[Decision] "Deducting 20% as a Withdrawal Penalty from Regional Housing Cooperatives Is Excessive"

Published 10 Nov.2025 15:10(KST)

The Supreme Court has ruled that deducting 20% of the total contribution as a penalty from members who lose their eligibility in a regional housing cooperative is excessively unfair.

The Civil Division 1 of the Supreme Court (Presiding Justice Noh Taeak) on October 16 dismissed the cooperative’s appeal and upheld the lower court’s partial ruling in favor of six plaintiffs, including Mr. A, who filed a lawsuit demanding the return of their contributions from the regional housing cooperative (Case No. 2023Da203221).

Photo to aid understanding of the article. Pixabay.

[Facts]

The plaintiffs, including Mr. A, entered into a membership agreement with a regional housing cooperative in Ulsan and paid contributions ranging from 41 million to 87 million won. Later, the cooperative passed a resolution at a general meeting stating that, in the event of loss of membership, only the balance after deducting 20% of the total contribution would be refunded. After losing their status as heads of household and thus their membership, the plaintiffs demanded the return of their contributions from the cooperative.

[Lower Court Rulings]

The court of first instance ruled against the plaintiffs, stating, "Considering that the resolution regarding the timing and amount of deduction and refund of contributions does not unfairly disadvantage members or lack fairness in violation of the principle of good faith, it is valid as a resolution of the general meeting." However, the appellate court sided with the plaintiffs, determining that the clause deducting 20% of the total contribution constituted a predetermined amount of damages.

The appellate court stated, "Setting the deduction amount in the resolution serves to prevent disputes over whether the cooperative actually suffered damages and the amount thereof due to loss of membership, and also psychologically pressures members to fulfill their obligation to maintain membership. Therefore, it constitutes a predetermined amount of damages. Even in cases where such an amount is set by a collective act like a resolution, Article 398(2) of the Civil Act, which allows for the reduction of predetermined damages, applies."

The court further noted, "In general real estate sale contracts, it is customary to set around 10% of the total sale price as a deposit and predetermined damages. Since the cooperative failed to provide objective and specific grounds for deducting 20%, the 20% deduction is excessively unfair."

[Issue]

Whether the resolution in question merely limits the scope of refund for contributions or sets a predetermined amount of damages for breach of the obligation to maintain membership status.

[Supreme Court Ruling]

The Supreme Court dismissed the defendant’s appeal and upheld the lower court’s decision. The panel stated, "The lower court’s conclusion is reasonable and acceptable. There is no error that would have affected the judgment, such as violating the rules of logic and experience, exceeding the bounds of free evaluation of evidence, misunderstanding the establishment of predetermined damages, the interpretation of resolutions by unincorporated associations, or the scope and requirements for reduction under Article 398(2) of the Civil Act, as claimed by the appeal."