Defendant 1 and one other

Defendants

Lee In-bok (Court of Prosecution), Han Jin-hee (Court of Public Trial)

Law Firm Il-won, Attorneys Lee Jong-hee et al.

Suwon District Court Decision 2012Ma614 Decided August 17, 2012

The judgment of the court below is reversed.

Defendants shall be punished by a fine of KRW 4,000,000.

When Defendant 1 fails to pay the above fine, the above Defendant shall be confined in a workhouse for the period calculated by converting 50,000 won into one day.

To order the Defendants to pay an amount equivalent to the above fines.

1. Summary of grounds for appeal;

A. misunderstanding of facts and misapprehension of legal principles

① Defendant 2’s social welfare foundation (hereinafter “Defendant corporation”) is merely a renewal of the existing lease agreement with Nonindicted Co. 1 (hereinafter “Nonindicted Co. 1”) and is not a new lease agreement. Pursuant to the proviso to Article 23(3) of the Social Welfare Services Act and Article 14(2) of the Enforcement Rule of the same Act, there was no need to obtain a permit for disposal of fundamental property, and even if a domestic license is required, Defendant corporation filed an application for a permit for disposal of fundamental property for the renewal with the Sungnam City Mayor around July 27, 2011, and rejected it on the grounds that it is not directly related to the above permit. In light of the above circumstances, the foregoing rejection disposition should be revoked illegally, and in view of the above circumstances, the Defendants did not have any criminal intent to violate the Social Welfare Services Act, and thus, it does not constitute a crime of violation of the Social Welfare Services Act.

B. Unreasonable sentencing

The sentence of the lower court (the Defendant: each fine of KRW 7 million) is too unreasonable.

2. Determination

A. As to the assertion of mistake of facts and misapprehension of legal principles

(1) According to the evidence duly adopted and examined by the lower court, the following facts can be acknowledged.

As a part of a profit-making business, the Defendant corporation transferred its business to a separate corporation, “Nonindicted Company 1” established around June 15, 2010, among the buildings of ○○○○○○ Welfare Center, the third floor of 1,301.29 square meters, 4 stories 1,304.48 square meters, and 258 square meters in five stories (hereinafter “instant building”).

○ Following the transfer of the foregoing business, the Defendant Company applied for the permission to dispose of the fundamental property to the Sungnam City for the lease of the instant building for three years to Nonindicted Company 1, around May 13, 2010. The Sungnam City, around May 26, 2010, ordered the disposal of the said fundamental property by attaching an additional clause stating that “The period of the lease contract shall be reduced from three years to one year, and if the lease period is extended upon the expiration of the lease period, the disposal of the said fundamental property shall be permitted again.”

Pursuant to the above permission, around July 25, 2010, the Defendant corporation leased the instant building to Nonindicted Company 1 on the last day of each month, such as KRW 500,000,000,000 and other management expenses, and the lease period from August 1, 2010 to July 31, 2011, unless the other party is notified of the modification of the terms and conditions of the contract in writing three months prior to the expiration of the contract, the lease period of the instant building was automatically extended one year on the same terms and conditions as the instant contract (hereinafter “instant lease contract”).

○ Meanwhile, on the other hand, on October 2010, Sungnam-si issued an order to dismiss nine directors of Defendant corporation and two auditors pursuant to Article 22 of the Social Welfare Services Act on March 2, 2011, and around March 2, 2011, around June 1, 2011; and around August 1, 201, it issued a corrective order with respect to 27 matters discovered from the said special audit on three occasions in total.

Around July 27, 2011, when the term of the foregoing lease expires, the Defendant corporation filed an application for permission to dispose of the fundamental property with the purport of additionally leasing up to 135.03 square meters of the first floor of the same building and 2 stories to the second floor 895.75 square meters (in addition to the instant building) for a lease for three years with the non-indicted 1 company. However, the Sungnam Mayor rejected the application on the grounds of the above dismissal order and the corrective order, the non-performance of the board of directors’ resolution, the excess of the leased area for profit-making business, and the inappropriate time of appraisal of the instant building. Accordingly, the Defendant corporation filed an application for permission to dispose of the basic property again on September 1, 201 and September 20, 2011, but the Sungnam Mayor rejected the disposition on September 8, 2011 and September 27, 2011, respectively.

○ Ultimately, the new lease agreement between the Defendant and the Nonindicted Company 1 was not concluded. Under the renewal agreement under the instant lease agreement, Nonindicted Company 1 continued to lease the instant building and paid the Defendant corporation KRW 509,718,900 in total on seven occasions from August 1, 201 to February 29, 2012.

(2) Whether the competent authority’s permission is required to renew the instant lease agreement

(A) As the Seongbuk-Nam market rejected the disposition of fundamental property of Defendant corporation, the instant lease contract between Defendant corporation and Nonindicted Company 1 is renewed, and Nonindicted Company 1 continued to lease and use the instant building. In accordance with the proviso of Article 23(3) of the Social Welfare Services Act and Article 14(2)5 of the Enforcement Rule of the same Act, where a lease contract for basic property is renewed, it is exceptionally stipulated that the permission of the Mayor/Do Governor is not required.

