Large Construction Co., Ltd.

Defendant

April 12, 2013

Suwon District Court Decision 2012Kadan5963 Decided November 2, 2012

1. Revocation of the first instance judgment.

2. The plaintiff's claim is dismissed.

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

The Defendant shall deliver to the Plaintiff the real estate listed in the attached Table (hereinafter referred to as “instant housing”).

2. Purport of appeal

The same shall apply to the order.

1. Basic facts

A. In accordance with Article 16 of the former Housing Act (amended by Act No. 7959 of May 24, 2006), the Plaintiff obtained approval of the project plan for the construction of the publicly constructed rental house from the Minister of Construction and Transportation, and made a public announcement of the invitation of occupants on March 28, 2006 with the approval of the invitation of occupants from the Seongbuk-nam City Mayor, which was approved on March 28, 2006, and newly constructed ○○○ apartment on the ground of 266 households on the ground of A3-2 block site development zone, which is a public housing site.

B. On May 23, 2006, the Plaintiff entered into a lease agreement (hereinafter “instant lease agreement”) with the Defendant on KRW 246,940,00 for the instant housing newly constructed with the Defendant, KRW 593,00 for the monthly rent, KRW 10 years from the expiration date of the initial designation period for occupancy, and KRW 1 as the last day of each month from the expiration date of the initial designation period for occupancy.

C. On January 9, 2009, the Defendant paid the Plaintiff the full amount of the deposit for lease under the instant lease agreement, and received the instant house, and thereafter, paid the rent of KRW 593,000 every month.

D. (1) Meanwhile, around 2009, the Defendant brought an action against the Plaintiff to refund the difference between the conversion deposit and the standard rental deposit, since the instant lease agreement concluded between the Plaintiff and the Defendant was concluded on the basis of the conversion deposit without the Defendant’s consent, the agreement on the rental deposit exceeding the standard rental deposit under the said lease agreement is null and void.

The Sungwon District Court rendered a judgment to the Defendant to return KRW 111,036,335, the difference between the initial rental deposit and the standard rental deposit, upon receiving the Defendant’s claim on December 2, 2009 (Dawon District Court 2009Gahap5663, Suwon District Court 2009).

(2) The Plaintiff appealed against the above judgment. The Plaintiff asserted that, during the course of the appellate trial proceedings, if the initial rental deposit of the instant lease agreement is lower than the standard rental deposit, the rent should be higher according to the conversion rate. On the other hand, the Plaintiff offsets the Defendant’s claim for return of unjust enrichment with the claim equivalent to the difference of the rent accrued until the closing date of the appellate proceedings. On the other hand, the Plaintiff filed a preliminary counterclaim seeking payment equivalent to the difference between the standard rent and the initial rent from the date of delivery of the instant apartment after the closing date of the appellate proceedings (Seoul High Court Decision 2010Na14461, October 4, 2010 (Counterclaim), 2010Na60525 (Counterclaim), 2010Na12109 (Intervention)).

On December 23, 2011, the appellate court accepted the Plaintiff’s conjunctive counterclaim, and rendered a judgment that “The instant lease agreement is legally effective in accordance with the legal doctrine of partial invalidation, only the portion of the standard security deposit and standard rent from the beginning. Therefore, the Defendant is obligated to pay to the Plaintiff monthly the difference of KRW 316,00,00, the difference between the standard rent of KRW 909,000 and the initial rent of KRW 593,000 as determined at the time of conclusion of the instant lease agreement, and the Defendant shall pay to the Plaintiff the amount calculated at the rate of KRW 316,00,000 from December 25, 2010 to the date of delivery of the instant apartment from the date following the closing of argument in the appellate court (hereinafter “instant appellate court”).

(3) The Defendant appealed against the instant appellate judgment, but the Supreme Court dismissed the Defendant’s appeal on June 24, 201, and the instant appellate judgment became final and conclusive.

E. (1) On February 25, 201, the Plaintiff deposited KRW 109,749,000, the difference between the converted deposit and the standard deposit deposit amount, and KRW 6,702,958, to the Defendant in Suwon District Court for repayment, in accordance with the instant appellate judgment.

