[1] The requirements to apply Article 42 of the Commercial Act to the lease of business or business facilities by analogy

[2] The case holding that Article 42 of the Commercial Code does not apply where a lessee, not leased a functional asset as a source of profit which is systematically organized from a lessor, but only leased a contact building necessary for the business of the container, Article 42 of the Commercial Code does not apply to the tenant

[1] In the case of lease of business or business facilities, Article 42 of the Commercial Act regarding the transfer of business is applied mutatis mutandis, and even if a lessee is liable for the repayment of a lessor’s business obligation, this is premised on the fact that the lessee continues to engage in the same business activity as that of the lessor, by leasing a functional property as the source of profit organically organized from the lessor.

[2] The case holding that Article 42 of the Commercial Act may not be applied to a case where a lessee, not a lessor, leases a functional property as a source of profit which is systematically organized from a lessor, but only a contact building necessary for business is leased

[1] Article 42 (1) of the Commercial Act / [2] Article 42 (1) of the Commercial Act

[1] Supreme Court Decision 2005Da602 Decided July 22, 2005 (Gong2005Ha, 1400) Supreme Court Decision 2007Da89722 Decided April 11, 2008 (Gong2008Sang, 675)

Plaintiff (Law Firm Han-hee, Attorneys Kim Sung-hee et al., Counsel for plaintiff-appellant)

Haju Co., Ltd. (Jiwon General Law Firm, Attorney Lee Na-tae, Counsel for the plaintiff-appellant)

Cheongju District Court Decision 2007Gaso3909 decided Nov. 27, 2007

May 20, 2008

1. The plaintiff's appeal is dismissed.

2. The costs of appeal shall be borne by the Plaintiff.

The judgment of the first instance is revoked. The defendant shall pay to the plaintiff 9 million won with 20% interest per annum from the day after the delivery of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

A. On October 11, 1990, the Plaintiff entered into a membership agreement with the Korean Cota Co., Ltd. (hereinafter “Korea Cota”) under which the Plaintiff was entitled to membership of another Cota condominium (hereinafter “instant Conta”) within the Cota Art complex for ten (10) years from the time when the Plaintiff paid the security deposit for membership, and was returned at the time of retirement. If the Plaintiff did not give separate notice within 30 (30) days from the expiration date of the contract, the Plaintiff entered into a membership agreement with the intent to automatically cancel the contract (hereinafter “instant agreement”). At that time, the Plaintiff paid the security deposit for membership (hereinafter “the instant security deposit”) in full to the Korean Cota.

B. The ownership of a hotel, a penta building, a parking lot site, etc. among the facilities operated by the Korean Cota, was transferred to a third party by auction, etc., due to the financial deterioration of the Korean Cota, and the ownership of play movables, water-related leisure facilities, singing rooms, and containers have been leased and operated by a third party until now.

C. Meanwhile, as some employees of the Korean Cota retired without receiving wages and retirement allowances from the Korean Cota, they agreed to substitute for the overdue wages paid from the Korean Cota until October 31, 2005, the lease deposit amount of 128,093,280 won, and the overdue wages paid from the Korean Cota, and to operate part of the facilities within the Cota in the name of the defendant company to be established. Accordingly, on November 2, 2000, the defendant company established on November 2, 200 leased the instant container from the Korean Cota and operated the instant container business, and thereafter, separately from the instant container, leased part of the hotel building in the instant container from the Korean Cota, Ltd. to the Korean Cota, Ltd., and used it from the Korean Cota, Ltd., 128,000 and the parking lot from the Korean Cota, Ltd., 200.

D. On March 31, 2007, the Defendant Company changed its trade name from the “Korea Co., Ltd. Cheongju-ri Ltd.” to the “Cheongju-ri Co., Ltd.”

[Reasons for Recognition] Uncontentious Facts, Gap evidence Nos. 1, 3, Eul evidence Nos. 2, 3, 5, 6, 8, 9, Eul evidence Nos. 10-1 through 4, Eul evidence Nos. 11-1 and 2, the result of the examination of the defendant representative director of the party, the purport of the whole pleadings

2. Determination:

A. The plaintiff's assertion

The contract of this case was automatically terminated by the Plaintiff’s failure to notify the Plaintiff within 30 days from the time when the Plaintiff completely paid the pertinent security deposit, and thus, the Korea Cota shall return the instant security deposit to the Plaintiff. The Defendant continued to use the trade name “Korea Cocota’s trade name and the main part of the trade name while running the instant container by leasing the instant container from Korea Cota, and continued to use the trade name “Korea Cocota’s trade name and the main part of the instant container,” and Article 42 of the Commercial Act shall apply to the case of the lease of business or business facility. As such, the Defendant is liable for the repayment of the obligation to return the instant security deposit arising from the business of Korea Cota.

(b) Markets:

In the case of lease of business or business facility, Article 42 of the Commercial Act applies mutatis mutandis to the transfer of business, and even if a lessee is liable for the repayment of a lessor’s business obligation, it is assumed that the lessee continues to engage in business activities such as lease of functional property as the source of profit organized by the lessor (see Supreme Court Decision 2005Da602, Jul. 22, 2005, etc.).

In light of the following circumstances recognized as the above facts, i.e., the Korean Cota operated the whole facility of the hotel, pent, play movable property, water-related leisure facility, etc. in addition to the instant container, it is reasonable to view that the Defendant leased only the instant container to a third party, not the source of profit organicized from the Korean Cota, but only the instant container necessary for the business, by applying Article 42 of the Commercial Act to the Plaintiff’s assertion that the Plaintiff’s main facility, such as hotel, pent, parking lot, part of the site, etc. is transferred to a third party through auction, etc., while a third party leases and operates play movable property, water-related leisure facility, etc., the Defendant Company leased only the instant container from Korean Cota to a third party after leasing it. Thus, it is not necessary to lease the functional property of the instant container as a source of profit organicized from Korean Cota., Ltd., and there is no further need to apply it to the Plaintiff’s assertion that Article 42 of the Commercial Act may not be applied by analogy.

3. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and the judgment of the court of first instance is just in conclusion, and the plaintiff's appeal is dismissed. It is so decided as per Disposition.

Judge Yang Tae-Gyeong (Presiding Judge)