Supreme Court: "Family Association Must Return Money Used, Even if Land Sold by Unauthorized Representative is Voided"

Unauthorized Sale of Family Association Land Worth 4.18 Billion Won
Lower Courts: "Contract Void, Only Land Must Be Returned"
Supreme Court: "Funds Used for the Association Must Be Repaid"

Even if a representative of a family association (jongjung) without proper authority illegally sold land belonging to the association and the contract was declared null and void, the Supreme Court has ruled that the family association must return the money to the buyer if the purchase price was actually used for the benefit of the association.

Yonhap News Agency

According to the legal community on July 13, the First Division of the Supreme Court (Presiding Justice Lee Heung-gu) recently overturned the previous court decision—which had rejected the counterclaim for the return of unjust enrichment by the land buyer, Mr. A, in a lawsuit filed by the Gyeongju Kim Clan Sangchon Gongpa Family Association for the registration of the transfer of ownership against Mr. A (main suit) and in Mr. A’s counterclaim for the return of unjust enrichment—and remanded the case to the lower court.

In October 2015, Mr. B, who was then the president of the family association, sold the association’s land to the buyer, Mr. A, for 4,185,000,000 won, just before a court decision invalidated his appointment and suspended his duties. Mr. B spent the proceeds on the association’s tax payments and litigation costs, and later transferred the remaining approximately 2.5 billion won to an acting representative who was lawfully appointed.

Subsequently, the family association filed a lawsuit demanding the return of the land’s ownership, arguing that the sales contract entered into by an unauthorized person was null and void. In response, Mr. A filed a counterclaim, demanding the return of the purchase price if the contract was invalidated.

Both the first and second trial courts ruled in favor of the family association. They held that Mr. B, who lacked representative authority, had entered into a void sales contract and that Mr. A must return the land. However, they also found that the association was not obligated to return the payment, reasoning that the association could not be deemed to have received a benefit equivalent to the purchase price without legal grounds.

However, the Supreme Court overturned the previous judgments that dismissed the claim for the return of the funds. The Court pointed out, "Even if Mr. B entered into the contract without authority, if a substantial portion of the payment made by Mr. A was handed over to a legally appointed acting representative or used for the benefit of the association, then the association has in fact received a substantive benefit."

The Court further stated, "The lower court should have examined how much of the purchase price was used for or accrued to the benefit of the association, and recognized the association’s obligation to return unjust enrichment to that extent," explaining the reason for remanding the case.

This content was produced with the assistance of AI translation services.