Plaintiff 1 and 11 others (Attorney Lee Jae-soo, Counsel for the plaintiff-appellant)

Integrated Construction Co., Ltd. (Law Firm Barun, Attorneys Kim Dong-dong et al., Counsel for the defendant-appellant)

January 21, 2010

Suwon District Court Decision 2009Gahap5151 Decided September 17, 2009

1. The part against the plaintiffs of the money that orders payment under the judgment of the court of first instance shall be revoked.

The defendant shall pay to the plaintiffs 1, 2, 3, 4, 5, and 6 106, 549, 200 won, respectively, 7, 9, 10, 11, and 12 respectively, 74,858,000 won, and 76,332,400 won to the plaintiffs 8, and 6% per annum from May 8, 2009 to February 11, 201, and 20% per annum from the next day to the day of full payment.

2. The plaintiffs' remaining appeals are dismissed.

3. All costs of the lawsuit shall be borne by the defendant.

4. The portion paid with the amount under paragraph (1) may be provisionally executed.

The judgment of the first instance shall be revoked. The defendant shall pay each of the plaintiffs 1, 2, 3, 4, 5, and 6 106,549,200 won, plaintiffs 7, 9, 10, 11, and 12 respectively, 74,858,000 won, and 76,332,400 won, and 20% interest per annum from the day after the delivery of the complaint of this case to the day of full payment.

1. Basic facts

A. In accordance with Article 16 of the former Housing Act (amended by Act No. 7959 of May 24, 2006), the Defendant obtained approval from the Minister of Construction and Transportation for the project plan for the construction of public rental housing, and made a public announcement of the invitation of occupants on March 28, 2006 after obtaining approval for the invitation of occupants from the Seongbuk-gu mayor, and constructed a rental apartment (hereinafter “lease apartment in this case”), which is located on nine units on the block 11-2 block site development zone A1-2, 585 units, and the mandatory rental period of ten years.

B. The Defendant publicly announced the initial rental deposit (hereinafter “the instant rental deposit”) and monthly rent as set out in the table below. The amount shall be calculated based on the following relevant Acts and subordinate statutes [the former Rental Housing Act (amended by Act No. 8015 of Sep. 27, 2006), the former Enforcement Decree of the Rental Housing Act (amended by Presidential Decree No. 19975 of Mar. 27, 2007), the former public announcement of the standard rental deposit and standard rent (amended by the former public announcement of the Ministry of Construction and Transportation No. 2004-70 of Apr. 2, 2004; hereinafter “public announcement”; hereinafter the same shall apply) by using the standard rental deposit and standard rent based on the rate of 3.45% per annum with the maturity of one-year term deposit (the amount shall be higher than the standard rental deposit, and the difference between the standard rental deposit and the instant rent shall be calculated based on the relevant rate of 3.45% per annum).

171,747,000 413,000 413,000 40,000 79.272 (23B square) 171,747,00 413,000 109.55 (33A square) 239,735,00 583,00 583,000 242,66,000 110.29 (3B square) 242,66,00 59,000 110.29 (33B square)

C. (1) According to the public notice of the invitation of occupants, the Plaintiffs entered into a lease agreement with the Defendant on the attached list between May 2006 to May 2009: (2) The term of lease for each apartment stated in the pertinent column of the subject-matter of Lease is two years from the date following the end of the first designation period of the subject-matter of Lease; and (3) the first lease deposit and monthly rent are to be leased as stated in the corresponding column of the above Table (hereinafter “each of the instant lease agreements”); and accordingly, the Defendant paid the respective lease deposit in full.

(2) At the time of the lease contract presented by the Defendant, the usual rental deposit and monthly rent are printed in the same fluorial letter, and the statement to the effect that they are converted into rental deposit which is not the standard rental deposit is written as the group of rental deposit.

D. The construction cost of the instant rental apartment and the amount of standard rental deposit and standard rent under the relevant statutes are as follows:

The standard rental deposit rent (won) at the 76.46.46 (23A square) 187,145,000,572,00 615,000 79.272 (23B square) 190,831,000,415,00 632,00 632,00 635 (33A square) 266,373,000 13,186,186,0089,0089,29 (3269,629,629,000 (33B square) 29,629,000,134,814,000,900,000

[Ground of recognition] The facts without dispute, Gap evidence 2 through 8, Gap evidence 12-1 to 11, Eul evidence 1-1, 2, Eul evidence 2 through 4, and the purport of the whole pleadings.

