[1] The legal nature of the premium / Whether the premium contract is a separate contract (affirmative) and the case where the whole of the premium contract is in an indivisible relationship such as one contract (a single contract)

[2] Whether a licensed real estate agent’s “the matters concerning the actual relation of rights or the rights of an article that is not publicly announced” that should be stated in the confirmation and explanatory note of the object of brokerage includes a lease under the Commercial Building Lease Protection Act (affirmative)

[1] Premiums are tangible objects such as business facilities and fixtures of a commercial building, or the cost for the transfer of intangible property value, such as business advantages, etc. according to the location of the business entity, customer, credit, business know-how or store, or the cost for use for a certain period. A premium contract entered into as a result of a lease transfer contract is a separate contract from a lease transfer contract, but in light of the developments leading up to the above two contracts and the details of the contract, etc., the premium contract was entered into in combination with a lease transfer contract and entered into as a whole in an economic and factual manner, and without any existence of any one of the parties appears to have not expressed any other intention, the entire contract shall be deemed as an indivisible relationship such as a single contract.

[2] According to Article 25(1) and (2) of the former Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (Amended by Act No. 12374, Jan. 28, 2014); Articles 21 and 22 of the former Enforcement Decree of the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (Amended by Presidential Decree No. 25522, Jul. 28, 2014); and Article 16 of the former Enforcement Rule of the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (Amended by Ordinance of the Ministry of Land, Infrastructure and Transport No. 115, Jul. 29, 2014; Enforcement Rule of the Licensed Real Estate Agents Act) of the former Licensed Real Estate Agents Act (Amended by Act No. 12374, Jan. 28, 2014; hereinafter referred to as the “Real Estate Agent Act”), a broker must verify the ownership, lease, mortgage, superficies, etc. of an object of brokerage before the brokerage is completed.

Furthermore, when a broker mediates a contract for the transfer of right to a commercial building, he/she has the duty to confirm and explain to the client the existence and content of the right to lease which is the object of the commercial building. Therefore, the broker has the duty to confirm and explain not only the right to the register of real estate which is the object of the right to lease but also the right to the rights of the commercial building necessary to determine whether the client constitutes a lease for which he/she is entitled to protection such as opposing power and preferential right to payment as provided by the Commercial Building Lease Act. Therefore, if the broker intentionally or negligently violates such duty and causes damage to the client’s property, he

[1] Articles 105, 618, and 629 of the Civil Act / [2] Articles 25(1) and (2), and 30(1) of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Act No. 12374, Jan. 28, 2014); Articles 21 and 22 of the Enforcement Decree of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Presidential Decree No. 25522, Jul. 28, 2014; Presidential Decree No. 25522, Jul. 29, 2014); Enforcement Rule of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Presidential Decree No. 11573, Jul. 29, 2014); Article 16 of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act

[1] Supreme Court Decision 2012Da115120 Decided May 9, 2013 (Gong2013Sang, 1032)

Plaintiff (Attorney Cho Jong-sik, Counsel for the plaintiff-appellant)

Defendant 1 and two others (Law Firm LLC et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Na2066340 decided September 28, 2016

All appeals are dismissed. The costs of appeal are assessed against the Defendants.

The grounds of appeal are examined.

1. Defendant 1;

A. Premium is a type of property, such as business facilities and fixtures of a commercial building, or the cost for the transfer of intangible property value, such as business interest, depending on the location of the business entity, customer, credit, business know-how or store, or for a certain period of time. A premium contract entered into as a result of a lease transfer contract is a separate contract from a lease transfer contract, but in light of the process of concluding the said two contracts and the details of the said contracts, etc., the premium contract was entered into in combination with a lease transfer contract and entered into as a whole in an economic and factual manner. In a case where, without any existence, it appears that the parties would have not expressed any other intent, the entire contract should be deemed as an indivisible relationship, such as a single contract (see Supreme Court Decision 2012Da115120, May 9, 2013).

B. According to the lower judgment, the following facts are revealed.

(1) On February 29, 2008, Defendant 1 leased the instant commercial building located in Gangnam-gu Seoul ( Address omitted) from Nonparty 1 on a lease deposit of KRW 62 million, monthly rent of KRW 2.2 million (hereinafter “instant lease contract”), and around that time, Defendant 1 operated the instant pharmacy. The instant lease contract was renewed every two years thereafter.

