[1] The base point of time to determine the development gains subject to restitution of development charges (=the point of time of termination of imposition)

[2] Whether the purchase cost of access roads outside the development project area constitutes development costs deductible when calculating development charges (negative)

[1] Articles 1, 2 subparag. 1, 3, 8, 9, and 10 of the former Restitution of Development Gains Act (Amended by Act No. 10662, May 19, 201) / [2] Article 11(1) of the former Restitution of Development Gains Act (Amended by Act No. 10662, May 19, 201); Article 12(1) of the former Enforcement Decree of the Restitution of Development Gains Act (Amended by Presidential Decree No. 22395, Sept. 20, 201)

[Judgment of the court below]

The head of Jung-gu Incheon Metropolitan City

Seoul High Court Decision 2013Nu28277 decided January 29, 2015

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

In light of the provisions of Articles 1, 2 subparag. 1, 3, 8, 9, and 10 of the former Restitution of Development Gains Act (amended by Act No. 10662, May 19, 201; hereinafter “former Restitution of Development Gains Act”), development gains subject to the restitution of development charges shall be the increase in the land value arising during the period in which the development project is implemented in an area where the project subject to the imposition of development charges is implemented due to the implementation of the development project or other social and economic factors. Thus, it shall not be deemed that the final and conclusive at the time of the completion of the imposition, i.e., the time of the completion of the development project, and it shall not be deemed that the final and conclusive at the time of disposal of the developed land actually after the completion of the imposition (see Supreme Court Decision 98Du692, May 26, 200). Therefore, even if the price of the land falls due to reasons as stated in the grounds of appeal after the completion of imposition, it is irrelevant to the development gains.

The lower court determined as follows: (a) there is no dispute between the parties that the instant development project is “development project involving a change of land category” under Article 5(1)9 of the former Development Gains Refund Act, which is subject to development charges; and (b) the Plaintiff was granted approval for use from the head of the Incheon Metropolitan City Free Economic Zone Authority on March 12, 2010 for a building newly constructed on a park of 1,331 square meters in Jung-gu, Incheon Metropolitan City ( Address 1 omitted); and (c) the Defendant can recognize the fact that the land price at the point of termination of the instant land was calculated as stipulated in Article 10(1) of the same Act based on the officially announced land price of the reference land ( Address 2 omitted) which is the most similar standard land use as at the time of the said approval for use; and (d) the Defendant’s calculation of the land

Examining the reasoning of the lower judgment in light of the evidence duly admitted, contrary to what is alleged in the grounds of appeal, the lower court did not err in its judgment by misapprehending the legal doctrine on the calculation of the land price at the time of termination

2. Regarding ground of appeal No. 2

(a) statutory provisions concerning the calculation of development costs;

According to Article 11 of the former Development Gains Refund Act, development costs shall be calculated by adding up “net construction costs (including taxes and public charges), research expenses, design expenses, general management expenses and other expenses,” which are paid in relation to the implementation of a development project to “where a person liable for payment provides or contributes public facilities, land, etc. to the State or a local government under the conditions of the relevant Acts and subordinate statutes or authorization, etc., the equivalent value thereof (Article 2), and “improvement expenses of the relevant land” (Article 3), and “development expenses of the relevant land” (Article 11(1)), and the calculation standards of development costs under the said subparagraphs shall be prescribed by Presidential Decree

Article 12(1) of the former Enforcement Decree of the Restitution of Development Gains Act (amended by Presidential Decree No. 22395, Sept. 20, 2010; hereinafter “former Enforcement Decree of the Development Gains Refund Act”) based on delegation, concerning the calculation standard of development costs; ① “net construction cost” is the sum of the material cost, labor cost, expenses, and taxes and public charges incurred for the development project concerned; ② “general construction cost” is the aggregate of the expenses incurred in the management activities in connection with the development project concerned; ③ “other expenses” is the sum of the compensation cost for buildings, standing trees, goodwill, etc. in the development project area not included in the land value and the charges paid to the State or a local government in accordance with the provisions of other Acts and subordinate statutes or the conditions of authorization for the development project, etc. ④ With respect to “the value of public facilities or public facilities, etc. donated by the person liable for payment under the conditions of related Acts and subordinate statutes or authorization,” the value of “land” is the value of land at which the development project is commenced, and the land price is not calculated.

