Constitutional Review of Judgments case

[9-2 KCCR 842, 96Hun-Ma172, etc., December 24, 1997]

A. Background of the Case

In this case, the Constitutional Court laid down a limited constitutionality decision on Article 68 (1) of the Constitutional Court Act that excluded ordinary courts' judgements from the jurisdiction of the Constitutional Court, and struck down a judgment of the Supreme Court that defied the Constitutional Court's unconstitutionality decision together with the original administrative action.

Article 68 (1) of the Constitutional Court Act provides that any person whose basic rights were infringed upon by exercise or non-exercise of governmental power, "excluding the ordinary courts' judgment", may file a constitutional complaint before the Constitutional Court.

On June 16, 1992, the respondent, Director of the Dongjak Tax Office, imposed transfer profit tax on the complainant who bought a property in his wife's name and sold it to a third party pursuant to the proviso of Article 23 (4) and the proviso of Article 45 (1) (ⅰ) of the former Income Tax Act, which levied upon transfers within one year of acquisition even when the acquisition had been made under another person's name. Pursuant to the provisions, the tax was imposed upon the transfer profit which was calculated by using the actual purchase price and the actual sale price.

When the Seoul High Court rejected the complainant's appeal challenging the taxation, he appealed to the Supreme Court (95Nu 11405). During the final review, on November 30, 1995, the Constitutional Court laid down a limited constitutionality decision on the above provisions in another case (94Hun-Ba40, etc.).

In that decision, the Constitutional Court first stated that the important matters relating to the duty to pay tax should be stated in the statute as explicitly as possible pursuant to the principle of statutory taxation, and that there existed a limitation on delegation of such matters to the inferior rules such as presidential decrees. The Court then interpreted a provision that delegated the task of determining when the actual transaction prices could be applied as opposed to the standard public land prices, and stated that the legislative aim of the provision was to remedy unjust and exorbitant taxation that

might arise out of strict application of the standard-prices-based taxation. Therefore, the Court ruled that the provision would be unconstitutional if interpreted as authorizing the Administration to apply the actual transaction prices even when such application worked against the taxpayer because the actual-prices-based tax exceeded the standard-prices-based tax. According to the Court, the provision would violate the principle of statutory taxation and the rule against blanket delegation if it be interpreted so broadly.

Despite this previous decision, the Supreme Court in 95Nu1405, on April 9 of 1996, upheld the same provision even as interpreted to authorize imposing the higher actual-price-based tax and rejected the complainant's appeal. The Supreme Court declared that a limited constitutionality decision does not bind on the ordinary courts because the decision merely specifies the meaning and scope of application of the provision and leaves in tact the statutory language. The Supreme Court then disagreed with the Constitutional Court and argued that the provision in question could not be construed to delegate legislative power only in the tax payer's favor and that the Constitutional Court's interpretation would unjustly relieve the complainant who made a considerable transfer profit over a very short time.

Upon this decision of the Supreme Court, the complainant filed a constitutional complaint, arguing that Article 68 (1) of the Constitutional Court Act which excludes the ordinary courts' judgements from the Court's jurisdiction, the imposition of transfer profit tax and the above decision of the Supreme Court were unconstitutional.

B. Summary of the Decision

In a 6-3 decision, the Court held that the challenged Article 68 (1) of the Constitutional Court Act should not exclude from constitutional review those judgments that applied the laws previously invalidated by the Constitutional Court. Therefore, the decision of the Supreme Court, i.e. 95 Nu 11405 and the transfer profit tax imposed on the complainant were annulled. The reasoning of this decision as follows:

Although making the ordinary courts' judgements subject to review of the Constitutional Court would be more desirable to strengthen the protection of constitutional rights, the failure to do so in Article 68 (1) does not amount to an unconstitutionality since it does not clearly go beyond the legislative discretion. Nevertheless, to the extent that the provision is interpreted to exclude from constitutional challenge those judgements that

enforce the laws struck down in whole or part by the Constitutional Court and thereby infringe upon people's basic rights, the provision in question should be unconstitutional.

Unconstitutionality decisions of the Constitutional Court could take such forms as unqualified unconstitutionality, limited constitutionality, limited unconstitutionality, and nonconformity to the Constitution, and the decision in all these forms are binding. The Court's evaluation of a statute may vary according to how it interprets the text, meaning, and legislative intent of the statute. Then, the Court chooses the most favorable interpretation within the scope permitted by general rules of interpretation. After that, the Court may articulate the constitutional scope of the meaning of the statute and find it constitutional within that scope. Or the Court may articulate the possibilities of applying the statute beyond its constitutional scope and find it unconstitutional as applied outside that scope. The two forms are flip-sides of a coin and are the same for all practical purposes. They differ only in whether they actively or passively exclude the unconstitutional applications of an otherwise valid statute, and they are equally decisions of partial constitutionality.

