Imposing School Site Acquisition Charge on Real Estate Development Company Case

[20-2(A) KCCR 424, 2007Hun-Ka9, September 25, 2008]

In this case, the Constitutional Court held constitutional Article 2, Item 2 and the main text of Section 1 of Article 5 (hereinafter, referred to as "the Instant Imposition Provision") of the Former Act on Special Cases of School Site Procurement (hereinafter, referred to as "the Act on Special Cases"), prescribing that a real estate development company which meets specific conditions must cover the expenses for buying a school site, but decided that Article 5 Section 4 of the Act on Special Cases (hereinafter, referred as to "the Instant Exemption Provision") not having provided an exception to the case, where such a developer remodels and extends an existing school building and donate it, is incompatible with the Constitution.

Background of the Case

The Instant Imposition Provision of the Act on Special Cases require a real estate development company within certain categories to bear the cost of procuring a school site. Also, the Instant Exemption Provision provides that donation of a site for building a new school is one of the necessary conditions for being exempt from this requirement. Although Jamsil Area No. 22 Apartments Reconstruction Association (hereinafter, the "Association") had negotiated a deal with the Gangdong Office Board of Education to remodel an existing school building and donate it, instead of paying the school site acquisition charge, Songpa-Gu District Office imposed the school site acquisition charge on the Association. At this, the Association raised an administrative litigation requesting cancellation of the charge. The Seoul Administrative Court, judging such provisions are in violation of the Constitution,sua sponte, requested constitutional review of the Instant Imposition Provision and the Instant Exemption Provision to the Constitutional Court.

Summary of Decision

In an opinion of 7 to 2, the Constitutional Court held that the Instant Imposition Provision of the Act on Special Cases are not in violation of the Constitution. The Court decided, by 8 to 1 decision, that the Instant Exemption Provision is not compatible with the Constitution. The reasoning for the decision is as follows:

1. Majority Opinion

A.The constitutional provision regarding free compulsory education is meant to transfer the financial burden of education from the parents or guardians of school-age children to the community as a whole, in order to guarantee the right to receive education more practically. It does not, however, mean that all expenses of compulsory education must be covered by taxation. Therefore, the Instant Imposition Provision which places the burden of school site acquisition charge on the developer, not the individual persons buying subdivisions of a parcel or apartment units, does not go against the principle of free compulsory education.

B.As the real estate developers have a particularly close relation to the public project of procuring school site as they gain profits from the development project, they also have a duty to bear certain costs of such public projects out of responsibility. Therefore, imposing the school site acquisition charge on the developers does not violate the principle of equality. It does not go against the principle of proportionality, because not only that the imposition of the charge on the developers according to the Instant Imposition Provision is an appropriate means to achieve the legislative purpose of securing new sources of funds for school sites, but also the school site acquisition charge balances between the public good of giving equal opportunity of education and the developers' private property profit.

C.The developer who remodels an existing school building and donates it and the developer who donates a school site can be basically regarded same in terms of contribution to achieving the legislative purpose of the Act on Special Cases. Nevertheless, the exemption provision, providing for mandatory exemption only for 'the

one who donates a school site' to prevent double taxation, while not providing any mandatory exemption or reduction in charge for 'the one who remodels an existing school building and donates it', violates the equality right of the latter. However, should the Court simply rule the provision unconstitutional, it may create a blank in the legal system because no provision becomes existent any more as a basis for providing mandatory exemption for the developers who donate a school site or who do not create demand for additional educational facilities. Therefore, the Court declares the exemption provision remains tentatively effective as a ground for exemption of the school site acquisition charge until the legislator revises it.

2. Dissenting Opinions of Two Justices regarding the Instant Imposition Provision

A.Regardless of who the party paying for the expenses is, when it comes to raise funds for compulsory education, adopting the means of special financial charge in itself, runs contrary to the constitutional principle of free compulsory education.

B.Securing educational facilities is a general public project, and the mere fact of having profited from development projects is not enough to assume that the developers have a particularly close relation or responsibility in providing new schools. Therefore, the Instant Imposition Provision discriminates the developers without proper grounds, and are against the principle of equality. Also, as it is clearly expected that the developers will shift the burden of the school site acquisition charge on the purchasers in the long run, the school site acquisition charge is not an appropriate means to achieve the legislative purpose. And, since the school site acquisition charge subjects the developers to ultimate and excessive responsibility to provide school facilities, which is should be the State's general project, the Instant Imposition Provision does not satisfy the principle of employing the least restrictive means, nor does it strike the balance between legal interests.

3. Dissenting Opinion of One Justice regarding the Instant Exemption

Provision

On the point that the Instant Imposition Provision do not violate the Constitution, this dissenting opinion shares the same opinion with the majority. However, this opinion sees the Instant Exemption Provision which does not include remodeling of existing school buildings as an exemption to the charge, is not against the Constitution, considering that if the construction and donation of new schools are forced on the developers by illegal exercise of governmental power without legitimate ground, it is more reasonable to fundamentally disclaim the effect of such administrative action, rather than including the 'construction and donation of new schools' as one of the grounds for exemption of the charge, in order to protect the citizens' rights.

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Party

Requesting Court

Seoul Administrative Court

Underlying Case

Seoul Administrative Court, 2006Ku-Hap24749, Cancellation of School Site Acquisition Charge

Holding

1. Article 2 Item 2 and the main text of Section 1 of Article 5 of the former 'Act on Special Cases of School Site Procurement (revised by Act No. 7397, March 24, 2005, but before revised by Act No. 8679, December 14, 2007) do not violate the Constitution.

