Plaintiff (Law Firm Deputy, Attorneys Ahn Byung-jin et al., Counsel for the plaintiff-appellant)

Defendant Incorporated Foundation (Law Firm Barun, Attorneys Choi Young-ro et al., Counsel for the defendant-appellant)

November 1, 2007

Seoul Eastern District Court Decision 2005Kahap15206 Decided April 28, 2006

Seoul High Court Decision 2006Na49514 Decided March 23, 2007

Supreme Court Decision 2007Da24442 Decided July 26, 2007

1. Revocation of a judgment of the first instance;

2. All the lawsuits of the plaintiff's primary claim and of the conjunctive claim added at the trial prior to the remand shall be dismissed; and

3. All costs of the lawsuit shall be borne by the Plaintiff.

1. Purport of claim

On August 7, 1998, it is confirmed that the Plaintiff has the right to manufacture, supply, and install stone in accordance with the contract for the manufacture, supply, and installation of stone products between the Plaintiff and the Defendant.

Preliminary, it is confirmed that the contract between the plaintiff and the defendant on August 7, 1998 for the manufacture, supply, and supply of stone exists effectively (the plaintiff added preliminary claim at the first instance prior to remand).

2. Purport of appeal

The judgment of the first instance shall be revoked. On August 7, 1998 between the Plaintiff and the Defendant, it is confirmed that the Plaintiff has the right to manufacture, supply, and install stone in accordance with the contract for the manufacture, supply, and supply of stone.

1. Basic facts

The following facts may be acknowledged by adding up the whole purport of the pleadings to the descriptions of Gap evidence 1-1, 2, Gap evidence 2, 3, Gap evidence 4-1 through 4, and Gap evidence 9-1 through 4:

A. The Plaintiff is a foundation that is engaged in the business of manufacturing, supplying, and installing stone products, and the Defendant (the name was changed from “○○○○, a foundation, to “○○,” on November 29, 1997,” and the former “Defendant Incorporated Foundation” on September 10, 2004) is a foundation established for the purpose of creating, establishing, selling, and maintaining park cemeteries and funeral centers.

B. From around 1994, the Plaintiff manufactured, supplied, and installed stone in the park cemetery located in Dong-dong, Dong-dong, Dong-dong, which was owned by the Defendant, and the name of the Defendant changed from 1994 to ○○, an incorporated foundation, to ○○, an incorporated foundation, the Plaintiff entered into a contract with the Defendant to manufacture, supply, and install stone stone in the park cemetery (hereinafter “instant contract”) with the Plaintiff on August 7, 1998 in order to re-examine the existing right to acquire stone.

① The Plaintiff and the Defendant shall comply with the following provisions in concluding the instant contract in accordance with the right to purchase and install stone (Article 1).

(2) The scope of stone to be supplied and installed by the Plaintiff shall be referred to as “the scope of stone to be supplied and installed in the whole cemetery created in the area permitted by the Defendant’s statutory area (Article

③ The stone supplied and installed by the Plaintiff shall coincide with the design drawing, and the stone supplied and installed by the Plaintiff shall be executed by consultation between the Plaintiff and the Defendant (Article 3).

(4) The payment of stone price shall be three times (10 days, 20 days, and 30 days) per month, and when it is changed, it shall be determined in consultation with the original and the defendant (Article 4).

(5) The unit cost of the delivery and installation of stone shall be determined by mutual agreement between the original and the defendant, and the defendant shall not bring in any and all stone from another place than the plaintiff (Article 5).

(6) Compensation for losses incurred as a result of the supply or installation of stone within the period designated by the Plaintiff shall be provided, and the same shall not apply to cases of force majeure, such as natural disasters (Article 6).

7. When the defendant does not comply with the above terms and conditions of the contract, all damages shall be compensated for the plaintiff, and all buried materials prepared for the purpose of using them in the park cemetery shall be accepted at the selling price (Article 7).

C. The Plaintiff manufactured, supplied, and installed stone materials about the 117th period of the park cemetery from January 19, 1999 to March 10, 200, but on November 10, 2000, the Defendant was declared bankrupt by Seoul District Court 9Ha293, and the Plaintiff was no longer manufactured, supplied, and installed stone materials in the park cemetery.

D. On November 27, 2003, the defendant sought rehabilitation by the procedure of compulsory composition during the bankruptcy proceedings, and obtained a ruling of authorization of compulsory composition from the Seoul District Court. On August 31, 2004, the bankruptcy proceedings were concluded upon the confirmation of the ruling of authorization of compulsory composition.

