Korea Electric Power Corporation (Attorney Lee Jae-tae, Counsel for defendant-appellee)

Korea Water Resources Corporation (Law Firm AB, Attorneys Choi Jin-soo et al., Counsel for the plaintiff-appellant)

December 4, 2014

1. The plaintiff's claim is dismissed.

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

The plaintiff's obligation 470,567,370 under the land sales contract of June 25, 2014 between the plaintiff and the defendant is confirmed to be nonexistent.

1. Basic facts and relevant statutes;

(a) Basic facts;

The following facts are not disputed between the parties:

1) On October 15, 2012, the Defendant is the operator of the special area development project. On October 15, 2012, the Minister of Land, Transport and Maritime Affairs revised the development plan of the Silverm (MTV) among the semi-monthly special areas (No. 2013-703 (Official Gazette No. 17866, Oct. 15, 2012) through the “Public Notice of the Ministry of Land, Transport and Maritime Affairs No. 2013-703 (Official Gazette No. 17866, Oct. 15, 2012.

2) On June 25, 2014, the Plaintiff entered into a land sale contract with the Defendant (the head of Silland headquarters) under which the Plaintiff would sell 003-01-012,730 square meters from the said industrial complex (hereinafter “instant transformation site”) among the said industrial complex (hereinafter “instant contract”). The main contents of the instant contract relating to the sale price are as follows.

Article 3 (Payment of Price) (1) of the 2,304,120,000 m2,730 m2,730 m2,00 m2,730 m2,00 m2,000 m2,000 m2,000 m2,000 m2,000 m2,730 m2,7300 m2,000 m2,412,00 m230,412,00 m2,00 m2,00 m2,00 m2,00 m2,00 m2,03,140,630,630,630,6370,567,370 m25, 2014. m25, m207, m207,737,207, and m2014.

3) The Plaintiff paid to the Defendant the remainder of KRW 1,833,552,630, excluding the purchase price of KRW 470,567,370, and the remainder of KRW 1,833,552,630, which was set forth in the instant sales contract. The amount of KRW 470,567,370 (=2,304,120,120, - 1,833,552,630) that the Plaintiff did not pay to the Defendant is the difference between the appraised value (2,304,120,000, and the sale price determined in the instant contract by the appraisal business entity under subparagraph 9 of Article 2 of the Public Notice of Values and Appraisal of Real Estate Act) and the development cost (1,83,552,630) of the instant transformation site.

4) On October 15, 2012, the Minister of Land, Transport and Maritime Affairs amended a development plan for the power supply facilities, which are major infrastructure, of the development plan for the Madlese (MTV) since the designation of a semi-monthly special area and the modification of the development plan for the Sildlese (Public Notice of the Ministry of Land, Transport and Maritime Affairs No. 2013-703 (Public Notice of the Official Gazette No. 17866, Oct. 15, 2012).

B. Relevant statutes

It is as shown in the attached Form.

2. The parties' assertion

A. The plaintiff's assertion

1) The instant transformation site constitutes “industrial facility site” under the former Industrial Sites and Development Act (wholly amended by Act No. 11474, Jun. 1, 2012; hereinafter “former Industrial Sites Act”) and the former Enforcement Decree of the Industrial Sites and Development Act (amended by Presidential Decree No. 23297, Nov. 16, 201; hereinafter “former Enforcement Decree of the Industrial Sites Act”). As such, the sales price of the instant transformation site is the cost of creation pursuant to Article 40(1) of the former Enforcement Decree of the Industrial Sites Act.