2. The parties' assertion

A. The plaintiffs' assertion

(1) According to Article 12 of the Enforcement Decree of the Rental Housing Act, which is an effective provision, the first rental deposit does not exceed the standard rental deposit, in any case, as determined and publicly notified by the Minister of Construction and Transportation, and the first rental deposit, which is the first rental deposit, was exceeded the standard rental deposit. The second rental deposit, which is close to the two times of the standard rental deposit, is in fact deprived of the plaintiffs' right to lease of public construction, is the large amount that actually infringes on the legislative purpose of the Rental Housing Act, and thus, the part exceeding

(2) According to the relevant laws and regulations, in order to mutually convert the standard rental deposit and rent, the defendant did not obtain the consent of the plaintiffs while mutually converting the standard rental deposit and rent, and even if the plaintiffs consented, the defendant violated the duty to explain clearly under Article 3(2) of the Regulation of Standardized Contracts Act (hereinafter “Standard Standardized Contracts Regulation Act”), and the consent is not valid.

(3) The Plaintiffs misleads the Defendant as the standard rental deposit and concluded each of the instant lease agreements, which constitutes mistake in motive caused by the Defendant, or mistake in important part of the content of a legal act, and upon delivery of a copy of the complaint of this case, the part exceeding the standard rental deposit of each of the instant lease agreements was legally revoked.

(4) At the time of the conclusion of each of the instant lease agreements, the Defendant entered into each of the instant lease agreements with the Plaintiffs by failing to explain to the Plaintiffs at all regarding the mutual conversion of the standard rental deposit and standard rental fee, by deceiving the Plaintiffs, and subsequently, entered into each of the instant lease agreements with the Plaintiffs. The portion in excess of the standard rental deposit under each of the instant lease agreements was legally revoked upon delivery of a copy of the preparatory document dated June 24, 2009.

(5) Therefore, the defendant is obligated to return the plaintiffs' unjust enrichment equivalent to the amount already paid in excess of the standard rental deposit.

B. Defendant’s assertion

(1) The Defendant clearly stated the fact that each of the instant lease agreements was based on the converted rental deposits and rents when announcing the invitation of occupants, and concluded each of the instant lease agreements. As such, the Plaintiffs are fully aware of such fact and concluded, the consent to the mutual conversion of the standard rental deposit and rents should be deemed to have been given.

(2) In addition, even without the consent of the plaintiffs, the pertinent laws and regulations are merely a regulation that is not an effective provision, and thus, the deposit received by the defendant does not constitute unjust enrichment.

(3) After entering into each of the instant lease agreements, the Plaintiffs paid each of the instant rental deposits with the knowledge of the construction costs of the instant rental apartments, and occupied each of the instant rental apartments, and thereafter, did not raise any objection to the rental deposit, etc., and confirmed each of the instant lease agreements.

(4) The plaintiffs concluded each of the instant lease agreements even though they are fully aware of all of the terms of each of the instant lease agreements. Accordingly, it goes against the principle of good faith to take the issue of the amount of rental deposit late after paying and occupying the lease deposit.

3. Determination

A. Location of the issue

The problem in this case is, in principle, ① the initial rental deposit and rent is based on the standard rental deposit and rent, and the relevant provision requiring the lessee to consent to converting part of the rent into the rental deposit is valid, or whether the amount of the instant rental deposit is in essence infringing on the legislative purpose of the Rental Housing Act by practically depriving the Plaintiffs of the right to lease of public construction rental housing, ② if the above provision is effective, in this case, whether the lessee’s consent was given in detail, ③ if the mutual conversion of the rental deposit and rent in this case is null and void without the consent of the Plaintiffs, ③ if the mutual conversion of the rental deposit and rent in this case is null and void, ④ whether the lease agreement between the Plaintiffs and the Defendant exists, ④ whether the Defendant’s ratification and the assertion of the violation of the good faith principle is reasonable, and the following is

B. Whether the relevant provisions are effective

(1) Rental housing system

The Rental Housing Act was enacted for the purpose of promoting the construction of rental housing and stabilizing national housing conditions by prescribing matters necessary for the construction and supply of rental housing and the rental housing business (Article 1 of the Rental Housing Act). The Rental Housing Act aims to preferentially sell the rental housing to the lessee who meets specific qualification requirements, such as the lapse of the mandatory rental period (see Supreme Court Decision 2006Da81035, Apr. 23, 2009).

