D. S.C. (Law Firm Thai, Attorneys Lee Jong-soo et al., Counsel for the plaintiff-appellant)

Korea National Housing Corporation (Law Firm Oat, Attorneys Final Aat-be et al., Counsel for the defendant-appellant)

December 12, 2008

1. The plaintiff's claim is dismissed.

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

The defendant shall pay to the plaintiff 4,66,031,368 won with 20% interest per annum from the day following the delivery of a copy of the complaint of this case to the day of complete payment.

1. Basic facts

A. The Plaintiff has promoted an urban development project within approximately KRW 565,00 square meters in Japan-si (hereinafter referred to as the “instant project area”) and the details thereof are as follows.

(1) Establishment of a plan on May 2004

(2) 2004. 6월∽9월 이 사건 사업구역 내의 토지소유자들을 대상으로 한 사업설명

(3) Formation of the committee of promoters and establishment of offices on October 2004, and conclusion of a land purchase services contract with Chungcheong City Development Co., Ltd.

B. On May 29, 2006, the Defendant filed an application with the Minister of Construction and Transportation for the designation of a district for national rental housing complex with a significant overlap with the instant project area, and around June 26, 2006, the Defendant made a public inspection announcement on the residents’ public inspection for the designation of a district for national rental housing complex for the said area. On January 4, 2007, the Minister of Construction and Transportation publicly announced the designation of a district area 667,829 square meters, and the designation of a district area for national rental housing complex for the Defendant as the Defendant (hereinafter “instant district”).

C. Meanwhile, on June 13, 2006 and June 21, 2006, the Plaintiff submitted a proposal for designation of an urban development zone (the non-party 2 omitted) to the Yanan City Mayor on June 13, 2006 by designating the non-party 2 and the non-party 3 as the person who is one of the land owners within the instant project zone and the non-party 3 submitted a proposal for designation of an urban development zone (the non-party 2 omitted), and the non-party 3 proposed a plan for designation of a planned area for national rental housing complex (the non-party 2 omitted) as each designated area. However, on August 7, 2006, the Yan City was considerably short of the consent rate (66.7%) with respect to the proposal of the non-party 2 on August 7, 2006, the Defendant already returned the proposal to the Minister of Construction and Transportation on May 29, 2006.

The facts without dispute, Gap evidence Nos. 1, 2, and 3, non-party 3's testimony, fact-finding results in the astronomic't dispute, the purport of the whole pleadings.

2. The plaintiff's assertion

According to the Defendant’s application, an urban development project was discontinued within the instant project zone, which was promoted by the Plaintiff. As a result, the Plaintiff has an obligation to pay the total amount of KRW 344,00,00 for urban development proposal service cost, KRW 20,000 for land purchase service cost, KRW 740,727,274 for land purchase service cost, KRW 104,000 for the promotion committee operation cost, KRW 90,000 for the head office management cost, KRW 117,015,071 for the site office operation cost, KRW 278,942 for land purchase cost, KRW 277,90, KRW 90 for land purchase cost and financial expenses therefor, KRW 272,641,70 for the said project, + KRW 200, + KRW 707, KRW 479, KRW 707, KRW 407, KRW 97507, KRW 207, KRW 9707, KRW 4007, KRW 2075707.7.207.

3. Relevant provisions;

Urban Development Act (amended by Act No. 8283, Jan. 26, 2007; hereinafter the same shall apply)

Article 3 (Designation, etc. of Urban Development Zones)

(1) When a planned urban development is deemed necessary, the Special Metropolitan City Mayor, Metropolitan City Mayor, or Do Governor (hereinafter referred to as "Mayor/Do Governor") may designate an urban development zone. In such cases, if the area of an urban development zone to be designated is larger than that prescribed by Presidential Decree,

(4) The head of a Si/Gun/Gu (referring to an autonomous Gu; hereinafter the same shall apply) may request a Mayor/Do Governor to designate an urban development zone, as prescribed by Presidential Decree.

Article 4 (Formulation and Alteration of Development Plans)

(1) Any person who designates an urban development zone (hereinafter referred to as "rightholder") under Article 3 shall, when he/she intends to designate an urban development zone, establish a plan for an urban development project for such urban development zone (hereinafter referred to as "development plan").

(2) Any designating authority may modify a development plan directly or at the request of the head of a relevant central administrative agency or Si/Gun/Gu under Article 3 (3) 2 and (4).

Article 5 (Contents of Development Plans)

(1) Each development plan shall include the following matters: Provided, That matters falling under subparagraphs 13 and 14 may be included in a development plan after the designation of an urban development zone:

1. The name, location and area of the urban development zone;

2. Designation purposes and implementation period for an urban development project;

3. Matters concerning the division of an urban development project, where an urban development project is implemented by dividing an urban development zone into two or more project implementation districts;

4. Matters concerning an implementer of an urban development project;

5. Methods of implementing urban development projects;

6. Plan for accommodation of population;

7. Land utilization plan;

8. Traffic control plan;

9. Environmental conservation plan;

10. Plans to establish health, medical and welfare facilities;

11. A plan for the installation of major infrastructure, such as roads, waterworks, and sewerage;

12. Financing plan;

13. Where infrastructure is to be built in an area outside the urban development zone, the plan for bearing the expenses necessary to build such infrastructure;

14. Where there are rights, other than ownership, to the land, buildings or things fixed to the land subject to expropriation or use, mining rights, fishing rights, and rights to use water (hereinafter referred to as "land, etc."), the details thereof;

15. Other matters prescribed by the Presidential Decree.

Article 6 (Basic Surveys, etc.)

