Choi Joon-kyu, Sale of Sports Facilities Based on the Trust for Security Purposes, and Transfer of Membership Contract -Subject case: Supreme Court en banc Decision 2016Da220143 Decided October 18, 2018, JURIS, Vol. 1, No. 48 (2019), pp. 359-402.
<Abstract>
The recent Korean Supreme Court en banc Decision 2016Da220143 rendered on October 18, 2018 (hereinafter “subject case”) ruled that, when the sale of the essential sports facilities was conducted by the trustee of collateral trust, the rights and duties of sports facilities operator are transferred to the buyer by applying Article 27 Parag. (2) Subparag. 4 of the Sports Facilities Act (hereinafter “Act”). This paper agrees with the conclusion of the ruling for the following reasons: ① The legislative purpose of the Act, which is to protect the members of sports facilities, can only be achieved, if Article 27 Parag. (2) of the Act is applied to the trust for security purposes. Even if there is a question about the legislative validity of the foregoing clause or the necessity of protection of the members, a judge should interpret the law to respect the authority of the law to the fullest possible extent, except where the law is unconstitutional or the collateral trust at issue is beyond the permissible meaning of the words of Article 27 Parag. (2) Subparag. 4 of the Act. ② Article 27 Parag. (1) of the Act is intended to protect the members of sports facilities mainly considering the situation where the sports facilities are sold according to the voluntary will of the operator. Therefore, it conforms to the legal framework to interpret Article 27 Parag. (2) of the Act as having been introduced to protect the members when the sports facilities are sold irrespective of the operator’s will. ③ In a rebuttal to my opinion, one might argue that, with his focus on the form of collateral trust, a buyer’s inheritance of the rights and duties that the trustee did not inherit from the trustor is unreasonable, as the buyer acquires the sports facilities by succession from the trustor (“no one can give more than what he has”). However, focusing on the substance of collateral trust, it is possible to treat the buyer, who is the successor of the trustee, differently from the ordinary third party acquiring the property from the buyer, who had purchased the pertinent property from the seller. In a similar vein, beneficiaries of collateral trusts can be treated as rehabilitation-secured creditors in the rehabilitation process. However, Article 27 Parag. (2) of the Act is inefficient in terms of the following points and needs to be improved from the legislative perspective. First, according to the foregoing clause, the members will enjoy the de facto right to receive repayment of the deposit in preference to any other creditors, even if the requirements of public announcement are not satisfied. This will be a serious hindrance to collateral transactions of essential sports facilities. Second, it is unclear how to determine the repayment ratio of the members’ claims in the rehabilitation proceedings so that it is in line with the principle of fair and equal treatment in the Article 217 of the Debtor Rehabilitation and Bankruptcy Act. This uncertainty can lead to increased transaction costs in drafting and authorizing the rehabilitation plan. From the standpoint of legislation, a desirable resolution would be to ① supplement Article 27 Parag. (2) of the Act to treat the members as secured-creditors based on the time at which the members meet the requirements of public announcement, or ② abolish the foregoing clause and protect the members through a guarantee or the insurance scheme.
<Keywords>
membership golf course, trust for security purposes, Sports Facilities Act, rehabilitation process, the relationship between de lege lata and de lege ferenda
Choi Joon-kyu, Sale of Sports Facilities Based on the Trust for Security Purposes, and Transfer of Membership Contract -Subject case: Supreme Court en banc Decision 2016Da220143 Decided October 18, 2018, JURIS, Vol. 1, No. 48 (2019), pp. 359-402.
<Abstract>
The recent Korean Supreme Court en banc Decision 2016Da220143 rendered on October 18, 2018 (hereinafter “subject case”) ruled that, when the sale of the essential sports facilities was conducted by the trustee of collateral trust, the rights and duties of sports facilities operator are transferred to the buyer by applying Article 27 Parag. (2) Subparag. 4 of the Sports Facilities Act (hereinafter “Act”). This paper agrees with the conclusion of the ruling for the following reasons: ① The legislative purpose of the Act, which is to protect the members of sports facilities, can only be achieved, if Article 27 Parag. (2) of the Act is applied to the trust for security purposes. Even if there is a question about the legislative validity of the foregoing clause or the necessity of protection of the members, a judge should interpret the law to respect the authority of the law to the fullest possible extent, except where the law is unconstitutional or the collateral trust at issue is beyond the permissible meaning of the words of Article 27 Parag. (2) Subparag. 4 of the Act. ② Article 27 Parag. (1) of the Act is intended to protect the members of sports facilities mainly considering the situation where the sports facilities are sold according to the voluntary will of the operator. Therefore, it conforms to the legal framework to interpret Article 27 Parag. (2) of the Act as having been introduced to protect the members when the sports facilities are sold irrespective of the operator’s will. ③ In a rebuttal to my opinion, one might argue that, with his focus on the form of collateral trust, a buyer’s inheritance of the rights and duties that the trustee did not inherit from the trustor is unreasonable, as the buyer acquires the sports facilities by succession from the trustor (“no one can give more than what he has”). However, focusing on the substance of collateral trust, it is possible to treat the buyer, who is the successor of the trustee, differently from the ordinary third party acquiring the property from the buyer, who had purchased the pertinent property from the seller. In a similar vein, beneficiaries of collateral trusts can be treated as rehabilitation-secured creditors in the rehabilitation process. However, Article 27 Parag. (2) of the Act is inefficient in terms of the following points and needs to be improved from the legislative perspective. First, according to the foregoing clause, the members will enjoy the de facto right to receive repayment of the deposit in preference to any other creditors, even if the requirements of public announcement are not satisfied. This will be a serious hindrance to collateral transactions of essential sports facilities. Second, it is unclear how to determine the repayment ratio of the members’ claims in the rehabilitation proceedings so that it is in line with the principle of fair and equal treatment in the Article 217 of the Debtor Rehabilitation and Bankruptcy Act. This uncertainty can lead to increased transaction costs in drafting and authorizing the rehabilitation plan. From the standpoint of legislation, a desirable resolution would be to ① supplement Article 27 Parag. (2) of the Act to treat the members as secured-creditors based on the time at which the members meet the requirements of public announcement, or ② abolish the foregoing clause and protect the members through a guarantee or the insurance scheme.
<Keywords>
membership golf course, trust for security purposes, Sports Facilities Act, rehabilitation process, the relationship between de lege lata and de lege ferenda