The legislative purport of Article 54-3 (3) of the Private School Act on the restriction on appointment of the principal of a school, and whether the above provision applies to cases where the principal of a school becomes in a relationship between a chief director and a spouse, etc. as a change

Article 54-3 (3) (main sentence) of the Private School Act provides that a person who has a relationship (hereinafter referred to as "spouse, etc.") between the chief director of a school juristic person and a principal of a school juristic person falling under any of the following subparagraphs, i.e., spouse (title 1), lineal ascendants and descendants, and their spouses (hereinafter referred to as "spouse, etc.") shall not be appointed to the principal of a school established and managed by the relevant school juristic person, and the proviso to the same paragraph recognizes exceptions where approval by the competent agency (hereinafter referred to as "approval by the competent agency") has been obtained with the approval of at least 2/3 of the fixed number of directors and approval by the competent agency. The legislative purport of the proviso is to prevent the operation of a private school centered on the chief director of the relevant school juristic person and to promote transparency and soundness in school management by separating the school management of the school juristic person from the chief director of the relevant school juristic person and those who have a relationship between the chief director of the school juristic person and his/her spouse, etc., by opening a way to the head of the school without impairing the above purport.

In addition to the above forms, contents, and legislative intent of Article 54-3(3) of the Private School Act, and also the possibility of avoiding this provision by coordinating the appointment of the chief director of a school foundation and the post-election of the principal of a school, this provision shall be deemed to have been determined not only as a principal’s appointment but also as a member’s qualification. Therefore, this provision shall apply to cases where a person in a relationship with the chief director of a school foundation, such as a spouse, is newly appointed as a principal, but also where the chief director of a school foundation

Article 54-3 (3) of the Private School Act

The East School Foundation and seven others (Law Firm Seo-Un et al., Counsel for the defendant-appellant)

The superintendent of the Office of Education (Law Firm Yang Jae, Attorneys Choi Byung-mo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2011Nu26987 decided December 13, 2011

All appeals are dismissed. The costs of appeal are assessed against the plaintiffs.

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

1. As to the scope of application under Article 54-3(3) of the Private School Act

A. The main sentence of Article 54-3(3) of the Private School Act provides that a private school shall not be appointed to a principal of the school foundation and a person who has any of the following relationships, i.e., spouse (title 1), lineal ascendants and descendants, and their spouses (hereinafter “spouses, etc.”) from among the heads of the schools established and operated by the relevant school foundation (hereinafter “the relationship”). The proviso of Article 54-3(3) provides that approval of two-thirds or more of the fixed number of directors and approval of the competent agency (hereinafter “approval of the competent agency”) shall be granted. The legislative intent seems to prevent a private school from being operated mainly by the principal of the relevant school foundation by restricting the appointment of a representative of the school foundation and a close relative relationship between the principal of the school foundation and the principal of the school foundation to promote transparency and soundness in school management by separating the school management of the school foundation from the principal of the school foundation and, to the extent that the above purport does not damage, by opening a way to the head of the relevant school after obtaining approval, etc. to the extent that does not undermine the above purport.

In addition to the above forms, contents, and legislative intent of Article 54-3(3) of the Private School Act, and the possibility of avoiding this provision by coordinating the appointment of the chief director of a school foundation and the post-election of the principal of a school, this provision shall be deemed to be determined not only as the qualification for appointment of the principal of a school but also as the qualification for employment. Therefore, this provision shall apply to not only where a person in a relationship with the chief director of a school foundation is newly appointed as a principal, but also where the chief director of a school foundation changes during his/her term of office

B. Based on its stated reasoning, the lower court determined to the effect that: (a) Nonparty 1, 2, and 3, who was newly appointed by the president as the principal in the case of Plaintiff 1, 2, and 3’s private teaching institutes (hereinafter referred to as “school juristic person” in each name); (b) was unlawful since Nonparty 1, 2, and 3, who was employed as the principal after the appointment of each principal, was not allowed pursuant to Article 54-3(3) of the Private School Act, insofar as it did not obtain approval from the competent authorities.

