":[\"LegalService\",\"LocalBusiness\"],\"@id\":\"https:\/\/atlaw.kr\/#legalservice\",\"name\":\"Atlas Legal\",\"alternateName\":[\"\ubc95\ubb34\ubc95\uc778 \uc544\ud2c0\ub77c\uc2a4\",\"Atlas Law Firm\"],\"url\":\"https:\/\/atlaw.kr\/\",\"telephone\":\"+82-32-864-8300\",\"email\":\"info@atlaw.kr\",\"priceRange\":\"\u20a9\u20a9\u20a9\",\"address\":{\"@type\":\"PostalAddress\",\"streetAddress\":\"Centroad B-2901, 323 Incheon Tower-daero (Songdo-dong)\",\"addressLocality\":\"Yeonsu-gu, Incheon\",\"addressRegion\":\"Incheon\",\"postalCode\":\"22007\",\"addressCountry\":\"KR\"},\"geo\":{\"@type\":\"GeoCoordinates\",\"latitude\":37.399438,\"longitude\":126.629812},\"openingHoursSpecification\":[{\"@type\":\"OpeningHoursSpecification\",\"dayOfWeek\":[\"Monday\",\"Tuesday\",\"Wednesday\",\"Thursday\",\"Friday\"],\"opens\":\"09:00\",\"closes\":\"18:00\"}],\"areaServed\":[{\"@type\":\"Country\",\"name\":\"South Korea\"},{\"@type\":\"Place\",\"name\":\"Songdo International Business District\"},{\"@type\":\"Place\",\"name\":\"Cheongna International City\"},{\"@type\":\"Place\",\"name\":\"Yeongjong International City\"},{\"@type\":\"Place\",\"name\":\"Incheon\"},{\"@type\":\"Place\",\"name\":\"Seoul Metropolitan Area\"},{\"@type\":\"Place\",\"name\":\"Incheon Free Economic Zone (IFEZ)\"}],\"knowsAbout\":[\"Real Estate Registration Disputes in South Korea\",\"Restoration of Cancelled Registrations under Korean Law\",\"Mortgage and Secured Lending Law in South Korea\",\"Korean Registration of Real Estate Act and Rules\",\"Forgery-Related Property Litigation in South Korea\",\"Real Estate Auction and Enforcement under Korean Civil Execution Law\",\"Incheon Free Economic Zone (IFEZ) Legal Services in South Korea\"],\"serviceType\":[\"Real Estate and Construction Dispute Resolution\",\"Secured Lending and Collateral Management Advisory\",\"Property Registration Litigation\",\"Real Estate Transaction Due Diligence\",\"Foreign Direct Investment Legal Services\"]}<\/script><br \/>\n<!-- ATLAS_SEO_BLOCK_END --><\/p>\n<style>@import url('https:\/\/cdn.jsdelivr.net\/gh\/orioncactus\/pretendard@v1.3.9\/dist\/web\/static\/pretendard.css'); 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letter-spacing: 0; margin: 0 3px 0 0; } .author-name { display: inline; font-size: 14px; } .author-detail { clear: both; font-size: 13px; line-height: 1.55; margin-top: 8px; margin-bottom: 1px; } .author-detail ~ .author-detail { clear: none; margin-top: 2px; } .author-link { clear: both; display: block; font-size: 13px; margin-top: 8px; } p.closing { font-size: 14px; } }<\/style>\n<div class=\"hero\">\n  <span class=\"category-tag\">Real Estate &amp; Registration<\/span><\/p>\n<div class=\"hero-title\">The Register Was Clean When You Bought It<br \/>Why the Mortgage Came Back<\/div>\n<div class=\"hero-meta\">\n<div class=\"hero-info\">\n      <strong>Soyoung Park<\/strong> \u00b7 Representative Attorney, Atlas Legal<br \/>\n      Supreme Court of Korea 2022Da230769 &nbsp;\u00b7&nbsp; Seoul Southern District Court 2021Na68054 &nbsp;\u00b7&nbsp; Supreme Court of Korea 95Da39526 &nbsp;\u00b7&nbsp; Supreme Court of Korea 2018Da285328\n    <\/div>\n<\/p><\/div>\n<\/div>\n<div class=\"content\">\n<div class=\"direct-answer\">\n    <strong>Direct answer:<\/strong> Under South Korean law, a registration that is cancelled through forged application documents, without the right holder&#8217;s intent, is void from the outset. Anyone who later acquires an interest in the property must consent to its restoration <strong>regardless of good or bad faith<\/strong> (Supreme Court of Korea, September 30, 1997, 95Da39526). Where a borrower forged the lender&#8217;s power of attorney to cancel a mortgage and the apartment then passed through three successive owners, the courts rejected the buyers&#8217; good-faith defense, and the Supreme Court of Korea affirmed (Seoul Southern District Court, April 8, 2022, 2021Na68054; Supreme Court of Korea, July 28, 2022, 2022Da230769).\n  <\/div>\n<div class=\"toc-nav\">\n<p class=\"toc-label\">Contents<\/p>\n<ol>\n<li><a href=\"#sec-1\">1. Can a mortgage reappear after the register looked clean?<\/a><\/li>\n<li><a href=\"#sec-2\">2. How did the mortgage disappear without anyone noticing?<\/a><\/li>\n<li><a href=\"#sec-3\">3. Does cancelling the registration extinguish the mortgage itself?<\/a><\/li>\n<li><a href=\"#sec-4\">4. How is this different from a cancellation the right holder chose?<\/a><\/li>\n<li><a href=\"#sec-5\">5. Must a buyer who knew nothing still consent?<\/a><\/li>\n<li><a href=\"#sec-6\">6. Why did the precedent the buyers relied on fail?<\/a><\/li>\n<li><a href=\"#sec-7\">7. Why did the argument that the lender also knew fail?<\/a><\/li>\n<li><a href=\"#sec-8\">8. What if the third party simply refuses to consent?<\/a><\/li>\n<li><a href=\"#sec-9\">9. What priority does the restored mortgage take?<\/a><\/li>\n<li><a href=\"#sec-10\">10. Are some registrations cancelled rather than consented to?<\/a><\/li>\n<li><a href=\"#sec-11\">11. What happens if the property is auctioned during the lawsuit?<\/a><\/li>\n<li><a href=\"#sec-12\">12. If consent is unavoidable, who pays for the loss?<\/a><\/li>\n<li><a href=\"#sec-13\">13. What should a buyer check before signing?<\/a><\/li>\n<li><a href=\"#sec-14\">14. What should a secured lender do?<\/a><\/li>\n<li><a href=\"#sec-faq\">15. Frequently asked questions<\/a><\/li>\n<\/ol><\/div>\n<p class=\"lead-text\">A certified copy of the real estate register showed no mortgage and no provisional attachment. Only a few transfers of ownership. So the buyer signed. Years later a lender served a complaint: it intended to restore a mortgage with a maximum secured amount of KRW 142.8 million on that very apartment, and the buyer was required to consent.<\/p>\n<p class=\"summary-text\">The buyers&#8217; answer was the intuitive one. &#8220;We had no idea any of this happened.&#8221; The trial court, the appellate court, and the Supreme Court of Korea all rejected it.<\/p>\n<p class=\"context-text\">This article examines Seoul Southern District Court, September 15, 2021, 2020Ga-dan243505, its appeal, Seoul Southern District Court, April 8, 2022, 2021Na68054, and the Supreme Court of Korea decision that made the outcome final on July 28, 2022, 2022Da230769. It explains why a blameless buyer loses, when a buyer wins instead, what a buyer can still recover, and what to verify before signing a Korean real estate contract. For foreign investors and companies operating in the Incheon Free Economic Zone (IFEZ), the point is structural rather than incidental: Korean real estate registration works differently from systems that protect a good-faith purchaser who relies on the register.<\/p>\n<p><\/p>\n<h2 id=\"sec-1\">Can a mortgage reappear after the register looked clean?<\/h2>\n<p class=\"lead-text\">It can, and the buyer&#8217;s ignorance is generally no defense. Where the cancellation itself was effected by forgery and is therefore void, anyone who registered an interest afterward owes a duty to consent to restoration, whether in good faith or not.<\/p>\n<p>If that seems surprising, one feature of Korean property law explains it. <strong>Korean real estate registration carries no positive credit, or public faith.<\/strong> A person who relies on the register is not protected by that reliance alone. There is no counterpart for real property to the good-faith acquisition rule that applies to movables under Article 249 of the Korean Civil Act.