[1] The legal effect of an administrative agency’s acceptance of a report on the succession of status following the transfer of business pursuant to Article 39(1) and (3) of the Food Sanitation Act, and whether the transferee shall attach explanatory materials as to whether the pertinent place of business satisfies the requirements for lawful operation when the transferee submits a report on the succession of status as a business operator (affirmative)

[2] Whether a person who intends to conduct an ordinary restaurant business under the Food Sanitation Act can conduct an ordinary restaurant business in a detached house without going through the procedure for changing the use of a building into a Class II neighborhood living facility under the Building Act (negative)

[1] An administrative agency's acceptance of a report of succession to the status following a transfer of business under Article 39 (1) and (3) of the Food Sanitation Act does not merely mean the act of simply accepting the report that the transferee succeeds to the business through the legal effect of the transfer of business under the private law that has already occurred between the transferor and the transferee, but also an act of legally establishing the status that the transferor is entitled to legally operate the business. Therefore, the transferee shall submit the report of succession to the status of the business operator along with supporting documents verifying that the transferee satisfies all the requirements for lawful operation at the pertinent place of business (see Article 48 of the Enforcement Rule of the Food Sanitation Act). The requirements include that the transferee shall secure the right to use the legitimate building (store) that can be used for the pertinent type of business at the time of the report and meet the facility standards as stipulated under Article 36 of the Food Sanitation Act.

If a transferee of a business who has failed to perform his/her duty to report despite the change in the area of the business continues to conduct the business without fulfilling such duty to report, he/she may be subject to sanctions, such as corrective orders or suspension of business.

[2] According to Articles 2(2) and 19(2)1 of the Building Act, Article 3-5 of the Enforcement Decree of the Building Act, and Article 3-5 [Attachment Table 1] 4(i) and Article 14(5) of the Enforcement Decree of the Building Act, a general restaurant must obtain permission from the head of a Si, etc. in order to change the use of a building belonging to a detached house into a Class II neighborhood living facility (No. 2 neighborhood living facility group). Therefore, a person who intends to conduct an ordinary restaurant business must either prepare a place of business in a building which is a Class II neighborhood living facility, or change the use of a building which is not a Class II neighborhood living facility into a Class II neighborhood living facility without following the procedure for changing the use of the building. In advance, an ordinary restaurant business in a detached house may not be permitted under the current Food Sanitation Act and the Building Act.

[1] Articles 37(4), 39(1) and (3), 71(1), 75(1)7, and 79(1) of the Food Sanitation Act; Articles 25(1)8 and 26 subparag. 4 of the Enforcement Decree of the Food Sanitation Act; Article 48 of the Enforcement Rule of the Food Sanitation Act / [2] Articles 2(2) and 19(2)1 of the Building Act; Article 3-5 [Attachment Table 1] subparag. 4(i) and 14(5) of the Enforcement Decree of the Building Act; Article 3-5(2) of the Food Sanitation Act; Article 36(2) of the Food Sanitation Act; Article 21 subparag. 8(b) of the Enforcement Decree of the Food Sanitation Act

[1] Supreme Court Decision 2011Do6561 Decided January 12, 2012 (Gong2012Sang, 293) Supreme Court Decision 2012Du1882 Decided March 13, 2014

Plaintiff (Law Firm LLC, Attorneys Kim Jong-Un et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 201Hun-Ga414 decided May 1, 201

Seoul High Court Decision 2018Nu68089 decided April 5, 2019

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. Case summary and key issue

A. Review of the reasoning of the lower judgment and the evidence duly admitted by the lower court reveals the following circumstances.

(1) On March 5, 1972, Nonparty 1 obtained a business license with the name of the business office “○○○”, the location of the business office (hereinafter collectively referred to as “instant land”), and the type of business as an ordinary restaurant business (hereinafter “instant business”), and the building area on the building register of the first floor located on the instant land (hereinafter “first building”) was 28.80 square meters (after that, the regulatory system under the Food Sanitation Act on general restaurants was changed to the business report system on July 3, 1981, the business report system on April 13, 1984, and the business report system again on November 13, 199).

(2) Around November 1998, Nonparty 1 removed a building No. 1 on the same site and constructed a new building on one story on the same site. Around July 1999, Nonparty 1 extended the two stories of the building to a second floor on the same site and the total floor area of the building was 149.22 square meters (= 9.66 square meters on one story + 49.56 square meters on two stories) (hereinafter “No. 2”).

