Plaintiff 1 and 27 others (Attorney Lee Jae-tae, Counsel for the plaintiff-appellant)

Defendant Co., Ltd. (Law Firm Sejong-Jin General Law Office, Attorneys Lee Byung-jin et al., Counsel for the defendant-appellant)

March 25, 2005

Seoul District Court Decision 2001Gahap47066 Delivered on October 30, 2002

Seoul High Court Decision 2003Na68 delivered on January 15, 2004

Supreme Court Decision 2004Da10213 Delivered on October 28, 2004

1. All appeals filed by the plaintiffs are dismissed.

2. According to the conjunctive claim added at the trial prior to remand, the defendant shall pay to the plaintiff 2 corporation and the plaintiff 3 corporation 78,000,000 won each, and 39,000,000 won each, and 20% interest per annum from July 25, 2003 to the date of full payment with respect to each of the above amounts.

3. All of the plaintiffs' remaining conjunctive claims are dismissed.

4. 4/5 of the total costs of the lawsuit shall be borne by the plaintiffs, and the remainder 1/5 by the defendants.

5. Paragraph 2 can be provisionally executed.

(1) The decision of the first instance court is revoked. (1) At the first instance court, the plaintiffs confirm that they are members (regular members) who have the right to access and use facilities for non-party 1 consortiums located in the sports (detailed address omitted) operated by the defendant. (2) Preliminaryly, the defendant shall pay to the plaintiff 2 corporation and the plaintiff 3 corporation 78,00,000 won each, and 39,000,000 won each, to the remaining plaintiffs except the above plaintiffs, and 39,000,000 won each, for each of the above amounts, 6% per annum from January 1, 1992 to the delivery date of a duplicate of the application for amendment of the conjunctive claim of this case, and 20% per annum from the next day to the date of full payment (the plaintiff added the conjunctive claim at the trial before remand).

1. Basic facts

This Court's explanation concerning this part is based on the reasoning of the judgment of the court of first instance as " around December 25, 1989," " around December 25, 1989," "Article 1-4 (e) is replaced as follows, as follows: (f) is additionally stated; and (f) is the corresponding part of the judgment of the court of first instance (as stated in paragraph 1) except for the following grounds for recognition: (a) is the same as the corresponding part of the judgment of the court of first instance (as stated in paragraph 1), and thus, it is cited as it is in accordance with Article 420 of the Civil Procedure Act.

D. On December 28, 199, the Defendant purchased the instant golf course site, and entered into a contract on the transfer of business (hereinafter “instant transfer agreement”) with Nonparty 2 on the following terms and conditions.

(1) The Defendant takes over all business rights related to the golf course business owned by Nonparty 2 (including superficies, and the above business rights refer to the approval of the instant golf course business plan with respect to the instant golf course business in the name of Nonparty 2) and forests and fields (4.4% of the entire site) owned by Nonparty 3, the representative director of Nonparty 2 (Article 1).

(2) Nonparty 2 holds 40% of the Defendant’s shares (Article 2).

(3) In principle, the Defendant succeeds to the existing membership rights issued by Nonparty 2 and used for payment in kind and sale following the construction of golf courses. However, the price and quantity of membership rights, and the treatment of members shall be determined after the completion of the golf course (Article 3).

(4) The Defendant succeeds to Nonparty 2’s claims and obligations arising in connection with the construction of golf courses (Article 4).

(5) A prior consultation with Nonparty 2 shall be made with respect to the contents to be promoted by the Defendant, and projects and duties under the plan, and efforts shall be made to maintain a mutually cooperative relationship (Article 7).

(6) In principle, the Defendant shall succeed to the employees of Nonparty 2 as they are (Article 8).

E. On August 200, the Defendant changed the name of Nonparty 4’s consortium to Nonparty 1’s consortium, recruited its members from around August 200, and operated it. On December 15, 2000, the Defendant reported the result of the membership recruitment to Nonparty 5 head of the Gun, and reported that the remaining Plaintiffs except Plaintiff 1 and Nonparty 6, and the existing members recruited by Nonparty 2 including Nonparty 370.