2. Article 5 Section 4 of the former 'Act on Special Cases of School Site Procurement (revised by Act No. 7397, March 24, 2005, but before revised by Act No. 8679, December 14, 2007) is not compatible with the Constitution.

Reasoning

1. Introduction of the Case and Subject Matter of Review

A. Introduction of the case

1.On March 6, 2002, ○○ Apartments Reconstruction Association (hereinafter, the 'Association') entered into a contract with the Head of the Gangdong Office of Education to remodel the existing building of Jamsin Elementary School (26 classrooms, 6,182.73㎡) and donate it to the Office of Education above mentioned, and take steps to improve educational environment in Jamsin Middle School. Later, on February 8, 2002, the Head of the Songpa-Gu District approved the Association to launch the development plan of constructing 65 apartment buildings with 5,536 units in total and one community center, adding a collateral condition for the approval which states "regarding the remodeling of the elementary school, the agreement with the Board of Education should be fulfilled before the construction finishes".

2.The Association decided to sell 1,115 apartment units out of 5,536 apartment units to public who are not the members of the Association. On April 7, 2005, it applied for approval to advertise the apartment complex for sale and reported its starting the construction to the Head of the Songpa-Gu District. The Songpa-Gu District approved the application for advertisement on April 26, 2006 and the units were completely sold out. Despite the contract between the Association and the Head of the Gangdong Office of Education, however, the Head of the Songpa-Gu District imposed 128,348,800 Won as school site acquisition charge on the 1,115 units sold to non members of the Association. At this, the Association initiated an administrative litigation against the Head of the Songpa-Gu District, asserting cancellation of the imposition of the charge (2006Gu-Hap24749). Judging the Article 2 Item 2 and the main text of Section 1 of Article 5 (hereinafter, "the Instant Imposition Provision") and Article 4 Section 5 (hereinafter, "the Instant Exemption Provision") of the Former Act on Special Cases of School Site Procurement (hereinafter, "the Act on Special Cases") violate the Constitution, the Seoul Administrative Court requested,sua sponte, constitutional review on the Instant Imposition Provision and Exemption Provision to the

Constitutional Court.

B. Subject matter of review

The subject matter of review is constitutionality of the Instant Imposition Provision and Exemption Provision. The text of the said provisions and related provisions in this case are as follows:

[the Instant Imposition Provision]

Former 'Act on Special Cases of school site Procurement' (revised by Act No. 7397, March 24, 2005, but before revised by Act No. 8679, December 14, 2007)

Article 2 (Definition) the definitions of the terms used in this Act are as follows:

1.omitted

2. Among the developments conducted pursuant to the Building Act, the Urban Development Act, the Act on Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, the Housing Act, the Housing Site Development Promotion Act and the Industrial Sites and Development Act, "development" in this Act means the development of land for more than 100 residential units or construction of common housing.

3.omitted

[the Instant Exemption Provision]

Article 5 (imposition and collection of charge)

① Mayor of a city or governor of a province may impose and collect school site acquisition charge on a developer who develops and sells parcels of land subdivided for constructing single houses or sells common housing within a development area (proviso omitted).

④ Mayor of a city or governor of a province should exempt a developer from school site acquisition charge if any of the following applies:

1. The developer donates a school site designated by Superintendent of the Office of Education, pursuant to Article 3 Section 3, to the special accounts for educational purpose.

2. Development is conducted in an area where there has been no

need to construct a new school for recent three years due to continuous decrease in school-age population.

3. Development is conducted for the construction of residential welfare facility for the aged pursuant to Article 32 of the Welfare of the Aged Act, which does not require educational facility for school age population.

[Related Provisions]

(intentionally omitted)

2. Reason for SeoulAdministrativeCourt'sRequest for this Constitutional Review and Arguments of Related Bodies

(intentionally omitted)

3. Review on Merits

A. Legislative history of school site acquisition charge

(1) Introduction of school site acquisition charge

School site acquisition charge was first introduced in December 29, 1995, when the 'Act on Special Cases School Site Procurement (hereinafter the 'Old Act')' was enacted by Act No.5072. The Old Act was enacted in order to easily procure school sites by establishing a special Act concerning formation, development and supply of school sites and defrayment of expenses. Therefore, anyone who purchases a parcel of land for a single house or an apartment unit in a newly developed common housing complex located within an area formed and developed more than 300 houses, pursuant to the Housing Construction Promotion Act (Article 2 Item 2 and Item 3), should pay 8/1000 of the purchase price of the apartment unit or 15/1000 of the purchase price of the parcel of land for a single house as school site acquisition charge (Article 5-2 Sections 1 and 2) (hereinafter, the 'old school site acquisition charge').

(2) Decision of unconstitutionality by the Constitutional Court and

enactment of the Act on Special Cases Concerning Refund of School Sites Acquisition Charge

Upon the enactment of the 'Old Act', social dispute on validity and fairness of the school site acquisition charge, which obliged the purchasers of land or houses to shoulder the burden of sharing the expenses, was heated. It eventually ended up requesting for a constitutional review of Article 2 Item 2 and Article 5 Section 1 of the revised version of the Old Act (revised by Act No. 6219 on January 23, 2000, but before revised by Act No. 6744 on December 5, 2002). In response to the request, the Constitutional Court decided that the part of Article 5 Section 1 of the revised version of the Old Act which stipulated 'school site acquisition charge can be imposed on and collected from a person who purchases a new apartment unit in a newly developed region, pursuant to the Housing Construction Promotion Act as defined in Article 2 Item 2, for the purpose of procuring sites for public school' violated the Constitution.

