In cases where, at the time when an ordering person receives a request from a subcontractor or a construction machinery rental business operator for a direct payment of the subcontract price or the lease price of construction machinery from the subcontractor or construction machinery rental business operator, the obligation to pay to the principal contractor or contractor is already extinguished due to payment of the subcontract price or construction machinery, whether the obligation to directly pay the subcontractor to the subcontractor, etc. occurs (negative); and in cases where the ordering person pays the subcontract price, etc. to the subcontractor, etc. by mistake that he/she had the obligation to directly pay to the subcontractor, etc., whether the ordering person may claim a return of unjust enrichment against the subcontractor, etc. (affirmative in principle)

Article 14(4) of the Fair Transactions in Subcontracting Act (hereinafter “subcontract”) provides that “When an ordering person directly pays a subcontract price to the relevant subcontractor pursuant to paragraph (1), the amount of subcontract that the ordering person has already paid to the principal contractor shall be deducted,” and Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act (hereinafter “Enforcement Decree of the Subcontract Act”) provides that “the ordering person shall be liable to pay the subcontract price to the principal contractor within the scope of the obligation to pay the subcontract price.” In light of the foregoing, the Subcontract Act intends to protect the subcontractor by imposing the subcontractor a direct payment obligation for the portion executed by the subcontractor to the extent that it does not impose any new burden exceeding the obligation to pay the subcontract price on the principal contractor. Considering such legislative purport, it is reasonable to interpret that the ordering person bears the obligation to pay the subcontract price directly to the extent of the obligation to pay the principal contractor pursuant to Article 9(3) of the Enforcement Decree of the Subcontract Act.

In addition, according to Article 35(7) of the Framework Act on the Construction Industry and Article 29(3) of the Enforcement Rule of the Framework Act on the Construction Industry, Article 32(4) and Article 35(2)4 of the Framework Act on the Construction Industry even where a contractor directly pays construction machinery rental fees to a construction machinery rental business operator pursuant to Article 32(4) of the Framework Act on the Construction Industry, Article 9(3) of the Subcontract Act shall apply mutatis mutandis, barring any special circumstance, a project owner shall be deemed

Therefore, in cases where, at the time when an ordering person receives a request from a subcontractor or a construction machinery rental business operator (hereinafter “contractor, etc.”) for the direct payment of the subcontract price or the rent of construction machinery (hereinafter “subcontract”) pursuant to Article 14(1)1 of the Subcontract Act, or Articles 32(4) and 35(2)4 of the Framework Act on the Construction Industry, where the obligation to pay to a prime contractor or a contractor is already extinguished due to repayment, a direct payment obligation to the subcontractor, etc. does not arise. Nevertheless, if the ordering person paid the subcontract price, etc. to the remaining subcontractor, etc. who caused an error that the subcontractor, etc. was liable to pay the direct payment to the subcontractor, etc., the ordering person is entitled to file a claim against the subcontractor, etc. for the return of unjust enrichment, barring special circumstances.

Article 14(1)1 and (4) of the Fair Transactions in Subcontracting Act; Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act; Articles 32(4) and 35(2)4 and (7) of the Framework Act on the Construction Industry; Article 29(3) of the Enforcement Rule of the Framework Act on the Construction Industry; Article 664 of the Civil Act

Supreme Court Decision 2014Da203960 Decided May 28, 2015

Korea

The Hocom Construction Industry, Inc., a lawsuit taking over the Hocom Industries, Co., Ltd., the administrator of Hocom Industries, a non-party taking over the lawsuit of the non-party taking over the lawsuit (Law Firm Park Jae-jin et al., Counsel for the plaintiff

Seoul High Court Decision 2017Na2007345 decided June 16, 2017

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

The grounds of appeal are examined.

1. Regarding ground of appeal No. 1

The lower court determined as follows. The Plaintiff not seeking the return of advance payment paid pursuant to the instant contract, but sought the return of excess payment by mistake, etc., even though there was no contractual obligation to pay the advance payment. The excess payment is subject to restitution of unjust enrichment regardless of the rescission or termination of the instant contract, and is not included in the scope of restitution following the rescission or termination of the instant contract. Therefore, a claim for return of excess payment paid by the Plaintiff does not constitute a claim for reimbursement of the value of the consideration that the obligor and the other party have received when the obligor and the other party cancel or terminate the bilateral contract that had not yet been completed at the time of the commencement of rehabilitation procedures at their option

In light of the relevant legal principles and records, the lower judgment did not err by misapprehending the legal doctrine on priority claim under Article 121(2) of the Debtor Rehabilitation and Bankruptcy Act (hereinafter “Rehabilitation Act”), contrary to what is alleged in the grounds of appeal.

