[1] Whether the procedures previously established by the Establishment Promotion Committee to select a specialized management businessman of a rearrangement project before the implementation of the criteria for the selection of the specialized management businessman of public management (No. 2010-274, Jul. 15, 2010) is lawful and effective (affirmative) and whether the procedures under the above notification should be followed again after the enforcement of the above notification (negative)

[2] The case holding that in a case where Gap's promotion committee, which held a site site meeting for the selection of a rearrangement project management contractor, selected Eul and Byung corporation as a candidate company to be presented to the residents' general meeting upon bidding, and as Article 77-4 of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents was newly established and implemented, the Seoul Special Metropolitan City Mayor publicly announced the Seoul Special Metropolitan City Ordinance on the Maintenance and Improvement of Urban Areas and Residential Environments (Ordinance No. 5007 of July 15, 2010) and the selection criteria for a rearrangement project management contractor (Ordinance No. 2010-274 of July 15, 2010) and ordered Gap's promotion committee to resume the selection procedures for a rearrangement project management contractor, but Gap selected Eul company as a rearrangement project management contractor despite the above direction, and entered into a service contract for specialized management management of rearrangement project, the above procedure for the selection of a rearrangement project management contractor

[1] Article 14(1)2 (see current Article 32(1)1), (2) (see current Article 32(2)), and Article 77-4 (see current Article 118) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Act No. 14567, Feb. 8, 2017) / [2] Article 14(1)2 (see current Article 32(1)1), (2) (see current Article 32(2)), Article 77-4 (see current Article 118) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Act No. 14567, Feb. 8, 2017)

Busan High Court Decision 200Na14466 delivered on August 2, 200

Hannam 5 Housing Redevelopment Project Association (Law Firm LLC et al., Counsel for the plaintiff-appellant)

Defendant Intervenor 1 and two others (Attorney No. 1 and 2 others, Counsel for the defendant-appellant)

Seoul High Court Decision 2013Na34541 decided August 21, 2014

The appeal is dismissed. The costs of appeal are assessed against the Intervenor, and the remainder are assessed against the Defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Ground of appeal No. 1 (Appellant of legal principles as to Article 77-4 (6) of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions

A. Article 77-4 of the former Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Act No. 10268, Apr. 15, 2010; wholly amended by Act No. 14567, Feb. 8, 2017; hereinafter “former Act”) provides that the head of a Si/Gun may provide for public management for a rearrangement project prescribed by municipal ordinance of a City/Do to support the process of implementing a rearrangement project in order to enhance transparency and efficiency of the rearrangement project, and the method, procedure, etc. for implementing the project are prescribed by municipal ordinance of a City/Do. According to delegation, Article 48(4) of the Seoul Special Metropolitan City Ordinance on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (wholly amended by Ordinance No. 507, Jul. 15, 2010; hereinafter “instant Ordinance”). Article 4(1) of the Addenda of this Ordinance provides that “any act performed under the previous provisions of this Ordinance at the time of enforcement of this Ordinance shall be deemed any other act.”

According to the delegation of this Ordinance, the criteria for the selection of a management entity specialized in public management (which was publicly notified by the Seoul Special Metropolitan City Notice No. 2010-274 on July 15, 2010 and enforced on July 16, 2010; hereinafter “instant criteria for the selection”) have been publicly notified. Article 2 of the Addenda provides that “The same shall apply from the rearrangement project portion in which no management entity specialized in improvement has been selected at the general meeting at the time of the implementation of the instant criteria.”

Comprehensively taking account of the contents, structure, legislative purport, etc. of the above provisions, the following conclusions may be derived. ① As regards a rearrangement project which does not select a rearrangement project management contractor at the general meeting as of July 16, 2010, the instant selection criteria apply (Article 2 of the Addenda to the instant selection criteria). ② At the time of the enforcement of the instant Municipal Ordinance, the procedure and act lawfully conducted pursuant to the previous provisions shall be deemed to have been conducted pursuant to the instant Municipal Ordinance (Article 4(1) of the Addenda to the instant Municipal Ordinance). Therefore, the procedures that the promotion committee had previously conducted to select a rearrangement project management contractor prior to the enforcement of the instant selection criteria may be deemed lawful and valid after the instant selection criteria were implemented, and the procedures in accordance with the instant selection criteria need not be followed to the extent overlapped.

