Busan Construction Co., Ltd. (Law Firm Taeil, Attorneys Lee Jong-soo et al., Counsel for defendant-appellant)

Korea Land and Housing Corporation (Law Firm Hanl, Attorney Shin-o, Counsel for defendant-appellant)

August 17, 2010

1. The defendant shall pay to the plaintiff 231,756,340 won with 20% interest per annum from March 6, 2010 to the day of complete payment.

2. The costs of the lawsuit are assessed against the defendant.

3. Paragraph 1 can be provisionally executed.

The same shall apply to the order.

1. Basic facts

(a) Conclusion of a construction contract and completion inspection of the instant apartment;

1) The Defendant is a project proprietor who sold (building name omitted) apartment ○○○ Dong-dong △△△△△△△ Group (hereinafter “instant apartment”) located in Gyeyang-gu, Gyeyang-gu (hereinafter omitted), and the Plaintiff, Japan Construction Co., Ltd., and Hanju Development Co., Ltd. are the contractors who jointly received the instant apartment construction from the Defendant.

2) On September 28, 1994, the Defendant entered into a contract with the Plaintiff, Japan Construction Co., Ltd., and Hanju Development Co., Ltd. for the construction of the instant apartment complex (hereinafter “instant contract”). The warranty period under the instant contract is two years for machinery, five years for beams, floors, roof, and main stairs, and ten years for walls and columns.

3) The Defendant completed a pre-use inspection on May 23, 1997, and delivered it to the buyer.

(b) Requests for the occurrence of defects and the repair of defects;

1) The council of occupants' representatives consisting of the representatives of the owners of the instant apartment (hereinafter referred to as the "council of occupants' representatives") requested the repair of each defect on October 16, 200 with respect to the defect in the track and waterproof section arising from the windows, stairs, etc. for common use on April 12, 199, with respect to the defect in the household toilet on October 16, 200, with respect to the defect in the household toilet on November 11, 200 each household on June 4, 201, with respect to the defect repair and the household on June 4, 2001 and the non-treatment of the second defect in the household on June 16, 201, with respect to the defect repair and the new construction of the news lubb on August 16, 2003.

2) The Defendant requested the council of occupants’ representatives to repair each of the above defects, and around that time, the Plaintiff caused the Plaintiff to repair the defects.

(c) Filing a lawsuit claiming damages in lieu of defect repairs by the council of occupants' representatives;

1) The defect of the apartment of this case remains, and the council of occupants' representatives filed a lawsuit claiming damages in lieu of defect repairs against the defendant on May 21, 2007 as Suwon District Court Branch 2007Gahap5164 decided May 21, 2007.

2) Of the instant apartment △△△△ households, the sectional owners of the remainder of the instant apartment △△△ households, other than the △△△△ households, transferred the right to claim damages in lieu of defect repairs held against the Defendant to the council of occupants’ representatives at that time (the ratio of the acquisition by transfer according to the area is 94.5

3) In the above lawsuit, the court found that the council of occupants' representatives found the defect that occurred in the apartment of this case and continuously requested the defendant for the repair of the defect for the owner of the apartment of this case on behalf of the owner, and recognized that the damages claim in lieu of the defect repair occurred, the court ordered the defendant to pay 5% per annum from July 16, 2008 to April 16, 2009 and 20% per annum from the next day to the date of full payment, on the grounds that it is reasonable to limit the amount of damages in lieu of the defect repair to 70% of the total damages in light of the fair burden of damages and the good faith principle.

4) Accordingly, the Defendant appealed to Seoul High Court No. 2009Na41214, and the above court rendered a compulsory adjustment order on October 9, 2009 that “the Defendant shall pay the council of occupants’ representatives KRW 1,025,000,000 to the council of occupants’ representatives by November 10, 2009,” and the above decision was finalized on the 29th of the same month (hereinafter “instant compulsory adjustment order”), and the Defendant paid KRW 1,025,00,000 to the council of occupants’ representatives.

5) Meanwhile, on September 20, 2007, when the lawsuit between the defendant and the council of occupants' representatives is pending, the defendant issued a notice of lawsuit to the plaintiff on September 20, 2007, and the above notice of lawsuit reached the plaintiff on January 7, 2008.

D. Payment of indemnity by the Plaintiff

1) On December 23, 2009, the Defendant requested the Plaintiff to pay the Plaintiff KRW 331,508,58,586 on the share of the Plaintiff among the instant compulsory adjustment amounting to KRW 1,025,00,000 (i.e., KRW 1,025,000,000 x 32.34%) and the expenses paid in relation to the instant lawsuit (such as litigation costs, attorney’s fees, consulting costs, and contingent fees) KRW 16,68,235 in total, KRW 348,196,821 as damages by January 15, 2010.