2) Article 2 Subparag. 7-2 of the Industrial Sites and Development Act (amended by Act No. 11474, Jun. 1, 2012; hereinafter “the amended Industrial Sites Act”) newly established a definition provision of a site for industrial facilities under Article 2 Subparag. 7-2, allowing the determination of a site for industrial facilities by Presidential Decree. Accordingly, Article 1-2 of the Enforcement Decree of the Industrial Sites and Development Act (amended by Presidential Decree No. 24190, Nov. 20, 2012; hereinafter “Enforcement Decree of the amended Industrial Sites Act”) newly established, provides that energy supply facilities under subparagraph 6 of Article 2 of the Energy Act constitute a site for industrial facilities. However, the instant transformation site constitutes a site for industrial facilities under the former Industrial Sites Act. Accordingly, there is no room for designating an industrial complex after the enforcement Decree of the amended Industrial Sites Act enters into force or amending an industrial complex development plan under Article 1-2 of the Addenda to the Enforcement Decree of the Industrial Sites Act (amended by Presidential Decree No. 2120, Apr. 21, 219, 20120).

3) If so, the land for transformation of this case constitutes a site for industrial facilities. Accordingly, the Defendant, a project operator, under Article 40 of the Enforcement Decree of the amended Industrial Sites Act, is obligated to sell the land for transformation of this case at the cost of creation. Accordingly, there is no sales price liability for the Plaintiff’s purchase price of KRW 470,567,370 (the difference between the sale price and the cost of creation) under the contract of this case against the Defendant.

B. Defendant’s assertion

1) In the interpretation of the former Industrial Sites Act and subordinate statutes, the site for industrial facilities under the former Industrial Sites Act and subordinate statutes shall be deemed as “the site for facilities of the pertinent industry” to be confined to an industrial complex. The instant substation site is planned as a support facility site, but does not constitute a site for industrial facilities under the former Industrial Sites Act and subordinate statutes, since it is not planned as a site

2) Article 1-2 of the amended Enforcement Decree of the Industrial Sites Act provides that the term “industrial site” can be defined by the Presidential Decree when the definition of “industrial site” was newly established, and Article 2-6 of the amended Enforcement Decree of the Industrial Sites Act provides that “energy facilities” constitutes “industrial site”. The site to install a transformation station corresponding to energy supply facilities constitutes “industrial site” under the amended Industrial Sites Act. However, Article 2 of the Addenda of the amended Enforcement Decree of the Industrial Sites Act provides that Article 1-2 of the amended Enforcement Decree of the Industrial Sites Act shall apply to cases where an industrial complex is designated or the industrial complex development plan is modified after the enforcement of the former Enforcement Decree, thereby restricting the retroactive effect by prescribing that Article 1-2 of the amended Enforcement Decree of the Industrial Sites Act shall apply to cases where an industrial complex is designated or the industrial complex development plan is modified after the enforcement of the amended Industrial Sites Act. Accordingly, the instant transformation site does not constitute “industrial site”

3) As long as the transformation site of this case does not fall under a site for industrial facilities, it cannot be deemed that the cost of sale should be the cost of development, and it is lawful to determine the sale price of the transformation site of this case as the appraised value of the transformation site of this case. Thus

2. Determination

A. The issues of the instant case

The plaintiff asserts that the selling price should be the development cost on the premise that the transformation site of this case constitutes a site for industrial facilities under the former Industrial Sites Act. The defendant argued that the transformation site of this case does not correspond to the site for industrial facilities under the former Industrial Sites Act, and that the sale price should be the appraised value on the ground that it does not correspond to the site for industrial facilities that should be sold at the development cost according to the Addenda to the Enforcement Decree of the amended Industrial Sites Act even under the amended Industrial Sites Act and subordinate statutes, and therefore, the issue of this case is whether the transformation site of this case constitutes the site for industrial facilities under the former

Therefore, after examining whether the instant substation site constitutes a site for industrial facilities under the former Industrial Sites Act, it is determined as to the Plaintiff’s claim by examining whether the sale price of the instant substation site should be determined between the development cost and the appraised value of the instant substation site.

