[1] The method to determine whether to increase the membership fees and the scope of increase in the membership fees in a case where the regulations stipulate the club so that the facility owner of the health club can arbitrarily adjust the membership fees

[2] In a case where Company A, which operates a membership sports center, demands that Company A pay annual annual fees or pay additional deposits to its special members on the condition that annual fees are exempted, instead of paying subscription fees exceeding two times compared to ordinary members, on the grounds of price increase, interest decline, sports center facilities increase or remodeling, ordinary members’ membership fees, etc., the case holding that the lower court erred by misapprehending the legal doctrine, even though the membership fees additionally imposed on Company A’s special members are beyond the objectively reasonable scope

[1] If the regulations of the club provide that the facility owner of the club can arbitrarily adjust membership fees, which are the consideration for the use of the club facilities, in consideration of public charges, price increases, and other economic factors, the right to determine whether to increase membership fees and the scope of increase thereof may be delegated to the facility owner. However, the right to determine the extent of increase thereof cannot be interpreted to mean that the facility owner has the right to arbitrarily determine membership fees without any reasonable ground. Rather, the facility owner who entered into a contract for the use of the club with multiple members can determine whether to increase membership fees and the scope of increase thereof only within the extent objectively reasonable.

[2] In a case where Company A operating a membership sports center demanded Company A to pay annual annual annual fees or pay additional deposits to special members admitted under the condition that annual fees are exempted in lieu of paying subscription fees exceeding two times the total members compared to the general members, the case holding that Company A did not demand the increase of special members to pay additional subscription fees from the opening of the sports center to the opening of the sports center, even though the price increase between the opening of the sports center and the opening of the facilities and the decline in the interest rate, and that Company A did not demand the special members to pay additional subscription fees, based on the circumstances that Company A did not demand additional subscription fees from special members to pay more than two times the total subscription fees, and that Company A was required to demand the special members to pay additional subscription fees from the opening of the sports center due to the increase in price or interest rate of the special members, and that the special members were not required to pay more than seven times the total subscription fees from the time of various construction to the construction of the sports center, and that the special members were not required to pay more than the total subscription fees.

[1] Article 5 and Article 10 subparagraph 1 of the Regulation of Standardized Contracts Act / [2] Articles 5 and 10 subparagraph 1 of the Regulation of Standardized Contracts Act, Article 3 of the Addenda ( December 31, 1986) of the Regulation of Standardized Contracts Act, Articles 2 and 22 of the Installation and Utilization of Sports Facilities Act

[1] Supreme Court Decision 95Da35098 delivered on February 27, 1996 (Gong1996Sang, 1090)

See Attached List of Plaintiffs (Law Firm Inulul et al., Counsel for the plaintiff-appellant)

Coup Global Co., Ltd. (Law Firm, Attorneys Park Ho-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2014Na32962 decided November 13, 2015

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

The grounds of appeal are examined.

1. As to the assertion that an agreement was concluded to avoid lifelong burden

For the reasons indicated in its holding, the lower court rejected the Plaintiffs’ assertion that, at the time of the conclusion of the instant membership agreement, the agreement was concluded that special members would not bear any lifelong burden.

In light of the relevant legal principles and records, the above determination by the court below is acceptable, and it did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, which affected the conclusion of the judgment.

2. As to the assertion that Article 17 of the Rules of the Association of this case violated the duty of explanation and explanation

For reasons indicated in its holding, the lower court rejected the Plaintiffs’ assertion that the Defendant violated the duty to clarify and explain the terms and conditions in relation to Article 17 of the instant Rules.

In light of the relevant legal principles and records, the above determination by the court below is acceptable, and it did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, which affected the conclusion of the judgment.

3. As to the assertion that the increase in membership fees was not made within the reasonable scope

A. If the rules of the club stipulate that the facility owner of a health club can arbitrarily adjust membership fees, which are the consideration for the use of the club facilities, in consideration of public charges, price increases, and other economic factors, the authority to determine whether to increase membership fees and the scope of increase thereof can be deemed delegated to the facility owner. However, on the contrary, the facility owner has the authority to arbitrarily determine membership fees without any reasonable ground. Rather, the facility owner who entered into a contract for the use of the facility with multiple members can determine whether to increase membership fees and the scope of increase thereof only within the extent objectively reasonable (see Supreme Court Decision 95Da35098 delivered on February 27, 1996).

