In case where a cause for direct payment of subcontract consideration under Article 14 of the Fair Transactions in Subcontracting Act occurs, whether a claim executed and preserved by seizure, provisional seizure, etc. against the principal contractor is extinguished prior to the occurrence of such cause (negative)

Under Article 14 of the Fair Transactions in Subcontracting Act and Article 4 (1) 1 of the Enforcement Decree of the same Act, if a principal contractor is unable to pay subcontract consideration due to the failure of the principal contractor, and the principal contractor requests a direct payment of subcontract consideration to the ordering person, the ordering person is obligated to pay the subcontract consideration directly to the subcontractor, while the principal contractor’s obligation to pay the subcontract consideration to the principal contractor and the principal contractor’s obligation to pay the subcontract consideration to the subcontractor is extinguished to the extent that it is paid. However, there is no provision excluding the effectiveness of compulsory execution or preservation execution conducted prior to the occurrence of the cause for direct payment of subcontract consideration. Thus, if a third creditor of the principal contractor before the cause for direct payment of subcontract consideration occurred due to the seizure or provisional attachment of the principal contractor’s obligation against the ordering person, the claims executed and preserved shall not be extinguished

Article 14 of the Fair Transactions in Subcontracting Act, Article 4 (1) of the Enforcement Decree of the Fair Transactions in Subcontracting Act, Article 276 of the Civil Execution Act

Sexual Co., Ltd. (Attorney Lee Im-soo, Counsel for the defendant-appellant)

Jeju City (Attorney Kim Jong-sub, Counsel for defendant-appellant)

Gwangju High Court Decision 2001Na385 decided September 21, 2001

The part of the judgment below against the defendant is reversed, and that part of the case is remanded to the Gwangju High Court.

1. Based on its adopted evidence, the court below acknowledged the fact that the non-party General Construction Co., Ltd. (hereinafter referred to as the "New Daily Construction") was awarded a contract from the defendant on June 5, 200 for the construction of access roads to Ararain Village from the defendant on August 2, 2000 and subcontracted part of the construction to the plaintiff around August 2, 2000, and notified the defendant of the fact of the subcontract around that time. The plaintiff completed the relevant sewage supply construction on November 4, 200, and the new comprehensive construction completed the supply and demand construction on November 9, 200. The new comprehensive construction completed the supply and demand construction on November 13, 200, and the plaintiff requested the defendant who is the owner of the new comprehensive construction to pay for the direct payment of the price of sewage to the plaintiff on November 16, 200, and determined that the new construction contract amount cannot be paid to the plaintiff under Article 14 (1) and 14 (2) 2 of the Fair Transactions in Subcontracting Act.

2. Article 14 (1) of the Fair Transactions in Subcontracting Act provides that "If any ground prescribed by Presidential Decree occurs, such as where a principal contractor is unable to pay the subcontract consideration due to his/her bankruptcy or default, etc., the ordering person shall directly pay the subcontractor the subcontract consideration equivalent to the portion manufactured, repaired, or constructed by the subcontractor, to the relevant subcontractor," and Paragraph (2) of the same Article provides that "if any ground referred to in paragraph (1) occurs, the obligation to pay the subcontract consideration to the subcontractor and the obligation to pay the subcontract consideration to the subcontractor to the subcontractor of the ordering person shall be deemed extinguished within the extent of the obligation to pay the subcontract consideration," and Article 4 (1) 1 of the Enforcement Decree of the Fair Transactions in Subcontracting Act provides that "if an ordering person directly pays the subcontract consideration to the subcontractor pursuant to Article 14 (1) of the Act, the principal contractor becomes unable to pay the subcontract consideration upon the cancellation of permission, authorization, license, registration, etc. of the principal contractor, and the subcontractor requests the subcontractor to pay the subcontract consideration directly to the ordering person and the subcontractor.

However, in accordance with the above provisions, there is no provision excluding the effect of compulsory execution or preservation execution that takes place prior to the occurrence of a cause for direct payment of subcontract consideration under the above provisions. Therefore, in a case where a third-party creditor of the principal contractor has preserved claims by seizure, provisional seizure, etc. against the principal contractor before a cause for direct payment of subcontract consideration occurred, the claims executed and preserved after the cause for direct payment of subcontract consideration shall not be extinguished notwithstanding the direct cause for payment of subcontract consideration which occurred.

Therefore, as long as the defendant asserts that before November 16, 200, a direct claim for the payment of the subcontract price was made in this case, the non-party's provisional attachment decision was delivered to the defendant of the new comprehensive construction, and that the attachment notification of local tax in arrears at Jeju and the attachment notification by the Korea Labor Welfare Corporation was served, etc., the court below should determine whether the subcontract price to be paid to the plaintiff under the above legal principles based on the circumstances revealed after all relevant arguments were reviewed by the defendant. However, although the remaining provisional attachment and seizure are different opinion, the court below concluded that the debt to the defendant of the new comprehensive construction was extinguished at the time of the occurrence of the reasons stipulated in Article 14 (1) and (2) of the Fair Transactions in Subcontracting Act and Article 4 (1) 1 of the Enforcement Decree of the Fair Transactions in Subcontracting Act, and there were errors in the misapprehension of legal principles as to the validity of the seizure or provisional attachment. The ground of appeal pointing this out is justified.

3. Therefore, the part of the judgment of the court below against the defendant among the remaining arguments in the grounds of appeal shall be reversed, and the case shall be remanded to the court below for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Hong-hoon (Presiding Justice)