The Constitutional Court, in the said case, stated that the school site acquisition charge imposed only on the purchasers of houses is in violation of the Constitution which declares that compulsory education shall be free of charge. And, it continued that the school site acquisition charge fails to meet the following legal requirements for being a valid financial purpose charge: a charge is justified only in relation to a specific public project; those subject to charges must have homogeneity and those subject to charges must have a particularly close connection to the specific public project for whose finance the charge is being imposed. The charge also violates the principle of proportionality, as it fails to abide by the requirements of appropriateness of means chosen, resulting in the imposition of a burden beyond the purchasers' equitable share (17-1 KCCR 294, 311, 2003Hun-Ka20, March 31, 2005).

After the Court's decision, the National Assembly enacted the 'Act on Special Cases Concerning the Refund of the School Site Acquisition Charge, etc'. as by Act No. 8886 on March 14, 2008, thereby canceling all the imposition of charges on purchasers and refunding the paid charges.

(3) Revision of school site acquisition charge

On March 24, 2005, while the aforementioned case (2003Hun-Ka20) was pending, the National Assembly revised the 'Act on Special Cases' by Act No.7397. The Act on Special Cases ① imposes the financial burden for procuring school sites on the 'developer', rather than the 'purchaser of an apartment unit or a parcel of land for a single house ② expands the scope of the collective housing project subject to the school site acquisition charge from 300 units to 100 units; ③ newly stipulates a provision waiving the charge when a certain development plan does not create new demand for public education or when the developer donates a school site ④ reduces the charge rates from 8/1000 to 4/1000 of the sales price of a new apartment unit or from 15/1000 to 7/1000 of the sales price of a parcel of land for a single house and ⑤ provides the ground for appropriating the charge to remodel existing school buildings if it is impossible to procure a new school site (hereinafter, the 'Instant Charge').

B. Nature of the instant charge

(1)Article 3 of the Framework Act on the Charge Management Charge stipulates that "any charge may not be imposed without statutory provisions as prescribed in the attached table" and the attached table No. 8 names "school site acquisition charge pursuant to Act on Special Case of the School Site Procurement" as one of charges enumerated in the aforementioned Framework Act. But a decision as to whether certain public charges are tax or not should be made not on the basis of the legal definition in statutory provisions but on the basis of the real nature of the public charges (16-2(A) KCCR 14, 32, 2002Hun-Ba42, July 15, 2004; KCCR 135, 80, 88, 2006Hun-Ba25, December 27, 2007). The school site acquisition charge is introduced in order to easily procure school sites and, if impossible top procure school sites, in order to easily remodel existing school buildings. The idea and function of the school site acquisition charge are practically different from those of tax in that it is paid without expectation of benefit in return; its use is limited to specific purposes (Article 2, Item 3 of the Act on Special Cases) and it is

imposed on only those who have a particularly close connection to the specific public project for whose finance the charge is being imposed. Therefore, the school site acquisition charge under the Instant Imposition Provision falls within charge.

(2)Charges are divided into two categories according to their purposes and functions: ① charges purely imposed with a purpose to finance a public project (hereinafter, the 'financial purpose charge'); and ② charges imposed not only to finance a public project but also to realize a specific socio-economic policy carried out by the imposition of charge itself (hereinafter, the 'policy realization charge'). In the former case, the public project is not fulfilled until the financial purpose charge is used, whereas in the latter case, the whole or part of the public project is fulfilled at the moment of levy of the charge itself (16-2 (A) KCCR 14, 26, 2002Hun-Ba42, July 15, 2004).

In this case, the school site acquisition charge is expenditure for 'procurement of school site or, in case of no site available, remodeling/reconstruction of existing school buildings,' imposed on the developers. The paid charge is used to cover the cost of buying sites on which new school buildings are to be constructed, appraisal fees, the cost for imposition and collection of the school site acquisition charge and the cost for remodeling existing school buildings. As such, the school site acquisition charge is imposed to cover the expenses required for the procurement of basic school facilities, rather than to restrict or prohibit development of residential area or housing. Therefore, the school site acquisition charge falls into the category of purely 'financial purpose charge' (17-1 KCCR 294, 301, 2003Hun-Ka 0, March 31, 2005).

C. Constitutionality of the Instant Imposition Provision

(1) Relationship with the principle of free compulsory education under the constitution

Reviewing the constitutionality of Article 2 Item 2 and Article 5 Section 1 of the revised version of the Old Act (revised by Act No. 6219 on January 23, 2000, but before revised by Act No. 6744 on

December 5, 2002) which imposes school site acquisition charge on purchasers of land or houses (2003Hun-Ka20, decided on March 31, 2005), the Constitutional Court ruled that:

…… the school facilities needed for compulsory education is the general responsibility of the State. It goes without saying that the physical site for a school, as a material basis for any school, is a necessary condition for providing education. Therefore, the expenditure for procuring the school site must come from the general budget of the State …… Then, insofar as compulsory education is concerned, adopting special financial means, separate from the general treasury and drawn from a particular group of persons in the form of a charge, for the purpose of procuring a school site, is in violation of the Constitution which declares that compulsory education shall be free of charge.

