[1] The validity in a case where the reconstruction improvement project association established under the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents concludes a "contract which becomes a partner's burden other than the matters stipulated in the budget" without going through the general

[2] The meaning of "a contract that becomes a partner's burden other than the matters stipulated in the budget" under Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents

[3] In a case where the issue was whether the service contract entered into between Gap and Eul constitutes "a contract that will become a partner's burden" as stipulated in Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, and thus becomes void without the resolution of the general meeting, the case holding that if the service contract entered into with Eul and Eul as stipulated in the budget of Eul constitutes "a contract that will become a partner's burden, other than the matters stipulated in the budget," since it cannot be executed beyond the scope of the reserve fund stipulated in the budget without the resolution of the general meeting, even if the disbursement of the work or the conclusion of the contract was made with respect to the work that has been disbursed in the budget of the reserve fund item

[1] Article 24(3)5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter “Urban Improvement Act”) provides that “a contract that becomes a partner shall undergo a resolution by a general meeting," while Article 85(5) through Article 24(3) provides that an executive officer of a cooperative who voluntarily promotes a project under each subparagraph of Article 24(3) shall be subject to criminal punishment without undergoing a resolution by a general meeting under Article 24(3). The purport of Article 24(3) of the Urban Improvement Act that requires a resolution by a general meeting is to ensure procedural guarantee so that the intent of the association members can be reflected in matters that directly affect the rights and obligations of the association members. In light of such purport of the provision, it is not effective where a reconstruction improvement project association established under the Urban Improvement Act enters into a contract that becomes a partner in addition to those prescribed by the budget without undergoing a resolution by a general meeting of association members.

[2] "Contract that becomes a partner's burden" as referred to in Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents means a contract that imposes a burden on the partner by paying money or making a debt outside the items and scope set forth in the budget of the partnership.

[3] In a case where the issue is whether the service contract entered into between Gap and Eul constitutes "a contract that will become a partner in addition to the matters stipulated in the budget" under Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents, and thus becomes void without the resolution of the general meeting, the case holding that the disbursement of the budget of a cooperative for the purpose of not the items of the budget determined through the resolution of the general meeting constitutes "a contract that will become a partner in addition to the matters stipulated in the budget," unless it is acknowledged as a legitimate expenditure of the reserve fund, in principle, a resolution of the general meeting of partners should be passed since it constitutes "a contract that will become a partner in addition to the matters stipulated in the budget," and in a case where the disbursement of the reserve fund item exceeds the scope stipulated in the budget is also interpreted as "a contract that will become a partner in addition to the matters stipulated in the budget," and thus, it should be interpreted as void unless the service contract is concluded after the execution of all items of the reserve fund set in the budget.

[1] Article 24 (3) 5 and Article 85 subparagraph 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents / [2] Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents / [3] Article 24 (3) 5 and Article 85 subparagraph 5 of the

[1] Supreme Court Decision 2009Do14296 Decided June 24, 2010 (Gong2010Ha, 1526)

Rod Co., Ltd. (Law Firm Woo, Attorneys Kang Sung-man et al., Counsel for the plaintiff-appellant)

Yeafaban District Housing Redevelopment and Improvement Project Association (Law Firm, Attorneys Kim Tae-tae et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2010Na44639 decided November 11, 2010

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined.

1. Article 24(3)5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions for Residents (hereinafter “Urban Areas and Dwelling Conditions for Residents”) provides that “a contract that will become a partner shall undergo a resolution of a general meeting.” Meanwhile, Articles 85(5) through 24(3) impose criminal punishment on the executives of an association who voluntarily promote the projects under each subparagraph of Article 24(3) without undergoing a resolution of a general meeting under Article 24(3). The purport of Article 24(3) of the Act is to ensure procedural guarantees so that the opinions of the members can be reflected in matters that directly affect the rights and obligations of the members. In light of such purport of the provision, if a reconstruction improvement project association established under the Urban Improvement Act enters into a contract that will become a partner’s burden other than those prescribed by the budget without undergoing a resolution of a general meeting of members (see, e.g., Supreme Court Decisions 200Da6108, Mar. 23, 2001; 209Do46960, Jun. 29, 2009

On the other hand, "a contract that becomes a partner's burden, other than the matters stipulated in the budget" under Article 24 (3) 5 of the Urban Improvement Act means a contract that imposes a burden on the partner by paying money or discharging a debt beyond the items and scope stipulated in the budget of the partnership.

2. According to the reasoning of the judgment below, the plaintiff sought payment of the remaining amount of KRW 1350 million for service charges under a service contract concerning public relations of the defendant's extraordinary general meeting and the receipt of a written resolution on the agenda (hereinafter "the service contract of this case") that the plaintiff entered into with the head of the whole association of the defendant, and the defendant also seeks a resolution of the general meeting because the service contract of this case constitutes "a contract which becomes a partner's burden other than budget" under Article 24 (3) 5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions," but the non-party, who is the head of the association of this case, concluded the service contract of this case without the general meeting of the association and obtained ratification of the general meeting of the association concerning the service contract of this case. Thus, the court below asserted that the service contract of this case was invalid because it was not in violation of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions, and that the defendant's execution of necessary and minor execution of the work of the association of this case constitutes an emergency redevelopment service contract of this case.

3. However, we cannot agree with the above determination by the court below for the following reasons.

In light of the contents and legislative intent of Article 24(3)5 of the Act on the Maintenance and Improvement of Urban Areas and Dwelling Conditions, expenditure of the association’s budget for purposes other than those stipulated in the budget following the resolution of the general meeting of the association members constitutes “contract to be borne by the association members other than those stipulated in the budget,” unless it is recognized as expenditure of legitimate reserve funds, and thus, in principle, a resolution shall be passed at the general meeting of the association members. In the same purport, even in the case of expenditure of the reserve fund item, expenditure or debt burden exceeding the scope stipulated in the budget constitutes “contract to be borne by the association members other than those stipulated in the budget,” and it is reasonable to interpret that such expenditure or debt burden beyond the scope stipulated in the budget should be subject to the resolution of the general meeting of the association members. Therefore, it cannot be executed beyond the scope

Therefore, if the instant service contract is concluded when the items of reserve funds set forth in the Defendant’s budget have already been fully disbursed, the instant service contract constitutes “a contract that will be borne by the union members other than the matters stipulated in the budget” as referred to in Article 24(3)5 of the Urban Improvement Act, and thus, should be deemed null and void unless it goes through the Defendant’s general meeting of the union members. However, the lower court, solely on the grounds stated in its reasoning, did not exhaust all necessary deliberations as to whether the instant service contract was concluded when the items of reserve funds set forth in the Defendant’s budget have already been fully disbursed, and rejected this part of the Defendant’s assertion. In so doing, the lower court erred by misapprehending the legal doctrine on Article 24(3)5 of the Urban Improvement Act that prescribes the matters to be resolved at the general meeting of union members, which affected the conclusion of the judgment, and it is obvious that such illegality has affected

4. Therefore, without examining the remaining grounds of appeal, the part against the defendant among the judgment below against the defendant is reversed, and that part of the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)