2) On February 10, 2010, the Plaintiff reserved an objection to the Defendant that: (a) KRW 231,756,340 of the above amount (i) KRW 4,726,60 of the pre-use inspection + KRW 1,2,3,50 of the pre-use inspection + KRW 218,151,395 of the pre-use inspection + the attorney’s fees, consulting costs, and contingent fees among the litigation costs; and (b) KRW 8,878,285 of the cost of litigation; and (c) paid the full amount of KRW 348,196,821.

[Ground of Recognition] Facts without dispute, Gap evidence Nos. 1 through 4, Eul evidence Nos. 1 through 6 (including each number), the purport of the whole pleadings

2. The parties' assertion

A. The plaintiff's assertion

1) The Defendant’s damage claim amounting to KRW 22,878,05 in lieu of the repair of defects in 1,2,3, and 5 years of inspection against the Plaintiff was extinguished upon the lapse of 5 years of the extinctive prescription of the Commercial Act on May 23, 2007.

2) Of the litigation costs incurred by the Defendant in a lawsuit with the council of occupants' representatives, the attorney’s fees, consulting costs at the time of appraisal, and the cost of success fees (hereinafter “appraisal-related consulting costs, etc.”) cannot be deemed as damages in proximate causal relation with nonperformance under the instant contract by the Plaintiff, and thus, it shall be deemed as damages arising from special circumstances not known to the Plaintiff. Therefore, the Defendant’s damage liability for nonperformance against the Plaintiff is not recognized.

3) Nevertheless, the Defendant received the above sum of KRW 231,756,340 from the Plaintiff, and since there is no legal ground, it should be returned to the Plaintiff as unjust enrichment.

B. Defendant’s assertion

1) The ten-year extinctive prescription is applied pursuant to the Civil Act to the right to claim damages in lieu of the defects prior to the pre-use inspection and the defects in the year 1,2,3, and 5. However, from April 27, 199 to May 14, 2007, the Defendant continuously requested the Plaintiff for the repair of the defects in the instant apartment from April 27, 199 to May 14, 2007. The Plaintiff was notified of the lawsuit on January 7, 2008 while the lawsuit was pending in lieu of the defect repair that was instituted by the council of occupants’ representatives, and the said lawsuit became final and conclusive for compulsory adjustment on October 29, 209. As such, the Defendant’s right to claim damages in the amount of KRW 22,878,055, which is substituted for the repair of the defects prior to the pre-use inspection against the Plaintiff and the period of prescription has ceased until October 29, 2009.

2) KRW 8,878,285, such as appraisal-related consulting costs, is the cost spent in a lawsuit claiming damages between the defendant and the council of occupants' representatives, and is the damage incurred to the defendant due to the plaintiff's failure to fully perform his/her obligations under the instant construction contract, and constitutes the damage with proximate causal relation with

3) Therefore, 231,756,340 won, which the Plaintiff paid to the Defendant, is legally recognized as a legal ground. Even if the Plaintiff’s obligation to pay the above money is not recognized, the Plaintiff paid the above money to the Defendant at will with the knowledge that the Plaintiff had no obligation, which constitutes a non-debt repayment under Article 742 of the Civil Act, and thus, it cannot be claimed

3. Determination

(a) Claim for return of unjust enrichment in lieu of defect repair in 222,878,055 won;

1) Extinctive prescription period

First of all, the period of extinctive prescription applicable to the above damage claim is a question in relation to whether the period of extinctive prescription of the damage claim in lieu of the repair of defects in the first, second, third and fifth years of the defendant's pre-use inspection against

The Plaintiff’s obligation to compensate for the defect repair in lieu of the defect repair borne by the Plaintiff against the Defendant is the Defendant as the contractor. Thus, it cannot be deemed that the Defendant’s legal liability, such as the obligation to compensate for damages borne by the buyer as a seller under Article 9 of the Act on the Ownership and Management of Aggregate Buildings (hereinafter “the Aggregate Buildings Act”), is a commercial contract, and the damage liability arising from the nonperformance of such commercial contract shall be deemed as the extinctive prescription of five years under the Commercial Act. Thus, it is reasonable to deem that the obligation of the Plaintiff to compensate for the defect repair borne by the Defendant also applies the five-year extinctive prescription period under the Commercial

2) Whether the statute of limitations has expired

The extinctive prescription of damage claim in lieu of the repair of defects that occurred before the inspection of use among the defects existing in the apartment of this case is the time when the defendant could exercise it against the plaintiff, that is, since the date of the occurrence of the defects in the apartment of this case before the inspection of use of the apartment of this case, the period from May 23, 1997. The second, 1, 2, 3, and 5 did not dispute the plaintiff's occurrence of defects within the defect warranty period. The extinctive prescription of damage claim in lieu of the above defects is from the expiration date of each defect warranty period from May 23, 1997 to the expiration date of each defect warranty period, and the period from May 23, 1998 to the expiration date of each of the pertinent defect warranty period from May 23, 1997, to the expiration date of each of the defect warranty period from May 23, 1999; and it should be delayed from May 23, 2009; and it should be delayed from May 23, 203, 2003.