But, we should understand the Constitutional Court's statement that former school site acquisition charge imposed on purchasers violates the Constitution simply means the parents or guardians of school-age children subject to compulsory education should not bear the cost of such education. That is to say, Article 31 Section 3 of the Constitution on free compulsory education does not necessarily mean that the cost of compulsory education should only be covered by the State or local government budget, or namely tax, but simply order to shift the burden of compulsory education from individual parents or guardians of school-age children to the community as a whole, in order to guarantee the right to receive education more substantially.

Therefore, the Instant Imposition Provision is not related any more to the principle of free compulsory education stipulated in Article 31, Section 3 of theConstitution.

(2) Requirements for constitutionally justified financial purpose charge

The Constitutional Court has presented three requirements for constitutionally justified financial purpose charge: ① in relation to tax, charges should be recognized only in exceptional cases, and should not be abused when imposed in order to conduct general public projects; ② compared to ordinary citizens, those subject to charges should have a particularly close connection to the specific public

project; and ③ when charges are imposed for a long period of time, the validity and appropriateness of such imposition should be continuously evaluated on a regular basis by the legislators (16-2(A) KCCR 14, 28, 2002Hun-Ba42, July 15, 2004; See 17-1 KCCR 294, 303-304, 2003Hun-Ka20, March 31, 2005). Among the three requirements, the requirement of 'particularly close connection' is regarded to be met when those subject to charges share a commonality as opposed to ordinary citizens; when they are regarded to have a particular financial duty to finance the specific public project and when the revenue generated by the charges is used for the benefit of those subject to the charge (See 16-2(A) KCCR 14, 28, 2002Hun-Ba42, July 15, 2004 etc.).

Also, as the school site acquisition charge inevitably restricts citizens' property right by its nature, in enacting such a statute imposing charges, legislative limitations such as the principle of proportionality and the principle of equality should be observed (10-2 KCCR 819, 830 98 Hun-Ka1, December 21, 1998; See 16-2(A) KCCR 13, 29-30, 2002Hun-Ba42, July 15, 2004).

(3) Whether the principle of equality is violated

(A) Whether there is 'specific public project'

Although school facilities are the very basic infrastructure for establishment and management of regular school education including compulsory education, new construction and remodeling of schools to meet the need created in short period of time in an area where new development project is in progress are not the same as procuring educational facilities as a general public project.

Currently, the percentage of school attendance reaches near 100% in Korea and the number of students continues to decrease. Despite this trend, the demand for new schools has been continuously increasing. According to the report prepared by the Ministry of Education, Science and Technology (formerly, the Ministry of Education and Human Resources Development) in 2007, budgets for purchasing school sites are used mainly in metropolitan cities where developing projects have been managed continuously. For example, in the year of

2006, Kyongki-Do Province where developments of new residential complex are most actively conducted spent 3.5 trillion Won to procure school sites, which is ten times bigger than the budget spent in Seoul (260 billion Won). Therefore, the expenses for procuring school sites in newly developed residential areas are different in its nature from those for procuring educational facilities as a general public project to 'provide human and material infrastructure to every corner of the country sufficiently enough to satisfy the demand of all citizens'. Rather, it should be regarded as the cost for supplying infrastructure specifically in the newly developed area. Therefore, the procurement of school site in a newly developed area has characteristics of specific public project.

(B) Whether there is 'particularly close connection'

1) The 'commonality among those subject to charge,' as one of the criteria of 'particularly closes connection', not only means that those subject to charge as a group are differentiated from general citizens but also means they should have something in common with each other within the group.

The developers as a group are distinguished from general citizens in that they 'create a demand for school site by developing parcels of subdivided land for more than 100 residential units or constructing common housing and selling them'. In addition, as developers who do not create a demand for a new school are excluded from the charge (the Instant Exemption Provision), those subject to the school site acquisition charge share common features regarding the public project of procuring school site with each other.

2) The purpose of imposition of school site acquisition charge is to 'procure school sites or to remodel an existing school building'. The developers have a particularly close connection to the public project of procuring school site as they gain profits from the development project and at the same time, create the need for new schools. Moreover, as reviewed before, since the money for building a new school in a newly developed area is also spent for both satisfying the educational need and providing infrastructure for the new residential area, the

developers should bear responsibility to shoulder the burden of procurement of school site, besides paying tax.

3) Also, given our country's great interest in education, having new schools in a newly developed area surely provides great benefits to the developers because furnishing such educational faculties within the developed area may pull up the sales price of the land or apartment units and make it easier for the developers to sell the land or apartment units. Therefore, the revised school site acquisition charge is, in certain points, closely related to the interests of those subject to charge as a group.

(C) Whether there is 'continuous evaluation'

According to Article 7 of the Framework Act on the Charge Management, the Minister of the Strategy and Finance should annually submit a comprehensive report for charge management which shows the amount of charges imposed in a year and full statements of the use of the charges to the National Assembly. In light of this, it can be said that the legislature continuously inspects the validity and fairness of the revised school site acquisition charge on an annual basis.