H. Meanwhile, the remaining plaintiffs except the plaintiff 1 and the non-party 6 notified the defendant on July 15, 2003 of the fact that the non-party 2 paid 39 million won to the non-party 2 as a regular member at the time of recruiting the members of the non-party 4 consortium, and obtained the membership certificate from the non-party 2. The non-party 6 transferred the membership of the non-party 4 consortium to the non-party 1 who is the husband on the ground of the cancellation of the title trust on January 1, 200 and notified the non-party 1 of the fact that the membership was transferred to the non-party 1 and the transfer of the membership to the plaintiff 1.

[Ground of Recognition] A without dispute, Gap evidence 1 through 4, Gap evidence 5-1 through 3, Gap evidence 6, 7-1, 2, Gap evidence 8 through 27, Gap evidence 28-1, 2, Gap evidence 29, Eul evidence 29, 34 through 38, Eul evidence 1, 2, Eul evidence 3-1 through 7, Eul evidence 4, 5, and 6, the testimony of non-party 3 of the first instance trial, the purport of the whole pleadings.

2. Judgment as to the main claim

A. The assertion

(1) The plaintiffs

The rest of the plaintiffs except the plaintiff 1 and the non-party 6 (hereinafter referred to as "the plaintiff et al.") acquired the qualification of the non-party 2 as a regular member of the golf club. ① The defendant comprehensively succeeded to the claims and obligations relating to the golf club membership between the non-party 2 and the plaintiff et al. pursuant to Articles 3 and 4 of the Agreement on the Business Transfer of this case, and ② the defendant succeeded to the agreement between the non-party 2 and the plaintiff et al. pursuant to Article 30 (3) and (1) of the Installation and Utilization of Sports Facilities Act by taking over the golf club business of this case from the non-party 2 or succeeding the approval of the business plan concerning the golf club business, and ③ the defendant reported the results of the membership recruitment to the non-party 5 after the transfer contract of this case, including 370 existing members, including the plaintiff et al.

(2) Defendant

① In the instant acquisition agreement, the Defendant did not agree to comprehensively succeed to the claims and obligations relating to membership with the Plaintiff, etc., and ② Article 30(3) of the Installation and Utilization of Sports Facilities Act is premised on the transfer of the business by the sports facility business entity as stipulated in Article 30(1) of the same Act. Since the Defendant’s site amounting to 4.4% of the site of the instant golf course and the golf course business owned by Nonparty 2 at the time of acquisition by Nonparty 2 of the approval of the business plan by Nonparty 2, the said acquisition agreement cannot be deemed as a transfer of business, since the said acquisition agreement does not constitute a transfer of business. Thus, the Defendant did not succeed to the agreed matters pursuant to Article 30(3) of the Installation and Utilization of Sports Facilities Act, and the Plaintiffs did not have the right to enter and use the facilities of the Defendant’s golf course.

B. Determination

(1) Status of the Plaintiff, etc. as a member of the consortium Nonparty 4

According to the above facts of recognition, since the plaintiff et al. joined the agreement clubs recruited by the non-party 2 as a member and acquired the membership, the plaintiff et al. is in the position of the existing member who has the right to enter and use the facilities for the non-party 2.

(2) Whether the Defendant succeeded to the duty of Nonparty 2 with respect to membership from Nonparty 2

(A) Whether a business transfer contract is succeeded

1) We examine whether the Defendant agreed to comprehensively succeed to the claims and obligations relating to membership rights between Nonparty 2 and the Plaintiff, etc. pursuant to Articles 3 and 4 of the instant transfer agreement.

2) When the Defendant entered into the instant transfer agreement with Nonparty 2, the Defendant, in principle, succeeds to the existing membership that Nonparty 2 sold in lots. However, with respect to the price and quantity of membership and treatment of the members, the Defendant shall make a decision following the verification procedure after the completion of the golf course. Article 4 succeeds to the claims and obligations of Nonparty 2 arising in connection with the construction of the golf course, and Article 7 shall consult with Nonparty 2 in advance about the matters to be promoted by the Defendant, and shall endeavor to maintain the mutual cooperative relationship, and Article 8 of the Agreement agrees to succeed to the employees of Nonparty 2 in principle.