B. Whether the transformation site of this case constitutes a site for industrial facilities under the former Industrial Sites Act

1) Legal interpretation ought to be carried out in the direction of finding concrete feasibility within the extent that does not undermine legal stability. To this end, as a matter of principle, the interpretation ought to be faithfully interpreted within the ordinary meaning of the language and text used in the law. By additionally applying a systematic and logical interpretation method that takes into account the legislative intent and purpose, history of enactment and amendment, harmony with the entire legal order, relationship with other statutes, etc., it ought to comply with the aforementioned request for legal interpretation (see Supreme Court Decision 2013Meu4591, Dec. 11, 2014, etc.).

2) Article 40(1) of the former Enforcement Decree of the Industrial Sites Act stipulates that the sale price of the land developed by a project operator as a site for industrial facilities shall be the development cost if the land is sold in lots as a site for industrial facilities pursuant to Article 38(1) of the former Industrial Sites Act. However, the former Industrial Sites Act or the former Enforcement Decree of the Industrial Sites Act does not have any separate definition on the “site for industrial facilities”. Therefore, the scope of the site for industrial facilities, which shall be sold in lots at the development cost pursuant to the above provision, shall be interpreted by taking into account the language, contents, and legislative intent of the relevant provisions. However, since the amended Industrial Sites Act and subordinate statutes newly enacted the definition of the site for industrial facilities, it is reasonable to take into account the language, content

In light of the following circumstances, it is reasonable to see that industrial facilities installed in a site for industrial facilities under the former Industrial Sites Act are facilities of each of the relevant industries under subparagraphs 1 through 7 of Article 2 of the former Industrial Sites Act, i.e., factories, knowledge industry-related facilities, cultural industry-related facilities, recycling industry-related facilities, recycling industry-related facilities, resource-stockpiling facilities, and logistics facilities, and as such, the area of the site for industrial facilities is determined depending on which industry facilities are included in the “industrial facilities”. In light of the following circumstances acknowledged by comprehensively taking into account the language and contents of the former Industrial Sites Act and subordinate statutes and the amended Industrial Sites Act and subordinate statutes, and the legislative intent or reason for the amendment thereof, etc., the area of the site for industrial facilities does not constitute “industrial facilities site” under the former Industrial Sites Act and subordinate statutes.

A) Article 2 of the former Industrial Sites Act defines "factory", "knowledge industry", "cultural industry", "information and communications industry", "recycling industry", "resources stockpile facilities" and "logistics facilities" in order under subparagraphs 1 through 7 of the same Article, and defines "industrial complex" in subparagraph 8 of the same Article as "industrial complex". "industrial complex" is defined as "facilities related to each of the relevant industries listed in subparagraphs 1 through 7 of the same Article (factory, knowledge industry-related facilities, cultural industry-related facilities, cultural industry-related facilities, recycling industry-related facilities, recycling industry-related facilities, recycling industry-related facilities, resource stockpile facilities, logistics facilities, etc.), facilities related thereto (education, research, work, support, information processing, distribution facilities), and facilities for improving the functions of such facilities (facilities, such as dwelling, culture, environment, park, park, green area, medical service, tourism, sports, welfare facilities, etc.). In light of the interpretation of the above Article, facilities installed in an industrial complex can be separated from "facilities" and "facilities related thereto.

B) Article 2 of the amended Industrial Sites Act defines “site for industrial facilities” as “site for factories, knowledge industry-related facilities, cultural industry-related facilities, information and communications industry-related facilities, recycling industry-related facilities, resource-stockpiling facilities, logistics facilities and other facilities prescribed by Presidential Decree” by newly establishing Article 7-2 following subparagraphs 1 through 7 of the same contents as the former Industrial Sites Act. It is obvious that a site for industrial facilities under the amended Industrial Sites Act is “site for facilities of each of the relevant industries prescribed by Presidential Decree” and “site for facilities prescribed by Presidential Decree”.

C) The amended Industrial Sites Act, in order to supplement the provisions regarding facilities that can be installed in a site for industrial facilities and to ensure that it may be additionally prescribed by the Presidential Decree, in order to timely reflect the changed industrial structure in the timely manner, newly established the definition provisions of the site for industrial facilities and included “the site for the facilities prescribed by Presidential Decree” in the site for industrial facilities (Evidence 3). Thus, the construction of the part, excluding “the site for the facilities prescribed by Presidential Decree” added to the aforementioned amended provisions as the grounds for the above amendment, can be a single standard to interpret the scope of the site for industrial facilities under the former Industrial Sites Act.