(D) Sub-conclusion

As previously reviewed, it can be acknowledged as reasonable that the Instant Imposition Provision treats the developers differently from ordinary citizens by levying the school site acquisition charge on them. Therefore, the Instant Imposition Provision does not violate the constitutional principle of equality.

(4) Whether the principle of proportionality is violated in restricting the property rights

(A) Legitimacy of purpose

In recent years, although the need for new schools has been

continuously increasing due to the development projects such as the "Newtown" project and "Innovation City" project, the budget for building new schools within the regions where new development projects are in progress is not increased enough to cover all the need, giving in to the demand for personnel expenses and educational business cost. In this situation, the legislative purpose to 'raise new funds to procure school sites' is legitimacy in terms of accomplishing public welfare.

(B) Appropriateness of means

Developers are the ones who create the need to build new schools or expand existing schools. Accordingly, requiring the developers to cover in part the expenses of establishing school facilities ensued by their development projects is regarded as appropriate means to raise funds for procuring school sites, thereby preventing unreasonable result of having the Office of Education shoulder all the burden of establishment of new school facilities from happening. Of course, there is criticism against the possibility that the developers may shift the burden of school site acquisition charge to purchasers by including the charge in the original sales price itself. But such concern is not grave enough to deny the appropriateness of the school site acquisition charge itself as a means to achieve funds for establishing new school facilities, and can be effectively solved by actively introducing incentive system regarding floor area ratio and bulk zoning or by amending subordinate statues such as the Rules on the Estimation of Sales Price of Apartment Houses.

Also, imposing the school site acquisition charge simply based on the number of household units seems inevitable. When households move to new places, until the relocating households reach a certain number, no new demand for more school facilities is created. But once exceeding a certain number, new demand for more school facilities is created, requiring extra expenses for covering the need. Therefore, it is reasonable to impose the charge on the basis of the number of household units. Also, as decision on the number of household units that would generate such extra expenses is in the realm of the legislative discretion, 100 household units set in the

Instant Imposition Provision as the number subject to the charge cannot be seen as exceeding the boundary of legislature's reasonable discretionary power.

(C) The least restrictive means

As the school site acquisition charge is imposed to raise funds for procuring school sites to build school facilities fundamental to education, the legislature may set a certain rate of the charge, reasonably balancing the public purpose and the citizens' private interests. When the school site acquisition charge was amended on March 24, 2005, the charge rates were reduced to 4/1000 for the sales price of a new apartment unit per household and to 7/100 for the sales price of a parcel of land for a single house, respectively. As this reduction substantially contributes to relieve the burden of those subject to the charge, the charge rate itself does not seem remarkably unreasonable.

Moreover, as those subject to the school site acquisition charge changes from the purchasers to the developers, the danger of double taxation, along with a special purpose tax called "education tax", is no more existent.

(D) Balance of legal interests

If the state solely takes the responsibility of building new schools in a newly developed region without imposing the school site acquisition charge, public finance for education, which is supposed to be equally distributed to all students, might be disproportionately used for the regions where residential developments are actively in progress, resulting in unreasonable spending of the educational budget only for the interests of specific regions. Therefore, requiring the developers to pay the school site acquisition charge is the proper result of balancing between the public interest of equal opportunity in education and the private interests.

(E) Therefore, the Instant Imposition Provision cannot be said to excessively infringe upon the developer's property rights.

D. Constitutionality of the Instant Exemption Provision

(1) Whether there is infringement of property right

The Instant Exemption Provision stipulates situations which exempt developers from the burden of the school site acquisition charge, such as when demand for new school facilities no more exists or a development project does not create a demand for new educational facilities. On the other hand, infringement on the property rights does not happen simply because someone obliged to pay charge is not benefited from such preferential exemption of the benefits-bestowing legislation. Nor is the simple expectation of financial interests, which could to be achieved if a developer were subject to the preferential exemption of the charge, protected by the constitutional guarantee of property rights (See 15-2(B) KCCR 281, 295-296, 2003Hun-Ba2, November 27, 2003; 19-2 KCCR 112, 134, 2004Hun-Ma914, July 26, 2007).

Therefore, the charge exemption provision does not infringe upon the developer's property rights who remodeled and extended an existing school building and donated it to the Office of Education.

(2) Whether there is infringement of the equality right

(A) Existence of Discrimination

The Instant Exemption Provision was newly enacted when the Act on Special Cases was amended on March 24, 2005, with purpose to relieve the citizens' burden by allowing exemption of the school site acquisition charge when the purpose of the charge is already achieved or there is no need to impose such charge. Moreover, the revision to the Act on Special Cases also expanded the scope of usage of the levied charge to include the expenditure for remodeling an existing school building near the development area in case of impossibility of procuring a school site (Article 2 Item 3 and Article 6 Section 2 of the Act on Special Cases). In this regard, 'the developer who remodels an existing school building and donates it pursuant to the indication of the administrative agency for education or mutual agreement between

the administrative agency' and 'the developer who donates a school site' can be basically regarded same in terms of their contribution to achieving the purpose of the school site acquisition charge by using their own money.

Nevertheless, the Instant Exemption Provision discriminates 'the one who donates a school site' from 'the one who remodels an existing school building and donates it': it provides for mandatory exemption only for the former to prevent double taxation while not providing any mandatory exemption or reduction in charge for the latter, discriminating between the two groups which are basically same.

