In order for a person subject to cash settlement to bear some of the rearrangement project costs incurred before he/she loses his/her membership in the articles of incorporation or by a method designated by the articles of incorporation, the basis for the occurrence of the expenses to be borne by the person subject to cash settlement, the standards for allocation, the details and scope of the expenses shall be specified. On the contrary, the abstract provisions of the articles of incorporation stating that the person subject to cash settlement may settle after deducting project costs, etc. from the cash settlement money to be paid, cannot be said

1. Relevant provisions and legal principles

A. According to Articles 57, 60(1), and 61(1) through (3) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (amended by Act No. 12116, Dec. 24, 2013; hereinafter “former Act”), and Article 57 of the former Enforcement Decree of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (amended by Presidential Decree No. 27409, Jul. 28, 2016), a project implementer shall, in principle, bear the cost of a rearrangement project; however, a project implementer, which is a partnership, shall allocate the cost of a rearrangement project to members who impose liquidation money in the form of a difference between the price of land or buildings previously owned and the price of a newly purchased site or building at the stage of liquidation; and, in particular, a project implementer may impose and collect dues from members of the association, including the amount of dues imposed on members of the association and the amount of dues imposed on each of the project implementer and the amount of dues imposed on each of land subject to be determined by Article 27(3).

Meanwhile, in a housing reconstruction project, a partner becomes eligible for cash settlement due to satisfying the requirements prescribed in Article 47(b) of the former Act, and thus, a cooperative that is a project implementer is prohibited from imposing and collecting dues pursuant to Article 61(1) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents. However, the legal relationship between a reconstruction association and its members under the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents shall be governed by relevant statutes or articles of association, resolution at a general meeting of partners, or agreement between a cooperative and its members. Thus, only where a person subject to cash settlement is determined in advance by articles of association, a resolution at a general meeting of partners, or a mutual agreement between a cooperative and its members, etc., the cooperative may settle the legal relationship or seek a return of the amount separately in liquidation proceedings prescribed in Article 47 of the former Act (see, e.g., Supreme Court Decisions 2013Du19486, Dec. 24, 2014; 2015Da785, Aug. 30, 2016)

B. To have a person subject to cash settlement bear some of the rearrangement project costs incurred before he/she loses his/her membership in the articles of incorporation, a specific provision on the basis of the occurrence of expenses to be borne by the person subject to cash settlement, the standards for allocation, details, scope, etc. In contrast, the abstract provisions of the articles of incorporation stating that the person subject to cash settlement may settle after deducting project costs, etc. from the settlement money to be received by the person subject to cash settlement may not be obliged to bear the project costs in a way that deducts project costs from the settlement money.

1) Where the articles of association provides that a rebuilding association shall share a certain portion of the rearrangement project cost incurred during the period in which it holds its membership in the association, such project cost shall be deemed as having the same nature as the cost to be borne by the remaining members in the form of dues. As such, the equity between the procedures for bearing the cost incurred by the remaining members and the principle of equity should be maintained. In addition, although the reconstruction association guarantees an opportunity to withdraw from the association relations through cash liquidation, it shall not unreasonably limit the opportunity to withdraw from the association at an unexpected excessive cost, or compel the association to leave the association beyond the reasonable scope on the ground that the remaining members left the association relations.

However, the remaining members are protecting the interests of the remaining members by reflecting the income accrued in the course of implementing the rearrangement project, and by requiring the resolution of the general meeting of the association members by determining the amount of dues, method of collection, details of allocation by each association member, etc. However, if a person subject to cash settlement is to bear the expenses, the person should first bear the expenses at the time of withdrawal from the association relationship solely on the ground that he/she held the status of the association member without considering the income accrued from the implementation of the rearrangement project. In cases of a person subject to cash settlement, it is practically difficult to obtain a resolution of a general meeting by determining a specific share at the time of withdrawal before withdrawal from the association relationship, and it is not possible to participate in the resolution of the general meeting that determines the specific share because he/she loses the status of the union member after withdrawal. As such, the person subject to cash settlement is not able

Therefore, considering the procedural legitimacy guaranteed by the remaining members in relation to bearing expenses, it is necessary to stipulate specific information on the basis of the basis of the occurrence of expenses, allocation standards, details, scope, etc. to be borne by a person subject to cash settlement at the time of withdrawal from partnership relations by providing necessary and adequate information about the burden of expenses to the association members to determine whether to reasonably withdraw from partnership by providing necessary and adequate information about the burden of expenses to the association members. It is against the equity between the remaining members and the withdrawing association members to ensure that a person subject to cash settlement bears an abstract project cost based solely on the articles of association provisions that stipulate

2) In particular, the Act on the Maintenance and Improvement of Urban Areas does not stipulate at all general provisions, such as whether a person subject to cash settlement may bear the cost incurred prior to the time of cash settlement, or the procedures for sharing the cost therefrom. Therefore, if the articles of incorporation provides that a person subject to cash settlement shall bear a certain portion of the project cost, the determination of whether a person subject to cash settlement may be made to bear a certain portion of the maintenance project cost in detail through the contents and interpretation of the