B.1) The lower court determined that, in light of the following: (a) during the period from 1985 to 2012 in which the Defendant imposed additional membership fees on the special members from the opening of the instant sports center, the membership fees calculated by the following methods do not deviate from an objective reasonable scope, in view of the following: (b) the producer price index was at least twice; (c) the consumer price index was increased by at least three times per annum; (b) the interest rate was reduced by at least ten percent per annum; (c) the Defendant invested the construction cost of at least 4.3 billion won; and (d) the annual fees of the general members were increased by at least eight times from KRW 3.60,00 to KRW 2.8,000:

A) At the time of the opening of the instant sports center in 1985, the general members, based on the premise that the interest rate of time deposits in commercial banks with 10% per annum is applied to the regular members, were borne by 48,000 won per annum (=1280,000 won per annum x 10% + 3.60,000 won per annum).

B) At the time of 1985, special members had 318,000 won per annum under the premise that the interest rate on fixed deposit in commercial banks with 10% per annum is applied to regular members (=3180,000 won x 10%).

C) The annual shares of special members at the time of 1985 constitute approximately 65.16% of the annual shares of the general members (=310,000 ± 48,000 ± 480,000 x 100).

D) The annual fee of a general member as of 2012 was set at KRW 2,860,00. However, under the premise that the interest rate on fixed deposit in a commercial bank is 4% per annum, the annual amount to be borne by a general member is 2,911,200 won (= deposit 1280,000 won + 4% + 2,860,000 won).

E) Therefore, a special member shall pay the annual fee of KRW 1910,000,000, which is 2,911,200,000, which is an annual burden of a general member, to KRW 1910,000,00, which is calculated by applying the ratio of 65.6% (which shall be applied by mistake, but which shall be deemed to have been mistakenly applied by mistake), or shall additionally pay the deposit of KRW 4,775,0

2) However, it is difficult to accept the above judgment of the court below in the following respect.

A) Review of the reasoning of the lower judgment and the record reveals the following facts.

(1) The Defendant recruited its members by means of selling memberships between 1985 and 1991, which was opened by the instant sports center, and recruited its special members and general members separately.

(2) The Defendant received from special members more than twice the regular members (i.e., membership fee + deposit) and raised early funds necessary for the opening of the instant sports center. At the time, the Defendant decided not to impose annual fees on special members.

(3) Article 17 of the instant bylaws, which had been enforced since the opening of the instant sports center, stated that “Various membership fees may be adjusted in consideration of the increase of public charges, price, and other economic conditions, etc. However, the rights to the existing membership fees are recognized.”

(4) During the period from 1985 to 2004, the producer price index increased above 1.6 times, and the consumer price index increased above 2.4 times.

(5) The interest rate on a commercial bank deposit has been 10% per annum between 1985 and 192; 8.5% per annum in 193; 8.5% per annum in 1994; 10.5% per annum in 1995; 10.79% per annum in 1996; 11.32% per annum in 1997; 13.3% per annum in 198; and 10% per annum in 198 between 1985 and 1998; however, the said interest rate has been 6.9% per annum in 199; and 7.01% per annum in 200; and records on 3.5% per annum in 204.

(6) It is not found that the Defendant intended to increase the membership fees of special members between 1985 and 2004.

(7) In 2005, the Defendant performed the repair work for the Sabya and swimming pool, the construction work to replace Saby in 2009, the remodeling work for the main building in 201, and the construction work to improve the environment of parking lots in 2012, and the construction cost to cover 4.3 billion won.

(8) At the operating committee of the instant sports center held on September 2005, the defendant sent to the defendant a letter stating that "the increase of membership fees due to facility construction, etc. should not be made to ordinary members, and the special member's membership fees should also be increased in 2006." On January 15, 2008, the chairperson of the operating committee held on January 15, 2008 sent to the defendant a letter stating that "the special member is exempted from annual fees and it is unreasonable that the special member will be exempted from assets due to the extension of facilities and will be transferred to the general member on a general basis."