(2) After the decision of the above Supreme Court was rendered, the Defendant requested a review on the above appellate court judgment, and even after the decision of the above appellate court became final, only KRW 593,00,000, which is the initial rent of the instant lease contract, was paid, and the amount of KRW 316,00,000, which

F. (1) Article 9(1)5 of the instant lease agreement provides that a lessor may terminate the instant lease agreement in cases where a lessee fails to pay rent or management fee for at least three months.

(2) On December 22, 2011, the Plaintiff notified the Defendant that the instant lease contract was terminated on the ground that the Defendant did not pay monthly rent for at least three months, based on the foregoing provision.

G. After that, on March 28, 2012, the Defendant calculated the amount ordered to pay in the instant appellate judgment and remitted it to the Plaintiff’s account by calculating the amount ordered to pay in the instant appellate judgment, and thereafter, remitted the amount of KRW 909,000 (= KRW 593,000 + KRW 316,000) each month.

[Ground of recognition] Facts without dispute, Gap evidence 1 through 6, Gap evidence 7 and 8-1, 2, Gap evidence 9, Eul evidence 1 and 3, and the purport of the whole pleadings

2. Determination as to the cause of action

A. The plaintiff's assertion

The Defendant, a lessee, pays only KRW 593,00 per month, which is a rent calculated on the basis of the monthly rent under the instant lease agreement, i.e., conversion rent, to the Plaintiff, a lessor. As the validity of the instant judgment on the instant lease agreement, the agreement on the conversion of rental deposit exceeding the standard rental deposit under the instant lease agreement was null and void. Accordingly, the monthly rent to be paid by the Defendant is KRW 909,000 based on the standard rent. Since the Defendant did not pay the rent equivalent to the difference between the standard rent (9,000) and the converted rent (593,000 won) even after the said judgment on the appellate court was rendered, the lease agreement with the Defendant is terminated by the notification on the termination of December 22, 2011.

B. Determination

(1) The judgment of the appellate court of this case held that “The lease contract of this case is legally effective and effective from the beginning in accordance with the legal principles of partial invalidation, only the part of the standard rental deposit and standard rent shall be deemed legally effective, and the defendant is obligated to pay the difference of rent to the plaintiff (Evidence A No. 4).

(2) However, although the instant appellate judgment expressed “the difference between the standard rent and the converted rent” as “the rent difference,” it should be examined whether it means “the monthly rent” used in the ordinary rental agreement.

① The proviso of Article 137 of the Civil Act provides that “if it is deemed that a juristic act has been conducted even without any invalid part, the remaining part shall not be null and void.” That is, even after the divisible juristic act differs from null and void, the remaining part may exist as an independent juristic act, and the remaining part alone is deemed null and void.

When applying the legal principles on partial invalidation in the instant case, determination of rental deposit as KRW 246,940,00 in the instant lease agreement is null and void only for the portion exceeding KRW 137,191,00, which is the standard rental deposit. The imbalance of monthly rents generated by reducing the amount of rental deposit as the standard rental deposit is a problem that should be resolved by returning unjust enrichment equivalent to the difference to the Plaintiff, and it cannot be said that the monthly rent portion of the instant lease agreement, which did not violate the validity provision through the legal principles on partial invalidation, cannot be increased.

Although there is a structure that increases the monthly rent if the monthly rent is reduced due to the inter-connection between the rental deposit and the monthly rent, since the lease agreement is a separate element with different legal effects from the monthly rent, it cannot be said that the monthly rent should be increased as much as the monthly rent, instead of nullifying a part of the rental deposit, by applying the legal principles on partial invalidation.

② However, the instant appellate judgment held that “only the portion of the standard rental deposit and standard rental fee, from the beginning, remains legally effective in accordance with the legal doctrine of partial invalidation.”

In Supreme Court Decision 2009Na93321 Decided February 11, 2010, which is the lower court’s judgment rendered on July 22, 2010, the Seoul High Court (Seoul High Court Decision 2010Da23425 Decided February 2, 2010, (hereinafter “Seoul High Court Decision 2009Da9321 Decided February 11, 2010), the lessor asserted that the lessor’s “if only the portion exceeding the standard rental deposit out of the rental deposit is null and void, the lessor would have suffered the difference between the standard rental deposit and the rental deposit and would not enter into a lease contract as a result of the difference between the standard rental deposit and the rental deposit and the rental deposit, the lessor would have the right to enter into the lease contract on the basis of the standard rental deposit and the standard rental fee.” This does not mean that the lessee is subject to the application of the standard rental deposit and at the same time, the lessor is obligated to return the rental deposit as long as the portion exceeding the standard rental deposit paid is null and void (hereinafter “the remaining part of the law”).