(B) However, in the instant case, when the Sungnam market permits the disposal of the above fundamental property on or around May 26, 2010, the additional clauses that "it requires the permission to dispose of the basic property even if the lease contract of this case is renewed," were attached to the above facts. Such additional clauses are unlawful unless there are special circumstances contrary to the above Acts and subordinate statutes. However, if the additional clauses are attached to the permission to dispose of the basic property of this case, it cannot be deemed that the additional clauses are not allowed because the legal nature of the permission to dispose of the basic property of this case constitutes a formative administrative act (see Supreme Court Decision 2004Da5044, Sept. 28, 2005, etc.). (2) The purpose of the Social Welfare Services Act is to promote the fair, clear, and reasonable disposal of the basic property of this case, and it cannot be seen that the above additional clauses were not valid for the purpose of the establishment of the lease contract of this case to the extent that it does not interfere with the execution of profit-making business of this case.

(C) Therefore, the defendants' assertion to the effect that the defendant corporation's renewal of the instant lease agreement requires permission to dispose of the Sungnam market is without merit.

(3) Whether the non-permission disposition in the gender south market is unlawful

On the other hand, even if the defendants' assertion itself is based on the defendant's assertion, the non-permission disposition in the Sungnam market should be revoked in an unlawful manner. Thus, even if the above non-permission disposition should be revoked due to the existence of defects such as the defendants' assertion, the non-permission disposition shall be valid until the revocation of the above disposition. Accordingly, the defendants' assertion on this part shall not be justified, since such circumstance cannot justify the defendants' acts like the facts charged in this case.

(4) Whether the Defendants were guilty

On the other hand, in the renewal of the instant lease agreement, insofar as the Defendants continued to lease the instant building to Nonindicted Company 1 and received the payment of the rent in its name, it cannot be denied that the Defendants were guilty of violating the Social Welfare Services Act, and the Defendants’ assertion on this part is without merit.

B. As to the assertion of unfair sentencing

The Defendants appears to have made considerable efforts to obtain the above disposal permission, and at the time, Nonindicted Co. 1 operated an international school with 268 students and 28 teachers in the instant building. However, in full view of all the sentencing conditions including the fact that the Defendants could not have been able to demand the side of Nonindicted Co. 1 to deliver the instant building within the short period, the lower court’s punishment against the Defendants is somewhat unreasonable.

3. Conclusion

Therefore, the judgment of the court below is reversed in accordance with Article 364(6) of the Criminal Procedure Act, and the defendants' appeal is justified, and the judgment is delivered again as follows.

As stated in each corresponding column of the judgment of the court below, the criminal facts against the defendants recognized by this court and the summary of the evidence are cited as it is in accordance with Article 369 of the Criminal Procedure Act.

1. Article relevant to the facts constituting an offense and the selection of punishment;

A. Defendant 1: Subparagraph 1 of Article 53 of the former Social Welfare Services Act (amended by Act No. 10997, Aug. 4, 2011; hereinafter the same shall apply) and Article 23(3)1 of the same Act (elective of fines)

(b) A social welfare foundation for defendant 2: Article 56, Article 53 subparagraph 1, and Article 23 (3) 1 of the former Social Welfare Services Act;

1. Detention in a workhouse;

Defendant 1: Articles 70 and 69(2) of the Criminal Act

1. Order of provisional payment;

Defendants: Article 334(1) of the Criminal Procedure Act

Judges Lee Ho-hoon (Presiding Judge)

1) The Sungnam City was delegated by the Minister of Health and Welfare and the Governor of the Gyeonggi-do with the affairs related to permission to dispose of fundamental property of social welfare corporations.

2) Defendant corporation, the above Nonindicted 2, and the above Nonindicted 4 were convicted of their respective suspended execution and fines due to the violation of the Act on the Establishment and Operation of Public Interest Corporations in the Suwon District Court’s Sungnam Branch on September 23, 201, and on May 24, 2012, the judgment became final and conclusive on May 24, 2012 (the above support 201st Order 724, Suwon District Court Order 201No4392, Supreme Court Decision 2012Do130, May 24, 201). The above Nonindicted 3 was final and conclusive on May 24, 201 after receiving a summary order to impose a fine of KRW 2 million on the said support due to the violation of the Act on the Establishment and Operation of Public Interest Corporations.

3) The crime of violation of the Social Welfare Services Act among the above convictions is that “Nonindicted 2 and Defendant Corporation leased the above first and second floors to Nonindicted Company 1 without obtaining permission from the Minister of Health and Welfare.”

4) Article 23 (Property, etc.) (3) of the Social Welfare Services Act shall obtain permission from the Mayor/Do Governor in any of the following cases with respect to fundamental property: Provided, That this shall not apply to matters prescribed by Ordinance of the Ministry of Health and Welfare:

(2) “Matters prescribed by Ordinance of the Ministry of Health and Welfare” in the proviso to Article 23 (3) of the Act means the renewal of a lease contract for fundamental property.

6) In fact, as seen earlier, it was found that a large number of illegal matters relating to Defendant corporation’s profit-making business were discovered as a result of a special audit in Sungnam-si.