[1] In a case where a company reorganization procedure has commenced against a principal contractor, whether the application of Article 14 of the Fair Transactions in Subcontracting Act, which is a provision on a subcontractor's direct payment claim against a subcontractor's ordering person, should be excluded pursuant to Article 112 of the former Company Reorganization Act (negative)

[2] Whether a request for direct payment of subcontract consideration to a subcontractor's ordering person under Article 14 of the Fair Transactions in Subcontracting Act constitutes "a compulsory execution against company property" prohibited by Article 67 (1) of the former Company Reorganization Act (negative)

[1] The provisions of Article 14 (1) 1 and (2) of the Fair Transactions in Subcontracting Act are to prevent a small subcontractor from being paid a subcontract price due to the suspension of payment, bankruptcy, etc. of the principal contractor, and thus, to prevent the chain of installments due to the failure of the principal contractor to receive the subcontract price. The contract price claim against the principal contractor is closely related to the subcontractor's subcontract price claim against the principal contractor, while the principal contractor's general creditors have no relation with the principal contractor's claim against the principal contractor. Since the principal contractor's contract price claim against the principal contractor is closely related to the subcontractor's contract price claim against the principal contractor, the principal contractor's claim amount to the principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's principal contractor's payment is more favorable than general creditors. Thus, there is no reason to exclude such direct claim amount that the principal contractor's bankruptcy procedure has commenced against the principal contractor (in particular, repayment value higher than the principal contractor's property in the company reorganization procedure shall be guaranteed.).

[2] A direct claim for payment of the subcontract price to the ordering person of the subcontractor under Article 14 of the Fair Transactions in Subcontracting Act shall not be deemed to constitute a "voluntary execution against company property" prohibited by Article 67 (1) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act (Act No. 7428 of March 31, 2005).

[1] Article 14 of the Fair Transactions in Subcontracting Act, Article 112 of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) / [2] Article 14 of the Fair Transactions in Subcontracting Act, Article 67 (1) of the former Company Reorganization Act (repealed by Article 2 of Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005)

[1] Constitutional Court Decision 2001HunBa98 decided May 15, 2003 (HunGong81, 43)

Plaintiff (Law Firm Green, Attorneys Lee Young-hoon et al., Counsel for the plaintiff-appellant)

Korea Land Trust Co., Ltd. (Law Firm Samil, Attorneys Oh Woo et al., Counsel for the plaintiff-appellant)

Yong-Nam Construction Co., Ltd., a receiver of Yong-Nam Construction Co., Ltd. (Law Firm Samil, Attorneys Oh Jeong-tae et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2006Na55403 decided January 24, 2007

The appeal is dismissed. The costs of appeal are assessed against the Defendant joining the Defendant.

1. According to Article 14 (1) 1 of the Fair Transactions in Subcontracting Act (hereinafter “subcontract Act”), where it is impossible for a prime contractor to pay the subcontract price due to the suspension of payment by a prime contractor, bankruptcy, or other similar causes, the ordering person shall directly pay to the subcontractor concerned when the prime contractor requests the direct payment of subcontract price. According to Article 14 (2) of the Act, if the subcontractor requests the direct payment of subcontract price to the ordering person due to the above causes, it shall be deemed that the subcontractor’s obligation to pay to the prime contractor and the obligation to pay subcontract price to the prime contractor to the subcontractor is extinguished within the scope of such obligation. This provision has been established in order to prevent a small-scale subcontractor from being paid the subcontract price due to the suspension of payment by the prime contractor or bankruptcy, and it shall not be deemed that the prime contractor’s obligation to pay subcontract price to the prime contractor is more than that of the prime contractor under Article 14 (1) 2 of the Act on the Fair Transactions in Subcontracting. The reason why the prime contractor’s obligation to pay subcontract price to the prime contractor is not related to the prime contractor’s obligation.

The decision of the court below to the same purport is correct, and there is no error of law in the misapprehension of legal principles as to the exclusion from the application of Article 14 of the Subcontract Act under Article 112 of the Company Reorganization Act.

2. After compiling the adopted evidence, the court below rejected the above assertion on the assertion by the defendant's assistant intervenor that since 50% of the principal and interest are exempted from the reorganization claim against the defendant's assistant intervenor in accordance with the reorganization plan approved in the company reorganization procedure for the defendant's assistant intervenor, the plaintiff's direct payment claim against the defendant should be reduced to the same extent. At the same time, the plaintiff's direct payment obligation under Article 14 of the Subcontract Act occurred upon the plaintiff's request for a direct payment of subcontract price to the defendant, and the plaintiff's direct payment claim against the defendant's assistant intervenor has already been extinguished within the scope of the subcontract price claim against the defendant's assistant intervenor, even if the reorganization plan for the defendant's assistant intervenor was approved thereafter, the reorganization plan is not effective against the plaintiff. In light of the provisions and records of Article 14 of the Subcontract Act, it is proper in the judgment of the court below, and there is no violation

On the other hand, a request for direct payment of the subcontract price to the ordering person by the subcontractor under Article 14 of the Subcontract Act cannot be deemed as a compulsory execution of company property as prohibited under Article 67 (1) of the Company Reorganization Act, and therefore, the argument in the grounds of appeal on this point cannot be accepted.

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

Justices Kim Ji-hyung (Presiding Justice)