[1] In calculating “development gains” that serves as the basis for the imposition of development charges, where the land price as at the starting point is calculated based on the actual purchase price, and the actual disposal price is applied as at the starting point, whether the land price at the starting point and at the ending point can be calculated based on either of the individual land price as at the end

[2] The meaning of Article 12 (1) 6 of the former Enforcement Decree of the Restitution of Development Gains Act

[1] Articles 8, 11(1) and (3), and 13 of the former Restitution of Development Gains Act (Amended by Act No. 12245, Jan. 14, 2014); Article 12(1)6 (see current Article 12(1)5) of the former Enforcement Decree of the Restitution of Development Gains Act (Amended by Presidential Decree No. 25452, Jul. 14, 2014); / [2] Articles 8 subparag. 3 and 11(1)2 and (3) of the former Restitution of Development Gains Act (Amended by Act No. 1245, Jan. 14, 2014); Article 12(1)6 (see current Article 12(1)2 and (3) of the former Enforcement Decree of the Restitution of Development Gains Act (Amended by Presidential Decree No. 25452, Jul. 14, 2014)

Han New Public Co., Ltd. (Law Firm Jeong, Attorneys Lee Young-soo et al., Counsel for the plaintiff-appellant)

Head of Ulsan Metropolitan City North Korea (Attorney Jeong-hee, Counsel for the defendant-appellant)

Busan High Court Decision 2015Nu22707 decided May 18, 2016

The judgment below is reversed, and the case is remanded to Busan High Court.

The grounds of appeal are examined.

1. Case summary and key issue

A. Review of the reasoning of the lower judgment and the record reveals the following circumstances.

(1) On May 16, 2008, the Plaintiff obtained approval from the Defendant for a housing construction project plan that newly constructs an apartment with a scale of 4,054 square meters in total of 34,054 square meters outside 16,00,000 square meters. On April 6, 2011, the Plaintiff obtained approval for a revision to the housing construction project plan that newly constructs an apartment with a scale of 527 square meters in total of 26,78 square meters outside ( Address 2 omitted) and 24,000 square meters from the Ulsan Metropolitan City Mayor, Ulsan Metropolitan City Mayor, and obtained a revision to the housing construction project plan that newly constructs an apartment with a scale of 527 square meters in total of 26,78 square meters, and is the project operator who completed the new apartment construction project and received a usage inspection on November 25, 201

(2) On March 22, 2014, the Defendant issued a disposition to impose development charges of KRW 394,130,340 on the Plaintiff (after the Defendant recognized the Plaintiff’s land category change as development costs and imposed the development charges of KRW 62,349,240 on November 24, 2014, excluding the development charges of KRW 378,565,50,50 (hereinafter referred to as “the development charges of this case”) under the former Restitution of Development Gains Act (amended by Act No. 12245, Jan. 14, 2014; hereinafter “Act”) upon the Plaintiff as of November 25, 2013, the date of approval for use of the apartment of this case, which is the date of the first project plan, as of May 16, 2008, which is the date of imposition, as of May 16, 208, based on the officially assessed individual land price.

(3) In accordance with the approval of the project plan of the instant apartment complex, the Plaintiff was also designated as the implementer of an urban planning facility project that installs a small park of 2-147 meters in length, 397 meters in length, 3-32 meters in length, 3-33 meters in small areas, 58 meters in length and 32 square meters in length, among urban planning facilities in the vicinity of the instant apartment complex. The said urban planning facility was gratuitously reverted to the Defendant pursuant to Articles 9 and 65 of the National Land Planning and Utilization Act (hereinafter referred to as “instant urban planning facility”). Accordingly, in calculating the development charges of the instant apartment complex, the Plaintiff filed a lawsuit seeking revocation of the instant disposal of the land (i.e., non-land expenses, 62,046, 638 won in length, 113 meters in small areas, 3-33 meters in length, 58 meters in length and 32 meters in small areas, and 1,082 square meters in length in small areas.

(4) Meanwhile, on June 13, 2011, the Defendant’s sales price examination committee decided that the total sum of 143,349,937,676 won (the housing site cost is KRW 40,334,348,500 for the housing site cost) of the instant business was set at KRW 124,009,000 within the scope of the upper limit of the sales price, and the Defendant approved the Plaintiff’s recruitment of occupants on June 15, 201.

