Lee & Lee Co., Ltd. (Law Firm National Law Firm, Attorney Yang Woo-man, Counsel for defendant-appellant)

The administrator of the non-party (Law Firm UBS, Attorney Kim Jin-si, Counsel for the plaintiff-appellant)

September 25, 2015

1. The instant lawsuit shall be dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The defendant shall pay to the plaintiff 201,876,654 won with 6% interest per annum from June 7, 2015 to the service date of a copy of the complaint of this case, and 20% interest per annum from the next day to the day of complete payment.

1. Case summary

The instant case asserts that the Plaintiff’s subcontract for construction works with Gyeongnam Co., Ltd. (hereinafter “Gyeongnam Co., Ltd.”), a rehabilitation company, was terminated as it constitutes a bilateral contract not performed by both parties, and that the Plaintiff seeks payment of KRW 201,876,654, which remains after deducting a progress payment of KRW 117,890,00 from the value equivalent to the performance service of 319,76,654, as a public-interest creditor, the Defendant, who is the administrator of Gyeongnam Co., Ltd.

2. Presumption

(a) Conclusion of a contract for construction works;

1) On September 20, 201, the Plaintiff entered into a subcontract for the installation of self-mashers and the GIS surveying services among the sections for the construction of the project for the development of the GIS Innovation City in Jin-nam, which was ordered by the Korea Housing Corporation, with the period from September 20, 201 to December 31, 201. As a result of the five-time modified contract, the Plaintiff entered into a subcontract for the period from September 20, 2014 to October 31, 2014, the contract amount was 356,904,000 won for the contract amount and the construction period was changed from September 20, 201 to December 31, 2014; the contract amount was 35,48,000 won on March 23, 2015 to December 35, 2015; and the period was changed from September 31, 2015 to December 31, 2015.

2) The instant construction works are to build a database on underground facilities by measuring the location of the underground facilities, such as water supply and sewerage, along the pipelines of the underground facilities. ① On-site survey, ② installation of self-mashacker on the pipelines of the underground facilities, ③ self-masher construction location measurement, ④ detection of self-masher location measurement, ⑤ detection of self-masher location measurement, ⑤ structural editing, 7 structural editing, 8 establishment and operation of a database, 9 drawing production, 00 performance review by the Korea Land Survey Association under the Korea Land Survey Information Institute (Article 10 of the Public Survey Work Regulations).

(b) Commencement of rehabilitation procedures for remaining companies;

1) On April 7, 2015, the Seoul Central District Court Decision 2015 Ma10070 decided to commence rehabilitation procedures for Gyeongnam Company and the Defendant was appointed as a custodian.

2) At the time of the instant construction, the Plaintiff performed the survey of the location of self-fashackers, and the Defendant paid only KRW 117,890,000 to the Plaintiff out of the subcontract price for the completed portion.

C. The plaintiff's peremptory notice and defendant's response

1) On May 7, 2015, the Plaintiff urged the Defendant to provide a definite answer as to whether to cancel or fulfill a contract under Article 119(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”) since both obligations under the instant subcontract have not yet been fulfilled.

2) On June 5, 2015, the Defendant sent to the Plaintiff a certificate of the content that “The instant construction section that was implemented by Sejongnam Company was completed and completed on January 15, 2015 and the receipt of completion money on March 10, 2015, the instant construction project is deemed not to constitute an executory bilateral contract upon completion of the contract performance. However, if the Plaintiff asserts that the instant subcontract was an executory bilateral contract, it shall be notified in writing of the termination of the instant subcontract.”

【Ground of recognition】 The fact that there is no dispute, Gap's 1, 2, 3, 5, Eul's 1, and the purport of the whole pleadings

3. Issues and the parties' arguments

(a) Whether to terminate the contract (or whether to terminate the contract);

【Plaintiff’s Claim】

At the time of the commencement of rehabilitation procedures for Gyeongnam-si, the Plaintiff: (a) was obligated to establish a database by conducting the business of editing and structural editing; and (b) was obligated to complete service performance by undergoing the performance review from the Korea Land Survey Association; and (c) the Defendant was obligated to pay the subcontract price; (d) accordingly, the instant subcontract constitutes a bilateral contract not performed by both parties; and (c) was terminated according to the Defendant’s content certification (Article 119(1) of the Debtor Rehabilitation Act).