Article 6(1) of the former Rental Housing Act provides that a person who intends to rent housing in at least a certain number may register as a rental business operator (Article 6(1) of the Act), and that a construction rental business operator may create a housing site at a low price by granting a right to preferential purchase of housing sites owned or developed by the State, local government, or government-invested institution (Article 7 of the Act). Furthermore, the National Housing Fund has been loaned to a construction rental business operator at a long-term and low interest rate (Article 5(1) and (2) of the Act), and the period of mandatory lease expires and the period of appraisal at the time of sale for sale for sale for lots. On the other hand, the construction rental business operator has a duty to lease rental housing to a person who won the winning through a certain procedure among non-owners of the housing for five to ten years, and the first rental deposit and rent under the relevant Acts and subordinate statutes shall not exceed the standard rental deposit and rent determined at a reasonable price. The public announcement of the rental deposit and rent shall be made within the scope of Article 50(2).

(2) The economic effect of mutual conversion of rental deposits and rents;

As in the instant case, when part of the rent is converted into a rental deposit, the lessee, instead of paying in advance the difference between the standard rental deposit and the converted rental deposit, shall be deducted from the rent paid every month by multiplying the difference by the fixed deposit interest rate, and the effect of such conversion agreement on the lessee and the construction rental business operator is as follows.

(1) In particular, if a lessee is to prepare a rental deposit as a loan to a financial institution, it is disadvantageous for a lessee. The rate applicable to a loan by the general public is set at the interest rate for ordinary fixed deposits, and if the rent is partially converted into a rental deposit, the difference takes the same economic effect as the lessee lends to the construction lessor with the interest rate for fixed deposits. Ultimately, the lessee is to borrow the difference from a financial institution at a high interest rate and lend it to the construction lessor, and the lessee bears an additional burden to the degree of difference in the interest amount. On the contrary, in the case of a construction lessor, it would normally be necessary to prepare expenses incurred in constructing rental housing, etc. through a loan. On the contrary, the effect of borrowing the difference between the rental deposit and converted rental deposit from the lessee at the interest rate for fixed deposits is reduced

② A security deposit that a lessee pays in advance to a construction lessor is deducted from the sale price at the time of conversion for sale in lots after ten years; however, as the amount deducted from the sale price at the time of conversion of part of a rent into security deposit increases, there is no difference between the sale price and the security deposit itself. Meanwhile, in view of the fact that the amount appropriated from the sale price is first paid as security deposit, there is a difference between the sale price and the security deposit amount. On the other hand, in consideration of the cash discount value of the money, if the amount paid in advance exceeds the amount to be paid in advance and the amount of the deposit is reduced corresponding to the interest of the lessee, and there is a difference between the lessee’s financial standing and utilization conditions

In full view of the above, where rent is converted into a rental deposit as in the instant case, the lessor, who is the lessor, may reduce the financial burden of interest, etc. and repay debts early, and the lessee, who has sufficient equity capital, may expect a positive effect of lowering the sales price to be borne in the future and lowering the rent to be borne every month by paying the amount of money in advance as the rental deposit. However, in the case of a lessee who is obliged to prepare a rental deposit through a loan without adequate equity capital, there is an additional effect on the lessee, who is obligated to bear the original construction lessor.

(3) Determination as to the validity of the relevant laws and regulations

As seen above, as long as the interest rate on a time deposit is considerably favorable to a construction lessor in applying part of a rental deposit, in principle, the standard rental deposit and standard rent shall be deemed a mandatory provision that the lessee shall obtain the consent of the lessee in order to mutually convert the rental deposit and rent. However, if the construction lessor does not grant the possibility of concluding a rental contract by applying the standard rental deposit and standard rent to the lessee, and as in this case, there is a significant economic incentive for the lessee to enter into a rental contract by uniformly converting the rental deposit into the rental deposit. In other words, if the relevant laws and regulations stipulate that the economic effect should be maintained, it is probable that the construction lessor, who is an economic entity, will act in the direction of increasing the rental deposit to the maximum extent possible as in this case, and the relevant laws and regulations that make it difficult for the lessee to prepare the rental deposit with the reasonable amount of the rental deposit, are also inconsistent with the relevant laws and regulations that make it difficult for the lessee to report the rental deposit and make the rental deposit more effective than the standard terms and conditions prescribed by the Presidential Decree to the lessee in the relevant laws and regulations.

In particular, in the instant case, the amount of rent converted by the Defendant to rental deposit exceeds 80% of the standard rental deposit. Since the standard rental deposit is set at 50% of the amount obtained by subtracting a loan from the National Housing Fund from the construction cost, it means that most of the construction cost, excluding a loan from the National Housing Fund, can be recovered as the rental deposit if the above amount of money equivalent to 80% of the standard rental deposit is additionally paid as the rental deposit, whereas a person lacking financial resources can be restricted from the opportunity to lease. If the above size of rental deposit is unlimitedly permitted without the lessee’s consent, it is apparent that the housing fund can be supplied in the form of lease to the low-income people who are unable to prepare for the date and time, and the purport of the system of supplying rental house to provide public support to those participating in such rental business. Moreover, in fact, some of the plaintiffs actually received at least 80% of the rental apartment of this case leased by the Defendant as collateral and received at least 10% of the interest rate of the rental deposit in this case (the interest rate of this case is higher than 30%).4.

