Requirements for recognition of a claim for compensation prescribed in Article 261 of the Civil Act / In a case where the materials reserved by the seller are used for construction of a building owned by a third party as a result of the performance of a contract between the third party and the buyer, whether the seller may claim for compensation even if the third party is unaware of the existence of the materials without negligence (negative), and whether the same applies to cases where the materials reserved by the seller are transferred from the seller to the unauthorized representative on the basis of a contract with no effect on the part of the seller on the basis that the materials reserved by the ownership are transferred from the seller to the unauthorized representative, and are used for construction of a building owned by the principal upon the performance

Article 261 of the Civil Act provides, “A person who suffers damage may file a claim for compensation in accordance with the provisions on unjust enrichment” in cases where the acquisition of ownership pursuant to the provisions on law (Article 256 through Article 260 of the Civil Act) is recognized by appendixment of the Civil Act. In order to recognize such claim for compensation, not only the requirements of Article 261 of the Civil Act itself but also the requirements of unjust enrichment should be recognized to have been fully satisfied by judgment

Where the materials for which ownership is reserved to a seller are used for the construction of a building owned by a third party due to the performance of a contract between a third party and a buyer, it cannot be deemed that there exists any legal ground for refusing to claim compensation. However, in cases where the third party did not know of the fact that the ownership of the materials provided by the contract was reserved by negligence, it is reasonable to deem that there exists a legal ground for a third party to hold profits arising from the possession of the materials, as in the case of bona fide acquisition, and therefore, the seller cannot make a claim for compensation

This legal doctrine applies likewise to cases where the material for which ownership is reserved to the seller is transferred from the seller to the unauthorized Agent on the basis of a contract that is not effective to the seller, and the said material is used for the construction of the building owned by the principal as a performance of the contract between the unauthorized Agent

Articles 249, 256, 261, and 741 of the Civil Act

Supreme Court Decision 2009Da15602 Decided September 24, 2009 (Gong2009Ha, 1743)

Hyundai Elevator Co., Ltd. (Attorneys Kim Jong-woo et al., Counsel for the defendant-appellant)

Defendant (Attorney Lee Ho-hoon, Counsel for defendant-appellant)

Seoul Central District Court Decision 2016Na72848 Decided October 31, 2017

The part of the judgment below on the ancillary claim is reversed, and that part of the case is remanded to the Panel Division of the Seoul Central District Court.

The grounds of appeal are examined.

1. Article 261 of the Civil Act provides that in a case where the acquisition of ownership pursuant to the statutory provisions (Article 256 through 260 of the Civil Act) is recognized as attachment, “a person who suffered damage may claim compensation in accordance with the provision on unjust enrichment.” In order to recognize such claim for compensation, it should be acknowledged that not only the requirements of Article 261 of the Civil Act itself, but also the requirements of unjust enrichment have been satisfied in accordance with the legal doctrine on unjust enrichment.

Where the materials for which ownership is reserved to a seller are used for the construction of a building owned by a third party due to the performance of a contract between a third party and a buyer, it cannot be deemed that there exists any legal ground for refusing a claim for compensation. However, in cases where the third party was unaware of the fact that the ownership of the materials provided by the contract was reserved by negligence, it is reasonable to deem that there is a legal ground for a third party to hold profits arising from the possession of the materials, as in the case of bona fide acquisition, and therefore the seller cannot make a claim for compensation (see Supreme Court Decision 2009Da15602, Sept. 24, 2009).

This legal doctrine applies likewise to cases where the material for which ownership is reserved to the seller is transferred from the seller to the unauthorized Agent on the basis of a contract that is not effective to the seller, and the said material is used for the construction of the building owned by the principal as a performance of the contract between the unauthorized Agent

2. The reasoning of the lower judgment and the record reveal the following facts.

A. On June 2015, the Defendant concluded a contract with the Nonparty for the construction of the instant building (hereinafter “instant construction”) by setting the construction cost of KRW 545,00,000 (including part of value-added tax) and the construction period from June 2015 to November 2015. The said contract includes the installation of eight passenger elevators produced by the Plaintiff.

B. On June 30, 2015, the Plaintiff entered into a contract with the Nonparty claiming that the Plaintiff is the Defendant’s agent to manufacture, sell, and install eight passenger elevators produced by the Plaintiff (hereinafter “instant elevator”) on the instant building (hereinafter “instant contract”). The Plaintiff’s ownership determined that the Plaintiff’s buyer transfers the elevator price from the seller to the Defendant as the buyer at the time the elevator price is fully paid (Article 8(1)).

C. On December 9, 2015, the Plaintiff installed the instant elevator in the instant building. The instant building was approved on January 13, 2016, and the registration of ownership preservation was completed in the name of the Defendant around March 2016.

D. The Plaintiff filed the instant lawsuit against the Defendant by asserting that, as the Nonparty was not paid part of the elevator price set forth in the instant contract by the Nonparty, the Nonparty had the power to represent the Defendant, or even if there was no power to represent, acting as an expressive agent, and the first instance court rejected all of the Plaintiff’s allegations.

E. In the lower court, the Plaintiff added the Plaintiff’s assertion that “the Defendant received the instant elevator without any legal ground for receiving the instant elevator from the Plaintiff, and since the instant elevator was affiliated with the instant building and owned by the Defendant, the Defendant should return the unpaid elevator price to the Plaintiff in unjust enrichment.”

3. Examining the above facts in light of the legal principles as seen earlier, it is determined as follows.

A. Since the instant elevator, the ownership of which was reserved to the Plaintiff, was consistent with the instant building due to the performance of the construction contract concluded between the Nonparty and the Defendant, the Defendant acquired the ownership of the instant elevator, thereby acquiring the ownership of the instant building pursuant to the main sentence of Article 256 of the Civil Act.

B. In order for the Plaintiff to file a claim for return of unjust enrichment equivalent to the value of the instant elevator with the Defendant pursuant to Article 261 of the Civil Act, not only the requirements of Article 261 of the Civil Act itself, but also the requirements of unjust enrichment shall be satisfied by judgment based on the legal doctrine

C. The Defendant cannot be deemed to have a legal ground for holding interest arising from the attribution of the instant elevator solely on the ground that the instant elevator was attached to the instant building due to a contract concluded between the Defendant and the Nonparty. However, in a case where it is acknowledged that the Defendant was not aware of the fact that the ownership of the instant elevator, which was attached to the instant building, was reserved to the Plaintiff without negligence, the Defendant should be deemed to have a legal ground for holding the interest arising from

4. Nevertheless, the lower court did not examine whether the Defendant was unaware of the fact that the ownership of the instant elevator was reserved to the Plaintiff without any negligence, and without considering whether the Defendant, as long as the Plaintiff acquired ownership of the instant elevator on the grounds of accord, etc., the value of the elevator should be returned to the Plaintiff as unjust enrichment. In so doing, the lower court erred by misapprehending the legal doctrine as to the interpretation of Article 261 of the Civil Act and the requirements for unjust enrichment, thereby failing to exhaust all necessary deliberations, and it is obvious that such error affected the conclusion of the judgment. The allegation contained in the grounds

5. Therefore, the part of the judgment below regarding the conjunctive claim is reversed, and that part of 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 on the bench.

Justices Park Sang-ok (Presiding Justice)