E. On February 28, 2005, the Plaintiff requested the Defendant’s new management to continue to manufacture, supply, and install stone in the future whenever a grave is installed in the said park cemetery, as the instant contract still remains valid, since the Defendant’s new management was corrected by the compulsory composition procedure.

F. Accordingly, on March 4, 2005, the Defendant was declared bankrupt to the Plaintiff, and the instant contract was already invalidated in the course of reorganization by a ruling of authorization of compulsory composition, and even if not, the Defendant exercised the right to terminate the contract of this case under the Civil Act. Thus, the Defendant notified the Plaintiff of the collection of all the stone remaining in the said park cemetery by March 31, 2005.

2. Judgment as to the lawfulness of the main claim part

A. The plaintiff's assertion

(1) As the Plaintiff installed stone in the above park cemetery and enjoys the right equivalent to the installation cost, the Defendant has the benefit in return for the Defendant in that it acquires the remainder other than the installation cost of stone in the cemetery, and ② the Defendant bears the obligation to enter into a contract for the manufacture, supply, and installation of stone in accordance with the contract of this case, upon the request of the Defendant for the manufacture, supply, and installation of stone from the Defendant, the Plaintiff bears the obligation to manufacture, supply, and install stone to the Defendant, and ③ the obligation to manufacture, supply, and install stone in accordance with Article 2 of the contract of this case and the obligation to pay stone to the Defendant in accordance with Article 4 of the contract of this case is a quid pro quo.

(2) Article 50(1) of the former Bankruptcy Act (amended by Act No. 7428, Mar. 31, 2005; hereinafter the same) grants a trustee in bankruptcy an option to decide whether to cancel a contract or to claim the performance of the other party’s obligation with respect to an executory bilateral contract. The defendant did not notify the trustee in bankruptcy of the cancellation of the instant contract, which is an executory bilateral contract, and there was no decision to authorize compulsory composition.

(3) Therefore, notwithstanding the fact that the Plaintiff still has an exclusive right to manufacture, supply, and install stone in the park cemetery in accordance with the instant contract, the Defendant contests this issue, and thus, sought confirmation from the Defendant.

B. Defendant’s assertion

(1) Since the instant contract is not an executory bilateral contract in that it was agreed upon by the Defendant, it is not subject to Article 50(1) of the former Bankruptcy Act, the Plaintiff is not entitled to demand the right to manufacture, supply, and install stone according to the instant contract.

(2) Even if not, the Plaintiff’s right to manufacture, supply, and install tins owned by the Plaintiff against the Defendant under the instant contract constitutes a bankruptcy claim under Article 14 of the former Bankruptcy Act, which is a property claim arising from a cause arising before the declaration of bankruptcy. Bankruptcy claims can be exercised only through bankruptcy proceedings, and in a case where bankruptcy proceedings exceed the compulsory composition procedure under the former Bankruptcy Act and the declaration of compulsory composition becomes final and conclusive, it can be exercised only under the conditions of compulsory composition (Article 298(1) of the former Bankruptcy Act). Thus, the Plaintiff cannot demand the Defendant to perform the original obligation (the obligation to receive tins from the Plaintiff) stipulated in the instant contract, and the Plaintiff’s right to manufacture, supply, and install tins is assessed in money and demand payment based on their value as stipulated in the conditions of compulsory composition.

C. Determination

(1) Whether the instant contract constitutes an executory bilateral contract under Article 50 of the former Bankruptcy Act

(A) Article 50(1) of the former Bankruptcy Act provides that "if the bankrupt and the other party to a bilateral contract have not yet completed the performance of the bilateral contract at the time that the bankruptcy is declared bankrupt, the bankruptcy trustee may, at his option, rescind the contract or claim the other party to perform the obligation of the other party." Article 38 subparagraph 7 of the same Act provides that "if the bankruptcy trustee performs the obligation under the provisions of Article 50(1), the other party's right to claim the other party shall be the estate claim." Thus, in principle, the both parties to the bilateral contract function as a security with mutual relationship with legal and economic relations. In light of the above, if one party to the bilateral contract becomes bankrupt, the parties to the bilateral contract may cancel the contract or request the other party to perform the obligation of the other party, thereby protecting the interests of the bankruptcy estate by recognizing the right to claim the other party to perform the obligation of the other party, and at the same time, in light of the purport of Article 50(1) of the former Bankruptcy Act, Article 50(2)7) of the former Bankruptcy Act provides that the parties to the bilateral contract shall be deemed as a mutual obligation (see 20.