B. The key issue of this case is whether the value of the donation facility of this case should be excluded from “development expenses” under Article 12(1)6 of the former Enforcement Decree of the Restitution of Development Gains Act (amended by Presidential Decree No. 25452, Jul. 14, 2014; hereinafter “Enforcement Decree”) when calculating the “development gains”, which serves as the criteria for imposing the development charges of the instant project.

2. Relevant provisions and legal principles

(a) Details of the statutes governing the restitution of development gains;

(1) According to the law, development charges to be paid by an obligor shall be 25/100 of the development gains calculated pursuant to Article 8 (main sentence of Article 13). Development gains shall be the amount calculated by subtracting the development costs under Article 11 (3) from the value of land subject to imposition at the end point of imposition (hereinafter “land at the end point of imposition”); (1) the value of land subject to imposition at the starting point of imposition (hereinafter “land at the starting point”); (2) the increases in the imposition period; and (3) the development costs shall be calculated by subtracting the development costs under Article 11 (3) (Article 8). Development costs shall be calculated: (1) the net construction costs, research costs, design costs, general management costs, and other expenses; and (2) the value thereof (hereinafter “value of donated facilities”); and (3) the improvement costs of the relevant land shall be calculated by adding them to the value of land at the end point of imposition (Article 11 (1)); and (3) the method of calculating development costs (Article 11 (3).

(2) Article 12(1) of the Enforcement Decree of the Act provides that “The value of donated facilities according to the delegation shall be calculated by adding the cost of creating the facilities to the value of the land, and the value of the land shall be calculated by adding the cost of creating the facilities to the value of the land, and the cost of the land shall be calculated by adding the increases in normal land prices at the starting point of the imposition period to the land price.” Article 11(2) provides that “Where the purpose of the development project is to sell in lots, etc. to another person and the disposal price includes the value of the public facilities, land, etc. in the disposal price, it shall be limited to

(3) According to the Act, in principle, the land price as of the starting point and the starting point shall be computed on the basis of the publicly assessed individual land price (Article 10(1) and the main sentence of Article 10(3): Provided, That in cases prescribed by Presidential Decree, such as where the State or a local government’s authorization, etc. is obtained for the disposal price when disposing of the land subject to an exception, such disposal price is to be the starting point when the disposal price ends (Article 10(2)), and where it is objectively recognized that the actual purchased price is a normal transaction price, such as where purchased from the State, etc., and where it is objectively recognized that the actual purchase price is a normal transaction price, the actual purchase price or acquisition price (hereinafter “actual purchase price”) may be the starting point when the normal land price increase or deducted from the starting point from the date of purchase to the starting point of imposition (Article 10(3) proviso). The payer shall submit to the competent administrative agency having jurisdiction over the collection of development charges within the period prescribed by Ordinance of the Ministry of Land, Infrastructure and Transport and Transport.

(4) Article 11(2) of the Enforcement Decree upon delegation of Article 10(2) of the Act lists as seven cases where exceptionally the disposal price can be determined as the place at the time of termination pursuant to each subparagraph of Article 10(1) of the Act, and Article 10(2) of the Act provides, “Where exceptionally the disposal price is calculated as the place at the time of termination pursuant to Article 10(2) of the Act, it shall be limited to cases where the land price as at the time of commencement is calculated as the purchase price pursuant to the proviso of Article 10(3) of the Act.”

B. The meaning of the overall title provision of this case

(1) Article 10 of the Development Gains Refund Act amended by Act No. 4563 of Jun. 11, 1993 (amended by Act No. 4563 of Jun. 11, 1993) provides that, in order to prevent disputes between a project implementer and the competent administrative agency based on the recognition of the purchase price, such as the credibility of the purchase price, and to promote the operation of the newly introduced individual land price system, development gains shall be calculated on the basis of the individual land price by avoiding the purchase price from the previous calculation method of development gains, which deducts the purchase price from the appraised value, and by integrating the land price as of the starting point and the land price at the starting point and at the expiration point, on the basis of the individual land price: Provided, That only five cases where the obligor reports within a certain period and it appears objectively to be objectively correct, it shall be calculated on the basis of the actual purchase price (see Supreme Court en banc Decision 96Nu1382, Mar. 20, 19