In its precedents, the Constitutional Court has stated that for purposes of ascertaining violation of equality, if there is textual commitment of the Constitution for equality, or if a certain discrimination causes grave infringement on related fundamental rights, strict scrutiny based on the principle of proportionality should be employed. If not, however, a moderate standard of the rational basis test on the principle against arbitrariness is enough (11-2 KCCR 732, 749, 98Hun-Ba33, December 23, 1999; 13-1 KCCR, 1441, 1464-1465, 2001Hun-Ma132, June 28, 2001).

The Instant Exemption Provision is not related to the issues or areas against which the Constitution specifically prohibits discrimination. And the developer's related fundamental rights cannot be said to be gravely infringed just because the provision excludes the developer remodeling of an existing school building and its donation from the preferential exemption. Therefore, in this case, it would be enough to ascertain whether the discrimination is distinctively unreasonable or not through applying the rational basis test on the principle against arbitrariness with respect to different treatment of the Instant Exemption Provision.

(B) Reasonableness of discrimination

As previously reviewed, the school site acquisition charge is an expense imposed on developers who conduct developmental project, for the purpose of procuring school site or remodeling existing school buildings near the development area in case of difficulty in procuring school site. Also, under the provision, a developer who donates a school site and thereby contributing to accomplishing the purpose of

the school site acquisition charge by donating a school site is necessarily exempt from the charge.

Then, the legislature should have guaranteed the same treatment for the developers who also contribute to achieving the aforementioned purpose by remodeling an existing school and donating it pursuant to the suggestion of the administrative agency for education or mutual agreement with it, thereby prevent them from bearing excessive burden of double taxation in a manner of providing mandatory exemption of the charge or imposing the charge after subtracting the expenses used for remodeling an existing school building.

Nevertheless, the Instant Exemption Provision provides mandatory exemption preventing double imposition only for those who donate a school site, but not for those who remodel an existing school building and donate it, thereby discriminating the latter without reasonable causes proper reasons.

(C) Therefore, the Instant Exemption Provision violates the Constitution, infringing on the equality right.

3. Decision of Incompatibility with the Constitutionand Order of Temporary Application

When a statute violates the Constitution, it is our basic tenet to render a decision of unconstitutionality in order to maintain the normative power of the Constitution. However, a incompatibility decision may be rendered that mandates tentative application of the provision found unconstitutional, if instant removing the unconstitutional provision from the legal system can cause a blank or confuse in law.

In this case, should the Court declare on the Instant Exemption Provision as unconstitutional or as simply incompatible with the Constitution, thereby losing its legal applicability, it may create a vacuum in law because no provision becomes existent any more as a basis for providing mandatory exemption for the developers who donate a school site or who do not create demand for new educational facilities. As a result, having the provision stay effective until the legislature cures the constitutional defects through statutory

revision seems necessary because far more unconstitutional situation may be created by instant deprivation of the effect of the provision or immediate suspension of its application than by the tentative application of the provision.

Therefore, the Instant Exemption Provision remains temporarily applicable as a ground for exemption of the school site acquisition charge until the legislature, following the purpose of this decision, revises it to be compatible with the Constitution including any method to 'exempt the developer who remodels an existing school building and donates it based on mutual agreement with the administrative agency for education from the school site acquisition charge or deduct a certain amount of money from the full charge' in the Act on Special Cases, by June 30, 2009.

4. Conclusion

Therefore, the Instant Imposition Provision is not in violation of the Constitution and the Instant Exemption Provision is not compatible with the Constitution. This decision is dissented by Justice Lee, Kong-hyun and Justice Min Hyeong-ki regarding the Instant Imposition Provision and Justice Cho Dae-hyen regarding the Instant Exemption Provision.

5. Dissenting Opinion by Justice Lee Kong-hyun and Justice Min Hyeong-ki

We dissent from the majority decision, thinking the Instant Imposition Provision violates the Constitution for the following reasons:

A. Relationship with the principle of free compulsory education under the constitution

The Constitutional Court, in reviewing constitutionality of Article 2 Item 2 and Article 5 Section 1 of the revised version of the Old Act (revised by Act No. 6219 on January 23, 2000, but before revised by Act No. 6744 on December 5, 2002), has held that " …… in so far as compulsory education is concerned, adopting special financial means,

separate from the general treasury and drawn from a particular group of persons in the form of a charge, for the purpose of procuring a school site is in violation of the Constitution which declares that compulsory education shall be free of charge".

Regarding the free compulsory education, the precedent places more emphasis on imposition of duty on the State to provide quality human and material infrastructure for education and to improve educational environment than on imposition of duty on the citizens to educate their school-age children. Therefore, it clearly articulates that when it comes to raise funds for education, adopting special financial means in the form of a charge itself, other than general treasury, runs contrary to the constitutional principle of free compulsory education.

As the precedent obviously elucidates this point, the majority's interpretation, stating that merely the imposition of charge on the parents or guardians of school age children who are the recipients of compulsory education should be prohibited, seems inappropriate. Moreover, even if we follow the interpretation of the majority opinion, as it is clearly expected that the developers will shift the burden of the school site acquisition charge on the purchasers in the long run, the parents or guardians of school age children obviously end up being the ones who pay the charge. Therefore, the school site acquisition charge imposed on developers is also in violation of the constitutional principle of free compulsory education.

Therefore, the Instant Imposition Provision is in violation of the Constitution which declares that compulsory education shall be free of charge, to the extent that the levied charges are used to procure school facilities for compulsory education.

