If a mortgage is lost due to a public official's negligence... Supreme Court "Local government liable for compensation"

[Financial News] If a local government official fails to verify the extinction of a mortgage and registers a new car, resulting in the loss of the mortgage, the local government must compensate the mortgagee, according to a Supreme Court ruling.
According to the legal community on the 23rd, the Supreme Court's 3rd Division (Chief Justice Lee Suk-yeon) overturned the original ruling that dismissed the plaintiff's case in a damages lawsuit filed by OK Savings Bank against Gwacheon City, Gyeonggi Province, and returned the case to the Suwon High Court.
OK Savings Bank lent a total of 258 million won to a car rental company three times between 2015 and 2016. Subsequently, it established a mortgage on three cars owned by the company and obtained a provisional seizure decision on 22 other cars.
However, in September 2018, when the company went out of business, the car rental business registration was canceled, and the registration of cars with mortgages and provisional seizures was also canceled ex officio.
The problem arose when someone acquired cars from the company between July and September 2019 and applied for new registration. Gwacheon City registered the cars anew without submitting documents proving the extinction of the mortgage and provisional seizure rights.
In response, OK Savings Bank filed a lawsuit claiming that Gwacheon City officials failed to properly verify, effectively extinguishing the mortgage and provisional seizure, resulting in the loss of collateral.
The first and second trials sided with Gwacheon City. The court acknowledged the illegality and negligence of the act of reviving (newly registering) the cars, but judged that it was difficult to see that damage occurred as a result.
Considering that it was already difficult to conduct voluntary auctions or compulsory executions from the time the car registration was canceled ex officio, it cannot be seen that voluntary auctions or compulsory executions became impossible due to the revival registration.
The Supreme Court's judgment was different. Although the car registration was canceled ex officio, the mortgagee still retained the right to exercise the right of subrogation on the car and receive priority repayment, but suffered damage by losing the mortgage due to the negligence of the public official.
The Supreme Court stated, "There is a substantial causal relationship between the violation of duty by the defendant's public officials and the damage caused by the plaintiff's loss of mortgage," and "The defendant is liable to compensate for the damage caused by the negligence of the public officials in executing their duties in violation of the law."
However, "If the car registration is lawfully canceled ex officio, the provisional seizure registered on the car loses its effect, and it is difficult to see that the effect of the provisional seizure extends to the car body," making it difficult to see that damage occurred to the provisional seizure creditors.

jisseo@fnnews.com Seo Min-ji Reporter