As can be seen, items of expenses to be borne by a person subject to cash settlement and standards for bearing such expenses are the most important and important contents of the articles of association, which serve as the basis for the burden of such expenses. However, in cases where the provisions of the Urban Improvement Act and the articles of association stipulate that a person may liquidate after deducting business expenses, etc. in the course of calculating the settlement money for cash, the specific contents and standards for deduction of expenses cannot be reasonably predicted for expenses to be borne by the person subject to cash settlement to be borne before withdrawal from partnership relations, barring special circumstances. Therefore, in order to deduct business expenses from settlement money based on the provisions of the articles of association, in principle, the items of expenses to be borne by the person subject to cash settlement and the standards for sharing the expenses to be borne by

C. If the articles of incorporation provides that a person subject to cash settlement bear a certain portion of the cost of a rearrangement project, it is necessary to stipulate only the items and amount of the cost to be borne by the person subject to cash settlement at the time of withdrawal, taking into account the characteristics of the reconstruction project that members bear, and the fact that the person subject to cash settlement withdraws from partnership relations before the completion of the rearrangement project.

The project cost incurred in implementing a reconstruction project is basically intended for the benefit of all union members at the time, and it is not clear whether the project cost of a specific item within the reasonable scope to be borne by the person subject to the settlement of cash. This is basically based on whether the person subject to settlement of cash has obtained or has to obtain the benefit due to the disbursement of the cost, or whether the expense has been disbursed for such purpose, but it is necessary to comprehensively examine the various circumstances such as the timing and background of the disbursement, the progress of the reconstruction project, etc.

For example, the purpose of a reconstruction project is to remove an existing building and construct a new building on the site and distribute profits therefrom to the members of the association. However, a person subject to cash settlement is unable to withdraw from the partnership relationship at an interim stage of a reconstruction project and enjoy such proceeds from sale. As such, the person subject to cash settlement shall not be required to bear the expenses to be borne by the person subject to cash settlement at least by the cost of contributing to sale. Moreover, barring special circumstances, such as the cost that is vested only in the interests of the remaining members or the cost that contributes exclusively to the formation of a newly constructed building is difficult to view

2. Determination as to the instant case

A. According to the reasoning of the lower judgment and the record, the following facts are revealed.

1) The Plaintiffs were members of the Defendant, a reconstruction association, but were eligible for cash settlement by refusing to conclude a sales contract in the process of concluding a sales contract that was completed from February 28, 2014 to March 2, 2014 after filing an application for parcelling-out with the Defendant on December 20, 2012.

2) Meanwhile, Article 44(5)1 of the Defendant’s Articles of incorporation amended at an ordinary general meeting on May 16, 2013 (hereinafter “instant Articles of incorporation”) provides that, where a partner fails to conclude a sales contract within 60 days from the date of notification of the approval for the management and disposal of the sales contract, the following day after the date when the period for the sales contract expires shall be the date of cash settlement and the settlement money shall be paid in cash after deducting the “business cost invested during that period”

3) The Plaintiffs filed the instant lawsuit seeking the payment of cash settlement money against the Defendant on June 23, 2014. According to the Articles of Incorporation clause of the instant case, the Defendant asserts that the amount calculated by multiplying the rearrangement project cost incurred until the Plaintiffs lose their membership by the investment ratio of the previous assets should be paid to the Defendant as the “maintenance project cost charges” and thus, it should be deducted from the cash settlement money.

B. Examining the above facts in light of the legal principles as seen earlier, the articles of association of this case only provides that the “project cost” can be deducted from the settlement money by abstract cash without including the items of expenses to be borne by the person subject to cash settlement and the criteria for bearing burden, etc., and it is difficult to specify the items and scope of reasonable cost to be borne by the person subject to cash settlement through other provisions of the Urban Improvement Act or the articles of association.

Therefore, a cooperative cannot seek partial deduction of the cost of rearrangement project from a person subject to cash settlement based on the provision of the articles of association of this case, unless the association provides for the details of allocation of the cost to be specifically applied to an individual person

C. Based on its stated reasoning, the lower court determined that, on the grounds of the instant Articles of Incorporation provisions, the Plaintiffs cannot be deducted from the cost of rearrangement project, on the grounds of the instant Articles of Incorporation, on the grounds that the instant Articles of Incorporation cannot be deemed to have set the criteria and ratio for specific calculation or predicted cost sharing, and that the details of allocation by each person subject to cash clearing were not subject

Although the reasoning of the lower judgment partially inappropriate, it is justifiable to have concluded that the Defendant’s defense of deduction of rearrangement project costs is groundless. In so determining, the lower court did not err by misapprehending the legal doctrine on the apportionment of rearrangement project costs by a person subject to cash settlement, contrary to what is alleged

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min You-sook (Presiding Justice)