[1] Whether the permission of the competent authority should be obtained in cases where a school foundation disposes of its fundamental property upon dissolution (affirmative)

[2] The case reversing the judgment of the court below which ruled that Article 28 (1) of the Private School Act shall not be applied since disposal of a school foundation's basic property through an auction procedure does not fall under the case where a school foundation's disposal of its basic property is unreasonably reduced, where it is de facto lost the substance as a school foundation due to dissolution order of the competent agency and it becomes impossible to function as a school foundation

[1] Even in a case where an educational foundation is dissolved upon the order to dissolve under Article 47 (1) of the Private School Act and loses its substance and becomes virtually unable to perform its functions as an educational foundation upon the closure of a school under Article 62 (1) of the Higher Education Act, it is reasonable to interpret that Article 28 (1) of the Private School Act should still be applied to dispose of its basic property when it intends to dispose of it.

[2] The case reversing the judgment of the court below holding that Article 28 (1) of the Private School Act is excluded from the application of Article 28 (1) of the Private School Act, on the premise that the application of Article 28 (1) of the Private School Act is consistent with the legislative intent, on the basis that the disposal of basic property of a school foundation through an auction procedure, including compulsory auction, does not unfairly reduce the property of the school foundation, in case where a school foundation is dissolved due to an order to dissolve the competent agency and is virtually unable to function as a school foundation, it is extremely limited to the extremely limited case such as unreasonably reducing its basic property.

[1] Articles 28(1) and 47(1) of the Private School Act; Article 62(1) of the Higher Education Act / [2] Articles 28(1) and 47(1) of the Private School Act; Article 62(1) of the Higher Education Act

[1] [2] Supreme Court Order 2003Ma1669 Decided December 17, 2003, Supreme Court Order 2005Ma578 Decided September 6, 2005

Plaintiff (Law Firm Dong, Attorneys Hong Sung-hoon et al., Counsel for the plaintiff-appellant)

Defendant (Attorney Park Sung-sung et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2009Na23476 decided October 28, 2009

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

Article 28 (1) of the Private School Act provides that “If an executing court intends to sell, donate or exchange its basic property, provide it for security, or waives its obligations, it shall obtain permission from the competent agency.” It does not immediately lose legal capacity due to dissolution, but it shall bear obligations only within the extent of liquidation as a liquidated corporation (Article 42 (1) of the Private School Act; Article 81 of the Civil Act). The same shall apply to cases where an incorporated school foundation dissolvess it pursuant to Article 47 (1) of the Private School Act because it considers that there are reasons falling under “the achievement of its objectives” and “the acts of disposal of its basic property by the competent school foundation without permission by the competent agency for its dissolution or bankruptcy.” Article 35 of the Private School Act provides that “If an incorporated school foundation is dissolved and disposes of its residual property without permission by the competent agency for dissolution or dissolution of the incorporated school foundation, its remaining property shall revert to the person designated by the articles of incorporation at the time of reporting the completion of liquidation of the school foundation” (Article 47 (1) of the Private School Act).

Nevertheless, the court below held that Article 28 (1) of the Private School Act is excluded from the application of Article 28 (1) of the Private School Act in such a case, on the premise that the application of Article 28 (1) of the Private School Act is consistent with the legislative intent, only in extremely limited cases such as unreasonably reducing the basic property in the event that the dissolution order of the competent agency loses the substance of the school juristic person and is de facto unable to perform its functions as a school juristic person due to the dissolution order, since the disposal of basic property by the school juristic person through a compulsory auction including compulsory auction does not constitute an unfair reduction of the property of the school juristic person. Thus,

Therefore, the lower judgment is reversed, and the case is remanded to the lower court 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 Shin Young-chul (Presiding Justice)