2. Regarding ground of appeal No. 2

A. Article 14(4) of the Fair Transactions in Subcontracting Act (hereinafter “subcontract”) provides that “When an ordering person directly pays a subcontract price to the relevant subcontractor pursuant to paragraph (1), the amount of subcontract that the ordering person has already paid shall be paid after subtracting the subcontract price that the ordering person has already paid to the principal contractor.” In light of the foregoing, Article 9(3) of the Enforcement Decree of the Fair Transactions in Subcontracting Act (hereinafter “Enforcement Decree of the Subcontract Act”) provides that “the ordering person bears the obligation to directly pay the subcontract price to the extent of the obligation to pay the principal contractor.” In short, the Subcontract Act intends to protect the subcontractor preferentially by imposing the subcontractor the obligation to directly pay the subcontract price to the extent that it does not impose any new burden exceeding the obligation to pay the contract price on the principal contractor. Considering such legislative purport, it is reasonable to interpret that the ordering person bears the obligation to directly pay the subcontract price to the extent of the obligation to pay the principal contractor pursuant to Article 9(3) of the Enforcement Decree of the Subcontract Act (see, e.g., Supreme Court Decision 2015Da36964, May 208.

In addition, according to Article 35(7) of the Framework Act on the Construction Industry and Article 29(3) of the Enforcement Rule of the Framework Act on the Construction Industry, Article 32(4) and Article 35(2)4 of the Framework Act on the Construction Industry even where a contractor directly pays construction machinery rental fees to a construction machinery rental business operator pursuant to Article 32(4) and Article 35(2)4 of the Enforcement Decree of the Subcontract Act, Article 9(3) of the Enforcement Decree of the Subcontract Act shall apply mutatis mutandis.

Therefore, in cases where, at the time when an ordering person receives a request from a subcontractor or a construction machinery rental business operator (hereinafter “contractor, etc.”) for the direct payment of the subcontract price or the rent of construction machinery (hereinafter “subcontract”) pursuant to Article 14(1)1 of the Subcontract Act, or Articles 32(4) and 35(2)4 of the Framework Act on the Construction Industry, where the obligation to pay to a prime contractor or a contractor is already extinguished due to repayment, a direct payment obligation to the subcontractor, etc. does not arise. Nevertheless, if the ordering person paid the subcontract price, etc. to the remaining subcontractor, etc. who caused an error that the subcontractor, etc. was liable to pay the direct payment to the subcontractor, etc., the ordering person is entitled to file a claim against the subcontractor, etc. for the return of unjust enrichment, barring special circumstances.

B. The reasoning of the lower judgment and the evidence duly admitted reveal the following.

(1) On December 12, 2012, the Plaintiff entered into a contract (hereinafter “instant contract”) with Ulsan Construction Co., Ltd. (hereinafter “Suld Construction”) by setting the total amount of construction cost of 12.93 billion won and the total construction period of 12.93 billion won as the total construction period, between December 12, 2012 and December 15, 2013 (hereinafter “instant contract”). A contract was concluded to extend the said construction period several times thereafter.

(2) On December 17, 2012, Ulsan Construction commenced the instant construction, but on October 22, 2014, rehabilitation procedures (hereinafter “instant rehabilitation procedures”) began with respect to Ulsan Construction, and thereafter the instant construction was suspended.

(3) On December 11, 2014, upon obtaining permission from the rehabilitation court, the administrator of Ulsan Construction notified the Plaintiff that “the instant contract is terminated, which is an executory bilateral contract under Article 119(1) of the Debtor Rehabilitation Act.”

(4) The sum of the construction cost paid by the Plaintiff to Ulsan Construction after entering into the instant contract and the construction cost paid directly to the subcontractor, subcontractor, construction machinery rental business operator, etc. pursuant to Article 14 of the Subcontract Act and Article 35 of the Framework Act on the Construction Industry is KRW 12,114,156,680.

(5) However, upon the Plaintiff’s delivery of the instant construction site on July 1, 2015, the 89.9% high and high interest rate at the time of discontinuance of construction, and the construction cost therefrom was KRW 11,631,186,818.

