[edit] Supreme Court Decision 2001Da71484 delivered on February 5, 2002 [Damages]

【Main Issue】

Whether Article 19 (1) of the Real Estate Brokerage Act applies to brokerage without compensation (affirmative)

【Summary of Decision】

Article 17, Paragraph (1) of the Real Estate Brokerage Act (hereinafter "the Act") provides that in case where a broker is requested to perform brokerage service, he shall confirm the current state, location of and rights relating to the object of brokerage, restrictions on the transaction or utilization thereof prescribed by relevant laws, and other matters as prescribed by the Enforcement Decree, and provide such information in writing to the client who desires to acquire rights in the object of brokerage, together with diligent and precise explanation. Article 19, Paragraph (1) of the Act provides that in case where the broker inflicts property damage upon a party to the transaction in the course of the brokerage, by willful misconduct or negligence, he shall be liable for the damage. In case of agency contracts of similar nature under the Civil Code, the agent is not exempted from the duty to exercise due care as a good faith caretaker in performing the delegated affairs, even if the agency is without consideration. Moreover, the Act does not particularly restrict the scope of application of the above provisions. In view of these circumstances, the broker's obligation of confirmation and explanation under the Act, and his duty of compensation for damages arising out of a default on such obligation, are not necessarily exempted even if the client fails to pay the prescribed commission to the broker.

【Reference Provisions】Article 17, Paragraph (1) and Article 19, Paragraph (1) of the Real Estate Brokerage Act, Article 681 of the Civil Code

Article 17 of the Real Estate Brokerage Act (Confirmation and Explanation on Object of Brokerage) (1) In case where a broker is requested to perform brokerage service, he shall confirm the current state, location of and rights relating to the object of brokerage, restrictions on the transaction or utilization thereof prescribed by relevant laws, and other matters as prescribed by the Enforcement Decree, and provide such information in writing to the client who desires to acquire rights in the object of brokerage, together with diligent and precise explanation.

(2)~(4) <omitted>

Article 19 of the Real Estate Brokerage Act (Liability of Compensation for Damages) (1) In case where the broker inflicts property damage upon a party to the transaction in the course of the brokerage, by willful misconduct or negligence, he shall be liable for the damage.

(2)~(5) <omitted>

【Plaintiff, Appellant】 Woo Sung-il

【Defendant, Appellee】 defendant

【Court of First Instance】 Suwon District Court Decision 2000Gadan10860 delivered on February 8, 2001

【the Court of second instance】 Suwon District Court Decision 2001Na4382 delivered on August 22, 2001

【Disposition】The decision of the court below shall be reversed and the case shall be remanded to the Appellate Division of the Suwon District Court.

【Reasoning】 Article 17, Paragraph (1) of the Real Estate Brokerage Act (the Act) provides that in case where a broker is requested to perform brokerage service, he shall confirm the current state, location of and rights relating to the object of brokerage, restrictions on the transaction or utilization thereof prescribed by relevant laws, and other matters as prescribed by the Enforcement Decree, and provide such information in writing to the client who desires to acquire rights in the object of brokerage, together with diligent and precise explanation. Article 19, Paragraph (1) of the Act provides that in case where the broker inflicts property damage upon a party to the transaction in the course of the brokerage, by willful misconduct or negligence, he shall be liable for the damage. In case of agency contracts of similar nature under the Civil Code, the agent is not exempted from the duty to exercise due care as a good faith caretaker in performing the delegated affairs, even if the agency is without consideration. Moreover, the Act does not particularly restrict the scope of application of the above provisions. In view of these circumstances, the broker's obligation of confirmation and explanation under the Act, and his duty of compensation for damages arising out of a default on such obligation, are not necessarily exempted even if the client fails to pay the prescribed commission to the broker.

The court below, on the contrary, dismissed the claim of the plaintiff for damages under the above provisions, on grounds that the plaintiff as client appears to have failed to pay the brokerage commission to the defendant as broker in view of various circumstances founded on the facts it adopted, based on the premise that the above provisions apply only to brokerage with compensation, and if the broker has not received any commission, he is exempted from liability for damages under the above provisions. The decision of the court below is improper in having misunderstood the legal principles regarding the scope of application of the above provisions. In addition, a large part of the various circumstances described by the court below, as grounds for accepting the fact that the plaintiff failed to pay commission to the defendant, is difficult for us to concur with (for example, the court below stated that since the object of brokerage was a newly built multi-unit housing, the defendant only acted as a broker between the plaintiff and the lessor and also the written confirmation and explanation of the object of brokerage was prepared by an employee of the lessor company, due to the peculiarities of such brokerage; however, although such circumstances may be grounds to find that the broker was not diligent in performing his duties of confirmation prescribed by law, such circumstances cannot be grounds for which the defendant should exempt the plaintiff from the commission or for the defendant to be released from his duties prescribed by law). In particular, although the defendant supposedly introduced the plaintiff who would become a lessee to the lessor, and prepared a lease agreement at his brokerage office in the presence of both parties, the defendant has not given any viable statement or explanation with respect to the reasons and circumstances due to which he had not urged the plaintiff to pay the commission or protested against the plaintiff, and did not take any action with respect to the plaintiff's default in payment, from the time of undergoing investigation by the investigation authorities until the time of hearing in this case. In view of these facts, it cannot be concluded that the defendant did not receive any commission, as the court below found, based only on the evidence of records in this case.

Accordingly, the decision of the court below shall be reversed and the case shall be remanded to the court below, and it is hereby decided as per Disposition. This decision is delivered with the assent of all Justices who reviewed the appeal.

Justices Lee Yong-woo (Presiding Justice)

Suh Sung

Bae Ki-won

Park Jae-yoon (Justice in charge)

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