[1] The creative effect of a compromise contract and the meaning of "matters other than dispute which is the object of compromise" which can be cancelled on the ground of mistake in a compromise contract under the Civil Code

[2] In a case where there is an error in the important part of the contents of a legal act pursuant to Article 109 of the Civil Act, whether an expression of intent to withdraw a legal act may be revoked (affirmative) and the meaning of “an error in the important part of a legal act”

[3] Whether the waiver of a claim or exemption of an obligation may be recognized by the interpretation of an obligee’s act or expression of intent (affirmative), and the method of interpreting an obligee’s act or expression of intent

[1] The agreement between the parties to terminate a dispute by mutual concession of the parties (Article 731 of the Civil Act). In other words, when a settlement contract is concluded, the right concession by one of the parties is extinguished and the other party acquires the right by mutual agreement (Article 732 of the Civil Act). In other words, the relationship of rights and obligations based on the previous legal relationship is extinguished according to the original legal relationship, barring any special circumstance, barring any special circumstance, and a new legal relationship arises according to the settlement contract without asking whether the former legal relationship has been left between the parties to the contract

In the case of the conclusion of a settlement contract under the Civil Act, the parties may cancel it only when there is an error in matters other than a dispute which is the object of qualification of the parties to the settlement or settlement (Article 733 of the Civil Act). The term “matters other than a dispute which is the object of settlement” means matters which are not the object of a dispute but the premise or basis of the dispute, and which are estimated by both parties, and are understood as facts that do not constitute a matter of mutual concession

[2] An expression of intent to withdraw an agreement may be revoked when there is an error in the important part of the contents of a juristic act pursuant to Article 109 of the Civil Act. In a case where there is an error in the motive for a declaration of intent, it may be revoked by mistake in the contents of the declaration of intent only when the parties have taken the motive into account as the content of the declaration of intent. The mistake in the important part of a juristic act shall be significant to the extent that the arbitr would not have made such a declaration of intent if he had made the arbitr in the place where the arr would not have made such a mistake. In this case, the arbitr would prove that the arbitr would not have made such a declaration of intent if he had made a mistake in the contents of the juristic act, together with the fact that there was an error in the contents of the juristic act, and that the arbitr would not have made such a declaration of intent

[3] The exemption of an obligation does not necessarily require an explicit declaration of intent, but must be recognized in cases where it can be seen as a waiver of a claim by the interpretation of an obligee’s act or declaration of intent. However, in order for such recognition, it shall be determined by strictly interpreting an obligee’s act or declaration of intent in accordance with the content of the pertinent legal relationship.

[1] Articles 731, 732, and 733 of the Civil Act / [2] Article 109 of the Civil Act, Article 202 of the Civil Procedure Act / [3] Articles 105 and 506 of the Civil Act

[1] Supreme Court Decision 95Da48414 Decided April 11, 1997 (Gong1997Sang, 1406), Supreme Court Decision 2017Da21411 Decided May 30, 2018 (Gong2018Ha, 1178) / [2] Supreme Court Decision 98Da4546 Decided April 23, 1999 (Gong199Sang, 1001), Supreme Court Decision 2016Da239345 Decided October 25, 2018 (Gong2018Ha, 22233) / [3] Supreme Court Decision 2010Da40505 Decided October 14, 2010 (Gong2010Ha, 208Ha, 208)

Plaintiff (Counterclaim Defendant) (Law Firm Dongin, Attorneys Park Yong-woo et al., Counsel for the plaintiff-appellant)

Defendant-Counterclaim (Attorney Park Byung-hwan, Counsel for the plaintiff-appellant)

Suwon District Court Decision 2018Na80636, 80643 decided April 14, 2020

The judgment of the court below is reversed, and the case is remanded to Suwon District Court.

The grounds of appeal are examined.

1. As to the grounds of appeal Nos. 1 and 2

A. Details of the instant case

1) On September 26, 2012, the Plaintiff (Counterclaim Defendant; hereinafter “Plaintiff”) filed the instant suit seeking the implementation of the procedure for registration of ownership transfer with respect to the land stated in the purport of the claim in accordance with the special agreement on sale and purchase with the Defendant (Counterclaim Plaintiff; hereinafter “Defendant”) on September 26, 2012. Accordingly, the Defendant filed the instant counterclaim seeking reimbursement based on the warranty liability under Article 576(2) of the Civil Act with respect to the damages incurred by subrogation of the secured obligation on behalf of the Plaintiff for cancellation of the right to collateral security regarding the land purchased from the Plaintiff. The first instance court accepted the Plaintiff’s principal claim and dismissed the Defendant’s counterclaim claim.

