Whether a person who acquires an essential facility in accordance with the facility standards for a sports facility business through a public competitive bidding procedure based on a security trust under the Trust Act succeeds to the rights and obligations upon approval, including a private agreement concluded between the existing sports facility business entity and its members solely on the acquisition of an essential sports facility without a separate ground to succeed to the approval of the business plan (affirmative)

Article 27(1) of the Installation and Utilization of Sports Facilities Act (hereinafter “sports facilities Act”) provides that a sports facility business entity’s inheritance and merger shall succeed to the rights and obligations arising from the registration or reporting of a sports facility business in addition to a sports facility business entity’s transfer of business. Paragraph (2) shall also apply mutatis mutandis to a person who acquires an essential facility (hereinafter “essential sports facility”) according to the standards for the facilities of a sports facility business through an auction or any similar procedure. In such a case, where a sports facility business entity’s business or essential sports facility is transferred to another person, a transferee of the sports facility business or a transferee of the essential sports facility succeeds not only to the rights and obligations under public law established in relation to the sports facility business, but also to the rights and obligations arising from

In cases where a sports facility business entity: (a) was entrusted with an essential sports facility under the Trust Act for the purpose of security; (b) the essential sports facility is disposed of in accordance with the procedures for sale by open competitive bidding (hereinafter “public sale”) or disposed of under a negotiated contract pursuant to the conditions of public sale prescribed in the procedures for public sale. In such cases, even where an essential sports facility is transferred en bloc by a public sale or private contract after the conclusion of a security trust agreement for an essential sports facility, in light of the language and structure under Article 27 of the Sports Facilities Act, legislative history and purpose, the transferee of an essential sports facility shall be deemed to succeed to the rights and obligations arising from the registration of or report on the essential sports facility business, including the matters

Article 27(3) of the Sports Facilities Act provides that “The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the succession to the approval of a business plan under Article 12.” This is to apply mutatis mutandis to the succession to the registration of a business plan. Of them, Article 27(1) and (2) to the succession to the approval of a business plan. Of them, the part to which Article 27(2) shall apply mutatis mutandis to the succession to the registration of an essential sports facility by an underwriter of an essential sports facility through an auction procedure, etc. under the Civil Execution Act, is transferred the right to approve a business plan from the person entitled to approve an existing business plan, and there is no separate cause for the succession to the approval of a business plan, even if there is no separate ground for

A public sale procedure based on security trust constitutes “other procedures corresponding to subparagraphs 1 through 3” as prescribed by Article 27(2)4 of the Sports Facilities Act. Therefore, the transferee of an essential sports facility through a public sale procedure based on security trust succeeds to the approval of a business plan for an existing sports facility business entity by acquiring an essential sports facility solely by acquiring an essential sports facility, thereby succeeding to the rights and obligations arising from the relevant approval, including a private agreement concluded between the existing sports facility business entity and its members.

Article 27 (1), (2) 4, and (3) of the Installation and Utilization of Sports Facilities Act

Supreme Court en banc Decision 2016Da220143 Decided October 18, 2018 (Gong2018Ha, 2183) Decided February 12, 2009

The bankruptcy trustee of the bankrupt Co., Ltd., who takes over the lawsuit of the non-party, the administrator of Co., Ltd., the rehabilitation debtor, the plaintiff (Attorney Ha-dae, Counsel for the plaintiff-appellant)

The Governor of the Gyeonggi-do (Law Firm Lee & Lee, Attorneys Lee Won-won et al., Counsel for the plaintiff-

Yu Jinex Co., Ltd. (LLC, Kim & Lee LLC, Attorneys Song Jae-chul et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2015Nu52397 decided June 17, 2016

All appeals are dismissed. The costs of appeal are assessed against the Defendant and the Intervenor joining the Defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Factual basis

According to the reasoning of the lower judgment and the evidence admitted, the following facts are revealed:

A. A. Around 2007, Co., Ltd., Co., Ltd. (hereinafter “Co-Handland”) obtained approval for a golf club business plan from the Defendant pursuant to the Installation and Utilization of Sports Facilities Act (hereinafter “ Sports Facilities Act”) with respect to a membership golf club located in the Pncheon-si ( Address omitted), a membership golf club located in the Pncheon-si (hereinafter “instant golf club”), and gave a contract for the construction of the said golf club to the Jin-si Co., Ltd. (hereinafter “Pin-si”).