B. Whether the requirements for justified financial purpose charge are met

In relation to non-compulsory secondary education, a charge for the purpose of providing educational infrastructure can be imposed. But even in this case, such charge may only be permitted when all the legal requirements of general financial purpose charges are also satisfied, and should not exceed the boundary within which limitation on the property right is allowable.

(1) Whether the principle of equality is violated

(A) On the 'specific public project' requirement

Considering the fact that education, among general public projects, is the one which should be carried out by the State even sacrificing other projects but the levied school site acquisition charge may be in practice diverted to fund other general public projects such as improvement of decrepit educational environment, it can not be admitted that the general public project of procuring educational facilities in a newly developed region may become a special public project only because the developers generate demand for extra educational facilities due to the development project.

(B) On the 'particularly close connection' requirement

School facilities are essential infrastructure for education, and procuring such facilities is a public project as well as a duty of the State. Therefore, it may not be reasonable to conclude that developers have a far more particularly close connection to the project.

Moreover, the developers also contribute to promoting national interests through expanding dwelling facilities and improving neighborhood environment while accomplishing private interests through carrying out development projects at the same time. Therefore, only because the expenses for building schools in a region where development is in progress can also be considered part of the whole expenses necessary for constructing infrastructure of the region, it can not be seen that the developers should take all the responsibility to bear the burden of the charge, other than tax, for procurement of school facilities.

Also, construction of school facilities requires much money in a short period of time, but the effect and benefit last for a long time, being accumulatively distributed to the people living in the region. Given the beneficiaries of the school facility construction and the scope of the benefits, the developers cannot be said to receive special benefits by procuring school facilities, merely because they may be able to realize some interests by selling the lands or apartment units.

(2) Whether the principle of proportionality is violated in restricting the property rights

Regarding the legitimacy of the purpose of the Instant Imposition Provision, we share the same opinion as the majority.

(A) Appropriateness of means

But, we can easily expect that the charge imposed on the developers will be included in the sales price paid by the purchasers, finally it will end up the same result as levying the charge directly on the purchasers themselves.

Although the problem of inequality seem to be cured to some degree by changing the standard of imposition of the charge from 300 units to 100 units, the Instant Imposition Provision seems identical to the revised version of the Old Act which had already been declared unconstitutional by the Court, in terms of its uniform imposition of the charge simply on the basis of the scale of multi-family dwelling complex development and the number of units. Moreover, though a series of construction of less than 100 units of new apartment are conducted at intervals, there still will also be demand for new school facility in the area. Therefore, making the developers pay for the school site seems discrimination without reasonable grounds.

As such, we doubt the appropriateness of the school site acquisition charge as a means to achieve the legislative purpose.

(B) Least restrictive means

Anyone who develops land for constructing dwelling houses is also subject to the 'development charge', other than the school site acquisition charge, pursuant to the 'Restitution of Development Gains Act'. Both of the charges are substantially overlapped as they are all imposed on the basis of the 'interests achieved from a development project,' which may amount to double imposition of burden prohibited by Article 5 of the Framework Act on the Charge Management.

Also, there surely exists less restrictive method for procuring school facilities in a newly developed region such as so-called

'pre-construction, post calculation' method, meaning that the developer, at first, cover all the expenses for providing school facilities while a development project is in progress, and, after the project completes, the developer and the administrative agency for education can settle up later, taking into consideration of the benefits leaped from the developmental project. Despite of such a method, the school site acquisition charge subjects the developers to ultimate and excessive responsibility to provide school facilities, which should be the State's general project. Therefore, it violates the principle of employing the least restrictive means.

(C) Balance between legal interests

In addition, although the public interest to provide school facilities is very important, given the fact that such public interest is should be realized and secured by the State, making the developers take responsibility for financing such public project, merely because their development projects generate demand of new schools, is excessive burden. Therefore, the Instant Imposition Provision fails to strikes the balance between legal interests.

C. Conclusion

Therefore, the Instant Imposition Provision runs afoul of the Constitution, violating the principle of free compulsory education, the principle of equality and the principle of proportionality.

6. Dissenting Opinion by Justice Cho Dae-hyen

I agree with the majority in that the Instant Imposition Provision does not violate the Constitution. However, different from the majority opinion, I think the Instant Exemption Provision cannot be regarded as violating the Constitution only because the Act on Special Cases does not provide a provision stipulating a developer's remodeling a existing school and donating it as one of the grounds for exempting the charge, as long as there is no statutory basis for requesting the developers to construct and donate a school building.

The Instant Imposition Provision considers that a development project constructing more than 100 dwelling units may generate demand for more elementary, middle and high schools and therefore, imposes the school site acquisition charge to raise funds for procurement of school sites or alternation and extension of an existing school building for the community. Also, Instant Exemption Provision prescribes specific categories where the charge may be waived, such as when a development project constructing more than 100 dwelling units does not necessitate construction of a new school or remodeling an existing school.

The school site acquisition charge is imposed to give special burden on the developers who generate demand for additional school facilities by conducting development project of constructing and selling more than 100 dwelling units. It seems reasonable to prescribe such creation of demand for additional school facilities as an active reason for levying the school site acquisition charge since the charge is meant to impose a financial burden directly to the one who brings about the demand for extra school facilities. The Act on Special Cases simply allows imposition of the school site acquisition charge without providing specific, concrete consideration as to whether the demand for additional school facilities is really generated or not by the development project while enumerating specific situations where the school site acquisition charge is waived. But, this legislative attitude, although not regarded as strictly abiding by the constitutional commitment under Article 37 Section 2 of the Constitution, cannot be deem clearly violating Article 37 Section 2 of the Constitution as long as it prescribes the situations where no extra school facilities are required as the grounds for exemption of the charge.