However, the above Supreme Court decision did not expressly state that "the lessee has the right to enter into a lease contract according to the standard rental deposit and standard rent, and at the same time, at the time when the standard rental deposit is applied, the part that held that the rental deposit under the lease contract in this case shall be null and void to the extent exceeding the standard rental deposit," and that "the rental deposit under the lease contract in this case shall be null and void to the extent that it exceeds the standard rental deposit," and that "the lease contract shall naturally be changed to the standard rental deposit and the part that contains the standard rental fee calculated based on it," and that "the monthly rent shall be increased to the standard rental fee."

In addition, in the case dealt with by the High Court decision, the lessor did not assert against the lessee the difference between the standard rent and the contractual rent, and did not offset his/her obligation to return the portion exceeding the standard rent out of the rental deposit. Therefore, the High Court decision did not directly state whether the difference between the standard rent and the converted rent is a “amount of rent” under the law or “amount of unjust enrichment.”

③ In the High Court ruling, the remaining portion of the standard rental deposit and standard rent should be understood as “a conversion of invalidation” based on Article 138 of the Civil Act, rather than “the existence” under the legal doctrine of partial invalidation.

The amount of the lease deposit and monthly rent is the most important part of the contract during the lease contract, and the increase of the monthly rent at the time of reducing the lease deposit cannot be recognized as a modification of the core contents of the contract and cannot be seen as creating a new contract. However, in light of the freedom of contract based on private autonomy, which is the large principle of the Civil Act of Korea, the court should, aside from the fact that a partial invalidation of the contract is required, invalidate the content of the contract or reduce the validity of the contract, and should not be deemed to have been concluded by the parties according to the modified terms and conditions of the contract. The same shall apply where the parties had no choice but to enter into the lease contract according to the standard rental deposit and standard rent if the contract had not been entered into.

However, it is unreasonable to change the term “rental deposit and conversion rent” to the term “standard rental deposit and standard rent” as stipulated in Article 138 (a) of the Civil Act. First of all, the instant lease contract is not a whole invalidation of a juristic act, as stated in the judgment of the appellate court in the instant case, but only a partial invalidation of a juristic act. In addition, if it is evident that either of the parties to the contract has no intention of conversion in light of the specific circumstances, such intention of conversion may not be recognized. In addition, in the instant appellate judgment, the Defendant did not properly calculate the standard rent and the Defendant did not object to a request for retrial. It is evident that the Defendant had no intention to convert the instant lease contract into the standard rent determined by the court in the instant case.

Therefore, the contents of the High Court judgment can not be seen as "the conversion of invalidation act" under Article 138 of the Civil Act.

④ The standard rent for lease deposit and standard rent determined by the judgment of the appellate court of the instant case vary depending on the content constituting a water test. In fact, in the Seoul High Court Decision 2011Na69062 (Main Office), 2011Na6979 (Counterclaim) Decided August 22, 2012, the lower court determined the standard rent to be borne by Nonparty 1 and Nonparty 2, the lessee of an apartment building whose size and the rental deposit are the same as that of the Defendant, as KRW 864,092 (Non-Party 1), KRW 860,519 (Non-Party 2) and the lower amount to be borne by the Defendant in the said judgment of the appellate court of the instant case, the lower amount to KRW 909,00,00, as the standard rent.

In other words, the standard rent is not conceptually defined, but vary depending on how much elements, such as construction cost, self-funded interest, repair and maintenance cost, fire insurance premium, tax and public charges, depreciation cost, etc., are determined and calculated. It is doubtful whether the standard rent calculated at will by the court can be deemed as a “rent” under a contract with legal effect granted. In particular, it is more so more true in the case where the payment of rent is delayed depending on how much the rent should be considered in relation to the Plaintiff and the Defendant as in the instant case, and whether the lease can be terminated.