[Dissenting of the Defendant]

Inasmuch as the main business of the Plaintiff under the instant subcontract was completed in most cases before the commencement date of rehabilitation procedures, it does not constitute an executory bilateral contract.

B. Nature of the Plaintiff’s claim (Dispute 2)

【Plaintiff’s Claim】

Since it is difficult to deem that the benefits that the Plaintiff performed pursuant to the instant subcontract remain in the property of the re-employed enterprise, it is impossible to return it. As such, the re-employed enterprise is obligated to repay the value to the Plaintiff pursuant to Article 121(2) of the Debtor Rehabilitation Act, and the Plaintiff may exercise its right as a public-interest creditor.

[Dissenting of the Defendant]

The Defendant merely loses its validity for the future since the instant subcontract was terminated by the Defendant, and the Plaintiff cannot seek restitution of the outcome that was performed before the termination of the contract. Therefore, the Plaintiff’s claim for the completion payment of the instant case is not a priority claim related to restitution but a rehabilitation claim arising before the commencement of the rehabilitation procedure

4. Determination

A. Issue 1 (whether the contract is terminated)

1) If the Plaintiff’s duty under the instant subcontract is not performed, but the result of the work of installing a self-masher and surveying that has already been performed would dance. Therefore, the Plaintiff’s duty cannot be deemed to have been practically fulfilled. Considering that a subcontract settlement agreement (construction completion) agreement was made between the Plaintiff and Gyeong-nam on March 23, 2015, which was after the completion date of the instant construction section, to the end of May 31, 2015, which was the date of the completion date of the construction of the instant construction section, was completed, the implementation of both the Plaintiff and Gyeong-nam Company was not completed at the time of the commencement of the rehabilitation procedure for Gyeong-nam Company. The custodian of the debtor’s rehabilitation may cancel or terminate bilateral contracts that were not performed by both parties pursuant to the main sentence of Article 119(1) of the Debtor Rehabilitation Act, and thus, the instant subcontract was lawfully terminated in accordance with the content certification of June 5, 2015, which included the Defendant’s declaration

B. Key issue 2 (Nature of Plaintiff Claim)

1) Even if a contract for a construction project is rescinded and has not been completed in the course of the construction project, if the construction project is considerably advanced and its restoration to its original state has resulted in significant social and economic losses, and the contractor is obligated to deliver the object that has been rescinded to the contractor as it is, and the contractor is obligated to pay reasonable remuneration to the object delivered in consideration of the state of the deterioration, etc. (see, e.g., Supreme Court Decisions 85Meu1751, Sept. 9, 1986; 96Da43454, Feb. 25, 1997). This applies to any other contract for construction project, other than the contract for construction project (see Supreme Court Decision 95Da7932, Jul. 30, 196).

2) Article 121(2) of the Debtor Rehabilitation Act provides that when a bilateral contract which is not performed by both parties is rescinded or terminated pursuant to Article 119 of the same Act, if the consideration received by the debtor exists among the debtor’s property, the other party may claim the return thereof, and if not, the other party may exercise his/her right as a public-interest creditor with respect to the repayment of the value thereof. In light of the foregoing legal doctrine that limits restitution upon rescission or termination of the contract for construction work, etc., it is reasonable to interpret that Article 121(2) of the Debtor Rehabilitation Act cannot be applied to a

3) Therefore, the portion already performed during the instant construction works shall belong to Sejongnam Company which is the contractor, and the Plaintiff, the contractor, has a subcontract consideration claim for the completed portion. The aforementioned subcontract consideration claim constitutes a property claim arising before the commencement of rehabilitation procedures, which constitutes a rehabilitation claim (Article 118 subparag. 1 of the Debtor Rehabilitation Act), and filing a lawsuit for direct performance without resorting to rehabilitation procedures is unlawful as it

5. Conclusion

Therefore, the plaintiff's claim of this case is unlawful and thus it is decided as per Disposition.

Judges Cho Jong-tae (Presiding Judge)