The Supreme Court has ruled that a family clan must refund part of the purchase price to a buyer who had nearly lost ownership of clan land without recovering any of the money he paid, on grounds that he had dealt with an unqualified clan representative.
According to the legal community on the 13th, the Supreme Court's Third Division (presiding Justice Lee Heung-gu) reached this decision in a lawsuit between Clan A and Mr. B and others over ownership transfer registration (principal claim) and unjust enrichment (counterclaim), overturning the lower court's ruling on the counterclaim portion and returning the case to the Suwon High Court.
Clan A passed a resolution at its regular general meeting in November 2014 to appoint Mr. C as chairman. However, the following January, a clan member argued that the resolution was invalid, sparking a legal dispute. On October 16 that year, the court ruled in the first instance that the resolution was invalid, and on the 29th of the same month, it also issued a provisional injunction suspending Mr. C's performance of duties.
The problem arose when Mr. C, two days before the injunction suspending his duties was granted, signed a contract on behalf of the clan to sell clan land to Mr. B for 4.18 billion won. Around that time, Mr. B completed the ownership transfer registration and paid the purchase price into a bank account managed by Mr. C by February of the following year. Mr. C also sold clan land to others besides Mr. B, and spent the proceeds on clan tax payments, legal costs related to litigation over the clan representative position, expenses for clan projects or affairs, business promotion expenses, office management costs, and employee salaries. A dispute over the clan representative position continued thereafter until an acting representative was appointed in July 2016, and the clan filed suit against Mr. B and other current landowners, claiming the sales contract previously signed by Mr. C was invalid and demanding the return of the land.
The first and second instances accepted the clan's argument and ruled that Mr. B and others must complete the ownership transfer registration procedures. The reasoning was that ownership transfer registration made under an invalid sales contract is itself invalid. In the second instance, Mr. B also filed a countersuit arguing, "If the sales contract is invalid, then the unjust enrichment equivalent to the purchase price I paid must also be returned," but this was not accepted.
The Supreme Court upheld the ruling that Mr. B and others must complete the ownership transfer registration procedures.
However, it also accepted Mr. B's counterclaim, ruling to the effect that the clan must return part of the land purchase price. The Supreme Court explained, "If a significant portion of the purchase price paid by Mr. B was paid to the acting representative who can be regarded as the clan's representative, or was used for the clan's benefit, then that gain can be seen as having substantially accrued to the clan," adding, "It is reasonable to hold that the clan bears a corresponding obligation to return the unjust enrichment."
The Supreme Court cited the legal principle that "when a party has rendered performance to the other party in fulfillment of a contractual obligation, but the contract is invalid or has been rescinded and thus has no effect, each party may demand from the other the return of its own performance in order to restore the state as if the contract had never existed."
Accordingly, the Supreme Court overturned and remanded the counterclaim portion of Mr. B's case, while dismissing the appeals on the principal claim by Mr. B and the remaining defendants.