2) On July 6, 2019, the Defendant submitted a written agreement to withdraw the principal lawsuit of this case to the effect that “the Plaintiff and the Defendant agreed to withdraw the principal lawsuit of this case (hereinafter “the withdrawal agreement of this case”)” while continuing the lower court, and asserted that the counterclaim shall also be withdrawn when the principal lawsuit is withdrawn. Accordingly, the lower court rendered a decision in lieu of conciliation to the effect that “the Plaintiff shall withdraw the principal lawsuit of this case and the counterclaim and consent to the withdrawal of the other party” is “the withdrawal of the principal lawsuit of this case and the counterclaim.”

3) The Plaintiff’s legal representative resigned while raising an objection. After the Plaintiff’s new legal representative was appointed to file a lawsuit, the Plaintiff asserted that the agreement on the withdrawal of the lawsuit in question was concluded with the content of mistake, i.e., “the agreement on the withdrawal of the lawsuit is revoked because it is an expression of intent by mistake,” and that the Plaintiff has agreed with the legal meaning of the agreement on the withdrawal of the lawsuit. The Plaintiff asserted that the legal meaning and effect of the agreement on the withdrawal of the lawsuit in question is an error with respect to the important part. As such, the Defendant asserted that the agreement on the withdrawal of the lawsuit in question is unlawful as there is no benefit of protecting the rights pursuant to the agreement on the withdrawal of the lawsuit in question. The Plaintiff asserted

4) However, the court below reasoned that the withdrawal agreement of the lawsuit in this case constitutes a compromise contract stipulated in Article 731 of the Civil Act, and accepted the plaintiff's assertion of revocation by mistake on the ground that the plaintiff's mistake on matters other than the dispute which is the object of reconciliation, caused the plaintiff to make a mistake on the part of the defendant, and the agreement of withdrawal of the lawsuit in this case is presumed to have been reached on the premise that the defendant suffered losses by subrogation of the right to collateral security. The amount subrogated by the defendant should be deemed to have already been completed through settlement agreement between the defendant and the non-party corporation (hereinafter "the company in this case") and the non-party corporation (hereinafter "the company in this case").

B. Determination

However, it is difficult to accept the judgment of the court below for the following reasons.

1) The lower court first examines the legitimacy of this part of the judgment, on the grounds that the instant withdrawal agreement was premised on the premise that it was a compromise agreement under Article 731 of the Civil Act.

A) The agreement between the parties to terminate a dispute by mutual concession (Article 731 of the Civil Act). In other words, a compromise agreement is effective when one of the parties terminates the concession right and the other party acquires the right due to the compromise (Article 732 of the Civil Act). In other words, if a compromise agreement is concluded, the relationship of rights and obligations based on the previous legal relationship according to the original legal relationship is extinguished, barring any special circumstance, barring any special circumstance, and a new legal relationship takes place according to a compromise agreement without asking whether the parties to the contract have left the previous legal relationship (see, e.g., Supreme Court Decision 2017Da21411, May 30, 2018).

In the case of concluding a compromise contract under the Civil Act, the parties may cancel it on the ground of mistake only when there is an error in matters other than those which are the object of the compromise party’s qualification or the settlement (Article 733 of the Civil Act). “Matters other than those which are the object of reconciliation” refers to matters which are not the object of the dispute, but the premise or basis of the dispute, and which are estimated by both parties, and which are understood as a fact that there is no dispute without mutual concession (see Supreme Court Decision 95Da48414, Apr. 11, 1997, etc.).

B) The content of the agreement submitted by the Defendant states that the Plaintiff would withdraw the principal lawsuit and will not raise an objection, and that if the principal lawsuit is withdrawn by the Defendant himself, the counterclaim shall be withdrawn by agreement. The lower court determined that the above agreement is a content of the right to claim the registration of transfer of land stated in the claim that is the object of the dispute in this case, the right to claim the payment of money corresponding to the damage incurred by the Defendant by subrogation of the floating mortgage debt, and the right to claim the payment of money corresponding to the damage incurred by the Defendant by subrogation, which is the object of the dispute in this case, shall be deemed as a compromise contract under the Civil Act, and further, the damage incurred by subrogation of the floating mortgage debt was understood as the fact that the settlement has already been completed, and

However, in light of the legal principles as seen earlier, it is evident that even if a settlement contract under the Civil Act is a compromise contract under the Civil Act, matters concerning “the payment by subrogation and the damage of the defendant caused by such subrogation” are still asserted by the defendant up to the original instance court, and at the same time, the subject of dispute is still pending in the dispute. Furthermore, other circumstances mentioned by the lower court, i.e., other circumstances mentioned by the lower court, that there is no reasonable ground to withdraw the principal lawsuit of this case rendered in favor of the plaintiff in the first instance court, cannot be deemed to constitute a ground for revocation of a settlement contract. Furthermore, it does not coincide with the fact that, as a result of the plaintiff’s own assertion or the party principal examination against the plaintiff, it does not coincide with the fact that “the plaintiff is an old and old person, and thus, it is signed with the agreement without knowledge about its meaning and legal effects.” Therefore, even if the withdrawal agreement of the lawsuit in this case is a compromise

2) Meanwhile, the Plaintiff asserted revocation on the premise that the withdrawal agreement of the instant lawsuit was a juristic act that does not reach the reconciliation agreement under the Civil Act, and further, examined the same.