<\/p>\n<p>&#8220;The register was clean&#8221; therefore guarantees nothing in a Korean real estate transaction. The familiar case is a buyer relying on an entry that turns out to be void. This case runs the other way. The buyers relied on the <strong>absence<\/strong> of an entry, and a right that should have been there returned to its place.<\/p>\n<p>The statutory basis is Article 59 of the Korean Registration of Real Estate Act: where an application is made to restore a cancelled registration and there is a third party with a registered interest, that third party&#8217;s consent is required.<\/p>\n<p>The contested question is <strong>when that duty to consent arises<\/strong> if the third party refuses. The Supreme Court of Korea has divided the answer into two lines, and this case turned on which line it fell into.<\/p>\n<p><\/p>\n<h2 id=\"sec-2\">How did the mortgage disappear without anyone noticing?<\/h2>\n<p class=\"lead-text\">The borrower forged a power of attorney in the lender&#8217;s name and filed the cancellation. A Korean registrar reviews the formal sufficiency of the documents rather than the underlying substance, so the cancellation went through. The lender learned of it only much later.<\/p>\n<table>\n<thead>\n<tr>\n<th>Date<\/th>\n<th>Event<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>April 13, 2017<\/td>\n<td>Lender A advances KRW 119 million to borrower B (fixed-rate conforming loan, term April 17, 2017 to April 17, 2037, fixed rate of 3.25 percent per annum)<\/td>\n<\/tr>\n<tr>\n<td>April 14, 2017<\/td>\n<td><strong>Mortgage registered with a maximum secured amount of KRW 142.8 million<\/strong> over B&#8217;s apartment (Seoul Southern District Court, receipt no. 84556)<\/td>\n<\/tr>\n<tr>\n<td>June 14, 2017<\/td>\n<td><strong>Mortgage cancelled<\/strong> on the stated ground of release (receipt no. 131562) \u2014 in fact filed by B using a forged power of attorney in A&#8217;s name<\/td>\n<\/tr>\n<tr>\n<td>July 31, 2017<\/td>\n<td>D acquires ownership from C, borrows from the same lender A, and grants A a new mortgage<\/td>\n<\/tr>\n<tr>\n<td>Thereafter<\/td>\n<td>Ownership passes <strong>successively<\/strong> from B to C, to D, and to Company E<\/td>\n<\/tr>\n<tr>\n<td>2020<\/td>\n<td>Lender A sues for restoration of the cancelled registration and for declarations of consent (Seoul Southern District Court 2020Ga-dan243505)<\/td>\n<\/tr>\n<tr>\n<td>September 15, 2021<\/td>\n<td>Trial court rules for the lender in full<\/td>\n<\/tr>\n<tr>\n<td>February 17, 2022<\/td>\n<td>B convicted, on charges including forgery of a private document, uttering of a forged private document, and false entry in an authenticated original deed<\/td>\n<\/tr>\n<tr>\n<td>April 8, 2022<\/td>\n<td>Appeal dismissed (Seoul Southern District Court 2021Na68054)<\/td>\n<\/tr>\n<tr>\n<td>July 28, 2022<\/td>\n<td>Supreme Court of Korea dismisses all appeals; judgment final (2022Da230769)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>What deserves attention is how the <strong>criminal and civil tracks reinforced each other<\/strong>. B was prosecuted before the Incheon District Court and <strong>confessed<\/strong> to the charges. The trial court treated that confession as part of the evidentiary basis, and the appellate court added the fact that B had been convicted on February 17, 2022.<\/p>\n<p>Proving forgery in a civil case is rarely straightforward, particularly once the document has been filed and the registration completed. Here the criminal confession and conviction carried much of that burden. Put differently, in disputes over forged cancellations the <strong>posture of the criminal proceeding often shapes the civil evidentiary strategy<\/strong>.<\/p>\n<p>One more fact mattered. At the close of oral argument the secured claim still had <strong>more than KRW 100 million outstanding<\/strong>. The security had vanished; the debt had not. Had the loan been repaid in full, the mortgage would have been extinguished by its accessory nature and there would have been nothing to restore. That is always the first question in a restoration dispute.<\/p>\n<p><\/p>\n<h2 id=\"sec-3\">Does cancelling the registration extinguish the mortgage itself?<\/h2>\n<p class=\"lead-text\">No. In Korean law registration is a requirement for a real right to arise, not a requirement for it to continue. Where a registration is cancelled without cause, the right is unaffected, and even before restoration the former registered holder is still presumed to be the lawful holder.<\/p>\n<p>The Supreme Court of Korea put it this way:<\/p>\n<p>&#8220;Registration is a requirement for the creation of a real right and not a requirement for its continuation, so where a registration is cancelled without cause the effect of the real right is not affected at all, and even before the restoration registration is completed the person named in the cancelled registration is presumed to be the lawful right holder; accordingly, the party contesting the effect of a registration cancelled without cause bears the burden of alleging and proving the ground of invalidity&#8221; (Supreme Court of Korea, September 30, 1997, 95Da39526).<\/p>\n<p>That single sentence explains the architecture of the case. On June 14, 2017, at the very moment of cancellation, <strong>the mortgage remained legally alive<\/strong>. It had merely become invisible on the public register. Restoration does not create a new right; it makes an existing one visible again.<\/p>\n<h3>The Supreme Court has said the same about mortgages<\/h3>\n<p>That holding arose in a provisional registration case. The Supreme Court of Korea confirmed the same point for mortgages directly:<\/p>\n<p>&#8220;The mere fact that a mortgage registration, once completed over real property, was cancelled without any cause on the basis of forged related documents does not immediately extinguish the mortgage; however, when real property is sold in an auction procedure the mortgages existing over the property sold are extinguished as a matter of course (see Articles 91(2) and 268 of the Korean Civil Execution Act) \u2026&#8221; (Supreme Court of Korea, December 11, 2014, 2013Da28025).<\/p>\n<p>The first half is the conclusion of this section. Cancellation by forged documents does not, by itself, extinguish the mortgage. The second half is an important exception addressed in section 11 below.<\/p>\n<p>The burden of proof follows the same logic. Once it is established that the mortgage was cancelled without cause, the party contesting it \u2014 here, the buyers \u2014 must allege and prove a ground of invalidity. Saying &#8220;we did not know&#8221; is not proof, because lack of knowledge is not a ground of invalidity in the first place.<\/p>\n<p><\/p>\n<h2 id=\"sec-4\">How is this different from a cancellation the right holder chose?<\/h2>\n<p class=\"lead-text\">The first dividing line is whether the cancellation reflected the right holder&#8217;s own intent. A registration a party cancelled voluntarily cannot be restored at all; only a registration cancelled improperly, against the holder&#8217;s intent, is eligible.<\/p>\n<p>The Supreme Court of Korea drew that boundary when it defined the restoration registration itself:<\/p>\n<p>&#8220;A restoration registration under Article 75 of the Registration of Real Estate Act means a registration that restores a registration cancelled improperly, whether for substantive or procedural defect, so as to produce retroactively, as of the time of cancellation, the same effect as if no cancellation had occurred; accordingly, <strong>where a party has voluntarily filed the cancellation, for whatever reason, a restoration registration is not available<\/strong>&#8221; (Supreme Court of Korea, June 26, 1990, 89Daka5673).