A court has ruled that even if a dwelling cooperative's agreement to guarantee a refund of the down payment is void because it was not approved by a general meeting, members cannot demand their contributions back on the grounds of the years-old agreement's invalidity if the dwelling construction project is proceeding normally.
According to legal sources on the 7th, the Supreme Court's First Division (Presiding Justice Ma Yong-ju) remanded to the Changwon District Court an appellate ruling that had partially sided with the plaintiffs in a countersuit filed by Jang, a person surnamed Jang who was a member of a regional dwelling cooperative in Changwon, South Gyeongsang, and others seeking a refund of payments made to the cooperative.
Jang and others paid member contributions and signed a membership contract in June 2015. From Mar. 2016 to Nov. 2017, they paid additional contributions and, after taking out bank loans, paid the interim payments, but they did not repay by the maturity date, so the cooperative, which had provided a joint guarantee, repaid the loans.
The cooperative sued Jang and others for indemnity and expelled them from the cooperative. They then filed a countersuit seeking a refund of their contributions, arguing for cancellation of the contract on the grounds that the refund agreement at the time of joining was void.
The refund agreement at the time stated, "If the application for project approval is not filed by Dec. 2015, we guarantee a refund of the entire down payment." The claim was that it was void because it was a matter that required a general meeting resolution but did not undergo one.
Both the first and second trials accepted the claim, found that the membership contract was lawfully canceled, and ordered the cooperative to return the contributions.
However, the Supreme Court held that even if the refund agreement is void, a claim for the return of contributions violates the principle of good faith and is not permissible.
The Supreme Court said, "The primary purpose of a cooperative member entering into a refund guarantee agreement together with a membership contract is to minimize losses from failure to achieve the contract's objective, and it is hard to see it as aiming to absolutely guarantee the return of contributions." It added, "Even if the refund guarantee agreement becomes void and a refund cannot be obtained, there may be cases where there is no impediment to the ultimate objective of the agreement and contract, which is 'acquiring ownership of a newly built apartment.'"
If project approval has been obtained, thereby achieving the purpose of the refund guarantee agreement, and furthermore the dwelling construction project is proceeding normally in accordance with procedures, then later asserting the invalidity of the refund guarantee agreement, or the invalidity or cancellation of the membership contract as a consequence, beyond the purpose and intent of that agreement, may violate the principle of good faith or constitute an abuse of rights.
It was also considered as a basis for the decision that although project approval was not obtained around Dec. 2015 as set in the initial refund agreement, Jang and others did not seek a return of the down payment for a considerable period and instead paid additional contributions.
The Supreme Court said, "Dwelling construction can determine whether many cooperative members can secure stable housing depending on its success or failure, so the contributions used as project funds take on substantial public interest," adding, "If contributions are refunded in full even though the purpose of the agreement has been achieved and the project is proceeding normally, the resulting funding shortfall would inevitably shift the damage to the remaining members."