D) According to Article 2 subparag. 9 (g) of the former Industrial Sites Act, “electric supply and demand facility business” includes “electric supply and demand facility business” in an industrial complex development project for creating an industrial complex, but Article 40(6) of the former Enforcement Decree of the Industrial Sites Act provides that the land supplied for “use other than industrial facility sites” shall be sold as appraised value, and that distribution facility sites, vocational training facility sites, school facilities sites, day care facilities sites, public medical facilities sites, public welfare facilities sites, national housing sites, rental housing sites, and research facility sites, etc., which are directly necessary to support the production activities of the persons moving into an industrial complex, may be sold at an exceptional price or at a price below such price. The above site is related to the project that is included in an industrial complex development project under Article 2 subparag. 9 of the former Industrial Sites Act, and therefore, it is difficult to view that the site for facilities immediately fall under the site for industrial facility sites under the former Industrial Sites Act and subordinate statutes.

E) For the purpose of facilitating smooth supply of industrial sites and promoting investment in industrial site development projects, the Enforcement Decree of the Industrial Sites Act provides that if a project operator parcels out land developed by the project operator as a site for industrial facilities, the project operator’s profit shall be excluded and the sale price shall be the cost of creation. In light of such legislative intent, it is reasonable to interpret the site for industrial facilities as a site for the installation of a specific industrial facility to be induced in the industrial complex in question. If the site for industrial facilities is extended to the site for the installation of facilities related to a specific industrial facility in question as well as the site for the installation of facilities to improve the functions of the facilities or facilities related to the industrial complex in question, the site for such facilities shall be sold at the cost of creation, which goes beyond the intent of the Industrial

C. Determination on the cause of the claim

1) As seen earlier, the instant transformation site does not constitute a site for industrial facilities under the former Industrial Sites Act. Meanwhile, pursuant to Article 2 subparag. 7-2 of the amended Industrial Sites Act and Article 1-2 subparag. 1 of the Enforcement Decree of the amended Industrial Sites Act, energy supply facilities under Article 2 subparag. 6 of the Energy Act constitute a site for industrial facilities. Energy supply facilities under the Energy Act refer to facilities installed to produce, convert, transport, or store energy, and a substation constitutes energy supply facilities under the Energy Act. However, according to Article 2 of the Addenda of the amended Industrial Sites Act, Article 1-2 of the Enforcement Decree of the amended Industrial Sites Act provides that an industrial complex is designated or modified after the enforcement of the amended Industrial Sites Act (amended by Presidential Decree No. 11206, Nov. 20, 2012), the amended Enforcement Decree of the Industrial Sites Act does not constitute “No. 2035, Dec. 15, 2012.”

2) As long as the transformation site of this case does not correspond to the site for industrial facilities, the sale price of the transformation site of this case shall be the appraised value by the appraisal business operator under Article 2 subparag. 9 of the Public Notice of Values and Appraisal of Real Estate Act pursuant to Article 40(6) of the Enforcement Decree of the Industrial Sites Act. Thus, it is lawful that the Defendant calculated the sale price of the transformation site of this case at KRW 2,304,120,00, which is the appraised value of the transformation site of this case. Therefore, under the premise that the transformation site of this case constitutes the site for industrial facilities, the sale price shall be calculated at KRW 1,83,52,630, which is the development cost of the transformation site of this case, on the premise that the Plaintiff’s claim seeking confirmation that there is no obligation to purchase the transformation site of this case against the Defendant of this case, is without merit.

3. Conclusion

Therefore, the plaintiff's claim is without merit, and it is dismissed. It is so decided as per Disposition.

[Attachment]

Judges Hong-jin (Presiding Judge)