Withdrawn Members Demand Refunds
First Instance Court Sides with Cooperative, Citing “Limited Refund Scope”
Appellate Court Rules “20% Deduction Is Pre-Determined Compensation for Damages,
Excessive Rate Should Be Reduced to 10%”
Supreme Court
The Supreme Court has ruled that the "20% deduction" regulation applied to the refund of contributions to members withdrawing from regional housing cooperatives is excessive. The deduction rate set by the cooperative is considered not as a "refund" but as a "liquidated damages" (a pre-agreed penalty), and the appellate court's decision to reduce it from "20% to 10%" was deemed correct. This case sets a precedent by curbing the excessive deduction regulations unilaterally established by regional housing cooperatives and is expected to become a standard for refund lawsuits filed by withdrawing members.
According to the legal community on November 10, the First Division of the Supreme Court (Presiding Justice Noh Taeak) dismissed the final appeal in a lawsuit filed by cooperative members against a regional housing cooperative for the return of their contributions, as well as the counterclaim filed by the cooperative, thereby upholding the lower court's ruling.
This case began when members of a regional housing cooperative filed a lawsuit against the cooperative, seeking the return of their contributions and service fees after withdrawing from the cooperative. In response, the cooperative established a regulation at its general meeting stating, "Upon withdrawal, 20% of the total contributions and the entire service fee will not be refunded," and insisted that only the remaining balance after deduction would be returned. Furthermore, the cooperative filed a counterclaim, arguing that since the deduction exceeded the amount paid in, the withdrawing members should actually pay the difference.
The cooperative members lost in the first trial. The court of first instance accepted the cooperative's argument, stating, "The deduction regulation is merely a special agreement that limits the scope of the refund," resulting in a loss for the members. However, the appellate court overturned this decision. The appellate court determined that "this deduction constitutes liquidated damages for the loss of cooperative membership status," and ruled that "20% is unreasonably excessive and should be reduced to 10%," ordering the cooperative to return a portion of the contributions to the members. The Supreme Court agreed with this judgment. Accordingly, it was ruled that the amount already paid, minus 10%, must be refunded to the withdrawing members. The Supreme Court concluded that "the lower court's ruling is justified" and dismissed the cooperative's final appeal.
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