3) However, comprehensively taking account of the following facts: Gap evidence Nos. 2 and 3, Eul evidence Nos. 10 and Eul evidence Nos. 10 and the testimony of non-party 3, the right to operate the golf course site of this case was only the approval of the business plan of non-party 2, which is the subject matter of the acquisition agreement of this case; non-party 2 sold membership rights or delivered membership fees in kind to non-party 4 through subscription for membership fees, etc.; although the existing members become members with a deposit of 39 million won, there are cases where the defendant paid membership fees to non-party 15 million won or 20 million won and acquired membership fees. The purport of the acquisition agreement of this case is that "in principle, the defendant succeeds to the existing membership, but the defendant decided to transfer the existing membership rights and obligations of non-party 2, which are the subject matter of the acquisition agreement after the completion of the golf course, and the fact that the defendant transferred the existing membership rights and obligations of non-party 2 to the non-party 2, which the previous members acquired membership rights and transferred the membership.

(B) Whether to succeed under Article 30 of the Installation and Utilization of Sports Facilities Act

1) Details of the provisions of the Installation and Utilization of Sports Facilities Act (amended by Act No. 5636, Jan. 18, 1999; Act No. 6907, May 29, 2003; hereinafter “Act”)

(1) Article 30 (1) of the Act provides that "When a sports facility business operator transfers his/her business or dies, or a corporation is merged with another sports facility business operator, the transferee, heir, or the corporation surviving the merger or established by the merger shall succeed to the rights and duties following the registration or report of the sports facility business (including the matters agreed upon between the sports facility business operator and his/her members where members are recruited under Article 19)," and Paragraph (3) of the same Article provides that "the provisions of paragraph (1) shall apply mutatis mutandis to succession to the approval of a business plan under Article 12."

(2) On the other hand, the sports facility business operator under Article 30 (1) of the Act is a person who registers or reports the sports facility business under Article 21 (1) and (2) or Article 22 of the Act (Article 2 subparagraph 3 of the Act), a golf club business is a registered sports facility business (Article 10 (1) 1 of the Act). A person who intends to operate a registered sports facility business shall prepare a business plan by type of sports facility business before installing the facilities under Article 11 of the Act and obtain approval from the Special Metropolitan City Mayor, Metropolitan City Mayor, or Do governor (Article 12 of the Act), a person who has obtained approval of a business plan shall register the sports facility business with the Mayor/Do governor before commencing the business (Article 21 (1) of the Act), and Article 8 [Attachment Table 4] of the Enforcement Rule of the Act provides that he/she shall be equipped with golf courses and facilities which are essential to a membership golf club business under Article 11 of the Act.

(3) The athletic facilities business operator and the person who has obtained the approval of the business plan may recruit members (Article 19(1) of the Act): Provided, That the person who has obtained the approval of the business plan may recruit members from the time when the process of installing the business facilities of the registered athletic facilities business is more than 30% (Article 18(2)1 of the Enforcement Decree of the Act (amended by Presidential Decree No. 14284 of Jun. 17, 1994) and Article 5 of the Enforcement Decree of the Act (amended by Presidential Decree No. 14284 of Jun. 17, 1994).

2) Interpretation of Article 30(3) of the Act

(1) Article 30(1) and (3) of the Act provides for the form and content of a new business plan before the date of the amendment by Act No. 4719 of Jan. 7, 1994; Article 30(3) of the Act provides that a person who has obtained approval of a business plan before the date of the amendment by Act No. 4719 of the Act may invite members even before he/she is equipped with the facilities under Article 11 of the Act; however, the mere fact that there was a need to allow a person who intends to operate a registered sports facility business to continue the business by succeeding the facilities before the completion of the business plan at the same stage is that the approval of a new business plan under Article 12 of the Act is merely the qualifications for legitimate installation of the sports facilities and that for completing the business plan is not meaningful, and that it is not permitted that a person who succeeded to the status of a new business plan by Act No. 6907 of May 29, 200 and that approval of a business plan under Article 30(1) of the Act shall apply mutatis mutandis to the person who succeeded to the existing sports facility business plan under the Act.

② Article 30(2) of the amended Act was newly established, and Article 30(3) of the same Act was amended as applicable mutatis mutandis to succession of approval of a business plan under paragraph (2) of this Article, and Article 30(3) of the Act is unreasonable in that: (a) where the site of a golf course, etc., which is an essential facility of the sports facility before the completion of the construction, was successful due to the execution of mortgage; and (b) human and material organization of the sports facility before the completion of the construction of the sports facility, was removed from the intent of the person who obtained approval of a business plan, and thus dissolved and lost its unity due to the dissolution of the physical organization to the successful bidder; and (c) the construction of Article 30(3) and (1) of the Act was made to succeed to the position of the transferor under the membership recruitment contract, which is merely a contractual relationship, for the reason that the successful bidder of the essential facility before the completion of the construction works, or the specific successor succeeded to the status of the successful bidder, would result in unexpected damages to the mortgagee and the successful bidder (see Supreme Court Decision 204Da.

