One Law Partners, LLC successfully represented a trust company in a major construction payment dispute arising from an officetel development project implemented under a managed land trust structure, securing a complete victory.
This decision is significant because it confirms that increases in construction costs made without the trustee's prior consent and without execution of the required succession procedures under the trust agreement are not enforceable against the trustee.
1. Case Overview
The plaintiff contractor sought payment of approximately KRW 1.9 billion in additional construction costs arising from a second amended construction agreement and design changes relating to the construction of an officetel project.
In addition to demanding payment from the trust company, the plaintiff sought an order compelling the developer to request fund disbursement and to complete the procedures for obtaining the trustee's consent to and succession of the amended construction agreement.
The defendant trust company argued that it had never consented to the second amended agreement or the design changes and had not entered into any succession agreement regarding the increased construction costs as required under the trust agreement.
Accordingly, it maintained that it had no obligation to make payment.
2. Key Issues
The central issues in this case were:
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Whether increases in construction costs and design modifications agreed upon solely between the contractor and the developer could be enforced against the trust company acting as the project trustee under the trust arrangement; and
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Whether the trust company had any obligation to pay the increased construction costs arising from such agreements.
3. Legal Strategy
Attorneys Eun-young Jung and Seong-hoon Park of One Law Partners, LLC argued that, pursuant to the special provisions of the trust agreement, any increase in construction costs could not be enforced against the trust company unless a separate succession agreement had been executed between the contractor and the trust company.
The attorneys further emphasized that any design changes required the trustee's prior consent.
Relying on the clear language of the trust agreement, they demonstrated that the trust company had no obligation to pay the additional construction costs.
Using the same reasoning, the defense argued that the trust company's payment obligations could not arise merely because the developer requested a fund disbursement.
4. Significance of the Decision
The court accepted all of the trust company's arguments and dismissed the plaintiff's claims in their entirety.
By giving effect to the express provisions of the trust agreement, the court confirmed that no obligation to pay increased construction costs arises in the absence of the trustee's consent or compliance with the required succession procedures.
This decision is significant because it establishes a clear standard that additional construction costs incurred through amendments between contractors and developers cannot be imposed upon a trustee without compliance with the contractual requirements set forth in the trust agreement.
The ruling therefore provides important guidance for defending trust companies in construction payment disputes arising in managed land trust projects.
Attorney Eun-young Jung | eyjung@onelawpartners.com
Attorney Seong-hoon Park | shpark@onelawpartners.com
Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com