However, on December 23, 2009, the Defendant sought payment of damages in lieu of defect repair to the Plaintiff on December 23, 2009, as seen earlier, the Defendant’s damage claim in lieu of the defect in the pre-use inspection against the Plaintiff and the repair of the defect in the year 1, 2, 3, and 5 had already expired by prescription.

In regard to this, the defendant asserted that the period of prescription was interrupted by claiming for the repair of defects with respect to the apartment of this case from April 27, 1999 to May 14, 2007, which was before the expiration of the statute of limitations, from April 27, 1999 to May 14, 2007. However, even if the defendant claimed for the repair of defects with respect to the apartment of this case to the plaintiff as above, the above claim for the repair of defects has only the effect of the peremptory notice, so long as it is not acknowledged that a judicial

In addition, the defendant asserted that the prescription was interrupted by giving a notice of lawsuit. However, since the damage claim in lieu of the defect repair against the plaintiff against the plaintiff came to end on January 7, 2008, which was after the expiration of the prescription, and notified the plaintiff by giving a notice of lawsuit, the above notice of lawsuit shall not interfere with the validity of the completed extinctive prescription.

3) Sub-decisions

Therefore, the Defendant’s damage claim of KRW 22,878,05 in lieu of the repair of defects in the first, second, third, and fifth five years of use inspection against the Plaintiff is not recognized to have expired by prescription. The Defendant gains the above money from the Plaintiff without any legal ground and reported damages equivalent to the same amount to the Plaintiff. Therefore, the Defendant is obligated to return the above money to the Plaintiff as unjust enrichment, barring any special circumstances.

(b) Requests for return of unjust enrichment of KRW 8,878,285, including consulting costs related to appraisal;

On the other hand, 8,878,285 won, such as the appraisal-related consulting cost that the Defendant sought to pay to the Plaintiff, cannot be deemed as losses in proximate causal relation with the nonperformance of the obligation under the instant contract between the Plaintiff and the Defendant, and there is no assertion or proof by the Defendant as to such special circumstances, and thus, the Defendant is not entitled to claim damages equivalent to the above amount since there is no assertion or proof by the Defendant as to the fact that the Plaintiff knew or could have known of such special circumstances. Thus, the Defendant gains profits from receiving the above amount from the Plaintiff without any legal ground and reported damages equivalent to the above amount. Thus, the Defendant should return the above amount to the Plaintiff as unjust

C. Judgment on the defendant's non-performance defense

However, if the payer voluntarily pays the debt with knowledge of the absence of the debt, the payer cannot claim the return of the debt as a non-performance under Article 742 of the Civil Code, but even if the payer was aware of the absence of the debt, the payer shall not lose his right to claim the return when there are circumstances which can be deemed to have been done against the free will, such as forced repayment or forced repayment in order to avoid de facto damage caused by the refusal of payment.

According to the evidence No. 3-1 and evidence No. 4, the defendant, on January 21, 2010, filed a claim for the payment of damages in lieu of the above defect repair with the plaintiff, and notified on January 21, 2010 that if the above money is not paid, it will be subject to measures such as restricting participation in the improper businessman and claiming the recovery of the amount for reimbursement. Accordingly, on February 2 of the same year, the plaintiff, although we cannot be held liable for payment, if we did not pay the part to the defendant, they are subject to measures to restrict participation in the bidding, and they are forced to unilaterally suffer disadvantage in the business. Thus, after reserving the objection and expressing the intention to pay the money, we cannot find that the plaintiff paid the above amount of damages in lieu of the defect in the 10th of the above defect in the year 122,878,055 won and the consultation related to appraisal, etc. 8,878,285 won, 192,821 won.

4. Conclusion

Therefore, the defendant is obligated to pay to the plaintiff 231,756,340 won (=22,878,055 won + 8,878,285 won) and damages for delay at the rate of 20% per annum under the Act on Special Cases concerning the Promotion, etc. of Legal Proceedings from March 6, 2010 to the date of full payment, which is obvious that the copy of the complaint of this case was served to the defendant. Thus, the plaintiff's claim shall be accepted for the reasons, and Article 98 of the Civil Procedure Act shall be applied to the burden of litigation costs, and Article 213 of the provisional execution shall be applied to the declaration of provisional execution. It is so decided as per Disposition.

Judge Lee Dong-young (Presiding Judge) Suspension of Park Byung-young