<\/p>\n<p>The same judgment defined &#8220;improper&#8221; broadly: it covers a substantive ground, such as invalidity or rescission of the cause of the cancellation registration, as well as a procedural defect, such as a registrar cancelling by mistake. Forged cancellations and clerical cancellations alike qualify.<\/p>\n<h3>Only the article number changed<\/h3>\n<p><strong>Article 75<\/strong> of the former Registration of Real Estate Act became <strong>Article 59<\/strong> in the complete revision of April 12, 2011. The provision moved; the substance and the case law did not. The Supreme Court of Korea has confirmed the same standard under the current article:<\/p>\n<p>&#8220;A third party with a registered interest within the meaning of Article 59 of the Registration of Real Estate Act means a person who would be exposed to the risk of loss if the restoration registration were made, where that risk is recognized formally from the existing entries in the register&#8221; (Supreme Court of Korea, July 11, 2013, 2013Da18011).<\/p>\n<p>The phrase &#8220;recognized formally&#8221; carries weight. Whether a person faces the risk of loss is assessed <strong>from the register alone<\/strong>. How much that person actually loses, whether the person acted in good faith, and how much was paid are all outside the inquiry at this stage. The buyers here registered their ownership after the cancellation, so the register itself shows that restoring the mortgage would disadvantage them. That made them third parties with a registered interest.<\/p>\n<p>The timing of that assessment is settled as well. Under 89Daka5673, the question is judged &#8220;not by reference to the time the third party acquired the registered right, that is, the time of the cancellation registration, but by reference to the time of the restoration registration.&#8221;<\/p>\n<p><\/p>\n<h2 id=\"sec-5\">Must a buyer who knew nothing still consent?<\/h2>\n<p class=\"lead-text\">Where the cancellation is void, yes. For this category the Supreme Court of Korea has removed the third party&#8217;s good or bad faith from the analysis entirely. What the buyer knew, and how carefully the buyer investigated, are not asked.<\/p>\n<p>The governing holding is:<\/p>\n<p>&#8220;Where a provisional registration has been cancelled otherwise than by the intent of the holder of the provisional registration and that cancellation registration is void, <strong>a third party with a registered interest owes a duty, regardless of good or bad faith<\/strong>, to give the consent necessary for the holder&#8217;s restoration procedure; accordingly, a third party who, after the improper cancellation, completed a provisional attachment registration, a mortgage registration, or an ownership transfer registration owes a duty of consent as a third party with a registered interest in the restoration of the provisional registration&#8221; (Supreme Court of Korea, September 30, 1997, 95Da39526).<\/p>\n<p>The trial court in this case applied that holding to a mortgage. Because B cancelled the mortgage improperly, by forging application documents, without the intent of the right holder and without any underlying cause, the cancellation was void; the remaining defendants were third parties with a registered interest; and <strong>regardless of their good or bad faith<\/strong> they owed the duty to consent.<\/p>\n<p>An earlier judgment states the principle even more strongly. In Supreme Court of Korea, February 24, 1970, 69Da2193, the court held that in such a case a third party with a registered interest owes the duty to consent &#8220;<strong>regardless of good or bad faith, and regardless of whether the party suffers loss from the restoration registration<\/strong>.&#8221; Not only knowledge but actual loss is outside the inquiry. The duty flows from the objective fact that the cancellation is void.<\/p>\n<h3>A case from 1971 with the same structure<\/h3>\n<p>Supreme Court of Korea, August 31, 1971, 71Da1285 states its holding in a single sentence: &#8220;Persons who acquired a registered right after the right holder&#8217;s registration was cancelled by unlawful means owe a duty to consent to the right holder&#8217;s restoration procedure.&#8221;<\/p>\n<p>The facts are almost identical to this case. The debtor forged the plaintiff&#8217;s seal, the accompanying certificate of seal impression, and a power of attorney delegating the cancellation filing to a judicial scrivener, cancelled the provisional registration, and the property then passed to others through <strong>successive sales<\/strong>. The Supreme Court upheld the finding that those acquirers owed a duty to consent.<\/p>\n<p>Forged power of attorney, unauthorized cancellation, successive transfers: the same three elements, repeated across more than half a century. This is a recurring transaction risk rather than an isolated accident.<\/p>\n<h3>The same result recently, for a mortgage<\/h3>\n<p>Those authorities all involved provisional registrations. A recent Supreme Court judgment applied the rule to a mortgage on facts that closely track this case.<\/p>\n<p>A lender held a mortgage over an apartment with a maximum secured amount of KRW 295.2 million. <strong>The lender&#8217;s own loan officer forged a power of attorney in the lender&#8217;s name<\/strong> and, through a judicial scrivener, cancelled the mortgage registration on February 1, 2013. The buyer purchased the apartment for KRW 250 million <strong>three days later, on February 4, 2013<\/strong>, and registered ownership the same day.<\/p>\n<p>The Supreme Court of Korea found no error in the lower court&#8217;s conclusion that &#8220;the mortgage registration was cancelled improperly, so the cancellation registration is void, and the defendant, having acquired ownership after the cancellation, is a third party with a registered interest and therefore owes a duty to declare consent to the restoration of the mortgage&#8221; (Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335).<\/p>\n<p>A purchase made three days after the cancellation did not avoid the duty. That judgment also contains a second holding that matters a great deal to buyers, taken up in section 12.<\/p>\n<h3>Why good faith is not protected<\/h3>\n<p>Weighing the interests makes the outcome easier to accept. On one side is a secured lender that lost its collateral through no fault of its own. On the other is a buyer who purchased through no fault of its own. Both are innocent.<\/p>\n<p>Korean law resolves that conflict in favor of the <strong>original right holder<\/strong>. It is the logical consequence of withholding public faith from the register. If reliance on the register could defeat the original right, the register would have public faith after all. The buyer&#8217;s remedy is routed instead through <strong>the seller&#8217;s warranty and damages liability, and tort liability on the part of those responsible for the forgery<\/strong> \u2014 a separate track that, as 2018Da285328 confirms, does function.<\/p>\n<p><\/p>\n<h2 id=\"sec-6\">Why did the precedent the buyers relied on fail?<\/h2>\n<p class=\"lead-text\">The buyers cited Supreme Court of Korea, February 27, 2004, 2003Da35567, which does contain language favorable to them. The trial court rejected it because in that case, whatever the defect, &#8220;the cancellation registration was made by the intent of the right holder, so the facts differ from this case.