③ Therefore, the Plaintiff’s assertion that the Defendant succeeds to the status under the existing membership recruitment agreement pursuant to Article 30(3) and (1) of the Act solely on the ground that Nonparty 2 acquired the approval of the instant golf course business from Nonparty 2.

(C) Whether the transfer of business can be seen as business

1) Next, we examine whether the requirements of Article 30(3) and (1) of the Act are satisfied by taking over the business related to the sports facilities before the completion by the Defendant as a whole while maintaining its identity.

2) The term "transfer of business" means a transfer of a human and material organization, i.e., a company organized for a certain business purpose, to maintain its identity. To deem that there is a transfer of business, it is necessary to view that the transferee continues business activities such as the transferor, which had been performed by the transferor after transferring functional properties as sources of revenue that have been systematically organized. In addition, since the previous business organization is maintained and its organization can function as a whole or an important part, even if it was transferred by dissolution of the organization, it cannot be deemed as a transfer of business (see, e.g., Supreme Court Decisions 9Du2680, Apr. 14, 1998; 9Du2680, Jul. 27, 2001; 2002Da23826, May 30, 2003).

3) Meanwhile, the term “sports facility business” means a business that installs and operates sports facilities for profit (Article 2 subparag. 2 of the Act); the term “member” means a person agreed with a sports facility business operator (including a person who has obtained approval of a business plan under Article 12 of the Act) to bear the costs invested in the establishment of sports facilities and to preferentially utilize the said facilities (Article 2 subparag. 4 of the Act); a person who intends to conduct a registered sports facility business such as a golf course business shall obtain approval of a business plan before installing the facilities under Article 11 of the Act (Article 12 of the Act); and a person who has obtained approval of a business plan under Article 12 of the Act shall register the relevant sports facility business before commencing the business (Article 21 of the Act).

4) In light of the above legal principles and related legal provisions, the business transfer by a sports facility business operator as prescribed in Article 30 (1) of the Act refers to "a transfer of human and material organizations organized to carry on the business of installing and operating sports facilities for profit-making purposes as a whole while maintaining their identity." In accordance with Article 30 (3) of the Act, the business transfer at the stage prior to the completion of the installation work means "a transfer of human and material organizations organized to carry on the business of installing and operating sports facilities as a whole while maintaining their identity" (see Supreme Court Decision 2004Da19289 delivered on November 26, 2004).

5) According to the facts as seen earlier, since the instant golf course site and its ancillary facilities, which amount to 95.6% of the site prior to the completion of the instant case, were awarded to Nonparty 7 through the auction procedure commenced by the mortgagee’s application without going through Nonparty 2’s intent and without obtaining approval of the project plan, Nonparty 2’s business as to the sports facilities prior to the completion, was demolished and dismantled most of the physical foundation at the time of the successful bid, and Nonparty 2 was merely holding a business right as a business plan after the above auction, and did not have a functional property, which is a source of organicly organized profit. Thus, the Defendant’s intent to acquire a golf course again purchased the golf course site four years after the date of successful bid from Nonparty 8, which acquired ownership by winning a successful bid in the auction procedure, and the acquisition of all business rights related to the golf course and the land equivalent to 4.4% of the remaining golf course site, even if it actually results in the completion of the construction by acquiring the entire golf course before completion of the construction project.

6) In addition, even if Nonparty 2 transferred all business rights, including superficies, in the instant acquisition agreement between the Defendant while Nonparty 2 was conducting a golf course business with a certain amount of 70% of the total process through consultation with the successful bidder even after the land was awarded a successful bidder, the business prior to the registration of a sports facility business constitutes not only the grounds for revocation of approval of the business plan, but also the act punished by penal punishment (Articles 34(1)3 and 42(1)2 of the Act). Nonparty 2 did not have any evidence to acknowledge that the superficies that Nonparty 2 transferred to the Defendant is a legitimate right to the instant golf course site, and so long as the right cannot be deemed to be the same as the original right that Nonparty 2 had held against the instant golf course site before the successful bidder, the form of business or business based on such right is separate from the original business or business type for which the initial approval of the business plan was obtained. Thus, the transfer of superficies is not deemed to constitute a transfer of business under Article 30(3) and (1) of the Act.

