The Arts Council Korea (Law Firm Bobna, Attorneys Park Jong-young, Counsel for defendant-appellant)

Republic of Korea and one other (Law Firm Roddd, Attorneys Yellow-nam et al., Counsel for the plaintiff-appellant)

August 20, 2010

1. The plaintiff's claims against the defendants are all dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

Defendant Republic of Korea shall pay to the Plaintiff 275,717,540 won, Defendant Gwangju-si (hereinafter “Defendant Gwangju-si”), 285,741,870 won, and 20% interest per annum from the day following the day of delivery of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

A. Permission to occupy and use and creation of golf courses by the plaintiff

(1) As to each real estate indicated in the separate sheet Nos. 1 and 2, which is State property from the Defendant Republic of Korea, the Plaintiff is running a golf course with the trade name "○○○○○○○○ club" from October 24, 1987, after obtaining permission from the Defendant Gwangju City to occupy each real estate listed in the separate sheet Nos. 3, which is public property, on December 9, 1985 with respect to each real estate as well as its surrounding land after obtaining approval for the golf course business.

(2) The category of real estate listed in the separate sheet No. 1, which was originally used as a road, ditch, etc., was changed from July 23, 1996 to May 12, 1997 after the formation of a golf course (the administrative property is deemed to have been abolished at that time). While the current status is mainly being used as a golf course course and landscape, the category of real estate listed in the separate sheet No. 2, while it is still classified as administrative property (the Ministry for Food, Agriculture, Forestry and Fisheries) as a ditch, and real estate listed in the separate sheet No. 3, as forest land, is in the state of preserving the original form of a golf course (hereinafter “instant real property”).

(b) Conclusion of a loan agreement and payment of rent concerning each real estate stated in the separate sheet 1 and 3;

After becoming a miscellaneous property or general property, the plaintiff has entered into a loan agreement and renewed it every year with the Gwangju Metropolitan City Mayor, which is the relevant administration office, pursuant to the State Property Act or the Public Property and Commodity Management Act (the former Local Finance Act) (the Gwangju Metropolitan City Mayor was delegated by the defendant Republic of Korea with the affairs concerning administration and disposal of state-owned property).

The Gwangju Mayor calculated the rent by multiplying the officially assessed individual land price (e.g., 67,00 won in 2005, 88,000 won in 208, and 91,000 won in 2010) based on the state of use at the time of renewal of the contract with respect to the renewal of the contract, and the details of each loan agreement and the loan charges acquired by the Defendants from 2005 to 2010 are as listed below.

In the event that the head of Si/Gun/Gu is delegated with the affairs of administration and disposal of State property, 2005, 30, 895, 205, 205, 40, 205, 205, 205, 306, 205, 207, 40, 205, 205, 206, 307, 406, 207, 306, 406, 207, 205, 207, 205, 207, 406, 207, 406, 207, 406, 650, 650, 650, 6507, 207, 207, 50, 6262, 260, 2608, 309, 106, 1701, 207

(c) Permission for use of and benefit from each real estate listed in the separate sheet 2;

In addition, the Gwangju City Mayor imposed the permission for use and profit-making under Article 30 of the State Property Act with respect to the above real estate, which is administrative property, and collected the user fee each year. From 2004 to 2010, the details of the user fee acquired by the Defendants are as follows (the user fee calculated according to the officially assessed individual land price based on the status of use at the time of the initial permission is collected, and it belongs to the Defendants each 50% of the fee belongs to the Defendants

The total area of the attached real estate year contained in the main sentence of this Article is 878 1,470,382,850 1,382,852,850 205 878 1,470,650,670,650 8788,617,610 1,617,720 1,617,720 1,823,823,170, 170 208, 2008 87888, 207, 2071, 207, 2075, 207, 207, 205, 207, 207, 207, 205, 207, 207, 207, 207, 205, 207, 207, 2757, 207, 27571

[Ground of Recognition: Facts without dispute, Gap 1 through 23, 26 through 27, and Eul 2 (including partial number of defenses) and the purport of the whole pleadings]