B. According to the lower judgment, the following facts are revealed.

(1) The Committee for Promotion of Housing Redevelopment Improvement Projects in the Five Urban Development Zones in South and North Korea (hereinafter “instant Promotion Committee”) is established for the purpose of establishing an association to implement housing redevelopment improvement projects within the five urban renewal acceleration zones in Yongsan-gu Seoul ( Address omitted) Seoul pursuant to the former Urban Improvement Act (hereinafter “instant projects”). The Defendant is a redevelopment association that obtained authorization for incorporation on August 22, 2012 under the former Urban Improvement Act for the purpose of implementing the instant projects. The Plaintiff is a rearrangement project management contractor.

(2) The instant promotion committee held the first promotion committee on June 27, 2010 pursuant to Article 14(2) of the former Urban Improvement Act and Article 28(1) of the Operational Rules of the instant promotion committee, and decided to select service companies and specialized management business entities to perform the duties of the promotion committee. On July 2, 2010, the site site conference was held on July 2, 2010, and was tendered until July 6, 2010, and was selected as a candidate for the management business entities specialized in improvement projects to be presented to the residents’ general meeting at the promotion committee on July 2, 2010.

(3) As Article 77-4 A of the former Urban Improvement Act was newly established by Act No. 10268 on April 15, 2010 and enforced on July 16, 2010, the head of Seoul Special Metropolitan City on July 15, 2010 publicly announced the instant selection criteria pursuant to Article 48(4) of the instant Ordinance. From July 16, 2010 to several times, the head of Yongsan-gu Seoul Special Metropolitan City and the head of Yongsan-gu Seoul Special Metropolitan City directed the instant promotion committee to resume the process of selecting the rearrangement project in accordance with the instant Ordinance and the selection criteria.

(4) On July 31, 2010, the instant promotion committee, despite the foregoing direction, continued a general meeting on the selection of service companies and the approval of service companies, and selected the Plaintiff as a specialized management businessman on September 11, 2010 (hereinafter “the procedure for the selection of the specialized management businessman of the instant improvement project”). On September 20, 2010, the Plaintiff entered into the instant promotion committee and the specialized management service contract for the rearrangement project (hereinafter “instant service contract”).

C. Examining the above facts in light of the aforementioned legal doctrine, the following determination is possible.

Article 7-4 of the former Urban Improvement Act, the Ordinance of this case, and the service contract of this case concluded after the execution date of the selection criteria of the management entity specialized in the improvement project of this case, shall be deemed to have been effective after the implementation of the Ordinance of this case and the selection criteria pursuant to Article 4 (1) of the Addenda to the Municipal Ordinance of this case. Since the residents' general meeting was held after the implementation of the Municipal Ordinance of this case and the selection criteria of this case, the above procedures cannot be deemed to have become invalid, the procedure of selecting the management entity specialized in the improvement project of this case and the service contract of this case shall be valid.

The judgment of the court below to the same purport is justifiable in accordance with the above legal principles. In so doing, the court below did not err by misapprehending the legal principles on each interpretation and scope of application of Article 77-4 of the former Act, the Addenda to the instant Ordinance, and the Addenda to the instant selection criteria.

2. Grounds of appeal Nos. 2, 3, and 5 (see, e.g., requirements for establishing a contract deposit, interpretation of a disposition document concerning standards for calculating sales revenue, and misapprehension of legal principles as to mitigation of service

A. The lower court determined that the Defendant, who comprehensively succeeded to the instant promotion committee pursuant to Articles 8(3) and 4(2) of the instant service agreement, was obligated to settle and pay the amount corresponding to the services that the Plaintiff had already completed, to the Plaintiff pursuant to Article 8(3) and 4(2) of the instant service agreement. For that reason, the instant promotion committee’s declaration of intent to reverse the trust relationship between the Plaintiff and the instant promotion committee, reached the Plaintiff, and the instant service agreement was lawfully terminated by adopting a resolution to change the management entity specialized in improvement projects at the residents’ general meeting

Furthermore, for the following reasons, the lower court determined that the Defendant was liable to pay 10% of the service price of this case to the Plaintiff respectively as down payment and the first intermediate payment.

