Whether a contractor who has been awarded a contract for the construction of an apartment is liable to compensate for damages in lieu of defect repair (negative)

Article 46(1) and (3) of the Housing Act, Article 9 of the Act on the Ownership and Management of Aggregate Buildings

The council of occupants' representatives of the right-building apartment (Attorney Lee Young-young, Counsel for the plaintiff-appellant)

Korean Housing Guarantee Co., Ltd. and two others (Attorneys Choi Han-soo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2007Na1489 decided January 8, 2008

Of the lower judgment, the part against the Plaintiff against Defendant Samho Construction Co., Ltd. is reversed, and that part of the case is remanded to the Seoul High Court. The appeal against Defendant Korea Housing Guarantee Co., Ltd. and Defendant Jinsan Construction Co., Ltd is dismissed. The costs of appeal against Defendant Samho Construction Co., Ltd. are assessed against the Plaintiff.

The grounds of appeal are examined.

1. As to Defendant Samho Construction Co., Ltd. (hereinafter “Defendant Samho Construction”),

A. In full view of the admitted evidence, the court below acknowledged that the apartment of this case constructed and sold by Defendant Samho Construction was occupied by the residents of the city around March 1, 1996 after obtaining approval for use on March 1, 1996, the plaintiff was a representative of each apartment of this case. The council of occupants' representatives was transferred from the 367 household owners among the 368 household owners of this case's apartment section for exclusive use of this case's apartment of this case's claim for damages in lieu of the defect repair for Defendant Samho Construction, etc., and notified the transferor of the assignment to the defendant Samho Construction, etc. upon delegation by the transferor of this case's attached defect. As to the remaining defects except the defect as stated in Paragraph (2) of this case's attached defect, the owner of this case's right to claim damages in lieu of the defect repair pursuant to Article 67 of the Civil Act applied mutatis mutandis by Article 9 of the Act on the Ownership and Management of Aggregate Buildings, but there is no evidence to acknowledge the defect repair liability of each of this case's.

B. However, the lower court’s determination is difficult to accept for the following reasons.

Article 6 of the Addenda to the Act on the Ownership and Management of Aggregate Buildings (amended by Act No. 7502, May 26, 2005; hereinafter referred to as the "Revised Aggregate Buildings Act") provides that the special provisions of the Housing Act on the method of management of aggregate housing and standards shall be effective unless they conflict with the Aggregate Buildings Act and infringe on the basic rights of sectional owners, but Article 46 of the Housing Act shall be applied to the liability for warranty of collective housing and the repair of defects, and Article 46 (1) of the Housing Act (amended by Act No. 7520, May 26, 2005; hereinafter referred to as the "Revised Housing Act") provides that Article 67 through 671 of the Civil Act shall apply mutatis mutandis to the liability for warranty for the sale of a building, and Article 9 of the Aggregate Buildings Act provides that the project owner shall make the tenant's request for repair, damage, etc. due to a defect caused by mistake, damage, etc. within the period prescribed by Presidential Decree within ten years from the date of inspection or approval for use of collective housing.

However, prior to the enforcement of the amended Housing Act, Article 29 of the Housing Act or Article 18 of the Building Act provides that the amended provisions of Article 46 shall apply to the liability for warranty and repair of defects of the apartment house for which the approval of use under the provisions of Article 16 of the amended Housing Act shall become null and void due to the declaration of unconstitutionality by the Constitutional Court Decision 2005HunGa16 Decided July 31, 2008. Meanwhile, the inspection for use or approval for use of an aggregate building shall be made after the construction of the aggregate building and immediately deliver it to the sectional owner who is the cause of defects. Since it is reasonable to ask for warranty liability in a uniform application of the Act on the Liability for Warranty of Defects applicable at that time from the point of view of trust protection or fairness, it is reasonable to view that Article 201 of the amended Housing Act and the Act on the Liability for Warranty of Aggregate Buildings shall apply mutatis mutandis to the liability for warranty of defects in accordance with Article 201 of the amended Housing Act and Article 281 of the amended Housing Act.

Therefore, Defendant Samho Construction, who is the seller of the apartment in this case, bears the warranty liability for all defects that occurred within 10 years from the date of delivery of the apartment in this case, in accordance with the provisions of the Aggregate Buildings Act and the Civil Act.

C. Nevertheless, the court below erred by misapprehending the legal principles as to the validity of Article 3 of the Addenda to the amended Housing Act and the scope of warranty against defects under Article 9 of the Aggregate Buildings Act, which affected the conclusion of the judgment. The ground of appeal pointing this out has merit.

2. As to Defendant Minsan Construction Co., Ltd. (hereinafter “Defendant Minsan Construction”) and Defendant Housing Guarantee Co., Ltd. (hereinafter “Defendant Housing Guarantee”).

A. The lower court determined that, on the grounds of each of the above provisions, it is difficult to view that the construction contractor has the liability to compensate for damages in lieu of defect repair on the ground of the above provisions, since Article 46(1) of the Housing Act only provides that the project proprietor, including the contractor, shall be liable for the damages in the event of a serious defect in the proof-stress structure, and Article 46(3) of the same Act provides that the liability of the project proprietor, including the contractor, shall be limited to the liability of the warranty against the warranty against the person who constructed and sold the apartment house.

In light of the relevant statutes and the records, the above recognition and determination by the court below is just, and there is no error in the misapprehension of legal principles as to Article 46 (1) of the Housing Act.

B. In full view of the admitted evidence, the court below acknowledged the following facts: the defendant's house guarantee contract of this case was entered into a guarantee contract of this case with the defendant Samho Construction for ten (10) years from March 1, 1996, which was the date of usage inspection; the obligation to guarantee the defendant's house under the above guarantee contract was claimed for the performance of the defect repair in accordance with the procedures prescribed in the Housing Act and the Enforcement Decree of the Housing Act; thus, it is limited to the damages suffered by the plaintiff's council of occupants' representatives due to the failure to perform the defect repair (refer to the contract of defect repair as recorded in the record 179). According to the above facts and relevant Acts and subordinate statutes, the defendant's house guarantee contract of this case did not have any obligation to pay the defect to the plaintiff's house within the warranty period of defect repair due to the defect in the construction work, since there was no evidence that there was any defect in the construction work or the defect in the construction work.

In light of the relevant laws and records, the above fact-finding and judgment of the court below are just and they are not erroneous as otherwise alleged in the ground of appeal.

3. Conclusion

Therefore, the part of the judgment of the court below against the plaintiff as to defendant Samho Construction is reversed, and that part of the case is remanded to the court below for a new trial and determination. The appeal against the defendant's house guarantee and the defendant's wall construction is dismissed. The costs of appeal against the defendant's house guarantee and the defendant wall construction 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 Nung-hwan (Presiding Justice)