A) An expression of intent to withdraw an agreement may also be cancelled when there is an error in the important part of the contents of a juristic act pursuant to Article 109 of the Civil Act. In a case where there is an error in the motive for a declaration of intent, it may be cancelled by mistake in the contents of the declaration of intent only when the parties have taken the motive into account as the content of the declaration of intent. The mistake in the important part of a juristic act shall be significant to the extent that the arbitr would not have made such a declaration of intent if he had made the arbitr had made the place in the ordinary person’s place (see, e.g., Supreme Court Decision 98Da4546, Apr. 23, 199). In this case, the person whose declaration of intent was cancelled on the ground of an error shall prove that there was an error in the contents of a juristic act, and that there was no such a declaration of intent if he had made such a mistake, it shall not be attested that it had an effect on the declaration of intent (see, e.g., Supreme Court Decision 2018Da365.

B) As the content of the agreement submitted by the Defendant is that the Plaintiff would withdraw the principal lawsuit and would not raise an objection, there may be room to interpret that the agreement does not constitute a compromise agreement under the Civil Act. However, it is difficult to find out circumstances to deem that the Plaintiff asserted and proved that there was an error in the content of a juristic act at the time of making the instant withdrawal agreement, or that the Plaintiff would not have made an expression of intent in the absence of such a mistake.

In addition, according to the judgment of the court below, the plaintiff caused mistake on the motive of "the subrogation of the collateral security obligation and the defendant's damage caused thereby," which led to the conclusion of the agreement on the withdrawal of the lawsuit in this case, and it is difficult to see that the plaintiff and the defendant were the contents of the agreement on the withdrawal of the lawsuit in this case at

3) Sub-determination

Therefore, the lower court shall deliberate on the background, circumstances, and facts leading to the conclusion of the instant lawsuit withdrawal agreement by the Plaintiff and the Defendant, and determine whether the instant lawsuit withdrawal agreement constitutes a compromise agreement under the Civil Act, and whether the said agreement constitutes a compromise agreement under the Civil Act, and whether the said agreement was not reached, and shall specifically examine and determine whether the mistake alleged by the Plaintiff could be a ground for revocation of the said agreement.

Nevertheless, the lower court accepted the Plaintiff’s claim for revocation by concluding that the instant written withdrawal agreement constitutes a compromise agreement under the Civil Act and the circumstances alleged by the Plaintiff constitute “matters other than a dispute which is the object of reconciliation.” In so doing, the lower court erred by misapprehending the legal doctrine on a compromise agreement under the Civil Act, a written withdrawal agreement, matters other than a dispute which is the object of reconciliation under Article 733 of the Civil Act, a revocation of declaration due to mistake under Article 109 of the Civil Act and the burden of proof, etc., and failing to exhaust all necessary deliberations

2. As to the fourth ground for appeal

A. The lower court rejected the Defendant’s assertion that the Defendant had a right to claim damages due to nonperformance as the Plaintiff failed to perform his/her duty to register the transfer of ownership with respect to the land purchased from the Plaintiff and caused the Defendant to pay the secured debt by subrogation and cancel the right to claim damages due to nonperformance, on the grounds that the Defendant and the instant company’s settlement agreement were exempted from the Plaintiff’s liability.

B. However, we cannot accept the judgment of the court below for the following reasons.

The exemption of an obligation does not necessarily require an explicit declaration of intent, but must be recognized in cases where it can be deemed a waiver of a claim by a creditor’s act or declaration of intent. However, to such recognition, the application of the exemption must be determined by strict interpretation of an obligee’s act or declaration of intent in accordance with the content of the pertinent legal relationship (see Supreme Court Decision 2010Da40505, Oct. 14, 2010, etc.).

As established by the court below, as long as the Defendant incurred loss by subrogated the secured debt in order to cancel the right to collateral security which the Defendant incurred due to the Plaintiff’s nonperformance, it is difficult to view that the Defendant renounced or exempted the Defendant’s claim for damages against the Plaintiff solely on the ground that the Defendant entered into an agreement with the instant company on the prohibition of settlement of accounts and accounts with the instant company. In so doing, the court below erred by misapprehending the legal principles on the waiver of claims or exemption

3. Scope of reversal

The plaintiff's main claim shall be entirely reversed, and the part of the claim for reimbursement based on the warranty liability under Article 576 (2) of the Civil Act, which has been selectively joined among the counterclaim claims rejected by the court below, shall also be reversed. Thus, the defendant's counterclaim claims shall also be reversed in its entirety (see Supreme Court en banc Decision 2010Da95390, Jan. 19, 2012, etc.). Accordingly, the judgment of the court below shall be reversed in its entirety.

4. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below for a new trial and determination. It is so decided as per Disposition by the assent of all participating Justices

Justices Noh Tae-tae (Presiding Justice)