7) Therefore, the plaintiffs' assertion that they succeeded to the rights and obligations of the non-party 2 under Article 30 (3) and (1) of the Act on the premise that the defendant acquired the instant golf course business by transfer is without merit.

(D) Whether the Defendant violated the good faith principle

In order to deny the exercise of the right on the ground that it violates the good faith principle, health care, and good faith, it should have been provided to the other party or objectively viewed that the other party has good faith. The exercise of the right against the other party’s good faith should reach the extent that it is not acceptable in light of the concept of justice.

In full view of the purport of the argument in Gap evidence No. 31, the defendant, after the acquisition agreement of this case, reported the result of the membership recruitment to the head of non-party 5, including the plaintiff et al. on December 15, 2000 and about April 2001, it can be acknowledged that the defendant reported the result of membership recruitment to the head of non-party 5, including the plaintiff et al. on the non-party 370 unit. However, this provision provides that when recruiting the members of a golf course under the Enforcement Decree of the Act, the head of the competent authority shall submit a membership recruitment plan to the head of the competent authority and shall attach the result of membership recruitment to the letter. Thus, even if the defendant reported the result of the membership recruitment to the non-party 5, a supervisory authority, along with the newly recruited membership recruitment under his own name after the acquisition agreement of this case, it cannot be deemed that the plaintiffs were justifiable, and it cannot be deemed that the plaintiff's new membership recruitment does not violate the good faith principle.

3. Judgment on the conjunctive claim

A. The assertion

Then, even if the defendant's membership status of the golf course operated by the defendant is not acknowledged to the plaintiffs, the defendant takes over the obligations of the non-party 2, such as the obligation to return the membership fee for the existing membership used for payment in kind and sale in relation to the construction of the golf course. Thus, the defendant is obligated to pay 39 million won and damages for delay to the remaining plaintiffs who held 78 million won and one copy of membership to the non-party 2 and the non-party 3, each of which possess two membership shares, respectively.

B. Determination

(1) When Nonparty 2 recruited Nonparty 4’s membership, the Plaintiff et al. acquired the membership of Nonparty 2 after paying 39 million won per unit to Nonparty 2. Plaintiff 1 acquired the membership from Nonparty 6. The fact that the Defendant agreed to refund the amount of the membership fee or the amount of the transfer fee to Nonparty 2 through the confirmation procedure against the existing members under the instant transfer agreement is as seen earlier.

(2) According to the above facts, the defendant is obligated to pay damages for delay calculated at the rate of 20% per annum under the Act on Special Cases Concerning the Promotion, etc. of Legal Proceedings from July 24, 2003 to the day following the delivery of a copy of the application for modification of the conjunctive claim as of July 25, 2003 to the day of complete payment as to each of the plaintiffs 2, 3, and 3,000,000 won and each of the above amounts, each of which are 39,00,000 won and each of the above amounts.

(3) The plaintiffs asserted that the damages for delay against principal should be paid at the rate of 6% per annum as stipulated in the Commercial Act from January 1, 1992 to the delivery date of a copy of the application for amendment of the above purport of claim. As seen earlier, the defendant is obligated to refund the amount equivalent to the previous members' membership fee or transfer fee under the contract of this case on December 28, 1999. The fact that the plaintiffs sought the return of the amount equivalent to the membership fee only when they added the preliminary claim on July 21, 2003 while seeking confirmation of the status of the original golf course member, and there is no evidence that the plaintiffs had previously acknowledged that the plaintiffs were demanding monetary settlement and payment against the defendant with respect to the membership fee. Thus, we cannot accept the above part of the claim regarding delay damages exceeding the above recognized portion.

4. Conclusion

Therefore, all of the plaintiffs' primary claims are dismissed without merit. Since the judgment of the court of first instance is justified, all of the plaintiffs' appeals are dismissed. The plaintiffs' preliminary claims added in the judgment before the remand are accepted within the scope of each above recognition, and the remaining preliminary claims are dismissed as they are without merit. It is so decided as per Disposition.

Judges Lee Jin-sung (Presiding Judge)