Lawsuit for Return of Unjust Enrichment | Supreme Court: Remuneration Paid Without a General Meeting Resolution Cannot Be Regarded as Performance of a Non-Existent Obligation

The plaintiff in this case, who brought a lawsuit for the return of unjust enrichment, is a regional housing association under the Housing Act.

Under the bylaws of the plaintiff association, which sought the return of unjust enrichment, the remuneration of the association president may be paid in accordance with separately established remuneration provisions, and those remuneration provisions are to be set by the general meeting.

However, the general meeting did not enact any remuneration provisions.

The defendant, the president of the plaintiff association, enacted the executive salary payment provisions at issue in this case concerning officers' remuneration through the board of directors, and received remuneration accordingly.

The plaintiff therefore argued that the payment of remuneration to the defendant was void, and brought a lawsuit for the return of unjust enrichment in the same amount.

The defendant, against whom the lawsuit for the return of unjust enrichment was brought, argued that ‘the plaintiff suffered no loss, and even if a loss had occurred, it amounted to performance of a non-existent obligation conforming to moral obligation (any case of performance where no obligation exists, including performance made with knowledge that no obligation exists).’

Regarding this lawsuit for unjust enrichment, the lower court stated that, for the plaintiff, an unincorporated association, to pay officers' remuneration out of the association's assets, a general meeting resolution must be obtained, and that the original association bylaws alone could not be taken to mean that the payment of the president's remuneration at the time had been delegated to the board of directors to determine.

It also determined that the executive salary payment provisions at issue in this case were without effect, and that it could not be said that a general meeting resolution concerning the payment of the remuneration at issue had been obtained.

However, the lower court noted that the defendant appeared to be the recipient of remuneration or the consideration for the provision of services in performing the duties of association president, and to have received the remuneration at issue in this case.

The lower court held that most of the plaintiff's association members were also aware of this, that, considering the nature of the duties performed by the defendant, the remuneration at issue could not be regarded as excessive, and that it was difficult to recognize that the plaintiff had suffered any loss by paying the remuneration at issue.

In other words, the lower court in the unjust enrichment lawsuit declined to accept the plaintiff's claim on the ground that the remuneration at issue could not be regarded as unjust enrichment.

In the lawsuit for the return of unjust enrichment, the Supreme Court held that, if the defendant obtained a benefit by receiving the remuneration at issue when there was no legal cause for its payment, then, as a result, the plaintiff must be regarded as having suffered a loss equivalent to the remuneration at issue.

The Supreme Court stated that ‘the lower court's determination, which held that the plaintiff suffered no loss and that the remuneration at issue therefore did not constitute unjust enrichment, contains an error that affected the judgment by misunderstanding the legal principles governing the occurrence of loss in the return of unjust enrichment.’

Referring to Article 741 of the Civil Act and Supreme Court precedent, the Supreme Court determined that the defendant, even though the procedural requirements strictly required by the former Enforcement Decree of the Housing Act, its Enforcement Rules, and the association bylaws for the payment of remuneration had not been met, amended the executive salary payment provisions at issue on his own together with one other director, set his own remuneration, and received it.

The Supreme Court held that it was difficult for the defendant's retention of the remuneration at issue to accord with the ordinary public's sense of justice, and that the lower court's determination, which nonetheless held the payment of the remuneration at issue to conform to moral obligation, contained an error affecting the judgment by misunderstanding the legal principles governing performance of a non-existent obligation conforming to moral obligation. The Supreme Court accordingly reversed and remanded the lower judgment.

When pursuing a lawsuit for the return of unjust enrichment, the process of examining whether the other party's gain constitutes unjust enrichment and what type it falls under is important.

Article 741 of the Civil Act provides that “a person who has obtained a benefit from another's property or services without a legal cause, and has thereby caused a loss to that other person, shall return such benefit.”

It has been held that, in the case of so-called performance-based unjust enrichment, where one party renders a certain performance of its own accord and then seeks its return on the ground that the performance lacked a legal cause, the performance itself constitutes both the benefit of the recipient and the loss of the party rendering it.

The Civil and Damages Group of Daeryun Law Firm LLP, through its 🔗attorneys experienced in civil matters, provides solutions tailored to each client's circumstances in preparation for claims for the return of unjust enrichment.