(3) Around December 2015, the Plaintiff, in fact, took over the business from Nonparty 1 to Nonparty 2. On December 10, 2015, the Plaintiff: (a) transferred the instant business from Nonparty 1 to the Defendant on December 10, 2015; and (b) reported succession to the status of the business operator and reported the change of the name of the business establishment to “△△△△△△” as if he transferred the instant business from the first building; and (c) thereafter, Nonparty 2 of the Plaintiff removed the second building; (d) removed Nonparty 2 of the Plaintiff’s husband; and (e) constructed a building for the purpose of detached houses of a size of 140.75 square meters in that place; (e) constructed a building for the purpose of detached houses of a size of 80.33 square meters in that place; and (e) obtained approval for use on or around May 13, 2016 (hereinafter “third building”). Around that time, the Plaintiff reported that the Defendant continued to engage in the instant business from the first building and changed only the name to “S

(4) The instant land is designated as a water-source protection area under Article 7 of the Water Supply and Waterworks Installation Act and an environment improvement area under Article 14 of the Water-source Management Rules.

(5) On February 28, 2017, food sanitation supervisors confirmed that the area of the general restaurant business site in the building No. 3 was significantly increased compared to the area of the instant business that was initially permitted for the first business. On May 2, 2017, the Defendant issued the instant corrective order ordering correction pursuant to Article 71(1) of the Food Sanitation Act on the ground that the Plaintiff’s transfer of the instant business to the Plaintiff did not report the change in the area of the business site, thereby violating Article 37(4) of the Food Sanitation Act.

B. The key issue of the instant case is, as of the time of the instant corrective order, whether the Plaintiff is obligated to report the change in the area of the place of business under Article 37(4) of the Food Sanitation Act with respect to general restaurant business in the third building

2. Whether the person has an obligation to report the size of business;

A. Relevant provisions and legal principles

(1) According to Article 37(4) of the Food Sanitation Act, Article 25(1)8 of the Enforcement Decree of the Food Sanitation Act, and Article 26 subparag. 4 of the Food Sanitation Act, where a business operator intends to engage in an ordinary restaurant business subject to reporting, and where he/she intends to modify important matters, such as the area of the relevant business place, etc., he/she shall report it to the Mayor, etc. The Food Sanitation Act provides that a business operator shall order necessary correction if he/she fails to comply with the same Act. Articles 71(1)7 and 79(1) of the Food Sanitation Act provide that where he/she engages in a business without filing a report in violation of the above duty to report, he/she may take measures to close the business place, and where he/she violates the duty to report, he/she may suspend all or part of the business or order the closure

The purport of the above duty to report and corrective order, suspension of business, closure of a place of business, etc. is to enforce a report and ultimately prohibit an unreported business, by imposing sanctions, such as corrective order or suspension of business, in cases where the business continues without reporting, even though the business subject to report is not reported or an important matter, such as the size of the place of business, is changed.

(2) An administrative agency’s acceptance of a report on succession to the status following the transfer of business under Article 39(1) and (3) of the Food Sanitation Act does not merely mean the act of simply accepting the report that the transferee succeeds to the business through the legal effect of the transfer of business under the private law that has already occurred between the transferor and the transferee, but also an act of legally establishing a position to legally operate the transferor and thus creating a business license, etc. (see, e.g., Supreme Court Decision 2011Do6561, Jan. 12, 2012). Therefore, the transferee shall submit a report on succession to the status of the business operator along with supporting documents verifying that the transferee satisfies all the requirements for legitimate operation at the relevant place of business (see, e.g., Article 48 of the Enforcement Rule of the Food Sanitation Act). The requirements include securing the legitimate source of use of a building (store) that can be used as at the time of the report and meeting the facility standards prescribed in Article 36 of the Food Sanitation Act.

If a transferee of a business who has failed to perform his/her duty to report despite the change in the area of the business continues to conduct the business without fulfilling such duty to report, such person may be subject to sanctions, such as corrective orders or suspension of business (see Supreme Court Decision 2012Du1882, Mar. 13, 2014, etc.).

(3) Meanwhile, according to Articles 2(2), 19(2)1 of the Building Act, Article 3-5 of the Enforcement Decree of the same Act, and [Attachment Table 1] 4(i) and Article 14(5) of the Enforcement Decree of the same Act, general restaurants shall be classified into Class II neighborhood living facilities, while general restaurants shall obtain permission from the head of a Si, etc. in order to change the use of a building belonging to detached houses into Class II neighborhood living facilities (No. 2 neighborhood living facilities group). Therefore, a person who intends to conduct general restaurant business shall either prepare a place of business in a building which is Class II neighborhood living facilities, or change the use of a building which is not Class II neighborhood living facilities into Class II neighborhood living facilities without following the procedure for changing the purpose of use of the building. In advance, general restaurant business in a detached house without following the procedure for changing the use of the building is not permissible under the current Food Sanitation Act and the Building Act.