(2) Examining the legislative intent of Article 10 of the Act and Article 11 of the Enforcement Decree of the Act, in light of the legislative intent, “development gains” as the basis for the imposition of development charges, in principle, the land price as of the starting point and the starting point of the completion point of the development charges are calculated based on the publicly assessed individual land price. In exceptional cases, where a payer intends to calculate the starting point based on the actual purchase price, he/she shall submit to the competent administrative agency within a given period, materials proving that the land price falls under the proviso of Article 10(3) of the Act, and only where the land price as of the starting point of the starting point is calculated based on the purchase price, the actual disposal price may be determined as of the starting point of the starting point of the starting point of the acquisition price. In addition, where the real disposal price can be determined as the starting point of the starting point of the starting point of the starting point of the acquisition price, the actual disposal price shall be calculated based on the sale price as set out in each subparagraph of Article 11(1) of the Enforcement Decree, and the actual disposal price shall not be permitted.

(3) Meanwhile, according to Articles 8 subparag. 3 and 11(1)2 of the Act and the main sentence of Article 12(1)6 of the Enforcement Decree of the Act, the value of donated facilities falls under the expenses incurred by a project operator in connection with the implementation of the relevant development project, and thus, is in principle included in “development expenses” that shall be deducted from the final land price at the time when the development charges are imposed, in calculating “development gains” that serves as the basis for imposing development charges. However, the instant comprehensive provision upon delegation under Article 11(3) of the Act is an exception to the main sentence of Article 12(1)6 of the Enforcement Decree, and “if the purpose of the development project is to sell in lots, etc. to another person and its disposal is included in the value of public facilities or land, etc., the disposal price shall be calculated at the time of termination pursuant to

Here, “the purpose of a development project is to dispose of others, such as sale in lots, and includes the value of public facilities or land, etc. in the disposal price” means the development project that is subject to the application of the overall provision of this case, and the project implementer disposes of them as the selling price authorized by the competent administrative agency after implementing the sale business under each subparagraph of Article 11(1) of the Enforcement Decree. In addition, “the case of calculating the disposal price at the time of termination pursuant to Article 11(2) of the Enforcement Decree” means the case of calculating the starting price based on the actual purchase price and applying the actual disposal price as the land price at the time of expiration of the actual disposal price as an exception as seen earlier.

In general, the project implementer set the sale price at the “development cost” including all the project costs, including the value of the donation facilities, and then sets a certain amount of profit to the buyer, thereby transferring the value of the donation facilities to the buyer. As such, the instant overall provision is premised on general cases where the value of the public facilities or land is included in the “total”. However, there may be extremely exceptional cases where the value of the donation facilities is not included in the disposal price in whole or in part. However, the instant comprehensive provision does not stipulate that development costs, such as the value of the donation facilities, shall be necessarily deducted when imposing development charges. Article 12(1)6 of the Enforcement Decree, including the instant comprehensive provision, cannot be deemed as grounds for recognizing or excluding the value of the donation facilities as development costs, and where the value of the donation facilities is not included in the disposal price at all, it shall not be deemed that the development costs should be included in the amount of the total amount of the donation facilities to be deducted pursuant to the main sentence of Article 12(1)6 of the Enforcement Decree of the instant comprehensive provision.

In full view of the above, the provision of this case is an exception to the main sentence of Article 12 (1) 6 of the Enforcement Decree, and where a project operator disposes of the proceeds from sale approved by the competent administrative agency after implementing a sale business under each subparagraph of Article 11 (1) of the Enforcement Decree, barring any exceptional circumstance, the land price shall be calculated based on the actual purchase price, and the actual disposal price shall be deducted from the final land price including the “development cost” only when the land price is calculated based on the actual disposal price, and the entire value of the donated facilities shall be deducted from the final land price including the “development cost” only when the actual disposal price is applied as the final land price. In the event the land price and the final land price are calculated based on the officially assessed individual land price, the entire value of the donated facilities shall not

3. Determination on the instant case

A. The lower court determined that the instant disposition was unlawful on the following grounds.

(1) Even if the purpose of the development project is to sell in lots, etc. to another person, if the value of the donated facility was included only in “part” in the disposal price, excluding the portion not included in the disposal price from the development cost based on the overall provision of this case is contrary to the principle of proportionality under the Constitution. Thus, the overall provision of this case can be applied to the disposal price only if the value of the donated facility is included in the disposal price, and it does not apply otherwise.