(6) Of KRW 482,969,862 paid by the Plaintiff in excess of the construction amount according to the high-level ratio (i.e., KRW 12,14,156,680, 11,631, 186,818), KRW 108,367,462 paid to the Defendant before the commencement of the instant rehabilitation procedure. On the other hand, KRW 374,602,40, the remainder of KRW 374,600 was paid to the Defendant before the commencement of the instant rehabilitation procedure. On the other hand, the assignee of the claims of Hanpo Construction Co., Ltd., Ltd., the subcontractor, and the Gwangju Metropolitan Construction Co., Ltd., the rental business operator, the construction machinery rental business operator, after the commencement of the instant rehabilitation procedure, requested the Plaintiff, who is the ordering person, to pay the subcontract amount, etc. directly from the Plaintiff.

(7) Meanwhile, the Plaintiff filed the instant lawsuit against the manager of Ulsan Construction. On September 19, 2016, during the first instance trial, the instant rehabilitation procedure was completed and the Ulsan Construction took over the instant litigation procedure. The Ulsan Construction was mutually changed on April 20, 2017, which was pending in the lower court, to “the Hocom Industries of the Stock Company” (the Hocom Industries of the Stock Company was merged with the Defendant on August 31, 2017, which was pending in the final appeal trial; hereinafter “Defendant”).

C. Based on the aforementioned factual basis, the lower court determined as follows regarding the claim for return of unjust enrichment regarding the subcontract price, etc. that the Plaintiff paid to mining name construction, etc. after commencement of the instant rehabilitation procedure.

Subcontract payment claims against the Defendant, such as Gwangju Construction, etc. constitute rehabilitation claims that occurred before the commencement of the rehabilitation procedure in this case. Even if the Plaintiff acquired the right to indemnity or subrogation by subrogation on behalf of the Defendant after the commencement of the rehabilitation procedure in this case, the nature of the above claim remains intact. Therefore, it does not constitute “a claim arising after the commencement of rehabilitation procedure due to unjust enrichment,” which is a priority claim under Article 179(1)6 of the Debtor Rehabilitation Act.

D. However, examining the reasoning of the judgment below in light of the aforementioned legal principles, the above facts, and the evidence duly admitted, it is difficult to accept the judgment of the court below as it is for the following reasons.

In accordance with Article 14(1)1 of the Subcontract Act and Article 32(4) and Article 35(2)4 of the Framework Act on the Construction Industry, the project owner requested the Plaintiff to pay the subcontract price, etc., and the Plaintiff paid the subcontract price directly to the Plaintiff.

However, since the Plaintiff’s obligation to pay the subcontract price to the Defendant was already extinguished at the time when the Plaintiff received a request for the direct payment from the luminous Construction, etc., even if the luminous Construction, etc. requested the direct payment of the subcontract price thereafter, the Plaintiff’s obligation to pay the luminous Construction, etc. does not occur.

Nevertheless, the Plaintiff paid subcontract consideration, etc. to the rest of luminous construction, etc. that caused a mistake that the obligation to pay the direct payment for luminous construction, etc., is deemed to have been the intention of the Plaintiff to perform the obligation to pay the direct payment for luminous construction, etc., and it does not mean that the Plaintiff intended to perform the obligation to pay the subcontract consideration for luminous construction, etc. by the Defendant, which is the Defendant’s obligation. Therefore, this constitutes a case where a third party, other than the obligor, erroneously performed another’s obligation with his/her own obligation with the knowledge of the fact that he/she performed the obligation, and thus, barring any special circumstance, the Plaintiff is only entitled

Therefore, the claim for return of unjust enrichment with respect to the subcontract price, etc. paid by the Plaintiff to the Defendant should be dismissed due to the lack of reasonable grounds.

E. However, the lower court dismissed the instant lawsuit claiming the performance of the above claim against the Defendant on the ground that there is no benefit in the lawsuit, and the reason is that the said claim falls under rehabilitation claims, but was approved without reporting it as rehabilitation claims in the rehabilitation procedure of this case, and without entering it in the list of creditors, and thus, the Defendant was exempted from liability pursuant to Article 251 of the Debtor Rehabilitation Act. Although the lower judgment was erroneous, the lower court did not err, it did not change the judgment against the Plaintiff, the appellant, in light of the principle of prohibition of disadvantageous alteration in the instant case, and thus, it did not accept this part of the final appeal.

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 Kim Shin (Presiding Justice)