The judgment of the Supreme Court enforces the statutory provision invalidated by the Constitutional Court in a decision of limited unconstitutionality, and it violates the binding force of the Constitutional Court's decisions. Therefore, the constitutional complaint against the Supreme Court's judgment must be allowed as an exception. Then, since the judgment infringes on the complainant's right to property, it should be cancelled according to Article 75 (3) of the Constitutional Court Act.

Finally, since both the judgment and the original administrative action applied the law already struck down, the latter is clearly unconstitutional as well. Since it is desirable for the realization of the rule of law to eliminate the unconstitutional state of affairs in one stroke as well as provide swift and efficient redress to peoples' infringed rights, the administrative action is hereby annulled according to Article 75 (3) of the Constitutional Court Act.

Justices Lee Jae-hwa, Han Dae-hyun and Koh Joong-suk dissented:

The legislative intent behind exclusion of judgment from the jurisdiction of the Constitutional Court is merely to exclude ordinary legal cases and constitutional review of executive orders, rules and regulations and administrative actions, which are allocated to the jurisdiction of the ordinary courts by the Constitution. It is not meant to exclude

review of a case in which an ordinary court itself conducted constitutional review of a statute. In this case, the Supreme Court undertook constitutional review of a statute itself, and therefore, the complainant could challenge the Supreme Court's April 9, 1996 judgment. However, annulment of the judgment is undesirable when the Constitution specifies the mutual independence between the Constitutional Court and the Supreme Court. Annulment can also cause disputes about its own effect for there is no statutory provision applicable to its consequences. It is desirable to find the judgment unconstitutional and leave the rest to the Supreme Court. Also, considering the original intent of Article 107 (2) of the Constitution and Article 68 (1) of the Constitutional Court Act that endowed constitutional review of administrative action with the ordinary courts, the imposition of tax by the Director of Dongsak Tax Office on June 16, 1992 is not reviewable in constitutional complaints proceedings.

C. Aftermath of the Case

There were a number of comments on this case. First of all, there were criticisms that the Court's position was too cautious. According to the critics, Article 68 (1), by excluding the ordinary courts' judgments from the constitutional complaint process, also excludes from the process those exercises or non-exercises of governmental power that may be the subject of the judgments. Therefore, it can defeat and dissolve the purpose of the constitutional complaint process, i.e., conforming governmental power to the binding force of the basic rights. The Court reduced the problem too much when it found Article 68 (1) unconstitutional only with respect to exclusion of those judgments that enforce the laws that the Court had invalidated. Also, the Court's decision took the form of limited unconstitutionality, leaving room for more controversy, when the Supreme Court had denied the binding force of such a decision. Another commentator suggested that the Constitutional Court should extend its jurisdiction over judgments by precedents.

On the positive side, some argued that the decision was a minimum necessary for preserving the primacy of the Constitution and the binding force of unconstitutionality decision, thereby protecting the integrity of the newly established constitutional adjudication system. Others viewed it inevitable to allow constitutional review of judgments to a limited extent in light of the ever-increasing need for legal unity and protection of constitutional rights.

On the negative side, some criticised that the decision arose out of the Constitutional

Court's wayward interpretation of a statute and that such decision conflicts with the supremacy of the Supreme Court and the independence of the judiciary and constitutes introduction of a four-trial system never anticipated by the Constitution. Article 68 (1) merely represents the legislative intent to carry out allocation of power provided for by the Constitution. The Constitutional Court's annulment of an ordinary court's judgment, despite the provision, is ultra vires.

However, the Supreme Court's judgment was not only direct defiance of the binding force of the Constitutional Court's unconstitutionality decision but also constituted a usurpation of power because it undertook constitutional review of the statute itself. It also ignored the constitutional ideas of right to property and the principle of statutory taxation while paying too much attention to the administrative expediency of levying on land speculation. Also, in light of other previous judgments by the Supreme Court that defied the decisions of the Constitutional Court, the decision was unavoidable on the part of the Constitutional Court in defending the binding force and integrity of the constitutional adjudication system.

In the ensuing cases where constitutional complaints were filed challenging judgments on the ground of the unconstitutionality of Article 68 (1) of the Constitutional Court Act, the Court has dismissed them unless they challenged the exceptional judgments such as shown in this case.