The judgment of the court below is based on the above legal principles, and there is no error in the misapprehension of legal principles as to the scope of application under Article 54-3 (3) of the Private School Act, as alleged in the grounds of appeal by the above plaintiffs

2. Regarding the grounds for the return of the subsidy

A. Article 43(1) of the Private School Act provides that, if the State or a local government deems it necessary for the promotion of education, a school juristic person or a private school support organization that has applied for subsidies as prescribed by Presidential Decree or Municipal Ordinance of the relevant local government for the support of private school education, may grant subsidies or provide other support. Article 4 of the Seoul Special Metropolitan City Ordinance on Financial Support for Private Schools (hereinafter “the instant Ordinance”) enacted upon delegation provides for a school juristic person’s financial deficiencies support project as one of the projects subject to financial support by the superintendent of the relevant office of education under Article 4, and Article 5 provides for the procedure so that the superintendent of the relevant office of education notifies the institution subject to financial support of each year and has the relevant superintendent of the office of education submit an application for subsidies, and stipulates that the superintendent of the relevant office of education shall review such application and determine whether to grant subsidies (hereinafter “subsidies for financial deficiencies”). Furthermore, Article 7 of the instant Ordinance stipulates that subsidies for an institution subject to financial support shall be granted occasional or occasional according to budget execution plan for educational expenses of Seoul Special Metropolitan City, and that may be determined to change in particular circumstances.

Meanwhile, Article 9(1) of the Ordinance provides that subsidies shall not be used for any purpose other than the purpose of support, and Article 9(2) provides that "when the Superintendent of an Office of Education uses all or part of subsidies to institutions subject to support for any purpose other than the purpose of support" (Article 1); "when the whole or part of the purpose of support is suspended or discontinued for any purpose other than the purpose of support" (Article 2); "when a person fails to comply with an order issued by the competent agency under the Private School Act or the Enforcement Decree of the same Act (Article 3); "when a person fails to comply with an order by the competent agency under the Private School Act or the competent agency under the Enforcement Decree of the same Act" (Article 4); "when the result of support is deemed inappropriate or it is deemed unlikely to achieve the purpose of support" (Article 5); "when a false fact is discovered in an application for subsidy and various reports prescribed by this Ordinance" (Article 6); and "when a person has received any other unfair means" (Article 7).

B. In light of the legislative form, structure, purpose, and contents of the above-mentioned statutes and ordinances, subparagraphs 1 through 5 of Article 9(2) of the instant Ordinance may be deemed to mainly stipulate the grounds for return related to the change of circumstances, etc. that occurred after the decision to provide support was made. On the other hand, Articles 6 and 7 of the instant Ordinance may be deemed to have determined the cases where a false fact is discovered in various reports against the Defendant even without the process of applying for support or reporting, and where there is a need for sanctions, etc.

C. (1) According to the facts acknowledged by the lower court and the evidence duly admitted, ① the application for subsidies and the decision to grant subsidies has been made in March every year, and the period eligible for subsidies has been set from March 1 to February 28 (or February 29) of the following year. ② The Defendant: (i) the Plaintiff’s Dong name Private Teaching Institutes was on July 1, 201; (ii) the Plaintiff’s Mayang Private Teaching Institutes was on September 1, 2007; (iii) the Plaintiff’s Mayang Private Teaching Institutes was on March 1, 2008; (ii) the Plaintiff’s Mayang Private Teaching Institutes was on March 5, 2008; and (iii) the Plaintiff’s Mayang Private Teaching Institutes was on March 1, 209, on the grounds that each of the above Plaintiffs’ 3rd Private Teaching Institutes was appointed as his principal; and (iv) the Plaintiff’s 1) was on the grounds that each of the above Plaintiffs’ 3rd Private Teaching Institutes was on the date of his school.

(2) We examine these facts in light of the contents of the pertinent laws and ordinances as seen earlier.

(A) First, at the time of applying for the subsidy for a project for supporting financial deficiencies every year, the Plaintiff Youngyang Institute and Sejong Institute may include a person who is unable to be appointed as the principal in violation of Article 54-3(3) of the Private School Act in the scope of the restriction on the appointment of the principal and apply for the subsidy, and accordingly, receive the subsidy calculated including the personnel expenses for each principal. Accordingly, it constitutes “when a false fact is discovered in the application for subsidy” (Article 9(2) of the Ordinance of this case or “when a person who is unable to be appointed as the principal has received the subsidy by unjust means” (Article 7).