(4) However, according to Article 7(4)1 of the Water Supply and Waterworks Installation Act, Article 13(1)2 and Article 13(2) of the Enforcement Decree of the Water Supply and Waterworks Installation Act, and Article 13 of the Water-source Management Rules, a person who intends to construct, extend, rebuild, rebuild, relocate, alter, or remove a building in a water source protection area can do so with permission from the Mayor, etc. only in certain cases where it is deemed that there is no hindrance to the purpose of designating a water source protection area. In particular, the degree of the generation of pollutants is limited to cases where the change of use of a building is no higher than that of a previous case. Furthermore, the water source protection area under Article 15 subparag. 2 of the Water-source Management Rules is exceptionally mitigated in cases where a part of a water source protection area is designated as an environmental improvement area. In this case, it is permitted to change the total floor area of a general restaurant into a water source protection area with the total floor area of 100 square meters or less, but, in principle, to the existing general restaurant is permitted with the total area of less than 100 square meters.

B. Determination on the instant case

Examining the aforementioned facts in light of the substance and legal principles of the relevant statutes, the following determination can be made.

(1) Around December 2015, the Plaintiff was actually taking over the instant business from Nonparty 1, and did not take over the instant business from the first building. If the Plaintiff seeks to lawfully continue the business of the second building that was acquired by the Plaintiff, the Plaintiff should have verified that the Plaintiff’s business was not the business of the first building, but the business of the second building, and verified that the Plaintiff was legally capable of conducting an ordinary restaurant business under the Food Sanitation Act in the second building. The Plaintiff should have obtained the status of lawful business in the second building through the Defendant’s acceptance of the report. However, the Plaintiff did not report the acquisition of the business in the second building, but did not report the succession to the status of the first building and the change of the name of the place of business as if the Plaintiff were to change only the name of the place of business by taking over the instant business in the first building. Thus, even if the Defendant accepted the business, this cannot be said to lawfully accept the Plaintiff’s status through the Defendant’s report on the establishment of the instant business status from the first building without knowledge that the Defendant had already been destroyed.

(2) Likewise, if the Plaintiff seeks to conduct an ordinary restaurant business lawfully from May 2016 to March 3, 2016, the Plaintiff should have verified that the general restaurant business intended by the Plaintiff is not a business in the building No. 1 but a business in the building No. 3, and should have reported the change of the place of business and the place of business lawfully in the building No. 3, and should have established the status of lawful operation in the building No. 3 through the Defendant’s report. However, the Plaintiff did not report the change of the contents of the business in the building No. 3 at that time, but only reported the change of the name of the place of business in the building No. 1 acquired from Nonparty 1 in the year No. 2015. Thus, even if the Defendant accepted it, it was merely established the status that the Plaintiff could continue to conduct the instant business with the changed name in the building No. 1 without knowing the fact that the building No. 1 was already destroyed, and thus, it does not legitimately acquire the status of the Plaintiff from the building No. 3 through the Defendant’s report.

(3) Upon reporting succession to the status of a business operator on December 10, 2015 and reporting the change of the name of the place of business, the Plaintiff acquired the status to continue the instant business from the first building. From May 2016 to May 3, 2016, the Plaintiff did not report the change of the location of the place of business and the area of the place of business while changing the area of the place of business to the Defendant, thereby failing to comply with the obligation to report the change under Article 37(4) of the Food Sanitation Act. Thus, the Plaintiff’s business in the third building may be subject to a corrective order under Article 71(

(4) Meanwhile, the third building is a detached house, and thus, it is impossible to conduct an ordinary restaurant business. If the Plaintiff seeks to lawfully conduct an ordinary restaurant business in the third building, it is required to obtain permission to change the use of the third building from a detached house to a Class II neighborhood living facilities. However, the instant land where the third building is located is designated as a water source protection area and an environment improvement zone, and thus, the alteration of use of the building is allowed only if the total floor area of the building intended to be used for general restaurants is less than 100 square meters. Since the third building is the total floor area of 140.75 square meters, it does not constitute a case where permission to change the use of the building from a house to a general restaurant is granted. Accordingly, even if the Plaintiff reported the alteration of the business area to the effect that the Plaintiff would conduct an ordinary restaurant business in the entire third building, the instant corrective order issued on the ground that the Plaintiff breached its duty to report the alteration of the

C. Nevertheless, solely based on its stated reasoning, the lower court determined that the Plaintiff did not have a duty to report even if having changed the business area of the instant case. In so determining, the lower court erred by misapprehending the legal doctrine on a report on succession to the status of a business operator under the Food Sanitation Act, the location of a business place, and the change in

3. Conclusion

Therefore, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Jong-hee (Presiding Justice)