B. As to the cost of opening access roads as indicated in the lower judgment and insurance premiums

(1) After finding the facts as stated in its holding, the lower court determined that, where the owner of the land subject to development charges has contributed to the increase of the land price of the land subject to development charges by building access roads located outside the relevant development project zone at his/her own expense, the costs for building access roads shall be deemed the development costs and the costs for building access roads, which the Plaintiff performed on the premise that the costs for building access roads should be deducted from the development costs, falls under the development costs within the scope calculated pursuant to Article 12 of the former Enforcement Decree of the Development Gains Refund Act, as net construction costs (Article 12(1)1 of the former Enforcement Decree of the Development Gains Refund Act). In addition, the lower court determined that, among the industrial accident insurance premiums and employment insurance premiums paid by the Plaintiff, the portion related to the construction for building sites and land category change of the instant land, also falls under the development costs within the scope calculated pursuant to Article 12 of the former Enforcement Decree of the Development Gains Refund Act.

(2) The allegation in the grounds of appeal in this part is purporting to apply the Plaintiff’s development costs to the amount of access road construction costs and insurance premiums that the lower court did not recognize as the development costs. This is merely an error in the selection of evidence and the determination of the value of evidence belonging to the free trial of the fact-finding court, and the reasoning of the lower judgment is examined in light of the aforementioned legal principles and the relevant legal principles as stated in the lower judgment, and the evidence duly admitted, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence contrary to logical

C. As to the construction cost of the land of this case and the purchase cost of this case

(1) The lower court rejected the Plaintiff’s assertion that construction costs of the instant land and construction costs of the instant land constitute development costs, on the ground that it is evident that construction costs of the instant ground buildings continued to change the land category do not constitute development costs, and on the same purport, did not recognize the purchase costs of the instant land, which are land subject to development projects, as development costs.

(2) Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the evidence duly admitted, the lower court did not err by misapprehending the legal doctrine on development gains and development costs, contrary to what is alleged in the grounds of appeal.

D. As to the cost related to the purchase of access roads as stated in the judgment below

(1) The lower court determined that development costs, which are deducted from the imposition of development charges, are limited to the costs of the kind stipulated in each subparagraph of Article 11(1) of the former Development Gains Refund Act, and that, even if such type of costs do not meet the development costs calculation standards stipulated in Article 12(1) of the former Enforcement Decree of the Development Gains Refund Act, development costs cannot be recognized, and that development costs do not constitute development costs, on the premise that site purchase costs and site purchase costs for access roads located outside the development project area do not constitute development costs.

(2) In addition to the language, structure, and purport of Article 11(1) of the former Development Gains Refund Act and Article 12(1)3 of the former Enforcement Decree of the Development Gains Refund Act, even if the cost of the purchase of a site was paid for the construction of an access road outside the development project area, the cost of the purchase of the site is difficult to be considered as the cost that was paid to increase the value of the land subject to development; ② Article 11(1)1 of the former Development Gains Refund Act and Article 12(1)5 of the former Enforcement Decree of the Development Gains Refund Act provide that the compensation object is limited to “other expenses” recognized as the development cost, and thus, the cost of the purchase of a site outside the development project area does not fall under the above compensation, but does not fall under the improvement cost under Article 11(1)3 of the former Development Gains Refund Act, and ③ the Plaintiff cannot be deemed as having provided or contributed the land to the State or a local government, and thus, the cost of the purchase of the access site cannot be deemed as the cost of the development project area subject to deduction.

In the same purport, the lower court is justifiable to have determined that all the purchase costs of access road sites located outside the instant development project zone and related expenses do not constitute development costs. In so doing, it did not err by misapprehending the legal doctrine on the deduction of development costs, as otherwise

3. Conclusion

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

Justices Kim Yong-deok (Presiding Justice)