Where either party to a contract directly provides a third party under another contractual relationship with the other party upon the other party’s instruction, etc., whether a claim for return of unjust enrichment may be made against the third party (negative), and whether the same applies to cases where the third party knows that there are defects in the legal relationship between the cause party and the third party (affirmative)

A party to a contract may not claim a return of unjust enrichment against a third party on the ground that the party has received payment from the other party, without any legal ground, because either of the parties to the contract received payment from the other party, as ordered by the other party, or directly provided payment to a third party under another contractual relationship with the other party (in a case where payment has been made in a fraudulent relationship with the other party), not only the payment has been made to the other party, but also payment to the third party has been made to the other party. In such a case, if a party to the contract can claim a return of unjust enrichment against a third party on the ground that there is a defect in the legal relationship between the party having provided payment to the other party and the other party, such a transfer of risk to the other party under one's own responsibility would result in a violation of the principle of contract law, and thus, it is improper for the third party to have infringed the other party's defense against the other party, etc. In the case of receiving payment from the third party, even if the third party knew the other party's legal relationship with the other party.

Article 741 of the Civil Act

Supreme Court Decision 99Da66564, 66571 Decided August 23, 2002 (Gong2002Ha, 2174) Supreme Court Decision 2001Da46730 Decided December 26, 2003 (Gong2004Sang, 207)

Plaintiff 1 and 15 others (Attorney Lee Jae-soo, Counsel for the plaintiff-appellant)

Culul Construction Co., Ltd. (Law Firm Rate, Attorneys Shin Sung-sung et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2004Na27350 decided June 14, 2006

The judgment below is reversed, and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

A party to a contract may not request a return of unjust enrichment against a third party on the ground that he/she received payment from the third party without any legal ground, inasmuch as a party to the contract receives payment from the third party, as a contract has reduced the process of performance by direction, etc. from the other party to the contract and directly provided a third party with another contractual relationship (in a case where payment has been made in a deceptive relationship), and not only the payment has been made to the other party to the contract, but also the payment has been made to the third party. In such a case, if a party to the contract is able to request a return of unjust enrichment against a third party on the ground that there is a defect in legal relations concerning the cause of payment to the other party to the contract, such as invalidation of the legal relationship between the other party and the other party to the contract, the transfer of the risk burden under his/her own responsibility to the third party, and thus, it is improper for a third party to have infringed the right to defense against the other party to the contract (see Supreme Court Decision 9Da6564, 6571, Aug. 23, 2002).

According to the reasoning of the judgment below, the court below held that the defendant has a duty to return the benefits to the plaintiffs as long as it was well known that there was a defect in the resolution of the special general meeting and the settlement general meeting of this case, which decided to pay additional charges, etc. by the members, notwithstanding the absence of a legal obligation to pay additional charges, etc. by the plaintiffs who are members, the plaintiff paid the additional charges, etc., and the defendant obtained profits equivalent to the same amount by appropriating the amount paid by the plaintiffs to the construction cost, etc., and therefore, the defendant's possession of these benefits in relation to the plaintiffs was unjust in violation of the concept of fairness. Thus, the defendant imposed and collected additional charges, etc. directly or jointly with the Sammomomopy Reconstruction Association, and even if it is difficult to recognize a direct causal relationship, the defendant had a duty to return it to the plaintiffs, as long as it was well known that there was a defect in the resolution of the special general meeting and the settlement general meeting of this case.

However, according to the evidence admitted by the court below, the plaintiffs in the position of the union members are internal relations that are obligated to pay additional charges, etc. between the articles of association and the resolution of the association members' general meeting. The Sammomomomomoup reconstruction association concluded a rebuilding project contract with the defendant and bears the obligation to pay the construction cost, etc. to the defendant as contractual obligations. The plaintiffs are deemed to have paid additional charges, etc. directly to the defendant as a third party who does not have any direct legal relations in accordance with the orders of the Sammomoup reconstruction association according to the resolution of the special general meeting of this case and the settlement general meeting of accounts (the plaintiffs were Sammoup reconstruction association and joint project undertakers by the defendant, and they were the joint project undertakers by proxy with the third party who did not directly pay the construction cost, etc. to the defendant (the plaintiff did not have any legal status of imposing and collecting additional charges, etc. directly from the plaintiffs as union members). Although they led the special general meeting of this case and the settlement general meeting of accounts of this case as to the payment of additional charges, and were practically forced to perform its implementation.

However, in light of the aforementioned legal principles, the payment made by the Plaintiffs against the Defendant, who is a third party, was performed as a performance of the obligation to pay additional charges, etc. against the Defendant, and at the same time, it was performed as performance of the obligation to pay the construction cost, etc. to the Defendant of the Sammomomoup Housing Association. However, the payment process may be reduced by the instruction of the Sammoup Housing Association, etc., and it can be evaluated that the Plaintiffs directly paid payment to the Defendant. In such a case, even if there was no special general meeting of this case and the settlement general meeting of accounts, which became the legal cause for which the Plaintiffs paid additional charges, etc., were made, or null and void, the Defendant received the additional payment, etc. from the Defendant as a repayment of the construction cost, etc. under the reconstruction project contract between Sammoup and Sammoup Housing Association, and thus, the Defendant has a valid legal cause for receiving the payment. Furthermore, even if the Defendant received the payment from the Plaintiffs, the Plaintiffs cannot be said to have received the unjust enrichment against the Defendant without any legal cause.

Nevertheless, the court below erred by misapprehending the legal principles as to unjust enrichment and thereby affecting the conclusion of the judgment. The defendant's ground of appeal pointing this out is with merit.

On the other hand, Supreme Court Decision 2003Da8862 Decided June 13, 2003 cited by the court below to the purport that where a person benefiting knew or could know well the process of unfair contribution of a person benefiting, such benefit shall be deemed to have no legal basis in relation to the person benefiting, applies to the case where he seeks the return of the consideration when the person benefiting was objectively infringed upon (the so-called infringed unjust enrichment relation). Thus, it is inappropriate to invoke this case as it differs from this case concerning the case where the person benefiting losses seeks the liquidation of the benefits he performed (the so-called unjust enrichment relation).

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Ahn Dai-hee (Presiding Justice)