&#8221; That reading matches the original text precisely.<\/p>\n<p>In 2003Da35567 a mortgage and a superficies registration in the plaintiff&#8217;s name were cancelled because <strong>the plaintiff itself released the underlying agreements<\/strong>. The plaintiff later argued that the release had been induced by <strong>deception<\/strong>, rescinded the declaration, and sought restoration together with a third party&#8217;s consent.<\/p>\n<p>The Supreme Court of Korea held:<\/p>\n<p>&#8220;Even where a third party with a registered interest exists in a restoration procedure and that party&#8217;s consent is required, <strong>unless that third party owes a substantive-law duty toward the registration right holder to give the consent, there is no reason for the party to comply with the request<\/strong>&#8221; (Supreme Court of Korea, February 27, 2004, 2003Da35567).<\/p>\n<p>The court then upheld the lower court&#8217;s refusal to impose a duty of consent because there was no evidence that the third party knew the release had been procured by deception. <strong>The third party&#8217;s knowledge was part of the analysis.<\/strong><\/p>\n<h3>The same judgment drew the boundary itself<\/h3>\n<p>Here is the most striking feature of this dispute. 2003Da35567 addressed the opposing line of authority and distinguished it in terms:<\/p>\n<p>&#8220;<strong>Supreme Court of Korea, August 31, 1971, 71Da1285 and September 30, 1997, 95Da39526, cited in the grounds of appeal, are to the effect that where a registration has been cancelled improperly by means such as forging application documents, without the intent of the right holder and without any underlying cause, so that the cancellation registration is void, a third party with a registered interest owes a duty, regardless of good or bad faith, to give the consent necessary for the right holder&#8217;s restoration procedure; the facts of this case differ, and those authorities are not apt to be invoked here.<\/strong>&#8220;<\/p>\n<p>That sentence is the boundary between the two lines:<\/p>\n<table>\n<thead>\n<tr>\n<th>Point<\/th>\n<th>Cancellation <strong>not<\/strong> by the right holder&#8217;s intent<\/th>\n<th>Cancellation <strong>by<\/strong> the right holder&#8217;s intent<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Typical facts<\/td>\n<td>Unauthorized cancellation using forged application documents or a forged power of attorney; registrar error<\/td>\n<td>Release given under deception; cancellation filed by mistake<\/td>\n<\/tr>\n<tr>\n<td>Nature of the cancellation<\/td>\n<td>Void<\/td>\n<td>Intent existed; only the intent was defective<\/td>\n<\/tr>\n<tr>\n<td>Third party&#8217;s good or bad faith<\/td>\n<td><strong>Not considered<\/strong><\/td>\n<td>A substantive-law duty is required, and knowledge is considered<\/td>\n<\/tr>\n<tr>\n<td>Leading authority<\/td>\n<td>95Da39526; 71Da1285; 69Da2193<\/td>\n<td>2003Da35567<\/td>\n<\/tr>\n<tr>\n<td>This case<\/td>\n<td><strong>Here<\/strong> \u2014 forged power of attorney<\/td>\n<td>\u2014<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The buyers&#8217; authority sat in the right-hand column; this case sat in the left. Two disputes that look identical in caption can end in opposite results depending on <strong>how the cancellation came about<\/strong>. Citing a holding without checking its facts produces exactly this outcome.<\/p>\n<p><\/p>\n<h2 id=\"sec-7\">Why did the argument that the lender also knew fail?<\/h2>\n<p class=\"lead-text\">On appeal the buyers changed the angle. On July 31, 2017, after the cancellation, D acquired ownership from C, <strong>borrowed from the same lender, and granted that lender a new mortgage<\/strong> over the same apartment.<\/p>\n<p>The argument followed: the lender must have reviewed the property then, so it knew or could have known that the earlier mortgage had been unlawfully cancelled. A lender with such <strong>intent or gross negligence<\/strong> should not be permitted to demand consent, and in any event the buyers owed no substantive-law duty to give it.<\/p>\n<p>The practical stakes were real. A restored mortgage recovers its <strong>April 14, 2017 priority<\/strong>, ahead of the new mortgage the same lender took in July 2017. The encumbrance on the property increases accordingly.<\/p>\n<p>The appellate court&#8217;s answer was short. Even assuming the lender knew or could have known of the unlawful cancellation when it lent to D and took the new mortgage, <strong>that circumstance is no obstacle whatever to seeking the consent required for restoration<\/strong>.<\/p>\n<p>That conclusion follows from the structure already described. If the <strong>third party&#8217;s<\/strong> knowledge is excluded in the void-cancellation category, the <strong>right holder&#8217;s<\/strong> knowledge has even less claim to relevance. The duty arises from the objective fact that the cancellation is void, not from what the parties knew.<\/p>\n<p>One qualification. The holding concerns the specific setting of <strong>a claim for consent to restoration<\/strong>. It does not mean that a secured lender&#8217;s lax collateral management is always irrelevant in other legal relationships, such as comparative fault in a damages claim or a dispute with a junior secured creditor.<\/p>\n<p><\/p>\n<h2 id=\"sec-8\">What if the third party simply refuses to consent?<\/h2>\n<p class=\"lead-text\">Restoration remains available. A <strong>judgment ordering the declaration of consent<\/strong> substitutes for the consent document. This was the buyers&#8217; final procedural argument, and the appellate court rejected it by pointing to the governing rule.<\/p>\n<p>The buyers reasoned that Article 59 of the Registration of Real Estate Act requires &#8220;the consent of that third party,&#8221; so consent itself is indispensable and an authenticated copy of a judgment cannot take its place. On that reading, a refusal would make the statutory requirement impossible to satisfy.<\/p>\n<p>The appellate court rejected this on the basis of the Korean Registration of Real Estate Rules. Where a third party&#8217;s consent is required for a restoration filing, it is clear that the filing may be made with information evidencing that consent <strong>or information evidencing a judgment that can be asserted against it<\/strong>.<\/p>\n<p>The provision is Article 46(1)(iii) of the Registration of Real Estate Rules: the attachments to be furnished to the registry office include &#8220;where the consent of a third party with a registered interest is required, information evidencing such consent or information evidencing that there is a judgment which may be asserted against that party.&#8221;<\/p>\n<p>This is why the claim takes the form of <strong>an order to declare consent<\/strong>. Once final, a judgment ordering a declaration of intent is treated as the declaration having been made, and the authenticated copy becomes the attachment filed with the registry office. Restoration does not depend on the third party&#8217;s cooperation.<\/p>\n<p>For a secured lender the practical consequence matters. On discovering that collateral was cancelled by forgery, there is no need to wait for the current registered owners to agree. The claim should seek <strong>performance of the restoration procedure from the party named in the cancellation, and declarations of consent from the third parties with registered interests<\/strong>, in a single action. That is exactly the structure of the trial court&#8217;s order in this case.