⑤ The reason why the part of the instant lease agreement was invalidated within the extent exceeding the standard rental deposit is entirely attributable to the Plaintiff’s mistake. The Plaintiff violated the relevant statutes, which are effective provisions, and thus unilaterally set the instant lease agreement on the condition that the Plaintiff would be subject to conversion deposit and conversion rent, with the Defendant’s opportunity to choose the lease contract based on the standard rental deposit and the standard rental fee, or deprived the Plaintiff of the opportunity to choose the lease contract based on the converted rental deposit and conversion rent.

Therefore, in accordance with the legal principles of partial invalidation, any legal disadvantage, for example, the security deposit was reduced due to the amendment of the instant lease agreement, but the increase in the monthly rent that is linked with such reduction is not a “rent,” but a legal effect that prevents the Plaintiff from exercising the claim for termination on the ground of unpaid rent even if it is delayed by deeming it as unjust enrichment, is consistent with the concept of equity. Since the Plaintiff may deduct the Defendant’s delayed unjust enrichment from the security deposit, such interpretation would not significantly infringe the Plaintiff’s right.

(6) The Plaintiff could modify the terms and conditions of the instant lease once every year based on Articles 4 and 17(3) of the instant lease agreement. The Defendant moved into the instant housing on January 9, 2009, and the instant judgment was rendered on February 23, 201, and the Supreme Court’s decision was rendered on June 24, 2011. Accordingly, the Plaintiff and the Defendant concluded a contract under the instant lease agreement with the Defendant in accordance with the amount determined by the said judgment, and even if there was sufficient time to reasonably adjust monthly rents between the Defendant and the Defendant, the Plaintiff did not submit materials to acknowledge that the Plaintiff made such efforts. Rather, the Plaintiff sent several content certifications to the Defendant, which did not pay the difference between the standard rent and the converted rent determined by the instant appellate judgment, but notified the Defendant that the instant lease agreement was terminated on December 22, 201, and did not appear to have been in bad faith against the Defendant.

(3) As above, even though the judgment of the appellate court of this case expressed the amount of money the Defendant did not pay, considering the above invalidity doctrine, the principle of private autonomy, whether it is reasonable to consider the standard rent as the rent, the responsibility to provide the cause of the dispute in this case, etc., it is not that it refers to “the difference of rent” as meaning in the lease contract, but it is merely an expression of “the unjust enrichment equivalent to the difference of rent” differently. In addition, such an interpretation is not contrary to the contents of the judgment of the above Supreme Court.

The Supreme Court Decisions 201Na69062, Seoul High Court Decision 2011Na69079, Seoul High Court Decision 2011Na69070, Seoul High Court Decision 2011Na105470 (Counterclaim), and 2011Na105487 (Counterclaim), except the above appellate judgment, are the lease contract of this case where the contents of the standard rental deposit and standard rental fee are valid. (b) The lease contract of this case where the rental deposit and standard rental fee are valid. (v) The lease contract of this case where the rental fee already paid by the lessee falls short of the standard rental fee and the lessee gains unjust enrichment, so the lessor has a claim equivalent to the difference in the above rent, and therefore the lessor clearly states that the nature of the lessor's claim is not a "rent," but a "illegal enrichment."

(4) If so, the Defendant faithfully paid monthly rent stipulated in the instant lease agreement to the Plaintiff, and only did not pay the unlawful gains (i.e., the obligation to rent the instant lease agreement, but the simple obligation to pay the judgment amount) set forth in the judgment of the appellate court of the instant case. The Defendant did not pay the unlawful gains, which are the judgment amount liability, and the Plaintiff does not have the right to terminate the instant lease agreement on the ground that the Defendant did not pay the unlawful gains.

Therefore, the plaintiff's claim of this case is without merit.

3. assumptive determination - Interpretation of “three-year rents unpaid”

A. If the difference between the standard rent in the instant lease agreement and the rent in the instant lease agreement is assumed to have the legal effect as a “rent,” we examine whether the instant lease agreement satisfies the requirements for termination.

B. According to Article 18(1) and (3) of the former Rental Housing Act, a person who intends to enter into a rental contract for a rental house shall use a standard rental contract as prescribed by the Ordinance of the Ministry of Construction and Transportation, and a rental business operator and a lessee shall comply with a rental contract entered into by using a standard rental contract. Such statutory provisions also continue to exist in the current Rental Housing Act under Article 32(1) and (3).