2. The plaintiff's assertion

After the commencement of possession by the Plaintiff, the land category was changed from the road, ditch to the sports site, or the land category was not changed due to the Plaintiff’s development activity. In such a case, the “property value” under Article 26(2)1 of the Enforcement Decree of the State Property Act (in the case of real estate in attached Form 3 list, the “individual land value” under Article 31(2)1 of the Enforcement Decree of the Public Property and Commodity Management Act), which is the basis for calculating rent or rent for the pertinent real estate, is not based on the individual land price which reflects the Plaintiff’s cost and effort after the commencement of possession, but should be based on the individual land price which reflects the land category (road or ditch) and usage status at the time of the commencement of possession by the Plaintiff. Since the Gwangju City Mayor entered into a renewal contract or permission from the Plaintiff from 2005 to 2010, it should be determined based on the individual land price which reflects the increase in rent or rent due to the Plaintiff’s development activity, which the Defendants received from the Plaintiff without any legal interest or profit.

3. Determination

The gist of the Plaintiff’s assertion is that the determination of the value of the instant real estate for the calculation of loan charges for State property should be based on the publicly assessed individual land price reflecting the land category and use status at the time when the Plaintiff commenced possession. Since the loan charges, etc. for the portion of increasing the value with the Plaintiff’s cost and effort after the commencement of occupation, it is unjust for the Defendants to first consider whether part of the loan charges and usage fees received from the Plaintiff are gains obtained without any legal ground.

(a) Grounds for loan agreements and disposition for use and benefit;

Among each loan contract for the real estate listed in the attached Forms 1 and 3, which is a disposal document, the main contents of the loan fee and the permission for use and profit for the real estate listed in the attached Table 2 are as follows:

【Loan Agreement (Renewal)】

- The loan period shall be one year.

- The rent shall be determined annually on the basis of the value of each property calculated for each year pursuant to Article 26(2)1 of the Enforcement Decree of the State Property Act.

- When the plaintiff intends to continue to obtain a loan after the expiration of the loan period, he/she shall apply for the renewal of the loan period one month before the expiration of

【Permission to Use and Profit (Entry)】

- The period of use shall be one year.

- The usage fee shall be determined on the basis of the value of each year calculated pursuant to Article 26(2)1 of the Enforcement Decree of the State Property Act.

- Where the period of permission is renewed upon the expiration of the period of permission, an application for renewal shall be filed one month before the expiration of the period of permission.

B. Relevant statutes

The provisions of the State Property Act and the Enforcement Decree of the same Act shall apply mutatis mutandis to the calculation of fees for use of administrative property and the assessment methods.The provisions on the rate of fees for use of administrative property and the assessment methods shall apply mutatis mutandis to the assessment of the value of the property without changing the usage fees as follows.

(1) Enforcement Decree of the former State Property Act (amended by Presidential Decree No. 20463, Dec. 28, 2007)

Article 26 (Rates of Rental Fees and Appraisal Method)

(1) The annual user fee under the provisions of Article 25 (1) of the Act shall be the amount obtained by multiplying the value of the relevant property by the rates in the following subparagraphs, and may be calculated monthly or daily:

5. In other cases: not less than 50/1000.

(2) The value of property in the calculation of a user fee pursuant to the provisions of paragraph (1) shall be calculated according to the following methods:

1. In the case of land: The officially assessed individual land price of the relevant land under the Public Notice of Values and Appraisal of Real Estate Act (referring to the amount computed on the basis of the officially assessed individual land price, if no, pursuant to Article 9 of the same Act); and

(2) The former Enforcement Decree of the State Property Act (amended by Presidential Decree No. 21641, Jul. 27, 2009)

Article 26 (Rates of Rental Fees and Appraisal Method)

(1) Annual user fees under Article 25 (1) of the Act shall be the amount calculated by multiplying the value of the relevant property by the rate falling under any of the following subparagraphs, taking into consideration market rent, and may be calculated monthly or daily:

5. In other cases: not less than 50/1000.

(2) The value of property in the calculation of a user fee pursuant to the provisions of paragraph (1) shall be calculated according to the following methods:

1. In cases of land: The officially assessed individual land price of the relevant land recently announced under the Public Notice of Values and Appraisal of Real Estate Act (where no officially assessed individual land price exists, referring to the amount computed on the basis of the officially assessed individual land price under Article 9 of the same Act);

(3) Enforcement Decree of the current State Property Act (amended by Presidential Decree No. 21641 of July 27, 2009)

Article 29 (Methods of Calculating Usage Fee Rates and Fees)

(1) The annual user fee under Article 32 (1) of the Act shall be an amount calculated by multiplying the value of the relevant property by a rate of at least 50/1000, but may be calculated on a monthly or daily basis.

(2) In calculating user fees pursuant to paragraph (1), the value of the relevant property shall be calculated by the following methods:

1. Land: The officially assessed individual land price (referring to the publicly assessed individual land price of the relevant land under Article 11 of the Public Notice of Values and Appraisal of Real Estate Act and, if there exists no officially assessed individual land price of the relevant land, referring to the amount calculated based on the officially assessed individual land price under Article 9 of the same Act) as at the time

C. According to the contents of the above loan agreement, etc. and the statutes that form the basis for the contract, the Defendants received the loan charges and usage fees calculated by multiplying the officially assessed individual land price calculated pursuant to the provisions of the Enforcement Decree of the State Property Act, which was in force at the time, by a certain rate, while concluding a renewal contract with the Plaintiff through the management agency and granting permission for the renewal of the use of the Plaintiff. Thus, barring any special circumstance, the received loan charges and usage fees are subject to a renewal contract or a renewed permission disposition

However, the purport that only some of the loan charges, etc. for the portion of the subject matter increased by the Plaintiff’s cost and effort, among the subject matter, shall be null and void. However, as seen below, the claim shall not be accepted by dividing the usage fees for the real estate listed in the attached Tables 2 and 3, and the decision shall be made in preference to the loan agreements for the real estate listed in the attached Tables

(1) According to Articles 25 and 38 of the State Property Act (amended by Act No. 9401 of Jan. 30, 2009), when lending miscellaneous property, loan charges shall be collected every year according to the rate and calculation method prescribed by the Presidential Decree. Accordingly, the Enforcement Decree of the State Property Act has been revised again, and Article 26 of the Enforcement Decree of the amended Act provides that "the publicly announced individual land price of the pertinent land taking into account the market rent," and further, Article 29 of the current Enforcement Decree of the amended Act of July 27, 2009 provides that "the publicly announced individual land price at the time of determining the value of the property to calculate the fee," and the loan charges received by the Defendants shall be calculated by multiplying the officially announced individual land price of the pertinent year by a certain rate.

Therefore, it is reasonable that the Plaintiff, at the time of entering into a renewal contract, requests the reduction of the rent in accordance with the adequacy of the calculation of the rent at the time of entering into the renewal contract (the rent rate has been reduced at the request of the golf club association, etc. according to the documents attached to the written appraisal application as of February 18, 2010), or conclude a renewal contract after adjusting the officially announced land price by undergoing a separate administrative remedy

Furthermore, the above Enforcement Decree of the State Property Act provides internal criteria to ensure convenience and fairness in concluding a juristic act, which is a private economic entity, such as a loan agreement, merely restricts the freedom of the State's decision on the loan agreement as a party to the loan agreement, and does not restrict the plaintiff's renewal of the loan agreement or the freedom of decision on the contents thereof. It is reasonable to view that the methods of calculating loan fees determined by the State as a golf club operator are the contents of the loan agreement, and whether the lease contract period for the occupation and use of the site is renewed by the plaintiff's free decision (see, e.g., Constitutional Court Order 2006Hun-Ma1244, Nov. 27, 2008).