(B) Next, at the time of the application for subsidies for the year in which the date of the application for subsidies was the time when the Plaintiff’s literature Young-gu Private Teaching Institutes, the Young-gu Private Teaching Institutes, the Young-gu Private Teaching Institutes, the Young-gu Private Teaching Institutes, the Young-gu Private Teaching Institutes, and the Oral Industry Institute were appointed by a legitimate principal who does not violate the above provisions on the restriction on the appointment of the principal. However, upon the change of the president, the appointment of the principal was in violation of the above provisions on the restriction on the appointment of the principal as the principal was newly appointed by the principal. In the case of the above Plaintiffs, it cannot be deemed that the false or unjust method was involved in the filing of subsidies in the year in which the time of the respective return was the time (the time). On the other hand, labor cost of the principal constitutes the above support project’s purpose and content, and thus, it is reasonable to view that the Plaintiffs’ use of the above subsidies for the purpose and purpose corresponding to the above provision on the restriction on the appointment of the principal of the school can be deemed to constitute an unlawful reasons for the purpose of Article 9(2).

Furthermore, among the above plaintiffs, the Plaintiff Young-gu Private Teaching Institutes, and Mine Private Teaching Institutes, from 2008 to 2010, filed an application for the payment of each of the above subsidies under illegal circumstances since the grounds for violating the restriction on appointment of the principal from 2009 to 2010. Thus, as in the case of Plaintiff Young-gu Private Teaching Institutes and Samsan Private Teaching Institutes, this constitutes “when false facts have been discovered in the application for subsidies” (Article 9(2) of the instant Ordinance, as in the case of Plaintiff Young-gu Private Teaching Institutes and Samsan Private Teaching Institutes, and “when the application for subsidies was received in an unjust manner” (Article 7) or “when the subsidy was received in an unjust manner

(3) On the grounds indicated in its reasoning, the lower court determined that: (a) the Plaintiffs’ application or receipt of a subsidy by including a person who is unable to be appointed as the principal due to the grounds for restriction on the appointment of the principal, or who was unlawfully appointed as the principal, constitutes grounds for return under Article 9(2)1, 6, or 7 of the instant Ordinance; and (b) the Plaintiffs’ application or receipt of the subsidy was not a legitimate reason for refusing the return of the subsidy, even though they failed to fully know the fact that the instant disposition contains a sanction on the application of the subsidy based on false or unjust means;

Such determination by the court below is identical to the above, and there are some inappropriate parts in its reasoning, but its conclusion is acceptable. Contrary to the plaintiffs' grounds of appeal, the court below did not err by misapprehending the legal principles on the grounds for the return of subsidies under Article 9 (2) 1, 6, and 7 of the Ordinance, failing to exhaust all necessary deliberations, or exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules

3. As to the effect of the appointment report of school principal and the approval of the re-employment of president

(1) The court below held that the approval of the competent agency on the grounds of restriction on the appointment of the principal required by the proviso of Article 54-3 (3) of the Private School Act is a kind of exercise of management and supervision right to enhance transparency and public nature in the exceptional operation of private schools by the chief relative of the principal. Thus, if a school teacher is appointed or dismissed within seven days, the meaning is different from the "report on the Appointment of a principal" under Article 54 (1) of the Private School Act, which provides that the plaintiffs shall report it within seven days, and if the plaintiffs appointed the chief director of each school and the spouse as the principal and reported it to the defendant, the court below held that even if the defendant did not recommend or take corrective measures to obtain approval from the competent agency, the appointment of the principal cannot be deemed to have been approved by the competent agency required under the proviso of Article 54-3 (3) of the Private School Act, and (2) the appointment approval of the chief director cannot be deemed to have been justifiable on the premise that the principal's appointment of the non-party 4 was approved by the appointment of the principal.