B. Cobaland borrowed funds from financial companies, such as the National Bank, under the joint and several sureties’s joint and several sureties to raise the construction cost of golf courses. Cobaland concluded a security trust agreement on the instant golf course site and buildings with the K non-Real Estate Trust Co., Ltd. (hereinafter “K non-Real Estate Trust”), which is the trustee, on October 15, 201, and on May 13, 201, concluded a trust agreement on the instant golf course site and the said financial companies as priority beneficiaries. At that time, the registration of ownership transfer was completed on the instant golf course site and buildings due to the trust. Meanwhile, the K non-Real Estate Trust was completed by the K non-Real Estate Trust for the said financial companies as joint and several sureties’s debt and succeeded to the status of the priority beneficiary of the security trust agreement.

C. Cobaland completed the conditional registration of sports facilities to the Defendant and commenced the golf course business on or around April 2010, but the financial standing has aggravated, and the rehabilitation procedure commenced on December 9, 201 with the District Court 201 Gohap201 Gohap28, which was approved on January 15, 2013. The rehabilitation plan was approved on January 15, 2013. In order for Cobaland to implement the rehabilitation plan as it is, however, failed to pay 47.5 billion won to the relevant company by July 12, 2013.

D. In order to receive reimbursement of KRW 47.5 billion, as the priority beneficiary of a security trust agreement, the relevant golf course site and buildings, which are secured trust property, were demanded to be liquidateded on August 4, 2013, as the instant golf course site and buildings, which are secured trust property, as the trustee. The K non-real estate trust proceeds from sale through an open competitive bidding method as stipulated in the security trust agreement. In that process, the Intervenor joining the Intervenor awarded a bid for the instant golf course site and buildings in KRW 59.6 billion on November 4, 2013, and completed the registration of ownership transfer.

E. The Defendant asserted that he succeeded to all the rights and obligations of the Co-Handland in accordance with the approval of the instant golf course’s business plan by accepting the instant golf course’s site and building through the sale procedure of the secured trust property, and filed an application with the Defendant for approval on the alteration of the project plan from the existing Co-Handland to the Intervenor joining the Defendant. The Defendant approved the alteration of the business plan on February 28, 2014.

F. On January 28, 2015, the administrator of Kobaland filed the instant lawsuit seeking the revocation of the instant disposition, and the trustee in bankruptcy taken over the instant lawsuit, following the adjudication of bankruptcy rendered by the District Court 2015Hamba2, the trustee in bankruptcy.

2. Whether there is a benefit in a lawsuit.

Even if the bankruptcy decision on Cobaland becomes final and conclusive and the bankruptcy procedure has already been completed in a considerable portion, the possibility is very low until the bankruptcy is completed, but it still remains likely that Cobaland will resume its business activities by means of discontinuation of bankruptcy with consent. In such a situation, there is a legal interest that the disposition in this case may be obtained by restoring its status as a project implementer under the previous business plan, such as the cancellation of the disposition in this case. Furthermore, even if the sale of the site and the building in this case, and the sale of the site and the building in this case, become practically difficult to carry out its golf course business activities, such circumstance alone does not affect the Plaintiff’s

Although the reasoning of the lower court’s judgment is somewhat inappropriate, the conclusion of the lower judgment that was determined to the same effect is justifiable. In so determining, the lower court did not err by misapprehending the legal doctrine on the benefit of litigation, thereby

3. Whether the procedure of the instant disposition is legitimate

The lower court determined that the instant disposition was unlawful on the grounds that it did not go through the procedures for prior notice of the disposition and giving an opportunity to state opinions prescribed by the Administrative Procedures Act. For that reason, even though the instant disposition was a disposition that restricts the rights and interests of the previous sports facility business entity, it is difficult for the Defendant to recognize that the instant disposition was a prior notice prescribed by the Administrative Procedures Act or given an opportunity to present opinions, and it is also difficult to view that there was a reason to omit prior notice or hearing of opinions prescribed by the Administrative Procedures Act.

Examining the relevant legal principles and evidence duly admitted, the lower court did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, or by misapprehending the legal doctrine on the Administrative Procedures Act, such as the other party to prior notice, without exhaust all necessary deliberations.

4. Whether the instant disposition is lawful or not

A. (1) Article 27(1) of the Sports Facilities Act provides that “When a sports facility business entity dies or transfers his/her business, or when a corporate sports facility business entity is merged with another sports facility business entity, the heir, the transferee of the business, the corporation surviving the merger, or the corporation incorporated by the merger shall succeed to the rights and duties (where members are recruited pursuant to Article 17, including the matters agreed upon between the sports facility business entity and its members) upon the registration or reporting of the relevant sports facility business.” Paragraph (2) of the same Article provides that “Article 27(1) shall apply mutatis mutandis to a person who acquires an essential facility in accordance with the facility standards for the sports facility business prescribed by Ordinance of the Ministry of Culture, Sports and Tourism in accordance with any of the following procedures,” subparagraph 1 and subparagraph 2 of the same Article provides that “an auction under the Civil Execution Act” and subparagraph 3 of the same Article “sale of property subject to seizure under the National Tax Collection Act, the Customs Act, or the Local Tax Collection Act” and subparagraph 4 through subparagraph 1 of the same Article.

