[1] Requirements for a rehabilitation claim under Article 118 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act

[2] Where the contractor of a construction contract completed the performance of the contract by completing and delivering the construction before the commencement of the rehabilitation procedure, and the damage incurred by the defect of the object completed after the commencement of the rehabilitation procedure for the contractor is practically caused, whether the contractor’s claim for damages in lieu of defect repair constitutes a rehabilitation claim (affirmative in principle)

[1] Article 118 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act / [2] Article 667 (2) of the Civil Act, Article 118 subparagraph 1 of the Debtor Rehabilitation and Bankruptcy Act

[1] [2] Supreme Court Decision 2011Da109388 Decided April 23, 2015 (Gong2015Sang, 719) / [1] Supreme Court Decision 2011Da8435 Decided November 29, 2012 (Gong2013Sang, 21) Supreme Court Decision 2012Da114851 Decided May 16, 201 (Gong2014Sang, 1193) / [2] Supreme Court Decision 2001Da24174, 24181 decided October 9, 201 (Gong201Ha, 2431)

[Judgment of the court below] The grounds for appeal are examined.

1. The term “the term “the term” means “the term” means “the term “the term” means “the term” means “the term.

[Defendant-Appellee] U.S. Co., Ltd. and one other (Attorney Soh-young et al., Counsel for defendant-appellee)

Seoul High Court Decision 2012Na98838 decided July 26, 2013

The part of the judgment of the court below against Defendant 4 is reversed, and that part of the case is remanded to the Seoul High Court. All of the appeals by the Plaintiff and Defendant U&S Co., Ltd. are dismissed. Of the costs of appeal, the part arising between the Plaintiff and the Defendant’s drawing engineering and the Defendant Dae Total Construction Co., Ltd. is assessed against the Plaintiff, and the part arising between the Plaintiff and the Defendant

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

1. Plaintiff’s ground of appeal

Where limitation of liability or comparative negligence is imposed in a damage compensation case in order to ensure the fairness of the burden of damage, the fact-finding or proportion of the ground is an exclusive authority of a fact-finding court unless it is deemed that it is considerably unreasonable in light of the principle of equity (see Supreme Court Decision 2012Da48190, Sept. 4, 2014).

Examining the record, the lower court is justifiable to limit the Defendants’ liability ratio to 80% based on its stated reasoning. In so doing, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence inconsistent with logical and empirical rules, or by misapprehending the legal doctrine on the duty of explanation or omitting judgment, thereby adversely affecting the conclusion of the judgment.

2. As to the ground of appeal by Defendant Shin Young-chul

The grounds of appeal by Defendant UBS Co., Ltd. are unreasonable to determine the judgment of the court below as to the causes of the instant defect, and that there is no responsibility for the instant defect to Defendant UBS. This purport is to dispute the lower court’s determination of evidence and its-based fact-finding. The evaluation of the evidence, which is the premise thereof, belongs to the exclusive authority of the fact-finding court unless it goes beyond the bounds of the principle of free evaluation of evidence. The lower court’s determination of evidence and fact-finding do not seem to exceed the bounds of the principle of free evaluation of evidence in violation

3. As to the grounds of appeal by Defendant 4 on the administrator of Defendant 3-able Construction Corporation

A. According to the reasoning of the judgment below, it is reasonable to view that the Plaintiff’s claim for damages against Defendant 4 (hereinafter “Defendant manager”) by the administrator of Defendant Cable Construction Co., Ltd. (hereinafter “Rehabilitation”) constituted the claim for damages at the time when the Plaintiff becomes necessary to take emergency repair measures due to the occurrence of defects in the instant case. On September 25, 2009, when the above emergency repair measures were needed, the Plaintiff’s claim for damages against the Defendant custodian was apparent after May 6, 2009 when the rehabilitation procedure commenced, and it was only after the commencement of rehabilitation procedure for the rehabilitation company, and thus, it cannot be deemed as “compensation due to nonperformance after the commencement of rehabilitation procedure” under Article 118 subparag. 3 of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”). The court below determined that the Plaintiff’s claim for damages against the Defendant custodian and the custodian’s claim for damages arising from the Plaintiff’s act falling under Article 118 subparag. 170 million won after the commencement of rehabilitation procedure.

B. However, it is difficult to accept the above determination by the lower court.

(1) Rehabilitation claims under Article 118 subparag. 1 of the Debtor Rehabilitation Act refer to a claim on property arising from the cause prior to the commencement of rehabilitation procedures, such as expression of intent. Thus, insofar as the cause of the occurrence of claims is based on the cause prior to the commencement of rehabilitation procedures or the maturity arrives after the commencement of rehabilitation procedures (see Supreme Court Decision 2012Da114851, May 16, 2014). It is sufficient that a major cause of the claim exists before the commencement of rehabilitation procedures (see Supreme Court Decision 201Da8435, Nov. 29, 2012). Meanwhile, barring special circumstances, a contract for construction works cannot be rescinded if the construction works were already completed, and it is reasonable to deem that the contractor completed the contract for construction works before the commencement of rehabilitation procedures (see Supreme Court Decision 201Da114851, Oct. 19, 201; Supreme Court Decision 2010Da418414, Apr. 18, 2019).

(2) According to the reasoning of the lower judgment, on December 26, 2001, the rehabilitation company contracted with the Plaintiff for the instant construction work to install structures, such as drainage pumps facilities, at the bank which divides the brain head and the west Sea into the river and the west Sea, and the said structure was completed on August 30, 2004; the rehabilitation company commenced the rehabilitation procedure on May 6, 2009; the instant defect occurred on September 25, 2009; the Plaintiff paid the cost of emergency measures construction and precise safety diagnosis due to the instant defect between November 10, 209 and June 7, 201; and the instant defect occurred due to a mistake in design and supervision in the construction process of the rehabilitation company.

Examining the above circumstances in light of the legal principles as seen earlier, if the rehabilitation company, which is a contractor, completed the instant construction before the commencement of rehabilitation procedures, the rehabilitation company should be deemed to have completed the implementation of the contract before the commencement of rehabilitation procedures. Thus, even if the defects arising from a mistake in the construction process of the rehabilitation company and the Plaintiff’s losses incurred to the rehabilitation company, such as expenses incurred therefrom, were practically incurred after the commencement of rehabilitation procedures for the rehabilitation company, the Plaintiff’s right to claim damages against the rehabilitation company is deemed to have major causes

Nevertheless, solely on the grounds indicated in its reasoning, the lower court determined otherwise by deeming the Plaintiff’s claim for damages constituted a public-interest claim under Article 179(1)2 or 5 of the Debtor Rehabilitation Act, and thus, held that the Defendant custodian is liable to compensate the Plaintiff for the damages. In so determining, the lower court erred by misapprehending the legal doctrine on rehabilitation claims, etc. under the Debtor Rehabilitation Act

4. Conclusion

Therefore, the part of the judgment of the court below against the defendant is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. All appeals by the plaintiff and the defendant UBS are dismissed, and the costs of appeal are assessed against the plaintiff and defendant UBS are assessed against the plaintiff. The part between the plaintiff and the defendant UBS is assessed against each party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)