(2) In the case of the instant project, upon obtaining approval for the sale price lower than the maximum amount examined and decided by the sale price examination committee, the housing site cost included in the sale price of the instant apartment is deemed to have been reduced than the housing site cost calculated by reflecting the value of the instant donated facility at the time of the examination and resolution. Therefore, it is difficult to readily conclude that the sale price of the instant apartment is included in the sale price of the instant apartment. Therefore, in the instant project, the instant provision cannot be applied, and thus, the instant disposition that was made by excluding the entire value of the instant donated facility from the development cost by applying the instant provision is unlawful.

B. However, the lower judgment is difficult to accept for the following reasons.

(1) The instant project is a development project stipulated in Article 11(1)1 of the Enforcement Decree, and constitutes the subject of the instant overall provision.

In light of the principle of proportionality under the Constitution, the lower court arbitrarily reduced the scope of application of the instant comprehensive provision. However, “development gains” calculated on the basis of the officially assessed individual land price as a matter of principle refers to “the objective profit” calculated by the method prescribed by the development gains restitution statute, and there is no choice but to be different from the development gains actually accrued to a project implementer (see Supreme Court en banc Decision 96Nu1382, Mar. 20, 1997). Whether a project implementer should deduct the “development expenses” included in the “development expenses” actually incurred in relation to the implementation of the relevant development project from the expiration point of time is a matter belonging to the broad legislative formation discretion (see Constitutional Court en banc Decision 95Hun-Ba37, May 28, 1998), and Article 11(3) of the Act is delegated to this Presidential Decree. Article 12 of the Enforcement Decree of the said Act, including the instant comprehensive provision, shall not be deemed to contravene the principle of proportionality, as long as possible, to the extent possible.

(2) As mentioned earlier, in a case where the sale price approved by the competent administrative agency is disposed of as a result of the implementation of a housing-sale project as stipulated in each subparagraph of Article 11(1) of the Enforcement Decree, barring any special circumstance, the project implementer sets the sale price by adding a certain amount of profit to the “development cost” including all project costs, such as the value of donated facilities, and thereby transferring the value of donated facilities to several buyers. The maximum sale price system under Article 38-2 of the former Housing Act (wholly amended by Act No. 13805, Jan. 19, 2016) is a response to the issue that a multi-family housing construction project operator excessively highs the supply price of housing and excessively highs the supply price of housing, and regulates the sale price below the upper limit of the sale price, not a multi-family housing construction project operator’s prohibition of setting the sale price by attaching a reasonable level of profit to a multi-family housing construction project operator. Therefore, it shall be deemed that the apartment housing construction project operator’s “ extremely short of the “sale price” within the upper limit.

As can be seen, the Plaintiff asserted that the “sale price” was set at a lower price than the upper price, although the special circumstance that the “sale price” did not reach the “sale price” should be proved by the Plaintiff. However, the Plaintiff did not prove such special circumstance.

(3) If so, the “sale price” set by the Plaintiff should be deemed to include all the value of the instant donated facilities. The land price and the place of termination, which are the items that serve as the basis for calculating the development charges, in the instant disposition, are not applied to the actual purchase price and the disposal price, based on the publicly assessed individual land price, which is the principle of calculating the land price, and thus, did not meet the requirements for recognition of the development costs under the instant overall provision. Therefore, the value of the instant donated facilities does not constitute the development costs to be deducted from the final land price when calculating the development gains pursuant to the instant comprehensive provision, and thus, the instant disposition that the Defendant calculated the development charges by excluding the entire value of the instant donated facilities from the development costs is lawful.

C. Nevertheless, the lower court determined that the instant disposition, which applied the instant provision, was unlawful, because the instant provision was not applied, even if the land price as of the starting point and the ending point of the land price were calculated based on the publicly assessed individual land price as in the instant project, and the value of the donated facility was not entirely included in the disposal price. In so doing, the lower court erred by misapprehending the legal doctrine on the interpretation and application of the instant provision, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal

4. Conclusion

Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Jung-hwa (Presiding Justice)