(2) On December 2012, Defendant 1 changed the name of the lessee of the instant lease to “non-party 2” by requesting Nonparty 1 to Nonparty 1.

(3) On March 8, 2013, the Plaintiff entered into a contract for acquisition and transfer of rights (hereinafter “instant contract for transfer of rights”) with Defendant 1 and Defendant 2, who is an employee of the Licensed Real Estate Agent Office of Defendant 3’s operation, stating that “the Plaintiff acquires the right of lease under the instant lease agreement and takes over the facilities (excluding all the facilities sold) of the instant pharmacy at KRW 380 million” (hereinafter “instant contract for transfer of rights”). Defendant 3 signed the “ broker” column of the instant contract.

(4) Article 2 of the instant contract for the transfer of rights provides that “Defendant 1 shall deliver the instant commercial building to the Plaintiff by the day immediately before the commencement of the lease contract, remove all matters hindering the exercise of the right of lease, and deliver all facilities and goodwill to the Plaintiff so that the Plaintiff may operate the business immediately upon the receipt of any balance.” Article 4(3) of the instant contract provides that “Defendant 1 shall make utmost efforts to conclude the lease contract (based on the lease deposit amount of KRW 70 million and monthly rent of KRW 3 million with the owner before the remainder payment date, and that the lease contract may be changed at the request of the owner) with the Plaintiff before the remainder payment date, and if the lease contract is not normally concluded or does not proceed, the instant contract for the transfer of rights shall be cancelled, and Defendant 1 shall immediately return the down payment and the intermediate payment received to the Plaintiff.”

(5) According to the instant contract for the transfer of right, the Plaintiff paid Defendant 1 a down payment of KRW 40 million on March 11, 2013, KRW 100 million on April 9, 2013, KRW 100 million on August 30, 2013, KRW 200 million on August 31, 2013, and KRW 200 million on August 31, 2013 (the sum of KRW 140,000 and KRW 62 million on rent) to Defendant 1, and operated the instant pharmacy from September 1, 2013.

(6) On August 27, 2013, Defendant 1 asked Nonparty 1 to change the name of the lessee of the instant lease to the Plaintiff, which is only the relative of the lessee of the instant lease at once,” and upon Nonparty 1’s request, issued a lease contract that the lessee became the Plaintiff and delivered it to the Plaintiff.

(7) Around January 2014, Nonparty 1 did not change the name of the tenant of the instant commercial building, but requested the Plaintiff to deliver the instant commercial building with the knowledge that the Plaintiff was operating the pharmacy in the instant commercial building. The Plaintiff was granted a grace period on several occasions from Nonparty 1, and was handed over the instant commercial building on and around January 15, 2015, and received the remainder lease deposit.

C. According to the above facts, the instant right transfer contract includes a right transfer contract that transfers the lease right under the instant lease contract to the Plaintiff along with the premium contract for the business facilities, etc. of the instant commercial building, and Defendant 1’s obligation to obtain the consent of Nonparty 1 with respect to the transfer of the lease right is concurrently performing the Plaintiff’s obligation to pay the remainder of the lease deposit amount. Defendant 1, as the Plaintiff and Nonparty 1’s lease contract was not concluded normally, should cancel the instant right transfer contract and return the money received as the premium if Defendant 1 violated the obligation. In addition, in light of the process of the conclusion of the instant right transfer contract and the details of the contract, etc., the premium contract is combined with the right transfer contract, and the entire contract is in an indivisible relationship, such as a single contract.

The judgment of the court below to the same purport is justifiable in accordance with the above legal principles. The court below did not err by misapprehending the legal principles on the premium or premium contract, as otherwise alleged in the grounds of appeal.

D. Furthermore, the lower court determined that Defendant 1 was liable for compensating the Plaintiff for 60% of the premium amounting to KRW 380 million for damages incurred by the Plaintiff, on the ground that Defendant 1 merely obtained a lease contract in the form of deceiving Nonparty 1 and delivered it to the Plaintiff, and it cannot be deemed that Defendant 1 performed the obligation stipulated in Article 4(3) of the instant contract for the transfer of rights. Accordingly, the Plaintiff did not assert the right of lease against Nonparty 1 and did not have to deliver the instant commercial building.