Examining the reasoning of the judgment below in light of the aforementioned Acts and subordinate statutes and legal principles, even if the circumstances alleged in the grounds of appeal by the Plaintiff Dongdong-gu Private Teaching Institutes, Go Young-gu Private Teaching Institutes, Mine Private Teaching Institutes, Young-gu Private Teaching Institutes, Samsan Private Teaching Institutes, Samsan Private Teaching Institutes (hereinafter “Plaintiff-U.S.”) and the OU.S. Institute, the lower court did not err in its judgment by misapprehending the legal principles on the legal nature and effect of the appointment of the principal, contrary

4. As to the retroactive effect of approval by the competent agency

The lower court determined that (1) in light of the contents and legislative intent of Article 54-3(3) of the Private School Act, even if the said Plaintiffs obtained the approval from the competent agency on December 21, 2010 and on December 16, 2010, the validity of the appointment of the principal, which was made before the said approval, cannot be deemed to have been lawfully maintained, even if the said Plaintiffs obtained the approval from the Defendant, based on the aforementioned facts, based on the fact that the term of office of each principal’s appointment approved by the Defendant was determined after the approval date of the competent agency.

Article 54-3 (3) of the Private School Act does not have a provision on the retroactive effect of the approval of the competent agency under Article 54-3 (3) of the Private School Act, and it is likely to circumvent the legislative intent of Article 54-3 (3) of the Private School Act by providing inducements to neglect the current state of illegality for a long time when recognizing such retroactive effect. In light of these circumstances, the above decision of the court below is acceptable, and contrary to what is alleged in the grounds of appeal, there is no error of law by misapprehending the legal principles

5. As to the violation of the principle of trust protection or the principle of good faith, and deviation and abuse of discretionary power

(1) The court below determined that the Defendant’s disposition of return of the subsidy in this case does not violate the principle of good faith or the principle of trust protection, on the ground that, even if the Defendant could have known that each school juristic person was in a relationship with the chief director, spouse, etc. of each school juristic person at the time of reporting the appointment of the principal of each school, and even if the Defendant could have known that each school juristic person was in a relationship with the chief director, etc. of each school juristic person by reporting the status of each school juristic person after reporting the appointment of the principal of each school, reporting the status of relatives with relatives with the school juristic person, reporting the change of president, etc., the mere fact that the Defendant accepted each school principal’s appointment report without recommending or taking corrective measures to obtain approval from the competent authorities against the Plaintiffs, it cannot be deemed that the Defendant did not lead the Plaintiffs to mistake that the Defendant obtained approval from the competent authorities, or did not take any issue without obtaining approval from the competent authorities. (2) The Defendant’s disposition of return of the subsidy in this case did not violate the principle of trust protection.

Examining the reasoning of the lower judgment in light of the record, the lower court did not err in its judgment by misapprehending the principle of good faith and the principle of trust protection, or the principle of deviation and abuse of discretionary power, the legitimacy of school attendance, and the cost of performance of duties, etc., contrary to what is alleged in the grounds of appeal by the Plaintiff and the Plaintiff Osan Institute

6. As to the requirement that the subsidy be returned from the other party to the grant of the subsidy and the corporate accounting funds

A. Article 43 of the Private School Act provides that subsidies may be granted to the “school juristic person or private school support organization” which applied for subsidies as seen earlier, and Article 3 of the Ordinance provides that the subjects of support provided by the Superintendent of an Office of Education for the promotion of private school education shall be the “school juristic person or private school operator” who establishes and operates a private middle school and high school for the purpose of promoting private school education. Meanwhile, Article 43 (2) provides that the principal of the relevant private school may directly provide support, notwithstanding the provisions of paragraph (1) where deemed necessary, notwithstanding

Meanwhile, Article 29 of the former Private School Act (amended by Act No. 12125, Dec. 30, 2013; hereinafter the same) provides that the income belonging to school foundation’s accounts shall not be transferred or lent to other accounts, except for the cases of repayment of principal and interest on loans, shall be classified into accounts belonging to school foundation’s affairs and accounts belonging to the corporation’s affairs. Article 13(2) of the former Enforcement Decree of the Private School Act (amended by Presidential Decree No. 23974, Jul. 24, 2012; hereinafter the same) stipulates that tuition fees and other charges shall be the income of school foundation’s accounts for school expenses and accounts for school expenses, and shall be managed in a separate account (Article 29(6) of the former Private School Act). In addition, Article 29(6) of the former Private School Act provides that the income belonging to school expenses shall not be transferred to other accounts or lent to other accounts (Article 13(2) of the former Enforcement Decree of the Private School Act).