As can be seen, Article 27(1) of the Sports Facilities Act provides that a sports facility business entity succeeds to the rights and obligations arising from the registration or report of a sports facility business in addition to the inheritance and merger of a sports facility business entity, and Paragraph (2) of the same Article also applies mutatis mutandis to a person who acquires an essential facility (hereinafter “essential sports facility”) according to the standards for the facilities of a sports facility business through an auction or any similar procedure. In such a way, where a sports facility business entity’s business or essential sports facility is transferred to another person, a business transferee or a transferee of an essential sports facility succeeds not only to the rights and obligations under public law formed in relation to the sports facility business but also to the rights

(2) In a case where a sports facility business entity: (a) was placed in a security trust under the Trust Act for the purpose of security; (b) the essential sports facility is disposed of by means of an open competitive bid method (hereinafter “public sale”); or (c) is disposed of by a negotiated contract in accordance with the terms and conditions of public sale prescribed in the public sale procedure. In such a case where an essential sports facility is transferred en bloc by a public sale or a private contract after the conclusion of a security trust agreement for an essential sports facility, in light of the language and structure under Article 27 of the Sports Facilities Act; (d) legislative history and purpose; and (e) the substantial function of a security trust, etc., the person who acquires an essential sports facility succeeds to the rights and obligations arising from the registration or report of the sports facility business, including the matters agreed between the sports facility business entity and its members (see Supreme Court en banc Decision 2016Da220

(3) Article 27(3) of the Sports Facilities Act provides that “The provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the succession to the approval of a business plan pursuant to Article 12.” This is to apply mutatis mutandis to the succession to sports facility business’s requirements and effects under Article 27(1) and (2) to the succession to the approval of a business plan. Of them, the part to which Article 27(2) applies mutatis mutandis to the succession to the approval of a business plan. There is no separate cause for the succession to the approval of a business plan, such as where the underwriter of an essential sports facility through an auction procedure, etc. under the Civil Execution Act transfers the right to approval of a business plan from the existing person entitled to approval of the business plan, and there is no separate cause for the succession to the rights and obligations arising from the approval of the business plan, including the agreement with the members recruited based on the approval of the existing business plan (see Supreme Court Decision

A public sale procedure based on security trust constitutes “other procedures corresponding to subparagraphs 1 through 3” under Article 27(2)4 of the Sports Facilities Act (see the en banc Decision 2016Da2220143, supra). Therefore, the transferee of an essential sports facility through a public sale procedure based on security trust succeeds to the acquisition of an essential sports facility business plan to the existing sports facility business entity by transferring the acquisition of an essential sports facility solely from the acquisition of an essential sports facility, and ought to be deemed to succeed to the rights and obligations based on the relevant approval, including a private agreement concluded between the existing sports facility business entity

B. Examining the above facts in light of such legal principles, the Defendant’s Intervenor’s purchase of the instant golf course site and building, which is a secured trust property, including all essential facilities of the instant golf course, in the public sale process constitutes a case where he acquires an essential sports facility pursuant to Article 27(2) Subparag. 4 of the Sports Facilities Act pursuant to “other procedures corresponding to subparagraphs 1 through 3” as stipulated under Article 27(2) Subparag. 4 of the said Act. Therefore, the Defendant’s Intervenor should be deemed to have succeeded to the rights and obligations arising from the approval of the business plan of

Nevertheless, the lower court determined that the instant disposition was unlawful on the ground that “public auction based on security trust does not fall under the procedures prescribed in Article 27(2)4 of the Sports Facilities Act, and the Defendant’s Intervenor did not succeed to the rights and obligations based on the approval of the business plan of Kobaland.” In so determining, the lower court erred by misapprehending the legal doctrine on Article 27(2)4 of the Sports Facilities Act.

However, as seen above 3. The instant disposition is a disposition that causes procedural defects in violation of the Administrative Procedures Act, and thus, cannot be exempt from revocation due to its illegality. The lower court’s determination on the legality of the instant disposition is erroneous, but this cannot be deemed to have affected the conclusion of the judgment.

5. Conclusion

The appeal by the Defendant and the Intervenor joining the Defendant is dismissed in entirety as it is without merit, and the costs of appeal are assessed against the losing party. It is decided as per Disposition by the assent of all participating Justices.

Justices Lee Dong-won (Presiding Justice)