<\/p>\n<p><\/p>\n<h2 id=\"sec-9\">What priority does the restored mortgage take?<\/h2>\n<p class=\"lead-text\">It reverts to the time of cancellation. Restoration recovers the original entry rather than creating a new one, so it has the same effect as if the cancellation had never occurred. Here the original priority of <strong>April 14, 2017, receipt no. 84556<\/strong> revives.<\/p>\n<p>The Supreme Court of Korea has used two formulations. In 89Daka5673 the restoration produces &#8220;retroactively, as of the time of cancellation, the same effect as if no cancellation had occurred.&#8221; In 95Da39526 it is a registration made &#8220;for the purpose of retaining the same effect as if the cancellation had never occurred from the outset.&#8221;<\/p>\n<p>For a buyer, that retroactivity is consequential. The restored mortgage <strong>outranks<\/strong> every security interest and disposition restraint registered after the cancellation, including the new mortgage granted in July 2017.<\/p>\n<p>The restored mortgage also revives with its full maximum secured amount of <strong>KRW 142.8 million<\/strong>. Because more than KRW 100 million of the secured claim was still outstanding at the close of argument, this was not a nominal encumbrance. If the borrower does not pay, <strong>the apartment the buyer lives in can be sold at auction<\/strong>. A duty to consent looks procedural; its consequences are not.<\/p>\n<p><\/p>\n<h2 id=\"sec-10\">Are some registrations cancelled rather than consented to?<\/h2>\n<p class=\"lead-text\">Yes. A registration that <strong>cannot coexist<\/strong> on the register with the registration to be restored falls into that category. Its holder is not a proper defendant to a consent claim but a party whose registration must first be cancelled, and a consent claim against that holder is dismissed for lack of standing.<\/p>\n<p>The Supreme Court of Korea held:<\/p>\n<p>&#8220;<strong>Where a registration has been made that cannot coexist on the register with the registration to be restored, the restoration cannot be effected unless that registration is first cancelled, so such a registration is merely subject to cancellation prior to the restoration, and there is no need to treat the party obligated on it as a third party with a registered interest and to obtain that party&#8217;s consent separately; a consent claim against such a party is therefore unlawful as a claim against a party without standing<\/strong>&#8221; (Supreme Court of Korea, July 11, 2013, 2013Da18011).<\/p>\n<p>The same distinction appears in 2003Da35567. There the plaintiff sought the consent of another <strong>superficies holder<\/strong> to the restoration of its own superficies. Because superficies, as a right of use, cannot be created twice over the same land, the two could not coexist, and the claim was dismissed. If there is a ground of invalidity, the remedy is cancellation, not consent.<\/p>\n<h3>Why consent was the right claim here<\/h3>\n<p>The registration to be restored was a <strong>mortgage<\/strong>; the buyers held <strong>ownership transfer registrations<\/strong>. Ownership and a mortgage plainly coexist over the same property, so the two entries are <strong>compatible<\/strong>. The buyers were therefore subject to a consent claim rather than a cancellation claim.<\/p>\n<p>A restoration dispute is best analyzed in three steps:<\/p>\n<ul>\n<li><strong>Step 1<\/strong> \u2014 Was the cancellation made by the right holder&#8217;s intent? A voluntary cancellation cannot be restored at all.<\/li>\n<li><strong>Step 2<\/strong> \u2014 Is the opposing party a third party with a registered interest? The risk of loss must appear formally from the register, judged as of the time of restoration.<\/li>\n<li><strong>Step 3<\/strong> \u2014 Can that registration coexist with the registration to be restored? If not, the claim must seek cancellation rather than consent; choosing wrong means dismissal.<\/li>\n<\/ul>\n<p><\/p>\n<h2 id=\"sec-11\">What happens if the property is auctioned during the lawsuit?<\/h2>\n<p class=\"lead-text\">Both the restoration claim and the consent claim lose their legal interest and are dismissed. When real property is sold in a Korean auction procedure, the mortgages over it are extinguished as a matter of course, and a mortgage cancelled without cause is extinguished along with them.<\/p>\n<p>The holding reads:<\/p>\n<p>&#8220;Where, after a mortgage registration was cancelled without cause, an auction procedure was conducted over the mortgaged real property on the application of another mortgagee or other right holder, the decision approving the sale became final, and the purchaser paid the sale price in full, <strong>the mortgage cancelled without cause is also extinguished.<\/strong> Accordingly, where, during a lawsuit seeking performance of the restoration procedure for a mortgage registration cancelled without cause and a declaration of consent to that restoration, an auction procedure was conducted, the sale approval became final, and the purchaser paid the price in full, the mortgages created over the property sold are extinguished as a matter of course, so <strong>there is no longer any legal interest in seeking performance of the restoration procedure or a declaration of consent<\/strong>&#8221; (Supreme Court of Korea, December 11, 2014, 2013Da28025).<\/p>\n<p>Note the source of that extinction. It arises from the <strong>auction sale as a separate event<\/strong>, not from the forged cancellation. This follows directly from the same judgment&#8217;s statement that cancellation on the basis of forged documents does not by itself extinguish the mortgage.<\/p>\n<p>The implications differ on each side:<\/p>\n<ul>\n<li><strong>For the secured lender it is a deadline.<\/strong> If an auction commenced by another right holder concludes before the restoration is registered, the lender loses the collateral despite winning the case. On discovering an unlawful cancellation, the lender must track the auction docket alongside the restoration action. Where distribution is already under way, an objection in the distribution procedure is worth considering.<\/li>\n<li><strong>For a buyer it may be a defense.<\/strong> If an auction is already pending over the property, the legal interest in the claim itself becomes contestable.<\/li>\n<\/ul>\n<p>No such circumstance existed here. With more than KRW 100 million of the secured claim outstanding, restoration and consent were granted in full.<\/p>\n<p><\/p>\n<h2 id=\"sec-12\">If consent is unavoidable, who pays for the loss?<\/h2>\n<p class=\"lead-text\">Owing a duty to consent is not the same as bearing the loss. In a case involving a mortgage cancelled by forgery, the Supreme Court of Korea <strong>reversed a judgment that had dismissed the buyer&#8217;s damages claim<\/strong>. For buyers this is the most consequential holding in this area.<\/p>\n<p>The case is 2018Da285328, described above. The forger was <strong>the loan officer of the lender that held the mortgage<\/strong>, and once the buyer was held to owe consent in the principal action, the buyer counterclaimed against that lender for damages on a <strong>vicarious liability<\/strong> theory.<\/p>\n<h3>The lower court found no loss yet<\/h3>\n<p>The lower court reasoned that although the lender might be liable as the employer of its officer, the buyer could not be said to have suffered loss <strong>unless and until the buyer actually lost ownership of the apartment through enforcement of the security or paid the maximum secured amount on the debtor&#8217;s behalf<\/strong>. Merely owing a duty to consent was not, on that view, a loss. The counterclaim was dismissed in full.