May a rehabilitation creditor join as an auxiliary participant after the trustee continues the creditor's revocation action as an avoidance action? Supreme Court Decision 2021Ma6702 on 'an interest in the outcome of the litigation'

Question

Article 71 of the Civil Procedure Act provides that a third party who has an interest in the outcome of the litigation may, in order to help one party, participate in the litigation pending before the court. The question is what relationship to the case gives a third party that interest, where the judgment will not bind the third party directly.

Decision 2021Ma6702 raises that question in the setting of a creditor's revocation action. Industrial Bank of Korea, as a creditor of Non-party, had sued the defendant over a lease contract and a mortgage security agreement. While the defendant's appeal was pending, rehabilitation proceedings were opened against Non-party, who was deemed the trustee, continued the action in that capacity and changed the claim into an avoidance action under Article 100(1)(i) of the Debtor Rehabilitation and Bankruptcy Act. The bank applied to take part in the continued action as an auxiliary participant helping the trustee, and the lower court refused the application for want of an interest in the outcome.

Material to check

The statutes are Article 71 of the Civil Procedure Act, quoted above; its current text, published with the amendment data of Act No. 21993 of 29 September 2026 effective 2 October 2026, also provides that this does not apply where the participation would considerably delay the proceedings, a proviso the decision does not discuss. Article 406 of the Civil Act allows a creditor, where the debtor, knowing it prejudices creditors, performs a juristic act concerning property, to seek in court the revocation of the act and the restoration of the original state, unless the person benefited or an acquirer did not know this at the time; paragraph 2 requires the action within one year of learning the ground of revocation and five years of the act. The Debtor Rehabilitation and Bankruptcy Act suspends proceedings on the debtor's property when rehabilitation is opened (Article 59(1)), lets the trustee or the other party continue those unrelated to rehabilitation claims or security interests (Article 59(2)); lets the trustee avoid listed acts for the benefit of the debtor's property, including in item (i) an act done knowing it prejudiced rehabilitation creditors or security holders, unless the person benefited did not know this (Article 100(1)); has the trustee exercise the avoidance right by action, claim or defence, with actions and avoidance claims under the exclusive jurisdiction of the rehabilitation court (Article 105); and, in Article 113, suspends an action a rehabilitation creditor filed under Article 406(1) of the Civil Act that is pending when rehabilitation opens, applying Article 59(2) to (5) mutatis mutandis.

The decisions are Decision 2021Ma6702 and the three it cites. Decision 2014Ma4009 (29 May 2014) states the meaning of the 'interest in the outcome of the litigation' required for auxiliary participation and, on an application by a party holding a garnishment order over distribution money in a case where a provisional seizure creditor sued to fix the amount to be distributed, held that the lower court's refusal of participation was wrong. Decision 2017Da265129 (15 June 2018) holds that after a bankruptcy adjudication a bankruptcy creditor cannot bring a creditor's revocation action, that the trustee may continue such an action however unlawful it was and exercise the avoidance right by amending the claim, and that an avoidance action falls under the exclusive jurisdiction of the court in charge of the bankruptcy, with the court of the pending action transferring the case where that action was at first instance. Decision 2016Da242440 (26 July 2018) holds that the requirement for auxiliary participation is a legal interest in the outcome, and that a company's interest in being unable to exercise the debtor's claims once the creditor was paid was merely factual and economic, so its application did not meet the requirement.

Possible readings

Read with Decision 2016Da242440, Article 71 of the Civil Procedure Act calls for a legal interest, not one that is merely factual or economic. Decision 2021Ma6702 cites Decision 2014Ma4009 and Decision 2016Da242440 for the further rule that such an interest is recognised even where the judgment's effect does not directly reach the third party, as long as that party's legal position is determined in a relationship premised on that judgment.

A second reading follows the division between the creditor's revocation right and the trustee's avoidance right. The decision states that where the debtor commits an act prejudicing a creditor, the creditor may exercise the right of revocation under Article 406 of the Civil Act, but that after rehabilitation proceedings are opened the trustee may exercise the avoidance right for the benefit of the debtor's property under Articles 100 and 105 of the Debtor Rehabilitation and Bankruptcy Act. Where a rehabilitation creditor's revocation action is pending at that time, the proceedings are suspended and the trustee or the other party may continue them under Article 113 and Article 59(2), and the trustee may continue the existing action and change it into an avoidance action; the decision cites Decision 2017Da265129, which had decided that point for the trustee in bankruptcy.