(1) Any implementer of an urban development project or any person who intends to be an implementer of an urban development project may, when he/she intends to designate an urban development zone or request or propose the designation of an urban development zone, investigate land, buildings, structures and other necessary matters within a zone that is designated as an urban development zone or make

(2) A person who intends to conduct an investigation or survey pursuant to the provisions of paragraph (1) may request the head of the relevant administrative agency, local government, government-invested institution, government-funded institution, or other related agency to submit necessary materials. In such cases, the head of the agency so requested shall comply with such request unless there

Article 11 (Implementers, etc.)

(1) An implementer of an urban development project (hereinafter referred to as "implementer") shall be designated by the designating authority from among the following persons: Provided, That where the whole of an urban development zone is implemented by a replotting method, the designating authority shall be designated as the implementer of land or association under subparagraph

1. The State or local governments;

2. Government-invested institutions prescribed by Presidential Decree;

3. Local corporations established under the Local Public Enterprises Act; and

4. Corporations established by persons falling under subparagraph 1 or 2 and persons falling under subparagraph 7 through joint investments for undertaking an urban development project (limited to the case where the ratio of investment by persons falling under subparagraph 1 or 2 exceeds 50/100); and

5. A landowner in an urban development zone or an association established by him/her for an urban development project (hereinafter referred to as "association").

6. Corporations meeting the requirements prescribed by Presidential Decree, such as the project period in the overconcentration control region among the corporations relocated from the overconcentration control region under the Seoul Metropolitan Area Readjustment Planning Act

7. 건설산업기본법에 의한 토목공사업 또는 토목건축공사업의 면허를 받는 등 개발계획에 적합하게 도시개발사업을 시행할 능력이 있다고 인정되는 자로서 대통령령이 정하는 요건에 해당하는 자

(2) Any designating authority may replace an implementer in any of the following cases:

1. Where an implementer fails to commence an urban development project within two years after authorization for an implementation plan for the urban development project is granted;

2. Where the designation of an implementer or the authorization of an implementation plan is revoked by an administrative disposition;

3. Where it is deemed difficult to achieve the objectives of an urban development project due to dishonor, bankruptcy, or other causes similar thereto.

4. Where a person designated as an executor pursuant to the proviso of paragraph (1) fails to apply for authorization of an implementation plan for an urban development project within the period fixed by Presidential Decree.

(5) A person falling under paragraph (1) 2 through 7 may propose the designation of an urban development zone to the head of a Si/Gun/Gu, as prescribed by Presidential Decree. In such cases, a person falling under paragraph (1) 5 through 7 shall obtain the consent of the land owners (including superficies; hereinafter the same shall apply) equivalent to at least 4/5 of the area of the land in the target zone.

Article 21 (Expropriation or Use of Land, etc.)

(1) Any implementer may expropriate or use land, etc. necessary for an urban development project: Provided, That any implementer falling under Article 11 (1) 5 through 7 shall purchase land equivalent to not less than 2/3 of the area of land subject to urban development project and obtain consent of not less than 2/3 of total number of landowners.

(2) Except as otherwise provided for in this Act, the Public Works Act shall apply mutatis mutandis to the expropriation or use of land, etc. referred to in paragraph (1).

Enforcement Decree of the Urban Development Act (amended by Presidential Decree No. 20298, Sept. 28, 2007; hereinafter the same shall apply)

Article 9 (Details of Basic Surveys)

(1) Matters that may be surveyed and surveyed by a person who intends to be an implementer or an implementer pursuant to Article 6 (1) of the Act shall be as follows:

1. The current state of population changes in the area where the relevant urban or urban development zone is to be designated, and the living zone of the same region and its trend;

2. Matters concerning the current status of population, land use, topography, and various development projects in an urban development zone;

3. Traffic conditions in the surrounding areas;

4. The frequency and status of collapses of storm and flood damage, landslide, and ground and other disasters;

5. Matters concerning superior plans, such as basic urban planning and Metropolitan planning;

6. Other matters as determined by the Ordinance of the Ministry of Construction and Transportation.

Article 19 (Proposal for Designation of Urban Development Zones)

(1) Any person who intends to propose the designation of an urban development zone under Article 11 (5) of the Act shall submit documents prescribed by Ordinance of the Ministry of Construction and Transportation to the head of a Si/Gun

(3) The head of a Si/Gun/Gu in receipt of a proposal for the designation of an urban development zone under paragraph (1) shall notify the proposer of whether he/she accepts the proposal within three months.

