[1] Where rehabilitation procedures commence for a contractor of a construction contract and the custodian cancels the contract as an executory contract, whether the contractor may seek the return of payment or reimbursement of the value pursuant to Article 121(2) of the Debtor Rehabilitation and Bankruptcy Act (negative), and whether the contractor’s right to claim remuneration for the completed portion of the contract constitutes a rehabilitation claim under Article 118 subparag. 1 of the same Act (affirmative in principle)

[2] Whether it is legitimate for a rehabilitation creditor to file a lawsuit seeking implementation of a rehabilitation claim against an objection to the rehabilitation claim after the rehabilitation procedure commenced (negative)

[1] Where a contractor is declared bankrupt, the contractor or the trustee in bankruptcy may rescind the contract pursuant to Article 674(1) of the Civil Act. In such a case, the contractor may join the bankrupt estate as to the expenses not included in remuneration and remuneration for the completed portion of the work. The termination of the contract refers to the termination of the contract in the future through interpretation of interpretation, and the restoration to its original state is not permitted. As such, Article 337 of the Debtor Rehabilitation and Bankruptcy Act concerning the rescission or performance of bilateral contract for which both parties have not completed the performance is not applicable. Meanwhile, the rehabilitation procedure aims at promoting the efficient rehabilitation of the debtor or the business by adjusting the legal relations among interested parties, such as the creditor, etc., with the aim of financial difficulties, while the bankruptcy procedure aims at fairly realizing and distributing the debtor's assets, the bankruptcy procedure differs in that it is common in that the legal relationship of the debtor prior to the commencement of the procedure should be rationally adjusted and processed, and Article 137(1)4 of the Civil Act concerning the cancellation of the contract and the cancellation of the construction project.

Therefore, if the custodian of a contractor cancels the contract as an executory contract, the completed part of the work until the time shall belong to the contractor, and the contractor cannot seek the return of the benefits or the refund of the value thereof pursuant to Article 121(2) of the Debtor Rehabilitation Act, and only requests for remuneration for the completed part of the work may be made. In this case, barring any special circumstance, it is reasonable to deem that the contractor’s right to claim remuneration for the contractor is related to remuneration under the contract according to the ratio of the base amount, etc. and that the principal cause has already existed before the commencement of the rehabilitation procedure, and thus, constitutes rehabilitation claim

[2] Any rehabilitation creditor who intends to participate in the rehabilitation procedures under the Debtor Rehabilitation and Bankruptcy Act shall report the rehabilitation claims (Article 148(1)); when an objection is raised against the reported rehabilitation claims, all of the objectors as other parties may file an objection to the final claim inspection judgment with the court (Article 170(1)); and any person who is dissatisfied with the judgment may file an objection to the final claim inspection judgment (Article 171(1)). Where a lawsuit on the rehabilitation claims is pending at the time rehabilitation procedures commence, any rehabilitation creditor shall file a report on the rehabilitation claims; and when an objection is raised against the reported rehabilitation claims, all of the objectors as other parties to the lawsuit (Article 172(1)). Accordingly, it is unlawful for any rehabilitation creditor to file a lawsuit seeking the performance of the rehabilitation claims against the objectors to the rehabilitation claims after the rehabilitation procedures commence.

[1] Article 674(1) of the Civil Act; Article 118 subparag. 1, Article 121, and Article 337 of the Debtor Rehabilitation and Bankruptcy Act / [2] Articles 148(1), 170(1), 171(1), and 172(1) of the Debtor Rehabilitation and Bankruptcy Act

[1] Supreme Court Decision 2001Da13624 Decided August 27, 2002 (Gong2002Ha, 2283) / [2] Supreme Court Decision 2011Da10310 Decided May 26, 201 (Gong201Ha, 1297)

Lee & Lee Co., Ltd. (Law Firm National Law Firm, Attorney Yang Woo-man, Counsel for defendant-appellant)

The non-party administrator of the rehabilitation debtor corporation

Seoul High Court Decision 2015Na2063464 decided May 3, 2016

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. Where a contractor is declared bankrupt, the contractor or the trustee in bankruptcy may rescind the contract pursuant to Article 674(1) of the Civil Act. In this case, the contractor may join the bankrupt estate as to the expenses not included in remuneration and remuneration for the completed portion of the work. The cancellation of the contract refers to the termination of the contract in the future through interpretation of interpretation, and the restoration to original state is not permitted. As such, Article 337 of the Debtor Rehabilitation and Bankruptcy Act concerning the cancellation or performance of bilateral contract for which both parties have not completed performance is not applicable (see Supreme Court Decision 2001Da13624, Aug. 27, 2002). Meanwhile, the rehabilitation procedure aims at facilitating the efficient rehabilitation of the debtor, including creditors, etc., who are faced with financial difficulties, by adjusting the legal relations among interested parties, and the rehabilitation procedure for the contractor is aimed at fairly distributing and distributing the debtor’s assets difficult to liquidate. However, Article 17(1) of the Debtor Rehabilitation and Bankruptcy Act, which is a special provision for the rehabilitation procedure for the same purpose as the rehabilitation procedure for the implementation of the contract.

Therefore, if the custodian of a contractor cancels the contract as an executory contract, the completed part of the work until the time shall belong to the contractor, and the contractor cannot seek the return of payment or the refund of the value thereof pursuant to Article 121(2) of the Debtor Rehabilitation Act, and only requests for remuneration for the completed part of the work may be made. In this case, barring any special circumstance, it is reasonable to deem that the contractor’s right to claim remuneration is related to remuneration under the contract according to the ratio of the base amount, etc., and its major cause has already existed prior to the commencement of rehabilitation procedures, and thus, constitutes a rehabilitation claim under Article 1

Any rehabilitation creditor who intends to participate in rehabilitation procedures under the Debtor Rehabilitation Act shall report a rehabilitation claim (Article 148(1)); when an objection is raised against any reported rehabilitation claim, all of the objectors may file an objection with the court to the final claim inspection judgment (Article 170(1)); and any person who is dissatisfied with such judgment may file a lawsuit seeking objection against the final claim inspection judgment (Article 171(1)): Provided, That where a lawsuit on rehabilitation claims is pending at the time rehabilitation procedures commence, any rehabilitation creditor shall file a report on the rehabilitation claim and when an objection is raised against any reported rehabilitation claim, all of the objectors as other parties shall take over the litigation procedures (Article 172(1)). Accordingly, it is unlawful to file a lawsuit seeking the performance of the rehabilitation claim against any objector after the rehabilitation procedures commence (see Supreme Court Decision 201Da10310, May 26, 2011).

2. The lower court determined that the part performed by the Plaintiff up to the time following the Defendant’s rescission of the instant subcontract as an executory bilateral contract is illegal to bring a lawsuit for direct performance without resorting to rehabilitation procedures, since the Plaintiff, the contractor, has a claim for the subcontract construction cost as to the part performed, which is a rehabilitation claim.

In light of the aforementioned legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on the interpretation and application of Article 121(2) of the Debtor Rehabilitation Act, contrary to what is alleged in the grounds of appeal.

3. Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ki-taik (Presiding Justice)