C. Whether the plaintiffs consented to the conversion of rental deposit

Next, the plaintiffs' consent to the conversion of the standard rental deposit and standard rent to the same as the instant rental deposit and rent is examined, and in this case, the defendant cannot assert the plaintiffs' consent to the conversion of the rental deposit for the following reasons, and in fact, it is difficult to view that the plaintiffs consented to the rental deposit.

(1) The substantial meaning of the lessee's consent to the conversion of rental deposit

In light of the form of a provision requiring a lessee’s consent, a part of a rent may be converted into a rental deposit at the time of conversion. The principle is based on the standard rental deposit and standard rent, but the construction lessor may suggest that the lessee shall mutually convert the rental deposit and rent to the lessee, and that the lessee may choose whether to convert the rental deposit and rent by himself/herself. It conforms with the language and purport of the rental house system and the aforementioned purport, and the announcement that the lessee may choose between the rental deposit and the rental deposit and the rental deposit and the waiver of the sale of the lease can not be understood as the “Lessee’s consent.” Since the instant rental apartment is leased out by open recruitment in accordance with the Housing Supply Rules, the Defendant is unable to select a lessee at his/her discretion, and the winner is determined by the winner through public announcement of recruitment and application, and the winner is not aware that the lessee is disqualified before the conclusion of the lease contract, and if the lessee is forced to enter into a lease contract at the later time, he/she is unable to enter into a lease agreement with each other.

Therefore, it is reasonable to deem that the “Lessee’s consent” stipulated in the above notice is applicable only where the right of choice to enter into a lease contract is substantially granted as the standard rental deposit.

(2) Whether it is possible to enter into a lease agreement with a standard rental deposit

According to the statement in Gap evidence No. 5, the Board of Audit and Inspection may recognize the fact that, based on the fact that some of the lessees at Sungnam City approved the invitation of lessees only on the mutually converted rental deposit and rent for rental housing in a housing site development zone without the lessee's consent, it is against Article 12 (1) of the former Enforcement Decree of the Rental Housing Act and requires the public official in charge to take disciplinary action against the lessee in charge as illegal approval of the right to select lessees to enter into a lease contract according to the standard rental deposit and rent. Comprehensively considering the evidence No. 2 and evidence No. 12-1 through No. 11, the standard rental deposit and rent No. 12-1 are not clearly stated in the notice of tenant recruitment and the purport of the whole oral argument, the term "conversion conversion" is not stated in the deposit entry column, and it is entirely impossible for the defendant to enter into the rental deposit and rent agreement with the lessee without the consent of the lessee to enter into the rental deposit and rent agreement in the form of the standard rental deposit without the consent of the lessee.

(3) Whether the plaintiffs agree

According to the evidence No. 2, in a case where there is no dispute between the parties as to whether there was no additional explanation as to the fact of mutual conversion of the above rental deposit and rent in the public notice of invitation of occupants, the Defendant may recognize the fact that “the conversion” was stated in the “the “transfer” column in the public notice of invitation of occupants, but there is no evidence to acknowledge that the above evidence alone recognized the fact that the Plaintiffs should convert the rent into the rental deposit, and that there was no other evidence to acknowledge that the Plaintiffs consented to the conversion of the rent

In light of the fact that the public announcement of invitation of occupants is an essential factor in determining the rental deposit and rent, the public announcement of invitation of occupants is ordinarily required to make an offer and know of the details of the invitation for subscription, barring any special circumstances, and the issue of mutual conversion of the rental deposit and rent is the key factor in determining the rental deposit and rent, it is reasonable to conclude that the Plaintiffs also made an offer with the view of mutual conversion of the standard rental deposit and rent. However, as determined above, if the Plaintiffs were to have known of the conversion merely by the entry of the standard rental deposit and standard rent in the situation where the conversion is not accompanied, it is difficult to say that the Plaintiffs were aware of the conversion, and if such a mutual conversion is an essential factor in determining the rental deposit and rent, which are the important part of the rental contract, there is a burden to clearly explain it in the Defendant’s side that the Plaintiffs merely a lessee merely because it is an important part of the lease contract, and there is no possibility that the Plaintiffs can know about the standard rental deposit and rent, and thus, there is no reason to conclude the agreement with the Plaintiffs as above.

