The Supreme Court ruled that the agreement made by the regional housing association that 'if the association establishment application cannot be made, the full amount of the contributions will be refunded' is invalid. However, it did not accept the request for a refund of contributions from members who had paid part of the contributions after the establishment approval, stating that their demand is contradictory since the agreement itself is invalid.
The Supreme Court’s second division (Chief Justice Oh Kyung-mi) stated on the 15th that it confirmed a lower court ruling that "the association does not have to return the contributions to its members" in a lawsuit filed by four members of the A regional housing association in Busan’s North District.
The four members who filed the lawsuit this time entered into contracts to join the A association between 2016 and 2017. At that time, the association reportedly provided participants with a guarantee letter that included the statement, 'if the establishment application is not made and the project fails, the full amount of the deposit will be refunded.'
The A association received establishment approval in 2019. The four members paid part of their contributions before and after the approval.
However, these members filed a lawsuit for a refund of their contributions against the association in August 2022. They argued that the agreement on refund guarantees made without passing a members' general meeting was invalid. They requested the return of the contributions, asserting that the contract itself, which includes invalid content, should be canceled. Separately from the lawsuit, the A association received project approval in November of that year and began to push forward with the residences construction project.
The first trial accepted the members' claims and ordered the association to return the contributions. The court stated, "Members' contributions are jointly owned property by the members," and said, "It is invalid to make an agreement on refund guarantees that reduces contributions without a general meeting resolution." Article 137 of the Civil Code stipulates that if part of a legal act is invalid, the entire act is invalid.
However, the second trial dismissed the members' claims. The court focused on the fact that the members had paid part of their contributions after the establishment approval. It concluded that since the establishment had proceeded smoothly and they paid contributions knowing they could not receive refunds, there was no need to invalidate the contract. The Civil Code states that even if there is no part judged to be invalid, if it is recognized that a legal act was conducted, it cannot be invalidated.
The Supreme Court also found the second trial's judgment to be correct. It stated, "The members ended up in a situation where they could not receive refunds, yet they paid a considerable amount of contributions to achieve the goal of acquiring ownership of new apartments." It added, "The A association appears to have proceeded with the project believing that the members wished to maintain their association membership contracts, regardless of the possibility of refunds, and there is a need to protect such trust."