To the contrary, if the provision fails to stipulate specific situations in which the school site acquisition charge is to be waived despite of no need for additional school facilities, such a provision should be regarded contrary to the Constitution as it unnecessarily places limitation on the fundamental rights without proper cause.

In this case, the Association promised to remodel and expand Jamsin Elementary School and donate it to the Ganagdong Office of Education, accepting the request of the Head of the Gangdong Office of Education. And subsequently, the Head of the Songpa-Gu District

approved theAssociation to launch the development plan with the condition of remodeling of Jamsin Elementary School. The Association spent approximately 11.5 billion Won in remodeling and expanding the existing building of Jamsin Elementary School and donated it. Nevertheless, the Head of the Songpa-Gu District imposed approximately 1.1 billion Won as the school site acquisition charge on the Association, pursuant to the Instant Imposition Provision.

As the development plan in this case sold 1,115 apartment units to non members of the Association, the school site acquisition charge can be imposed according to the Instant Imposition Provision. Also, the development plan does not fall into the categories eligible for exemption of the charge prescribed in the Instant Exemption Provision. Therefore, it is not in violation of the Constitution, nor unreasonable to impose 1.1 billion Won as the school site acquisition charge on the Association.

The issue in this case is whether it violates the Constitution that a statutory provision dose not consider a situation in which a developer remodels and expands an existing school building and donates it to satisfy the demand for new school facilities caused by its development plan as one of the grounds for exempting the school site acquisition charge. Regarding this, the majority opinion is positive The majority opinion is reasonable in emphasizing that the school site acquisition charge should not be imposed when there is no demand for additional school facilities created by the development plan.

But, we should not overlook the problem that making a developer to construct and donate new school facilities in this case is actually done by administrative coercion without legitimate statutory ground. Such practice places as much restriction on the developer's fundamental right as the school site acquisition charge does, without having any statutory basis. Regarding a case when a demand for additional school facilities is created by a development plan of more than 100 dwelling units, the Act on Special Cases does not impose duty on the developer to construct a new school or remodels an existing school, but only requires the developer to procure school site or pay the school site acquisition charge. Regarding a development plan of more than 300 dwelling units, the Act on Special Cases stipulates that matters on construction and development of school site

may be included in the development plan after consulting with the Superintendent of an Office of Education who has jurisdiction over the newly developed region (Article 3 of the Act on Special Cases), and if a development plan is not conducted by a city or a province, the developer should provide school site for the city or province and the city or province pay the appraised price for the school site, one half from its general accounts and the other half from special accounts for educational purpose, respectively (Article 4 of the Act on Special Cases).

Nevertheless, in this case, the Head of Gangdong Office of Education requested the Association to demolish and expand the existing building of Jamsin Elementary School and donate it, without any proper statutory basis. And the Head of the Songpa-Gu District made remodeling and donation of Jamsin Elementary School as conditions for approval of the development plan without statutory basis. In my opinion, such measures by the local governmental bodies are not consistent with Article 37 Section 2 of the Constitution, because the local governmental bodies who have duty to protect the citizens' fundamental rights demand unwarranted sacrifices from the developer without proper statutory basis, abusing the authorities in approving a development project. Although the Association in this case promised to construct and donate a bigger and better new school in accordant with the request of the Head of Gangdong Office of Education, such a promise cannot cure the unconstitutionality because the Association does not seem to voluntarily decide to donate a new Jamsin Elementary school but unwillingly answer the request in order to get approval of its development plan. Considering the fact that the school site acquisition charge authorized by the statutory provisions should also meet the requirements for being a justified special charge, the mere fact that the Association has reluctantly admitted the condition in order to get the approval of the development plan cannot justify the administrative arbitrariness which passed tremendous economic burden solely onto the Association without proper statutory basis.

Therefore, the request by the Head of Gangdong Office of Education to renovate and donate Jamsin Elementary School and the demand by the Head of the Songpa-Gu District to renovate and

donate Jamsin Elementary School as a condition for approval of the development plan are in violation to Article 37 Section 2 of the Constitution as requesting special sacrifices to the developer. In this regard, the expenses paid for remodeling Jamsin Elementary School should be reimbursed by the relevant local governmental body. Also, construction and donation of newly renovated Jamsin Elementary School should not be considered as a ground for exemption of the school site acquisition charge. If so, that would result in tacit permission of the de facto repression done by administrative authority without proper statutory basis.

As long asa developer constructs and donates a renovated school by administrative coercion, admitting such construction and donation as a ground for exemption of the school site acquisition charge should not be allowed. Rather, we should deny such practice and its effect by the root in order to eradicate the illegitimate administrative coercion itself, which is the proper way to abide by the constitutional commitments of respecting fundamental rights and the rule of law.

Justice Lee Kang-kook (Presiding Justice), Lee Kong-hyun, Cho Dae-hyen, Kim Hee-ok, Kim Jong-dae, Min Hyeong-ki, Lee Dong-heub, Mok Young-joon, Song Doo-hwan