The Public Works Act (amended by Act No. 8665 of Oct. 17, 2007, hereinafter the same shall apply)

Article 24 (Discontinuance and Alteration of Projects)

(1) Where it becomes unnecessary to expropriate or use all or part of land, etc. due to the discontinuation or alteration of all or part of a project after a public announcement of project approval has been made, the project operator shall report it to the Mayor/Do Governor having jurisdiction over the project area, and notify the landowner

(6) A project operator shall compensate the landowner or person concerned for any losses incurred by the discontinuation or alteration of all or part of a project under paragraph (1).

The project operator shall indemnify the landowner or person concerned for any losses incurred by the acquisition or use of the land, etc. required for the public works.

Article 77 (Indemnity for Business Losses, etc.)

(1) Compensation for any business loss incurred in the discontinuation or suspension of business shall be provided in consideration of the business profits, transfer expenses for facilities, etc.

(4) Specific calculation methods of and criteria for compensation under paragraphs (1) through (3) shall be prescribed by the Ordinance of the Ministry of Construction and Transportation.

Enforcement Regulations of the Public Works Act (amended by Ordinance of the Ministry of Construction and Transportation No. 551, Mar. 19, 2007; hereinafter the same shall apply)

Article 45 (Business Subject to Compensation for Loss of Business) The business subject to compensation for loss of business under Article 77 (1) of the Act shall be the business falling under any of the following subparagraphs:

1. A business which continues to be operated for profit with human and physical facilities installed in a certain place prior to the date of project approval, etc.;

2. Where permission, license, report, etc. (hereinafter referred to as "permission, etc.") is required under relevant Acts and subordinate statutes in the course of conducting business, a business being operated in accordance with such permission, etc. after obtaining permission, etc.

Article 57 (Compensation for Discontinuance, etc. of Business) Where any project, etc. that is in progress pursuant to relevant Acts and subordinate statutes, such as a building permit for construction of a building, is discontinued, altered or suspended due to the implementation of public works, legal fees and other expenses incurred in relation to such project, etc. shall be compensated for.

Where a person who operates a business subject to the compensation for business losses under the provisions of Article 45 outside a zone where public works are performed (compensation for business losses outside a zone where public works are performed) fails to continue his/her business at the relevant place due to the loss of at least 2/3 of the hinterland due to the implementation of public works, he/she shall, at the request of the relevant business operator, be deemed to be incorporated into a zone where public works are performed and compensated.

4. Determination

A. Whether Article 57 of the Enforcement Rule of the Public Works Act is applied directly

In light of the location, text, etc. of Article 57 of the Enforcement Rule of the Public Works Act, the purpose of Article 57 is to prescribe the liability for direct losses arising from the abolition, modification, or suspension of a project, etc., which was in progress in accordance with the relevant Acts and subordinate statutes, such as building permission, in order to construct a building on the ground by using the land, etc. subject to expropriation. However, the urban development proposal service cost, operating expenses, etc. spent by the Plaintiff in the course of implementing an urban development project in the project area of this case cannot be deemed as direct losses arising from the abolition of the project due to the designation of the district of this case. Furthermore, the above provision aims to compensate for losses incurred by the person who performed the project in trust of the administrative subject, such as building permission, and conducted the project in accordance with the administrative act of the administrative subject and conducted the project accordingly. Since the Plaintiff was returned after submitting the proposal for designating the urban development zone and did not have been granted any trust from the Defendant or the administrative subject, this case ultimately is not directly subject to the above provision.

B. Whether Article 57 of the Enforcement Rule of the Public Works Act applies by analogy

In a case where a person, who trusted an administrative act of an administrative body, contributed to property or paid-in expenses, etc. thereby, is limited to the exercise of property rights due to a legitimate administrative plan established by a public necessity, and as a result, an indirect loss occurred outside a public project implementation zone as a result of the implementation of a public project, without consultation between the victim and the project implementer. Even in the case where there is no explicit statutory basis for such compensation, it can be easily predicted that such loss would occur due to the implementation of a public project, and where the scope of the loss can be specified specifically, the relevant provisions, etc. concerning the compensation for the loss may be applied mutatis mutandis (Supreme Court Decision 2004Da25581 Decided September 23, 2004).

However, as seen earlier, at the time of the public announcement of the designation of the instant district, the Plaintiff was submitted and returned the proposal for designation of an urban development zone, and was granted any trust in the business promoted by the Plaintiff from the Si of Yanan City or the Defendant and other administrative entities. As such, it cannot be said that the Plaintiff “a person who trusted the administrative actions of the administrative body, thereby making property contribution or paying expenses therefrom. Furthermore, it is difficult to regard the loss incurred by the Plaintiff as an indirect loss incurred outside the Defendant’s national rental housing complex project implementation zone, and it is difficult to readily expect that the Plaintiff would incur any loss as alleged by the Plaintiff due to the implementation of the said project. Therefore, the foregoing provision cannot be applied by analogy.

Ultimately, the plaintiff's assertion is without merit.

5. Conclusion

Therefore, the plaintiff's claim of this case is dismissed as it is without merit, and it is so decided as per Disposition.

Judges fixed-ranking (Presiding Judge) or award and decoration