Requirements for a rental business operator to whom the former Rental Housing Act applies to cancel or terminate a rental contract due to a default on a lease contract.

In light of the legislative purport and purpose of the former Rental Housing Act (amended by Act No. 9541, Mar. 25, 2009; hereinafter “former Rental Housing Act”), the legislative purport and purpose of the former Rental Housing Act (amended by Act No. 9541, Mar. 25, 2009; hereinafter “former Rental Housing Act”), and the language, contents, and purport of the relevant Acts and subordinate statutes on the grounds of the cancellation or termination of a rental house, in order for a rental business operator to cancel or terminate a rental agreement on the grounds of nonperformance of a rental agreement, the relevant liability must be deemed as the principal obligation of the rental agreement, as well as allowing a lessee who violates the relevant obligation to use or make profits from a rental house to be contrary to the legislative intent of the former Rental Housing Act or in essence infringing upon a lessor’s rights as a lessor. 26(1) of the former Enforcement Decree of the Rental Housing Act (amended by Presidential Decree No. 22102, Mar. 26, 2010).

Article 543 of the Civil Act, Articles 1 (see current Special Act on Private Rental Housing), 27 (1) (see current Article 45 of the Special Act on Private Rental Housing), and 32 (1) (see current Article 47 (1) of the Special Act on Private Rental Housing) of the former Rental Housing Act, Article 26 (1) (see current Article 35 of the Enforcement Decree of the Special Act on Private Rental Housing) of the former Enforcement Decree of the Rental Housing Act (Amended by Presidential Decree No. 22102, Mar. 26, 2010); Article 21 (2) [Attachment Form 20] of the former Enforcement Rule of the Rental Housing Act (Amended by Presidential Decree No. 22102, Mar. 23, 2013) (see current Article 20 (1) 1 of the Enforcement Rule of the Special Act on Private Rental Housing)

Hani (Law Firm Li, Attorneys Gu Young-hwan et al., Counsel for the plaintiff-appellant)

Defendant-Counterclaim (Law Firm LLC, Attorneys Lee Woo-soo et al., Counsel for defendant-Counterclaim)

Seoul High Court Decision 2015Na205197, 2055203 decided July 8, 2016

The part of the lower judgment against the Defendant (Counterclaim Plaintiff) regarding the main lawsuit is reversed, and that part of the case is remanded to the Seoul High Court. The remainder of the appeal is dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the ground of appeal on the claim of the principal lawsuit

A. The lower court determined that the Defendant’s act of infringing the management authority and installing banner, as stated in its reasoning, violated the duty under the instant lease agreement, and thus becomes a ground for termination of the lease agreement. The lower court rejected the Defendant’s assertion that the Defendant’s above violation was merely a violation of the incidental duty or matters of the instant lease agreement, on the grounds that: (a) negative impact on the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) who is a rental business operator and a seller for sale in lots due to the above acts; (b) the relationship between the Plaintiff and the Defendant; (c) the details, frequency, and degree of the Defendant’s duty; (d) a series of processes and developments leading to the instant dispute; and (e) the intent of the parties, if the Plaintiff could have predicted the Defendant’s above violation in advance, it would not have concluded the instant lease agreement with the Defendant.

B. However, we cannot accept the above determination by the court below for the following reasons.

(1) In order to cancel or terminate a contract on the ground of nonperformance, the contract shall not be rescinded or terminated unless it is necessary to achieve the purpose of the contract and the purpose of the contract is not fulfilled, and the creditor shall be deemed to have not entered into the contract, and the contract shall not be rescinded or terminated unless it is merely an incidental obligation that is not fulfilled (see, e.g., Supreme Court Decisions 2005Da53705, 53712, Nov. 25, 2005; 201Da22948, Mar. 14, 2013).

