2018Da265911 Construction Price

Tae Young River Corporation

Law Firm Mission

Attorney Park Jong-tae et al., Counsel for the defendant

Co., Ltd.

Daejeon High Court Decision 2018Na11372 Decided August 22, 2018

February 25, 2021

The appeal is dismissed.

The costs of appeal are assessed against the Plaintiff.

The grounds of appeal are examined.

1. Case summary

The reasoning of the lower judgment and the record reveal the following facts.

A. On March 4, 2016, the Defendant entered into the instant contract with the mining area construction industry corporation (hereinafter referred to as the “mining area construction industry”) and Seosan (hereinafter referred to as the “instant construction”) with respect to the construction work for which the Defendant’s “mast” painting factory is extended (hereinafter referred to as the “instant construction work”), which is stipulated as KRW 1.1 billion for the construction cost (excluding value-added tax), March 7, 2016 for the commencement date, and May 15, 2016 for the completion date of the instant construction work. Article 40 of the General Conditions of the instant contract provides for the construction work other than drawings under a special agreement.

On April 8, 2016, the Plaintiff entered into the first subcontract with respect to steel works among the mining area construction industry and the instant construction works, setting the construction cost of KRW 429 million from April 9, 2016 to May 31, 2016, and thereafter, increased the construction cost of KRW 495 million.

On June 20, 2016, the Plaintiff concluded a subcontract for the second subcontract with respect to metal structures and windows among the mining area construction industry and the instant construction works, setting the construction cost of KRW 363 million and the construction period from June 20, 2016 to July 10, 2016.

The defendant applied for approval for use of a factory extended on July 29, 2016 and obtained approval for use on August 8, 2016.

B. On March 31, 2016, the Plaintiff filed a claim for KRW 128.7 million with the mining area construction industry as the first subcontract price, KRW 297 billion on May 27, 2016, KRW 69.3 million on July 1, 2016, and KRW 495 million on July 1, 2016, and received KRW 250 million.

As the subcontract price for the mining area construction industry, the Plaintiff claimed KRW 100,000 on June 13, 2016, KRW 1100,000,000 on July 1, 2016, KRW 1552,90,000 on July 26, 2016, KRW 363,00,000,000,000,000 were paid to the mining area construction industry.

On July 29, 2016 and September 22, 2016, the Plaintiff requested the Defendant to pay the subcontract price directly on October 6, 2016, as the Plaintiff filed a claim for payment of KRW 57.9 million of the subcontract price payable to the mining area construction industry, but was not paid.

C. The Plaintiff filed the instant lawsuit against the Defendant seeking direct payment of the subcontract price pursuant to Article 14(1)3 of the Fair Transactions in Subcontracting Act (hereinafter “subcontract Act”).

2. The assertion on an offset based on the damage claim

For the following reasons, the lower court accepted the Defendant’s defense that the construction cost of the mining area would be offset against the claim for the construction cost of the mining area construction industry. Under the instant contract, the construction cost included the construction work stipulated in Article 40(g) of the General Conditions, and the mining area construction industry did not perform the construction work as stipulated in the special agreement. The mining area construction industry, as it renounced the construction work stipulated in the special agreement on September 12, 2016, prepared a memorandum of the construction waiver in which the construction cost was KRW 67,556,000, which stated the construction cost as KRW 67,556,000, among the matters stipulated in the special agreement. Therefore, the construction cost of the non-construction portion in the special agreement can be deemed to be KRW 67,56,00

Examining the reasoning of the lower judgment in light of the record, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the burden of proof.

3. Claims concerning offset based on claims for indemnity;

A. Where a direct payment request is made under Article 14(1) of the Subcontract Act, the obligation of the subcontractor to the subcontractor who is affiliated with the contract shall be transferred to the subcontractor while maintaining the identity thereof. Therefore, the contractor may set up against the subcontractor on the grounds that he/she may set up against the contractor before a direct payment request is made (see Supreme Court Decision 2009Da19574, Jun. 10, 2010).