B. In full view of the forms and contents of the provisions on the division of the school accounting and corporate accounting, (1) the counterpart to the disposition of granting subsidies for financial defect support projects is an educational foundation or a private school manager, and the Superintendent of an Office of Education deems it necessary to grant subsidies directly to the principal is merely a promotion of convenience in the business at the stage of providing the subsidies in reality. (2) Furthermore, the granting of subsidies under Article 9(2) of the Ordinance also has the nature of sanctions on the grounds that subsidies should not be paid in an unjust manner. Therefore, it is difficult to view that the refund following the disposition falls under the item of “amount of expenditure of school expenses accounts” which is allowed from the “amount of expenditure of school expenses” as expenses directly necessary for school education. Accordingly, even if the Superintendent of an Office of Education directly paid subsidies to the principal pursuant to Article 3(2) of the Ordinance, it is reasonable to view that the subsidies should be returned from the corporate accounts in cases where the subsidies should be returned to him/her as they fall under Articles 9(2)1, 6, and 7, etc.

C. The court below rejected the plaintiffs' assertion that "the defendant paid the subsidy to the school accounting, and the return should also be made with the school accounting funds, not with the corporate accounting funds." The decision of this case that ordered the return of the subsidy with the corporate accounting funds was lawful. It did not err by misapprehending the legal principles on the grant institution, the distinction between the school accounting and the corporate accounting, and the interpretation of Article 3 of the Ordinance, or by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules.

7. As to the application of the Civil Code to pay bad faith bonds

As seen earlier, based on Article 43(1) of the Private School Act and Article 9(2)7 of the Ordinance of this case, the disposition of this case requires the institution subject to support to return all or part of the subsidy when it received support by improper means, and does not seek a return of unjust enrichment under the civil law. Thus, there is no room to apply the provisions of the Civil Act concerning malicious debt repayment with the effect of preventing the occurrence of a claim for unjust enrichment under the civil law.

In light of the above, the court below rejected the claim that "the defendant received an application from six principals such as the plaintiff Dong-dong Private Teaching Institutes on November 4, 2010 and thereafter paid the subsidy on November 201, 2010, constitutes a bad faith debt repayment, and thus is not subject to return." In so doing, the court below did not err by misapprehending the legal principles as to the ground for the return of unfair subsidy or the repayment of bad faith under the civil law, contrary to what is alleged in the ground of appeal by six persons such as the plaintiff Dong-dong Private Teaching Institutes, etc.

8. Regarding the scope of return of subsidy

The court below held that (1) The amount of the subsidy is an amount obtained by deducting the standard amount of financial revenue from the standard amount of financial revenue, and that if the appointment of the principal is illegal and the remuneration for the principal is not included in the standard amount of financial demand, the amount of the subsidy would be reduced accordingly, and therefore, it is reasonable to refund the amount equivalent to the above amount of the subsidy. We do not accept the plaintiff's assertion that the above plaintiff's assertion that the ratio of the subsidy to the above plaintiff's total revenue to the above plaintiff's own income is illegal among the remuneration paid to the principal because it is difficult to distinguish the source of the subsidy paid to the principal from his own revenue, and since the appointment of the principal of the plaintiff Osan Institute is illegal, the part of the subsidy corresponding to the above principal's salary is not satisfied, and since the principal of the above school actually performed his duties, it does not constitute unjust enrichment. Thus, the plaintiff's assertion that the above disposition was unlawful since the subsidy in this case is not an internal problem between the principal and the school juristic person.

Examining the reasoning of the lower judgment in light of the relevant statutes and legal principles as seen earlier, and the evidence duly admitted, the lower judgment did not err by misapprehending the scope of the return of subsidies and its discretionary power, and the legal doctrine on appropriation of the cost of occupational act, etc., contrary to what is alleged in the grounds of appeal by the Plaintiff Hayang Institute

9. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim So-young (Presiding Justice)