Meanwhile, relevant Acts and subordinate statutes, such as the former Rental Housing Act (wholly amended by Act No. 8966, Mar. 21, 2008; hereinafter “former Rental Housing Act”), aim at facilitating the construction of rental housing and stabilizing national residential life (Article 1). In particular, a rental business operator may cancel or terminate a lease contract or refuse to renew a lease contract if a lessee living in the relevant rental house falls under the matters prescribed by Presidential Decree, such as leasing a rental house by false or other unlawful means (Article 27(1)). Accordingly, Article 26(1) of the former Enforcement Decree of the Rental Housing Act (wholly amended by Presidential Decree No. 21134, Nov. 26, 2008; hereinafter “former Enforcement Decree of the Rental Housing Act”) provides for the following reasons: (a) Where a lessee has leased a rental house by fraudulent or other unlawful means; (b) where he/she intentionally transfers or destroys a rental house and other standards prescribed by Ordinance of the Ministry of Land, Transport and Maritime Affairs (Article 26(1) of the former Rental Housing Act).

In light of the language, contents, and purport of the relevant Acts and subordinate statutes on the cancellation of a contract or the requirements for cancellation of a contract that requires such principal obligation, the legislative purport and purpose of the former Rental Housing Act, and the grounds for cancellation or termination of a rental house, in order for a rental business operator to cancel or terminate a rental contract on account of a rental business operator’s nonperformance, it should not be deemed that the relevant obligation constitutes the principal obligation of a rental contract, as well as that of the former Rental Housing Act, allowing a lessee who has violated the relevant obligation to use or make profit from a rental house violates the legislative intent of the former Rental Housing Act, or that it is so serious that it is equally assessed as the grounds for cancellation or termination as prescribed by Article 26(1) of the Enforcement Decree of the former Rental Housing Act or Article 10(1)

(2) According to the reasoning of the first instance judgment cited by the lower court and the evidence duly admitted by the lower court, the following circumstances are revealed.

① The Defendant’s act of infringing the Defendant’s management authority is deemed to be temporary, without focusing on the degree of such infringement, that the Defendant’s act did not constitute a substantial infringement on the Plaintiff’s management authority over the instant apartment, on the following grounds: (a) found in an asset management company and the service company office within the instant apartment community center, which is a welfare facility managed by the Plaintiff, together with the Nonparty, the president of the council of lessees’ representatives, and other lessees; and (b) demanded the company to leave for about one hour; (c) entered the office’s house or dissolved with some employees.

② The Defendant’s act of installing banner is merely an act of installing a banner against the Plaintiff on the outer wall of the apartment of this case over several occasions, and it does not seem to have destroyed or destroyed the apartment of this case or caused direct damage to the Plaintiff or other tenants in the process.

③ Each of the above violations committed by the Defendant is not directly related to the conclusion, maintenance, existence, etc. of the instant lease agreement, but rather due to the conflict between the Plaintiff and the Plaintiff regarding the calculation of the pre-sale conversion price for the instant apartment and the subsequent conclusion of the pre-sale contract.

(3) Examining these circumstances in light of the legal principles as seen earlier, it is difficult to view that the Defendant’s act of infringing the Defendant’s management authority and installing banner alone violated the Defendant’s principal obligation under the instant lease agreement, and it cannot be deemed that the content of each obligation that the Defendant violated is significant to the extent that it is equally evaluated as the grounds for termination under Article 26(1) of the former Enforcement Decree of the Rental Housing Act or Article 10(

C. Nevertheless, the lower court determined otherwise that the Plaintiff could terminate the instant lease agreement on the sole ground of the Defendant’s infringement of management authority and the installation of banner. In so doing, the lower court erred by misapprehending the legal doctrine on the grounds for termination of the lease agreement on rental housing, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point

2. As to the ground of appeal on the counterclaim

citing the reasoning of the judgment of the first instance, the lower court rejected the Defendant’s counterclaim on the grounds that it is difficult to view the content of the occupant’s notice sent by the Plaintiff to occupants on February 2, 2014 and around June 2014 as merely an expression of opinion or a false statement on the attached Table 3 of the judgment of the lower court, and it is difficult to view that the contents of the occupant’s notice cannot be deemed to be merely an expression of opinion or a false statement, or that it is difficult to view the Defendant’s use of a somewhat inflammable expression that could undermine the social norms.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court’s aforementioned determination is justifiable. In so doing, contrary to what is alleged in the grounds of appeal, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence

3. Conclusion

Therefore, without further proceeding to decide on the remainder of the grounds of appeal on the claim of the principal lawsuit, the part against the Defendant regarding the principal lawsuit among the judgment below is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The remaining grounds of appeal are dismissed. It is so decided as per Disposition by the assent

Justices Park Sang-ok (Presiding Justice)