(B) However, according to the facts of recognition and employment evidence of Paragraph 1., in the “Agreement on Manufacture, Supply, and Installation of tins” prepared by the plaintiff and the defendant at the time of conclusion of the contract of this case, the scope of the Plaintiff’s installation of tins shall be the entire cemetery to be created by the area for which the Plaintiff was permitted (Article 2), and the Plaintiff must supply and install tins without fail (Article 3), and the Defendant shall pay tins price on 10,20,30 per month (Article 4), and the unit price for the supply and installation of tins shall be determined by the usual type of each cemetery (Article 5), and the defendant shall not be supplied with tins (Article 5). Since the contract of this case was prepared at the time of conclusion of the contract of this case and attached to the above contract of this case, the Plaintiff’s obligation to supply tins and install tins shall be determined by the agreement of both parties to the contract of this case and the right to pay tins shall be determined by the terms and conditions of each of the contract of delivery and installation.

(2) Whether there is interest in confirmation

(A) The bankruptcy procedure is basically a procedure to ensure the equitable and equal satisfaction of creditors by converting all assets of the bankrupt into money and distributing them as proceeds from the realization of the bankruptcy claim. Even in the case of executory bilateral contract, under Article 103(1) of the former Company Reorganization Act (amended by Act No. 7428 of Mar. 31, 2005), when the company and the other party fail to complete the performance of bilateral contract at the time of commencement of the reorganization procedure, the receiver may exercise the right to rescission or performance of the contract to the receiver of the reorganization company even before the rescission of the contract, on the contrary to Article 103(1) of the former Company Reorganization Act (amended by Act No. 7428 of Mar. 31, 2005), while Article 103(2) of the former Company Reorganization Act provides that the other party may exercise his right to rescission or performance of the contract as a bankruptcy creditor before the rescission of the contract, the other party may still exercise his right to rescission or performance of the contract within a fixed period of time after the bankruptcy procedure is declared.

(B) As to the instant case, since the Plaintiff’s right to manufacture, supply, and install stone, which the Plaintiff had against the Defendant under the instant contract, is a bankruptcy claim under Article 14 of the former Bankruptcy Act, and the instant contract constitutes an executory bilateral contract under Article 50 of the former Bankruptcy Act, as seen in paragraph (1) above, even if the instant contract constitutes an executory bilateral contract under Article 50 of the former Bankruptcy Act, the Plaintiff may only exercise the value of his right under the instant contract, which is not money, as a bankruptcy claim, at the time of declaration of bankruptcy after the bankruptcy is declared. Furthermore, even if the Defendant’s previous bankruptcy trustee decided to authorize compulsory composition without deeming the execution or rescission of the instant contract or the rescission of the contract, and the instant bankruptcy procedure has become final and conclusive, the Plaintiff cannot seek implementation of the instant contract against the Defendant as the effect of the previous declaration of bankruptcy, and as such, it is reasonable to view that the Plaintiff’s compulsory composition becomes effective only for all bankruptcy creditors or all of its compulsory composition claims under Article 298(1) of the former Bankruptcy Act.

(C) Therefore, it would be possible for the Plaintiff to seek confirmation against the Defendant that the Defendant has the right to manufacture, supply, and install stone according to the instant contract, and otherwise, there is no benefit to seek confirmation that the Plaintiff has the right to manufacture, supply, and install stone. Therefore, the Plaintiff’s lawsuit on the primary claim portion is unlawful.

3. Determination as to whether the lawsuit in the conjunctive claim is legitimate

A. The plaintiff asserts that the contract of this case continues to exist effectively as a preliminary claim and seeks its confirmation.

B. On the other hand, the plaintiff can only exercise his right under the contract of this case after the bankruptcy is declared, with the appraised value at the time of the declaration of bankruptcy as bankruptcy claim. After that, the defendant's previous bankruptcy trustee decided to enforce or cancel the contract of this case pursuant to Article 50 (1) of the former Bankruptcy Act or to authorize compulsory composition without regard to the termination of the contract, and the bankruptcy procedure of this case becomes final and conclusive and conclusive, the plaintiff can exercise the above bankruptcy claim only in accordance with the terms and conditions of compulsory composition.

Therefore, the plaintiff also seeks the performance of his duties against the defendant, and there is no benefit to seek confirmation that the contract of this case remains effective separately, and thus, the plaintiff's lawsuit on the conjunctive claim is unlawful.

4. Conclusion

Therefore, all of the plaintiff's main claim and the conjunctive claim shall be dismissed, and the judgment of the court of first instance which dismissed the plaintiff's main claim shall be dismissed, and it is unfair to conclude otherwise. Therefore, the judgment of the court of first instance shall be revoked and the plaintiff's main claim and the conjunctive claim shall be dismissed in all of the plaintiff's main claim and the plaintiff's main claim. It is so decided as per

Judges Lee Young-gu (Presiding Judge)