(4) The theory of lawsuit

Therefore, in the case of this case, the defendant cannot assert the validity of the lease contract on the ground of the consent of the plaintiffs, and the above public announcement of invitation was made, and accordingly, the fact that the plaintiffs concluded each of the lease contracts in this case with the defendant and paid the lease deposit cannot be deemed to have consented to the mutual conversion of the lease deposit

(d) Partial invalidation;

Therefore, the lease deposit under each of the lease contracts of this case without the consent of the plaintiffs is null and void within the extent exceeding the standard rental deposit. This is because the amount of the lease deposit is divisible, and according to the evidence and facts of recognition, the plaintiffs clearly expressed their intent to conclude each of the lease contracts of this case on the basis of the standard rental deposit, and the defendant who is the lessee is unable to choose the lessee under the relevant laws and regulations, and it is clear that the defendant would not be able to mutually convert the lease deposit and the rent from the standard rental deposit and the standard rental fee without the consent of the plaintiffs. In addition, it is clear that the lease contract was concluded under the standard rental deposit and the standard rental fee without the consent of the plaintiffs, and if the remaining portion is null and void in light of the relevant effective provisions and the legislative intent of the law with the effect thereof, it would not be deemed null and void if it obviously goes against the purpose of the lease contract of this case, and it would not be deemed null and void from the standard rental deposit of this case on the basis of the standard rental deposit of this case (see Supreme Court Decisions 2003Da18, 2001, respectively.

If only the portion exceeding the standard rental deposit out of the instant lease agreement becomes null and void, the Defendant asserts that the legal doctrine on partial invalidation is not applicable since it did not enter into a lease agreement, considering the difference between the standard rental fee and the amount of the rent under the instant lease agreement. However, the lower court’s determination is merely that the Plaintiffs have the right to enter into a lease agreement on the basis of the standard rental deposit and the standard rental fee, and at the same time, is subject to the application of the standard rental deposit. As long as the portion exceeding the standard rental deposit out of the rental deposit paid by the Plaintiffs is null and void, the Defendant bears the obligation to refund it, and the instant lease agreement only remains legally effective, and as such, only the portion which contains the standard rental deposit and the standard rental fee calculated on the basis of the standard rental deposit, the amount should be calculated according to the terms of the lease agreement and the time of occupancy by the Plaintiffs, and if already paid the rental fee, the legal relationship is formed based on the reasonable rental fee calculated as above. Therefore, the Defendant’s allegation on the other premise is

E. Judgment on the defendant's assertion of ratification

In order to regard a null and void juristic act as a new juristic act by ratification, the parties must confirm that the previous juristic act is null and void, and there is not sufficient evidence to acknowledge it by itself, and otherwise, there is no evidence to acknowledge it as to the fact that the plaintiffs knew of such circumstances, and the above argument of the defendant is without merit.

F. Determination as to the Defendant’s assertion of violation of good faith

It is difficult to view the Plaintiff’s lawsuit as contrary to the good faith principle solely on the grounds alleged by the Defendant. Therefore, the Defendant’s assertion is without merit.

G. Sub-committee

Therefore, the defendant is obligated to pay to the plaintiffs 1, 2, 3, 4, 5, and 6 each 106, 549, 200 won, plaintiffs 7, 9, 10, 11, and 12 each 74,858,000 won, and 76,332,400 won from May 8, 2009 to February 11, 2010, the date the defendant delivered the complaint of this case, which is deemed reasonable to dispute over the existence and scope of the obligation to perform, 6% per annum under the Commercial Act, and 20% per annum under the Act on Special Cases Concerning Expedition, etc. of Legal Proceedings from the next day to the date of full payment.

4. Conclusion

Therefore, the plaintiffs' claim is justified within the above recognition scope, and the remaining claims are dismissed as it is without merit. Since the part against the plaintiffs in the judgment of the court of first instance as to the above quoted part is unfair with different conclusion, it is revoked, and the defendant is ordered to order the plaintiffs to pay the above amount, and the remaining appeal by the plaintiffs is dismissed as they are without merit.

[Attachment of List]

Judges Kim Chang-chul (Presiding Judge)

Note 1) Defendant’s reply on June 2, 2009 see the Defendant P12

(2) The loan interest rate of Plaintiff 1, 5.69%, the loan interest rate of Plaintiff 2, 6.66%, 6.58%, the loan interest rate of Plaintiff 6, 5.75%, the loan interest rate of Plaintiff 8, 5.69%, 5.69%, the loan interest rate of Plaintiff 9, and 5.75%, and the loan interest rate of Plaintiff 11 is at least 2.24%, compared to the conversion rate.