CONTENTS
- 1. Civil Act Litigation, the Detailed Background
- - Civil Act Litigation, Relevant Statutes and Precedents
- 2. Civil Act Litigation, the Lower Courts' Determination
- 3. Civil Act Litigation, the Supreme Court's Determination
- 4. Civil Act Litigation, Daeryun's Strategy
1. Civil Act Litigation, the Detailed Background
The plaintiff who filed this Civil Act lawsuit was Mr. A, a donor to a social welfare corporation.
From 2017 to 2020, Mr. A donated 50,000 won each month to that social welfare corporation.
The corporation operated a facility where elderly survivors of the comfort women issue resided, and it carried out related social activities.
Its website also stated that it provided the survivors with a ‘place to call home’ and led activities aimed at resolving issues of the past.
Mr. A was deeply moved by this description and, on that basis, decided to make donations.
One day, however, while continuing his donations, Mr. A learned of allegations of misappropriation of donations surrounding the corporation.
Press reports indicated that billions of won in donations gathered by the corporation had largely been retained within the corporation, and that the amount actually spent for the survivors was extremely small.
Mr. A therefore filed a lawsuit seeking the return of his donations.
Civil Act Litigation, Relevant Statutes and Precedents
◈ Relevant Statute
Article 109 of the Civil Act (Declaration of Intention Based on Mistake)
(1) A declaration of intention may be rescinded where there is a mistake as to an important part of the contents of the juristic act. However, it may not be rescinded where such mistake arose from the gross negligence of the declarant.
◈ Relevant Precedent
“For there to be a mistake in a declaration of intention under Article 109 of the Civil Act, the declarant's recognition must diverge from the relevant facts, as where, at the time of performing the juristic act, the declarant mistakenly believes a nonexistent fact to exist or mistakenly believes an existing fact not to exist. Where the declarant, at the time of the act, merely predicted that some matter would arise in the future, it cannot be said that there is a divergence between recognition and the facts being compared within the declarant's state of mind, and this therefore cannot be treated as a mistake (see Supreme Court Decision of May 14, 2020, 2016 Da 12175). However, where a particular recognition does not remain a mere prediction of or expectation about some future matter but includes a recognition of the present circumstances that form the basis of that prediction or expectation, and that recognition does not accord with the facts as they actually exist, this may be treated as a mistake.”
2. Civil Act Litigation, the Lower Courts' Determination
The courts of first and second instance did not accept the claims of the 23 plaintiffs, including Mr. A.
The court of first instance first found that the corporation had not clearly disclosed how the donations were used, and it noted that this was improper.
At the same time, it determined that this unclear disclosure was not intentional.
The court also explained that the corporation's donations were ‘undesignated donations’ for which no specific purpose had been clearly set, and that their permissible uses could therefore be interpreted broadly.
The court added that it had also taken into account the corporation's statement that it planned to use the retained donations for the survivors whenever necessary.
Mr. A and the others objected and appealed, but the appellate court reached the same determination as the court of first instance.
After these successive losses, 22 of the 23 individuals who had been named as plaintiffs all gave up filing a final appeal, and Mr. A alone continued with the litigation.
3. Civil Act Litigation, the Supreme Court's Determination
The Supreme Court's determination differed from that of the courts of first and second instance. It reversed the case and remanded it to the lower court.
The Supreme Court relied on ‘Article 109 of the Civil Act’ as its basis.
As noted above, Article 109 of the Civil Act provides that ‘a contract may be rescinded where there is a mistake as to an important part.’
The Supreme Court first determined that the purpose of the donation contract in this case was clearly connected to supporting the survivors of the comfort women issue.
This purpose was a principal motive that led Mr. A to decide to donate, and it therefore constituted an important part of the contents of the contract.
The Supreme Court also pointed out that, in the description provided through its website and other channels, the corporation had stated that the donations were used for activities related to the survivors of the comfort women issue, and that this was not merely an expression of intent but also included the fact that, at the time the funds were solicited, the donations were being used for that purpose.
The Court therefore held that, in accordance with this representation, Mr. A could only have recognized that his donations had been and were still being used for activities related to the survivors of the comfort women issue, and would continue to be so used.
According to the results of an accounting investigation by the competent local government, the corporation had used only about 2.3% of the total donations for the survivors, and the Court added that this did not accord with the donation purpose the corporation itself had stated or with the recognition that Mr. A had held.
During the proceedings, the corporation also argued that the donations received were far too large in relation to the number of survivors, so that it had no choice but to keep the funds in the corporation's account.
The courts of first and second instance accepted this argument, but the Supreme Court did not.
The Court reasoned that, if there were circumstances that left no choice but to retain the donations within the corporation, the corporation should have provided appropriate disclosure that took even those circumstances into account, so that donors could make decisions based on accurate information.
The Court therefore held that, unless it is proven that Mr. A's mistake arose from gross negligence, Mr. A must be regarded as entitled to rescind this donation contract on the ground of mistake.
4. Civil Act Litigation, Daeryun's Strategy
In connection with this Civil Act litigation, we have analyzed a Supreme Court decision holding that, where donations are used for a purpose different from what was originally stated, the contract may be rescinded.
As a ‘culture of giving’ has spread in recent years, many people regularly extend support to particular organizations.
As in this case, situations may arise in which the donations a person has made are used for a different purpose.
The Supreme Court determined that, with respect to an ‘important part’ of a donation contract, accurate information must be provided so that those entering into the contract can make sound decisions.
This Supreme Court decision appears likely to have considerable influence on other cases involving legal disputes related to donations.
Daeryun Law Firm LLP, through a legal team experienced in civil litigation, provides tailored assistance to clients.
If you have any questions regarding the Civil Act or civil litigation, you are welcome to reach out to Daeryun Law Firm LLP at any time.
