In a case where concluding a lease contract with a person arranged by a school foundation to become a new lessee by means of competitive bidding violates the legal obligation to select a lessee, whether it constitutes “justifiable cause” to refuse the conclusion of a lease contract under Article 10-4(1)4 of the former Commercial Building Lease Protection Act (affirmative in principle)

Article 10-4 of the former Commercial Building Lease Protection Act (amended by Act No. 15791, Oct. 16, 2018; hereinafter “former Commercial Building Lease Act”) provides, “The lessor shall not interfere with receiving premiums from a person who wishes to become a new lessee arranged by the lessee according to the premium contract by doing any of the following acts from three months before the lease term expires to the end of the lease (Article 10-4).” (Article 10 of the same Act provides, “The lessor shall not interfere with receiving premiums from a person who wishes to become a new lessee arranged by the lessee pursuant to the premium contract without any justifiable reason).” (Article 10-4 of the same Act provides, “The lessor refuses to conclude a lease contract with a person arranged by the lessee as a new lessee without any other justifiable reason). In the event the lessor causes damages to the lessee in violation of the duty to protect the opportunity to recover the premium (Article 10-4(3)).

Meanwhile, according to Article 33 of the Private School Act and Article 35(1) of the Financial Accounting Rules of private school institutions, where a school foundation intends to enter into a lease agreement exceeding KRW 50 million (based on the annual amount or total amount), which is the amount under Article 26(1)5(a) of the Enforcement Decree of the Act on Contracts to Which the State is a Party, it shall be put into general competition unless there is any reason to make a negotiated contract under Article 35(3) of the said Rule. Thus, barring any special circumstance, where a school foundation refuses to enter into a lease agreement on the grounds of such circumstance, barring special circumstances, it shall be deemed that there exists “justifiable cause” as provided by Article 10-4(1)4 of the former Commercial Building Lease Act.

Article 10-4(1)4 and (3) of the former Commercial Building Lease Protection Act (Amended by Act No. 15791, Oct. 16, 2018); Article 33 of the Private School Act; Article 35(1) and (3) of the Financial and Accounting Rules of Private School; Article 26(1)5(a) of the Enforcement Decree of the Act on Contracts to which the State is a Party;

dong School Foundation (Law Firm Lee & Lee LLC, Attorneys Lee Hy-hwan et al., Counsel for defendant-appellant)

Defendant-Counterclaim (Law Firm Shin, Attorneys Choi Young-sik et al., Counsel for the defendant-Counterclaim plaintiff-appellant)

Seoul High Court Decision 2019Na1066, 10673 decided October 25, 2019

The appeal is dismissed. The costs of appeal are assessed against the Defendant (Counterclaim Plaintiff).

The grounds of appeal are examined.

1. As to the ground of appeal No. 1 (the part on violation of the duty to protect the opportunity to recover premiums)

A. Article 10-4 of the former Commercial Building Lease Protection Act (amended by Act No. 15791, Oct. 16, 2018; hereinafter “former Commercial Building Lease Act”) provides, “The lessor shall not interfere with receiving the premium from a person who wishes to become a new lessee arranged by the lessee according to the premium contract by doing any of the following acts from three months before the lease term expires to the end of the lease term (Article 10-4).” Paragraph (1) of the same Article provides, “any of the reasons described in the following subparagraphs is that a lessor refuses to enter into a lease contract with a person who wishes to become a new lessee arranged by the lessee without any justifiable reason” (Article 10-4). In the event the lessor causes damages to the lessee in violation of the duty to protect the opportunity to recover the premium (Article 10-4(3) of the same Act).

Meanwhile, according to Article 33 of the Private School Act and Article 35(1) of the Financial Accounting Rules of private school institutions, where a school foundation intends to enter into a lease agreement exceeding KRW 50 million (based on the annual amount or total amount), which is the amount under Article 26(1)5(a) of the Enforcement Decree of the Act on Contracts to Which the State is a Party, it shall be put into general competition unless there is any reason to make a negotiated contract under Article 35(3) of the said Rule. Thus, barring any special circumstance, where a school foundation refuses to enter into a lease agreement on the grounds of such circumstance, barring special circumstances, it shall be deemed that there exists “justifiable cause” as provided by Article 10-4(1)4 of the former Commercial Building Lease Act.

B. On the grounds indicated in its reasoning, the lower court determined that the refusal by the Defendant (Counterclaim Plaintiff; hereinafter “the Defendant”) to enter into a lease agreement with the party arranged by competitive bidding pursuant to Article 33 of the Private School Act and Article 35(1) of the Financial Accounting Rules constitutes “justifiable cause” as stipulated in Article 10-4(1)4 of the former Commercial Building Lease Act, and thus, did not constitute a breach of the duty to protect the opportunity to recover premiums.

C. Examining the records in accordance with the aforementioned legal principles, the judgment of the court below is just, and contrary to what is alleged in the grounds of appeal, the court below did not err by misapprehending the legal principles on “justifiable cause” under Article 10-4(1)4 of the former Commercial Building Lease Act, thereby affecting

2. As to the ground of appeal No. 2 (the ground of appeal No. 2)

The Defendant’s assertion in this part of the grounds of appeal is that the Plaintiff’s damage liability and the Defendant’s duty to deliver the instant store are concurrently performed, on the premise that the Plaintiff is liable for damages arising from a violation of the duty to protect the opportunity to recover premiums. However, as long as the lower court’s determination that did not recognize the Plaintiff to violate the duty to protect the opportunity to collect premiums, this part of the grounds

3. Conclusion

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.

Justices Min You-sook (Presiding Justice)