<\/p>\n<p>The reasoning has surface appeal. The buyer had not yet lost the apartment, nor paid anything.<\/p>\n<h3>The Supreme Court located the loss earlier<\/h3>\n<p>The Supreme Court fixed the loss at a different moment. The starting point is that the buyer could have <strong>withheld payment<\/strong>.<\/p>\n<p>&#8220;Absent a special agreement, a purchaser of real property may, where a mortgage registration over the property creates a risk that the purchaser will not receive complete transfer of ownership, <strong>refuse payment of the purchase price up to the maximum secured amount shown in the register until that mortgage is cancelled<\/strong>&#8221; (Supreme Court of Korea, September 27, 1988, 87Daka1029). Article 588 of the Korean Civil Act likewise allows a buyer to refuse payment, to the extent of the risk, where a person asserts rights over the object of sale and the buyer may lose all or part of the right purchased.<\/p>\n<p>Had the mortgage remained on the register, then, the buyer could have <strong>held back the maximum secured amount<\/strong>. The forged cancellation removed that opportunity. The Supreme Court concluded:<\/p>\n<p>&#8220;The plaintiff&#8217;s officer D unlawfully caused the mortgage registration to be cancelled, thereby <strong>creating the appearance that no mortgage had been created<\/strong> over the apartment, and the defendant, believing this and unaware that the mortgage validly existed, entered into the sale contract and paid the purchase price in full, with the result that the defendant paid a purchase price it need not have paid. Since the defendant cannot legally resist the restoration of the mortgage registration, <strong>the defendant has actually suffered loss by paying, in reliance on an unlawfully created entry in the register, a purchase price it was not required to pay in law or under the contract<\/strong>&#8221; (Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335).<\/p>\n<p>The loss thus crystallized when <strong>the price was paid in full<\/strong>, not when the property would be lost. The court added that the borrower&#8217;s loan had gone unpaid past maturity and the borrower had been declared bankrupt, so the possibility of substantive loss could not be ruled out. The judgment below was reversed and remanded.<\/p>\n<h3>The defendant to sue depends on the facts<\/h3>\n<p>The lender was the proper defendant there <strong>because the forger was its own employee<\/strong>, engaging vicarious liability under Article 756 of the Korean Civil Act. Where the forger is the borrower, the analysis differs. That is the situation in 2022Da230769, the case examined here: the forger was borrower B, and the lender was itself a victim.<\/p>\n<p>In that configuration a buyer may look to:<\/p>\n<ul>\n<li><strong>Tort damages against the forger<\/strong> \u2014 often of limited practical value where the forger is insolvent. In 2018Da285328 the borrower had been declared bankrupt.<\/li>\n<li><strong>The seller&#8217;s warranty and contractual liability<\/strong> \u2014 absent special circumstances a seller owes a duty to transfer ownership free of restrictions or encumbrances.<\/li>\n<li><strong>Liability of anyone who participated in the forgery or failed to verify<\/strong> \u2014 including vicarious liability where the forger was an employee of an institution.<\/li>\n<\/ul>\n<p>The sequence is therefore: contesting the duty to consent and deciding whom to hold liable for the loss are <strong>separate determinations<\/strong>, and the second is often the one that produces an actual recovery. Both should be planned from the moment the complaint seeking consent is served.<\/p>\n<p><\/p>\n<h2 id=\"sec-13\">What should a buyer check before signing?<\/h2>\n<p class=\"lead-text\">The essential point is singular. Look not at <strong>what the register shows now<\/strong> but at <strong>what has disappeared from it<\/strong>. That is precisely what the buyers in this case missed.<\/p>\n<p>A Korean certified copy of the register can be issued either <strong>including cancelled entries<\/strong> or <strong>showing currently valid entries only<\/strong>. A copy limited to currently valid entries will not show an already cancelled mortgage at all. To detect a security interest cancelled by forgery, the copy must <strong>include cancelled entries<\/strong>. In practice this step is frequently skipped.<\/p>\n<p>With the cancelled entries visible, these are the signals worth pursuing:<\/p>\n<ul>\n<li><strong>Ownership transferred soon after a security interest was cancelled<\/strong> \u2014 here the mortgage was cancelled on June 14, 2017, and the transfers began immediately afterward.<\/li>\n<li><strong>Repeated transfers of ownership over a short period<\/strong> \u2014 from B to C, to D, to Company E. Turnover that does not look like end-user demand is itself a reason to inquire.<\/li>\n<li><strong>A security interest cancelled on the ground of release, with no evidence of repayment<\/strong> \u2014 a mortgage securing a twenty-year loan being released two months after drawdown is not ordinary. Ask the seller for the repayment record and the financial institution&#8217;s release documentation.<\/li>\n<li><strong>Indications that the owner at the time of cancellation later faced criminal proceedings<\/strong> \u2014 not easily verified, but rapid turnover sometimes has this background.<\/li>\n<\/ul>\n<p>The contract itself can carry some of the protection. Have the seller <strong>represent and warrant that any prior security interest was lawfully cancelled<\/strong>, and specify the right to terminate and the measure of damages if that representation proves untrue. Where the registration system does not protect the buyer, the protection must be built into the contract.<\/p>\n<p>A buyer already facing a claim should begin with whether <strong>the cancellation was in fact procured by forgery<\/strong>. As shown above, a cancellation made by the right holder&#8217;s intent leads to a different result, and there the claimant must prove a substantive-law duty to consent. Whether the registrations can coexist, and whether there is a real risk of loss judged as of the time of restoration, are also worth testing. And the damages route remains open: the Supreme Court held that a buyer &#8220;has actually suffered loss by paying, in reliance on an unlawfully created entry in the register, a purchase price it was not required to pay in law or under the contract,&#8221; reversing a judgment that had required loss of ownership first (Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335). Contesting consent and recovering the loss are best planned together from the outset.<\/p>\n<p><\/p>\n<h2 id=\"sec-14\">What should a secured lender do?<\/h2>\n<p class=\"lead-text\">A security interest is not finished when it is registered. The lender here lost its collateral two months into a twenty-year loan, and considerable time passed before it confirmed the fact and filed suit. Meanwhile the apartment passed through three hands, and the number of defendants grew accordingly.<\/p>\n<ul>\n<li><strong>Monitor registration changes on collateral as a routine.<\/strong> A cancellation appears on the register immediately. The earlier it is found, the fewer interested parties there are and the simpler the restoration.