Therefore, since the above enforcement decree, which set the criteria for calculating the rent for the loan agreement under private law cannot be deemed to be a mandatory provision, the Gwangju City Mayor, the managing authority of the real estate of this case, calculated the rent for the portion which increased the value of the plaintiff's cost and effort among the subject matter, in this case where the contract cannot be deemed to have any defect in the validity of the contract because the plaintiff failed to make a free decision at the time of renewal, it is difficult to conclude that the rent agreement for the excess portion is null and void in violation of the above enforcement decree or the Civil Code

In addition, the Gwangju City calculated the rent based on the officially assessed individual land price as at the time of renewal of the loan agreement with respect to the real estate listed in the separate sheet No. 1, which is assessed based on the officially assessed individual land price at the time of renewal of the loan agreement. This is calculated based on the previously announced individual land price at the time of determining the property value for calculating the rent, and it does not violate the language and text of the Enforcement Decree of the State Property Act that provides for the criteria for calculating the property value as above (the same shall also apply to the list of real estate listed in the separate sheet No. 3, which is the ground for calculating the rent

(2) In addition, in the case of a loan renewal contract as in this case, the State and the other party may freely determine whether to renew the loan. If the Plaintiff refuses to renew the loan, and thus the State re-loans the State property to a third party, the State will receive loan charges based on the newly assessed publicly assessed individual land price from the third party at that time. As alleged by the Plaintiff, even if the Plaintiff partly increased the value of the loan object at its own expense, the Plaintiff has renewed the loan again for several years after the initial loan contract was concluded, and even if a considerable period of time has elapsed from the first loan date, if the Plaintiff is deemed to have been equally applied the loan fee within the loan period, regardless of the length of the period and the number of renewals, regardless of the loan period, it would result in the Plaintiff’s unfair result that the renewal of the contract with the Plaintiff would rather result in damage, compared to the lending at other places.

(3) In addition, if the value of the object of lease has increased due to the lessee’s beneficial expenses in general lease relationship, rent shall be set on the basis of the increase in its value, and the lessee who has paid the beneficial expenses shall recover the increased value by paying the premium, etc. from the new lessee upon the termination of the lease. However, as in this case, if the State lends the State property to a private person for a fee, it is reasonable if it is necessary to strictly calculate and renew the increased value due to the efforts and expenses of the lessee who has treated otherwise, and to strictly calculate and renew the loan, it is also unreasonable against the principle of freedom of contract (if it is assumed that the loan contract should be renewed only by the above method as alleged by the Plaintiff, it is anticipated that the management agency will increase the rate of rent under the above provision to meet the low-evaluation value in calculating the rent, and as seen earlier, the current Enforcement Decree only set the lowest rate of rent, but does not have the upper limit).

D. Determination on the claim for return of unjust enrichment related to real estate stated in the attached Table 2 list

Unlike other real estate for which the loan contract was concluded, the plaintiff used the above real estate with the permission to use or profit from the State property owned by the defendant Republic of Korea (the Ministry for Food, Agriculture, Forestry and Fisheries) from the Gwangju City Mayor in paying the fee.

Such permission for use and profit-making of state property is an administrative disposition made in a superior position with public authority upon the Plaintiff’s application by the Defendant’s Republic of Korea, and is fair as it constitutes a so-called “a lecture patent,” which establishes the right to use administrative property to a specific person. Thus, such disposition is valid as long as it is revoked through an administrative litigation, etc. or the defect existing in the disposition is grave and apparent, so it does not become null and void. Thus, it cannot be said that the Defendants obtained a benefit without legal cause

However, this part of the disposition imposing a user fee cannot be deemed as null and void due to the violation of the important part of the law or the apparent defect of the defect as seen in the above (see, e.g., Supreme Court Decision 2009Da15488, Apr. 2, 2009). Thus, the Plaintiff’s claim is rejected (see, e.g., Supreme Court Decision 2009Da10009, Apr. 2, 2009).

4. Conclusion

Therefore, all of the plaintiff's claims are dismissed as it is without merit. It is so decided as per Disposition.

[Attachment]

Judges Yellow-gu (Presiding Judge)