A third reading is the one the decision applies. Where the trustee continues the rehabilitation creditor's revocation action and changes it into an avoidance action, the outcome of the litigation directly affects the increase or decrease of the debtor's property and therefore the legal position of the rehabilitation creditor. On that basis the decision holds that the rehabilitation creditor who brought the revocation action has, absent special circumstances, an interest in the outcome and may take part in order to help the trustee.

What the decisions held

Supreme Court Decision 2021Ma6702 (10 December 2021) set aside the decision of the Seoul Eastern District Court of 7 September 2021 (Case No. 2020Na28186) and remanded the case to that court. The lower court had held that the appellant on review had no interest in the outcome of the litigation and dismissed its application for auxiliary participation. The Supreme Court held that this misunderstood the law on the requirements for auxiliary participation and affected the decision, so the ground of review was well founded.

The decision took the following facts from the lower court's decision and the record. Industrial Bank of Korea, a creditor of Non-party, brought a creditor's revocation action against the defendant, and on 14 August 2020 the court of first instance (Seoul Eastern District Court, Case No. 2019Ga-Dan147882) gave judgment cancelling the lease contract of 24 January 2017 and the mortgage security agreement of 3 September 2018 between Non-party and the defendant over an apartment owned by Non-party, and ordering the defendant to carry out the cancellation registration of the mortgage registration completed on 4 September 2018. The defendant appealed. While the appeal was pending, Non-party obtained an order opening rehabilitation on 20 October 2020 (Seoul Rehabilitation Court, Case No. 2020Hoe-Dan100138) and, as no trustee was appointed under Article 74(3) and (4) of the Debtor Rehabilitation and Bankruptcy Act, was deemed to be the trustee; Non-party then continued the action in the capacity of trustee and changed the claim into an avoidance action under Article 100(1)(i) of that Act. Industrial Bank of Korea applied to take part in the continued action as an auxiliary participant.

Applying its rule to those facts, the decision held that Non-party had continued the revocation action in the capacity of trustee and changed it into an avoidance action, that the appellant on review, the former plaintiff and a rehabilitation creditor, had an interest in the outcome of the litigation, and that it could therefore take part in order to help the trustee. It decided only the requirements for auxiliary participation; it did not decide the merits of the revocation claim or of the avoidance claim into which it was changed.

Points left open

The rule is stated with the words 'absent special circumstances', and the decision does not say which circumstances would be special enough to take the interest away. Nor does it discuss the proviso in the current text of Article 71 of the Civil Procedure Act, under which participation is not allowed where it would considerably delay the proceedings; the decision addresses the requirement of an interest in the outcome alone.

The decision concerns the rehabilitation creditor who brought the revocation action itself. It does not decide whether a rehabilitation creditor who did not file that action may apply for auxiliary participation, or what happens where the trustee continues the action without changing the claim into an avoidance action. It also does not say which court should hear the changed claim; Decision 2017Da265129, which it cites, held for bankruptcy that an action continued and changed at first instance falls under the exclusive jurisdiction of the bankruptcy court while one continued at the appeal stage stays with the appellate court.

When to reconsider

We revisit this brief if a later decision states what counts as a 'special circumstance' that removes the interest, rules on an application by a rehabilitation creditor who did not bring the revocation action, or settles the court that should hear the claim after the change to an avoidance action in rehabilitation, or if Article 71 of the Civil Procedure Act is amended again.

Statutes referred to

• 민사소송법 제71조
• 민법 제406조
• 채무자 회생 및 파산에 관한 법률 제59조, 제100조, 제105조, 제113조

Decisions referred to

• 대법원 2021. 12. 10. 자 2021마6702 결정 · Decision ledger
• 대법원 2014. 5. 29. 자 2014마4009 결정
• 대법원 2018. 6. 15. 선고 2017다265129 판결 · Decision ledger
• 대법원 2018. 7. 26. 선고 2016다242440 판결

Verification status

All texts were read at the National Law Information Center (law.go.kr) on 24 October 2026. Decision 2021Ma6702 was read in its published holdings, summary and reasons, the cited articles in their current text, and the three cited decisions in their published holdings, with the summary of Decision 2017Da265129.