<\/li>\n<li><strong>Review the controls over seals, powers of attorney, and registration identifiers.<\/strong> The cancellation here was effected with a forged power of attorney. In 2018Da285328 the forger was the lender&#8217;s own loan officer, which is a reminder that the exposure is not only external.<\/li>\n<li><strong>Run the criminal track in parallel.<\/strong> Forgery of a private document and uttering, and false entry in an authenticated original deed and uttering, are the relevant offenses. The borrower&#8217;s confession and conviction were decisive for the civil proof in this case.<\/li>\n<li><strong>Frame the action once, completely.<\/strong> Seek performance of the restoration procedure from the party named in the cancellation and declarations of consent from every third party with a registered interest. If one is omitted, the filing package for the registry office is incomplete.<\/li>\n<li><strong>Check whether an auction is pending over the property.<\/strong> If, during the lawsuit, an auction commenced by another right holder proceeds to full payment of the sale price, the mortgage cancelled without cause is extinguished and the legal interest in the claim disappears (Supreme Court of Korea, December 11, 2014, 2013Da28025).<\/li>\n<li><strong>Confirm first that the secured claim survives.<\/strong> If the claim has been satisfied, the mortgage is extinguished by its accessory nature and there is nothing to restore.<\/li>\n<\/ul>\n<p class=\"closing\">The buyers in this case were not without a grievance. But in a system that withholds public faith from the register, &#8220;the register was clean&#8221; is not a defense. What does protect a buyer is the habit of examining cancelled entries as well as current ones, contract terms that cover what that examination cannot reach, and an early decision about where the loss will ultimately be recovered. For foreign investors and companies transacting in Incheon, including the Incheon Free Economic Zone (IFEZ) districts of Songdo International Business District, Cheongna International City, and Yeongjong International City, this is a point of Korean law that has no direct equivalent in many other jurisdictions.<\/p>\n<p><\/p>\n<h2 id=\"sec-faq\">Frequently asked questions<\/h2>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. I checked the register before buying. Can a mortgage that was not there really come back?<\/p>\n<p>A. Yes. If the cancellation was itself void because it was effected by forgery without the right holder&#8217;s intent, anyone who registered an interest afterward owes a duty to consent to restoration regardless of good or bad faith (Supreme Court of Korea, September 30, 1997, 95Da39526). Korean law does not give the real estate register public faith, so reliance on the register alone does not protect a buyer. Seoul Southern District Court 2020Ga-dan243505 and its appeal, 2021Na68054, reached the same conclusion, made final by the Supreme Court of Korea on July 28, 2022, 2022Da230769.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. If the mortgage registration is cancelled, is the mortgage itself gone?<\/p>\n<p>A. No. The Supreme Court of Korea held that &#8220;registration is a requirement for the creation of a real right and not a requirement for its continuation, so where a registration is cancelled without cause the effect of the real right is not affected at all, and even before the restoration registration is completed the person named in the cancelled registration is presumed to be the lawful right holder&#8221; (Supreme Court of Korea, September 30, 1997, 95Da39526). The mortgage remained legally alive; it was merely invisible on the register.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can any cancelled registration be restored?<\/p>\n<p>A. No. A registration the right holder cancelled voluntarily cannot be restored. The Supreme Court of Korea held that &#8220;where a party has voluntarily filed the cancellation, for whatever reason, a restoration registration is not available&#8221; (Supreme Court of Korea, June 26, 1990, 89Daka5673). Restoration is limited to cancellations that were improper for a substantive reason, such as invalidity or rescission of the cause of the cancellation, or for a procedural defect, such as registrar error.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. I genuinely knew nothing about the forgery. Does my good faith count for nothing?<\/p>\n<p>A. Not in this category. The Supreme Court of Korea held that where the cancellation is void, &#8220;a third party with a registered interest owes a duty, regardless of good or bad faith,&#8221; to consent (Supreme Court of Korea, September 30, 1997, 95Da39526). An earlier judgment went further, excluding even actual loss from the inquiry: the duty applies &#8220;regardless of good or bad faith, and regardless of whether the party suffers loss from the restoration registration&#8221; (Supreme Court of Korea, February 24, 1970, 69Da2193). Separately from the duty to consent, claims against the seller and against those responsible for the forgery remain available.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. I was told there is a Supreme Court case denying a duty to consent based on the third party&#8217;s good faith.<\/p>\n<p>A. That is Supreme Court of Korea, February 27, 2004, 2003Da35567. In that case, however, the cancellation was made pursuant to the right holder&#8217;s own declaration of release. The release had been induced by deception, but the intent to release existed. The same judgment stated that 71Da1285 and 95Da39526 stand for the proposition that where a registration is cancelled improperly by means such as forging application documents, without the right holder&#8217;s intent and without any underlying cause, a third party owes a duty to consent regardless of good or bad faith, and that &#8220;the facts of this case differ, and those authorities are not apt to be invoked here.&#8221; It does not apply to forged cancellations.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. These are old judgments. Are they still good law?<\/p>\n<p>A. Yes. The Supreme Court of Korea confirmed the same standard under the current provision: &#8220;A third party with a registered interest within the meaning of Article 59 of the Registration of Real Estate Act means a person who would be exposed to the risk of loss if the restoration registration were made, where that risk is recognized formally from the existing entries in the register&#8221; (Supreme Court of Korea, July 11, 2013, 2013Da18011). Article 75 of the former Act became Article 59 in the complete revision of April 12, 2011; only the article number changed.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. If the lender knew about the unlawful cancellation, can I refuse consent?<\/p>\n<p>A. The appellate court in this case said no. The buyers argued that the lender knew or could have known of the unlawful cancellation when it took a new mortgage over the same apartment in July 2017, but the court held that even so, that circumstance is no obstacle whatever to seeking the consent required for restoration (Seoul Southern District Court, April 8, 2022, 2021Na68054). The duty arises from the objective fact that the cancellation is void.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. What if I refuse to consent altogether?<\/p>\n<p>A. Restoration still proceeds. Article 46(1)(iii) of the Korean Registration of Real Estate Rules provides that the attachments include, &#8220;where the consent of a third party with a registered interest is required, information evidencing such consent or information evidencing that there is a judgment which may be asserted against that party.