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Forced auctions based on the executory title of debt under the Civil Execution Act and auctions for exercising a security right (optional auction) are called substantial auctions in the sense that they are executed by creditors in order to satisfy the creditors’ claim, and auctions for the price compensation or liquidation of properties are called formal auctions.
With regard to formal auctions, Article 274 of the Civil Execution Act stipulates that auctions by a lien and those according to the Civil Code, the Commercial Law, and other relevant laws shall be executed according to the cases of auctions for the exercise of a security right. In general, auctions according to what is stipulated by the Civil Code, the Commercial Law, and other relevant laws are called formal auctions in a narrow sense, and these auctions plus auctions by a lien are called formal auctions in a broad sense.
It is questionable, however, whether it is an interpretation of law adapted for the information society of the 21st century that, while the legal nature of a lien is considered a statutory lien, it is regarded as an auction for realization, namely, a kind of formal auction rather than an auction for exercising a security right. That is, as the paradigm on the institutional purpose of lien regulating the social condition of the 1950s and 1960s has been changed, we need new interpretations and theories adapted for the institutional function of lien regulating the information society of the 21st century.
With regard to delayed payment for construction due to unsold units, etc., the ultimate goal of creditors such as constructors who occupy the construction site and claim a lien as a means of getting payment for the construction contract is to get the liquidation of claims on the corresponding construction.
Accordingly, if an auction applied by a lienor has to be included in the category of formal auctions, it cannot be regarded as a formal auction for encashment in a pure sense, and should be regarded as a formal auction for the liquidation of the object property like an auction applied for selling inherited properties in order for a qualified acceptor to repay to an obligee of the person succeeded to or the person to receive the bequest (Article 1037 of the Civil Code).
Among the procedural issues related to real estate auctions by a lien, first, application for a real estate auction by a lien requires the attachment of objective evidence for the claim secured, and with regard to this, it is necessary to improve the system by adapting the procedure of provisional attachment. That is, it is necessary to prepare for delayed processing and to secure objectivity and transparency by getting the court’s prompt decision on the existence and scope of lien through the procedure of provisional attachment and attaching the decision to the application for real estate auction by the lien.
Second, it is considered an interpretation adapted for the nature of a lien as a real right to see that the lienor’s right ceases to exist on receiving an adequate amount of dividend at his turn.
Third, it is considered possible for other security right holders and creditors with the right to obtain preferential satisfaction to claim a dividend in auction procedure applied by a lienor.
Summing up, liens in the 1960s, which expected that lienors’ object of security would be a movable property or a small amount of property, has been changed considerably due to the claim of lien in which the claim secured is payment for construction due to recent unsold units, etc. The core of change in the paradigm of the legal nature of lien reflecting such a change in the pattern of claiming a lien is securing the real right of lien in real estate auctions adapted for the system of the Law of Property in the Civil Code.