(1) The instant service contract does not add other conditions, etc., and only stipulates that 10% of the service price shall be paid to the Plaintiff as down payment within 14 days from the date of conclusion of the contract. The Plaintiff performed various duties for the instant promotion committee at considerable costs immediately after the establishment approval of the promotion committee was granted, and sought written consent to the establishment of the promotion committee from some landowners, etc.

(2) The first intermediate payment is required to be paid after the completion of the general project implementation plan. The Plaintiff drafted and submitted a rough project implementation plan around November 201, 2010. The instant promotion committee reviewed the project implementation plan prepared by the Plaintiff, and distributed the same to the owners of the land, etc. along with the written consent for establishment of the association. Therefore, the Plaintiff should be deemed to have completed the overall project implementation plan around November 201, 201.

(3) The Plaintiff and the instant promotion committee set the instant service cost as 2.38% of the sales revenue on the basis of the sales revenue of one trillion won, and finally becomes final and conclusive that the sales revenue falls short of one trillion won, the Plaintiff and the instant promotion committee decided to settle the service cost accordingly.

(4) After the instant promotion committee reversed the instant service contract and then selected Pakistan as a new management entity specialized in the management of the rearrangement project, the service price for the corporation is KRW 4.7 billion, but the individual expenses, such as various outsourcing costs, litigation costs, general assembly-related expenses, various documents issuance fees, and authorization fees, may be separately claimed, and the service price may be additionally added, such as service price fluctuations, based on the inflation rate. There is no evidence to deem that the Plaintiff failed to perform its duties stipulated in the instant service contract, and thus, it is difficult to view that the service price was unfairly excessive compared to the Plaintiff’s duties.

(5) The instant total service cost is KRW 23.8 billion (2.38% x 2.38%), and the Defendant is obligated to pay to the Plaintiff the sum of KRW 4.76 billion (23.8 billion x (10% of the total service cost + (10% of the contract price + 10% of the first intermediate payment)) and value-added tax of KRW 476.6 billion.

B. Examining the reasoning of the lower judgment in light of the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine on requirements for establishing a down payment contract, interpretation of disposal documents regarding standards for calculating sales proceeds, and mitigation under the good faith principle on service proceeds, contrary to what

3. Ground of appeal No. 4 (Ground of appeal as to the interpretation of a disposition document and the arrival of payment deadline)

A. The lower court determined that, upon the termination of the instant service contract, the Defendant’s obligation to pay down payment and the obligation to pay the first intermediate payment to the Plaintiff was due on October 10, 2012, for which the Plaintiff claimed payment, and the due date for which the Plaintiff claimed payment arrives. On the grounds delineated below.

(1) Notwithstanding Article 4(2), Article 4(3) of the instant service contract provides that the instant promotion committee may postpone the payment of the service cost by the time the project is selected, notwithstanding the provision of Article 4(2) that sets the time to pay the service cost. However, even if the instant service contract is terminated, deeming that the Defendant may postpone the payment of the cost for the service that had already been completed in an indefinite manner until the time the project is selected is inconsistent with the intention

(2) Article 8(3) of the instant service contract provides that where the contract is terminated, the settlement of the price for the service that has already been completed pursuant to Article 4(2) shall be made, and Article 4(3) does not apply mutatis mutandis to the extension of the cost of service.

(3) The Defendant’s obligation to pay down payment and the first intermediate payment is an obligation without setting a deadline, and the claim purporting to include the Plaintiff’s declaration of intent to pay down payment and the first intermediate payment, and the application form for modification of the cause of the claim reached the Defendant on October 10, 2012, thereby reaching the due date.

B. Examining the reasoning of the lower judgment in light of the relevant legal doctrine and the evidence duly admitted, the lower court did not err in its judgment by misapprehending the legal doctrine regarding the interpretation of the disposal document and the arrival of the payment deadline.

4. Conclusion

The Defendant’s appeal is dismissed as it is without merit, and the costs of appeal are assessed against the Defendant, and the remainder is assessed against the Defendant. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Min You-sook (Presiding Justice)