&#8221; A final judgment ordering a declaration of consent substitutes for the consent document. The appellate court in this case rejected the contrary argument on exactly this basis.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. What priority does the restored mortgage take?<\/p>\n<p>A. It reverts to the time of cancellation. A restoration registration produces &#8220;retroactively, as of the time of cancellation, the same effect as if no cancellation had occurred&#8221; (Supreme Court of Korea, June 26, 1990, 89Daka5673). Here the original priority of April 14, 2017, receipt no. 84556, revives, ranking ahead of security interests and disposition restraints registered after the cancellation.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Does consenting mean I lose the property?<\/p>\n<p>A. Consent itself does not transfer ownership. What is restored is the mortgage; ownership remains. The buyer bears the encumbrance up to the maximum secured amount, and if the borrower defaults the property can be sold at auction. In this case the maximum secured amount was KRW 142.8 million and more than KRW 100 million of the secured claim was still outstanding at the close of argument.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Can the claimant sue the wrong party in a restoration case?<\/p>\n<p>A. Yes. The holder of a registration that cannot coexist on the register with the registration to be restored is not a proper defendant to a consent claim but a party whose registration must first be cancelled, and a consent claim against that holder is unlawful for lack of standing (Supreme Court of Korea, July 11, 2013, 2013Da18011). Here, however, the registration to be restored was a mortgage and the defendants held ownership transfer registrations, which coexist, so a consent claim was correct.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. Is there a Supreme Court case applying this rule to a mortgage specifically?<\/p>\n<p>A. Yes. In Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335, a lender&#8217;s own loan officer forged a power of attorney in the lender&#8217;s name and cancelled a mortgage registration. The court found no error in the holding that a person who acquired ownership after the cancellation is a third party with a registered interest and owes a duty to declare consent. The buyer there had purchased the apartment three days after the cancellation and still did not avoid the duty.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. What happens if the property is auctioned while the lawsuit is pending?<\/p>\n<p>A. Both claims lose their legal interest. The Supreme Court of Korea held that where &#8220;an auction procedure was conducted over the mortgaged real property on the application of another mortgagee or other right holder, the decision approving the sale became final, and the purchaser paid the sale price in full, the mortgage cancelled without cause is also extinguished&#8221; (Supreme Court of Korea, December 11, 2014, 2013Da28025). This creates a deadline for the secured lender and may supply a defense for the buyer.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. If I have to consent, do I simply absorb the loss?<\/p>\n<p>A. No. The Supreme Court of Korea reversed a judgment dismissing a buyer&#8217;s damages claim. The lower court had held that no loss arises until the buyer loses ownership or pays the maximum secured amount on the debtor&#8217;s behalf, but the Supreme Court held that the buyer &#8220;has actually suffered loss by paying, in reliance on an unlawfully created entry in the register, a purchase price it was not required to pay in law or under the contract&#8221; (Supreme Court of Korea, April 3, 2019, 2018Da285328 and 2018Da285335). Had the mortgage remained on the register, the buyer could have withheld payment up to the maximum secured amount. Note that the lender was the proper defendant there because the forger was its employee; where the forger is the borrower, the defendant differs.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. How do I check for this risk before buying property in South Korea?<\/p>\n<p>A. Obtain the certified copy of the register <strong>including cancelled entries<\/strong> rather than currently valid entries only, so that previously cancelled security interests are visible. Pay particular attention where ownership transferred shortly after a security interest was cancelled, where ownership changed hands repeatedly over a short period, or where a mortgage securing a long-term loan was released soon after drawdown; ask the seller for the repayment record and the financial institution&#8217;s release documentation. Adding a representation and warranty on the lawfulness of any prior cancellation, with termination and damages provisions, is also advisable.<\/p>\n<\/div>\n<div class=\"faq-item\">\n<p class=\"faq-q\">Q. A lender has just discovered its mortgage was cancelled by forgery. What comes first?<\/p>\n<p>A. Identify every party currently holding a registered interest, then bring a single action seeking performance of the restoration procedure from the party named in the cancellation and declarations of consent from all third parties with registered interests. Running the criminal track in parallel matters: in this case the borrower&#8217;s confession and conviction for forgery of a private document and uttering, and false entry in an authenticated original deed and uttering, were decisive for the civil proof. Check as well whether an auction is pending, since full payment of the sale price extinguishes the mortgage. Because the number of interested parties grows with delay, routine monitoring of registration changes on collateral is the more fundamental safeguard.<\/p>\n<\/div>\n<div class=\"author-box\">\n    <img decoding=\"async\" class=\"author-avatar\" src=\"https:\/\/atlaw.kr\/wp-content\/uploads\/2022\/12\/\ubc15\uc18c\uc601-1.png\" alt=\"Soyoung Park, Representative Attorney \u2014 Atlas Legal\"><\/p>\n<div class=\"author-text\">\n<div class=\"author-section-label\">About the Author<\/div>\n<div class=\"author-name\">Soyoung Park | Representative Attorney<\/div>\n<div class=\"author-detail\">Family Law, Inheritance, Construction &amp; Real Estate Disputes<\/div>\n<div class=\"author-detail\">Judicial Research and Training Institute, 33rd Class<\/div>\n<div class=\"author-detail\">Korea University, Department of Law<\/div>\n<div class=\"author-detail\">Atlas Legal | Incheon Songdo, South Korea<\/div>\n<p>      <a class=\"author-link\" href=\"https:\/\/atlaw.kr\" target=\"_blank\" rel=\"noopener noreferrer\">Visit Atlas Legal Homepage \u2192<\/a>\n    <\/div>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A mortgage cancelled by a forged power of attorney is void in South Korea, and a later buyer must consent to its restoration even in good faith.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[17],"tags":[943,944,942,946,945],"class_list":["post-1951","post","type-post","status-publish","format-standard","hentry","category-civil","tag-forged-cancellation","tag-korean-registration-of-real-estate-act","tag-mortgage-restoration-registration","tag-real-estate-register-public-faith","tag-registered-interest-third-party"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Restoring a Cancelled Mortgage in South Korea | 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