(9) The Defendant appears to have recruited at least 600 special members. At the time of opening the sports center of this case, the regular members among the special members paid 4,610,000 won, the first family members paid 2,305,00 won, and the second and third family members paid 1,65,000 won.

(10) On July 13, 2012, the Defendant notified on July 13, 2012 that a special member should pay the annual fee of KRW 19.10,000 per year or pay additional deposit of KRW 4,775,00,00,000, regardless of regular members and family members.

B) Examining the above facts and the following circumstances revealed therefrom in light of the legal principles as seen earlier, it is reasonable to view that the Defendant’s membership fees additionally imposed on the special members of the instant sports center exceed the objectively reasonable scope.

(1) During the period from the year 1985 to the year 2004, the producer price index 1.6 times the consumer price index 2.4 times or more, and the interest rate of 10% per annum 3.75% per annum was lowered by 3.75% per annum, the Defendant did not demand the special members to increase the membership fee on the grounds that the price was increased or the interest rate was lowered. This is due to the fact that there was an agreement between the special members to not raise the membership fee on the sole ground that the price was simply increased or the interest rate was lowered, taking into account the circumstances that the Defendant received more than twice the membership fee from the special members and raised the initial funds necessary for the opening of the instant Sports Center.

(2) The Defendant’s demand for the increase of membership fees from 2005 to 2012 seems to have been attributable to the fact that as the facilities of the instant sports center were expanded or reconstructed through various constructions during the period from 2005 to 2012, special members obtained unexpected profits at the time of the conclusion of the instant membership agreement. However, the Defendant is merely entitled to demand special members to share some of the costs incurred in the process of expanding or reconstructing the facilities of the instant sports center.

(3) It does not seem that there are grounds to recognize that deposits paid by special members at the time of entry were calculated at a ratio based on the amount of deposits and annual fees paid by general members. The core contents of the membership agreement in this case do not impose annual fees on special members instead of receiving high-amount annual fees, and special members do not assume that annual fees equivalent to 65.16% of annual fees borne by general members are deposited in the way of depositing deposits. Accordingly, just because the annual fees of general members have been increased, it is impossible to demand the increase of annual fees on the sole basis of the increase of annual fees of general members.

(4) The Defendant spent the construction cost of 4.3 billion won in the course of performing various construction works between 2005 and 2012. However, if 47.75 million won per capita is additionally paid from 600 special members, the amount would amount to KRW 28.65 billion.

(5) At the time of opening the instant sports center, when four family members join as special members, 10,245,000 won (i.e., regular members of KRW 4,610,00 + KRW 2,305,00 + KRW 1,665,00 for secondary family members + KRW 1,665,00 for third family members + KRW 1,665,00 for third family members). In order to maintain the status of special members who did not pay annual fees, additional payment should be made (i.e., KRW 19,100,000 (= KRW 4,7750,00 x 4). This is because the Defendant demanded the additional payment of KRW 4,775,00 in lump sum without distinguishing regular members and family members, and such demand by the Defendant is obviously unreasonable in light of the result.

(6) Article 17 of the instant Rule includes the content that “the right to membership fees already paid is recognized,” and the membership fees the Defendant requires to pay additional membership fees to special members are not reflected in the circumstance that special members paid deposits at the time of entry.

C. Nevertheless, the lower court determined that the membership fees imposed by the Defendant on special members did not deviate from the objective reasonable scope, solely based on its reasoning. In so doing, the lower court erred by misapprehending the legal doctrine on membership fees in a membership sports facility use agreement, thereby adversely affecting the remaining judgment. The allegation contained in the grounds of appeal

D. Meanwhile, among the construction cost of the 4.3 billion cost claimed by the Defendant, expenses unrelated to the expansion or reconstruction of facilities, such as replacing the deteriorated facilities or repairing the damaged facilities, are deemed to have been included in the construction cost of the 4.3 billion cost. The court below pointed out that it is necessary to examine and determine whether the expenses related to the expansion or remodeling of facilities are much needed among the construction cost claimed by the Defendant. Furthermore, it is necessary to confirm how the Defendant prepared any means for the expenses incurred in the maintenance and repair of facilities from the opening of the sports center to the year 2005.

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, 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.

[Attachment] List of Plaintiffs: Omitted

Justices Kim Seon-soo (Presiding Justice)