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 determining, the lower court did not err by misapprehending the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on

2. Defendant 2;

The defendant did not enter the grounds of appeal in the petition of appeal, and did not submit the grounds of appeal within the due time limit for submission.

3. Defendant 3;

A. According to Article 25(1) and (2) of the former Licensed Real Estate Agents’ Business Affairs and Report of Real Estate Transactions Act (Amended by Act No. 12374, Jan. 28, 2014); Articles 21 and 22 of the former Enforcement Decree of the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act (Amended by Presidential Decree No. 25522, Jul. 28, 2014); and Article 16 of the former Enforcement Rule of the Business Affairs of Licensed Real Estate Agents and Report of Real Estate Transactions Act, a broker must verify the rights, such as ownership, lease on a deposit basis, mortgage, superficies, leases, etc. of the object of brokerage before the brokerage is completed, and explain the description and specification of the object of brokerage delivered by a licensed real estate agent to a party to a transaction, other than the “matters to be entered in the register” in the column of rights and obligations of the object of brokerage, and the lease of a commercial building under the Lease Protection Act (hereinafter “Lease Protection Act”).

Furthermore, when a broker mediates a contract for the transfer of right to a commercial building, he/she has the duty to confirm and explain to the client the existence and content of the right to lease which is the object of the commercial building. Therefore, the broker has the duty to confirm and explain not only the right to the register of real estate which is the object of the right to lease but also the right to the rights of the commercial building necessary to determine whether the client constitutes a lease for which he/she is entitled to protection such as opposing power and preferential right to payment as provided by the Commercial Building Lease Act. Therefore, if the broker intentionally or negligently violates such duty and causes damage to the client’s property, he

B. For the following reasons, the lower court determined that Defendant 3, as an employer of Defendant 2, who is a licensed real estate agent and employee, violated the obligation to verify whether the lease subject to the transfer of the right of lease is subject to protection under the Commercial Building Lease Act while mediating the instant contract with Defendant 2, and explain it to the Plaintiff, thereby making it liable to compensate the Plaintiff for the damages incurred by the Plaintiff due to his failure to operate the instant pharmacy for a certain period.

(1) The instant contract, arranged by Defendant 3’s employees, includes not only the premium but also the content that the right of lease is transferred. The instant contract stipulates that “this contract shall correspond to the lease agreement,” and Defendant 3 signed and sealed the said contract as a licensed real estate agent. Accordingly, Defendant 3 has the same duty of care as mediating the conclusion of the commercial building lease contract with Defendant 2.

(2) At the time of entering into the instant contract for the transfer of rights, the Plaintiff, the client, was interested in the duration of the instant lease agreement.

(3) The instant lease agreement is a lease deposit of KRW 62 million and monthly rent of KRW 2.7 million, and the conversion deposit is KRW 332 million under Article 2(2) and (3) of the former Enforcement Decree of the Commercial Building Lease Protection Act (amended by Presidential Decree No. 25036, Dec. 30, 2013) (amended by Presidential Decree No. 25036, Dec. 30, 201) and is not included in the object of protection of the Commercial Building Lease Protection Act. Defendant 3 and Defendant 2 did not explain to the Plaintiff even though they confirmed the same.

(4) The premium amount stipulated in the instant contract is KRW 380,000. If the Plaintiff provided such explanation to Defendant 3 and Defendant 2, it appears that the Plaintiff did not conclude the instant contract for the transfer of rights or set the premium amount at a less than the lower amount.

C. Examining the reasoning of the lower judgment in light of the foregoing legal doctrine and the record, the lower court’s determination that recognized Defendant 3’s liability for damages against the Plaintiff is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on the scope of the duty to confirm and explain the legal relationship on the object of brokerage of real estate brokers, or by misapprehending the legal doctrine on the causation between the violation of the duty to explain and confirm, and the Plaintiff’s damage, contrary to what is alleged

4. Conclusion

The Defendants’ appeals are dismissed in entirety as it is without merit, 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 Park Poe-young (Presiding Justice)