Where the automatic claim against the contractor is closely related to the subcontractor's obligation to the subcontractor, which is a passive claim, the subcontractor may set off against the subcontractor by offsetting the claim even if the contractor has incurred the automatic claim after the contractor's direct claim has occurred. In such cases, the cause of the automatic claim has already been established before the subcontractor requests a direct payment, and thus, the automatic claim does not constitute the claim acquired after the subcontractor requests a direct payment.

The right of simultaneous performance defense shall be acknowledged in a case where there are circumstances to recognize the relation of performance as a quid pro quo of the obligations owed by both parties under a specific contractual relationship, even though each obligation owed by both parties is not an obligation under a bilateral contractual relationship with its own quid pro quo relationship (see Supreme Court Decision 2000Da43819, Mar. 27, 2001).

B. According to the reasoning of the lower judgment and the record, the following facts are revealed.

On March 1, 2016, the mining area construction industry entered into a contract with Korea Industrial Co., Ltd. (hereinafter referred to as "Korea Industrial Complex"). The Defendant jointly and severally guaranteed the obligation to pay ready-mixeds for the Korea Mining Area Construction Industry. The Korea Industrial Complex supplied ready-mixeds to the mining area construction industry from March 10, 2016 to June 11, 2016. The Korea Industrial Complex requested the Defendant to pay the amount of ready-mixed which the mining area construction industry had not been paid but was not paid to the Defendant on December 29, 2016 (Seoul Central District Court Decision 2016 tea67478). The payment order case was implemented as a lawsuit by the Defendant on March 1, 2017; the Seoul District Court Decision 300 million won was finalized on April 27, 2017 (Seoul High Court Decision 200, 2000, 2007. 75. 17. 2017).

C. Examining these facts in light of the legal principles as seen earlier, the following conclusions are derived.

The Defendant acquired the claim for indemnity against the mining area construction industry by subrogation by paying for the amount of ready-mixed. The claim for indemnity for the mining area construction industry is modified to the obligation to complete the instant construction pursuant to the instant contract, and the Defendant’s obligation for the construction cost and the compensatory significance still exist, and thus, it is reasonable to deem that two obligations are in a simultaneous performance relationship. Therefore, even if the Defendant’s claim for indemnity occurred after the Plaintiff’s direct claim occurred, the Defendant may set off the claim for indemnity against the Plaintiff by offset it by the automatic claim.

In the same purport, the lower court determined that the Defendant could oppose the Plaintiff by offsetting the claim for reimbursement against the Plaintiff. The lower judgment is justifiable in accordance with the foregoing legal doctrine, and 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 in violation of logical and empirical rules, or by misapprehending the legal doctrine on concurrent performance defense, burden

4. Claims on offsetting the claim of the penalty for delay;

The lower court rejected the Plaintiff’s assertion that part of the liquidated damages should be deducted by accepting the Defendant’s defense based on the claim for liquidated damages, as follows. In applying Article 27(2) of the General Conditions of the Contract to the instant case, where the Defendant used the whole or part of the subject matter of construction, the amount corresponding thereto shall be deducted from the contract amount when applying the liquidated damages. However, it is difficult to recognize the fact that the Defendant used the factory of this case when the mining area construction industry performed steel construction works.

Examining the reasoning of the lower judgment in light of the record, the lower judgment did not err by failing to exhaust all necessary deliberations and exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

5. Claims concerning performance; and

The lower court partially accepted the Defendant’s defense of repayment, deeming that the Defendant paid the amount of money to the Plaintiff to the subcontractor of the mining area construction industry as to the instant construction work.

Examining the reasoning of the lower judgment in light of the record, the lower judgment did not err by failing to exhaust all necessary deliberations and exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules.

6. Conclusion

The Plaintiff’s appeal is dismissed 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.

The presiding Justice shall mobilization by the presiding Justice

Justices Kim Jae-sik in charge

Justices Min Min-young

Justices Noh Tae-ok