Meanwhile, in light of the legislative intent of the Rental Housing Act and the related Acts and subordinate statutes, which provide for matters necessary to promote the construction of rental housing and promote the stability of national housing life, and put restrictions on rental business operators with various support to achieve the purpose, and to protect homelesss who are socially weak, it shall be deemed that the contents of the standard contract should be interpreted as the content of the standard contract to the extent that it is interpreted disadvantageous to the lessee within the extent that it is interpreted disadvantageous to the lessee, instead of according to the standard contract stipulated under the Rental Housing Act, if the terms and conditions of the contract are unfair, invalid the qualitative or quantitative part of the terms and conditions (see, e.g., Supreme Court Decision 90Meu2398, Dec. 24, 191).

C. The requirements for the termination of a contract under the instant lease agreement include “where rent is overdue for at least three months,” and it is clear that such requirements are more unfavorable to a lessee than granting a lessor a right to terminate a contract for a rental agreement prescribed by the Ordinance of the Ministry of Construction and Transportation, rather than granting a lessor a right to terminate a contract.

Therefore, the relevant provision of the instant lease agreement shall be interpreted by reducing the rent to “where the rent is in arrears for at least three consecutive months” as stipulated in the standard lease agreement. In addition, in light of the legislative intent of the Rental Housing Act and the Enforcement Decree thereof to promote the stability of the residential life of homeless tenants, “where the rent is in arrears for at least three consecutive months” should be strictly interpreted in cases where the lessee fails to pay the monthly rent for three consecutive months.

The phrase of the standard contract is an institutional important device that enables a lessee to continue residing in a rental house while the lease contract is renewed. For a rental house to which the Rental Housing Act applies, a lessor may terminate the lease contract or refuse to renew the lease contract unless there is any special reason falling under any of the subparagraphs of Article 10(1) of the Standard Lease Contract, and the lessee may not refuse to renew the lease contract unless there is a special reason to do so (see Supreme Court Decision 2004Da45998, Jul. 22, 2005, etc.). However, even if the lessee has renewed the lease without the consent to a lessee’s unilateral change in the terms and conditions of lease, it is difficult for the lessor to interpret that the lease contract can be terminated if the aggregate amount of rent is more than three months because of the difference in the monthly rent adjusted by the lessor, the purport of the relevant law that the renewal of the lease contract would be enforced, and the actual precedent of the Supreme Court has been avoided.

In the case of this case, the Defendant continued to pay the monthly rent as stipulated in the instant lease agreement, and it is reasonable to deem that even if the difference between the standard rent and the rent is a rent, it does not constitute “where the rent is in arrears for at least three consecutive months,” and therefore, the Plaintiff cannot terminate the instant lease agreement on the grounds as above.

This part of the plaintiff's assertion is without merit.

4. Conclusion

Therefore, the plaintiff's claim shall be dismissed as it is without merit, and the judgment of the court of first instance which has different conclusions is unfair, and the plaintiff's claim shall be dismissed. It is so decided as per Disposition.

[Attachment]

Judges Kim Jong-jin (Presiding Judge) and Park Jae-hun

1) The lease deposit and monthly rent under the above lease agreement are based on the amount calculated on the mutual conversion (the rental deposit is higher than the standard rental deposit) at the rate of 3.45% per annum with a maturity of 1 year, based on the former Rental Housing Act (amended by Act No. 8015 of Sep. 27, 2006), the former Enforcement Decree of the Rental Housing Act (amended by Presidential Decree No. 19975 of Mar. 27, 2007), the former Rental Housing Act (amended by Presidential Decree No. 2004-70 of Apr. 2, 2004) and the former public announcement of standard rental deposit and standard rent (amended by the Ministry of Construction and Transportation No. 2004-70 of Apr. 2, 2004).

2) The security deposit paid by the Defendant is KRW 248,227,335, and the standard security deposit is KRW 137,191,000.

3) The above appellate court assessed the Defendant’s payment guarantee amount of KRW 246,940,00 and the standard rental deposit of KRW 137,191,00.

4) It is evident that the Plaintiff’s conjunctive counterclaim in the above appellate judgment does not claim the amount of rent increase as an exercise of right to form under Article 628 of the Civil Act.