Where a third party pays money collectible by a local government, such as a local tax, to be paid by a taxpayer under the taxpayer’s name, whether a claim for return of unjust enrichment may be made against the local government (negative in principle), and whether the same applies to cases where a disposition on default for collecting local tax, etc.

Article 741 of the Civil Act, Article 70 of the Framework Act on Local Taxes, Article 60 of the former Local Tax Act (wholly amended by Act No. 1021, Mar. 31, 2010) (see current Article 70(1) of the Framework Act on Local Taxes), Article 47(1) of the former Enforcement Decree of the Local Tax Act (wholly amended by Presidential Decree No. 22395, Sept. 20, 2010) (see current Article 70(2) of the Framework Act on Local Taxes), Article 70 of the Framework Act on Local Taxes (see current Article 70(3) of the Framework Act on Local Taxes) and

Supreme Court Decision 98Da27579 Delivered on October 9, 1998

Plaintiff (Law Firm Jung-dong, Attorneys Park Jong-chul et al., Counsel for plaintiff-appellant)

Chicago-si

Gyeonggi-do (Government Law Firm Corporation, Attorneys Kim Jong-min, Counsel for defendant-appellant)

Seoul High Court Decision 2013Na63792 decided May 1, 2014

The part of the lower judgment against the Defendant is reversed, and that part of the case is remanded to the Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Article 70(1) of the Framework Act on Local Taxes and Article 60 of the former Local Tax Act (wholly amended by Act No. 10221, Mar. 31, 2010) provide that a third party may pay the money collectible by a local government on behalf of a taxpayer. Article 70(2) of the Framework Act on Local Taxes and Article 47(1) of the former Enforcement Decree of the Local Tax Act (wholly amended by Presidential Decree No. 22395, Sept. 20, 2010; hereinafter “former Enforcement Decree of the Local Tax Act”) provide that payment shall be made only in the name of a taxpayer. Article 70(3) of the Framework Act on Local Taxes, Article 47(2) of the former Enforcement Decree of the Local Tax Act provides that where a third party pays in the name of a taxpayer, he/she may not request the local government to return or exercise a right to indemnity.

As can be seen, where a third party pays an amount collectible by a local government, such as a local tax, additional dues, and expenses for disposition on default, under the taxpayer’s name, the tax liability of the taxpayer is in principle effective, and the tax claim of the local government is extinguished upon satisfaction. Therefore, it cannot be deemed that there is no legal ground for the local government to have received the money collectible by the local government. Therefore, the third party is not entitled to file a claim for return of unjust enrichment against the local government (see Supreme Court Decision 98Da27579, Oct. 9, 198). The performance of tax liability following such payment is not related to the procedure for disposition on default to collect the local tax, etc., and thus, the same applies to cases where the seizure on default is null and void in principle.

2. According to the reasoning of the lower judgment and the evidence duly admitted, the following facts are revealed.

A. On July 1, 2011, the Defendant seized the instant real estate held in trust with Puuu Co., Ltd. to collect delinquent local taxes (hereinafter “Puu”) (hereinafter “instant seizure”).

B. On March 26, 2013, the Plaintiff completed the registration of transfer of ownership on the instant real estate, and indicated remitter as the Plaintiff and remitted KRW 106,178,290 of the resident tax, automobile tax, business place tax, local income tax, and local income tax on the delinquent account established by the Defendant to receive local tax from Peru.

C. On March 26, 2013, the Defendant cancelled the seizure of this case, and completed the registration cancellation of the seizure of this case’s real estate.

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

A. The Plaintiff cannot be deemed to have paid the amount in arrears under his/her name only because the Plaintiff indicated the remitter as the Plaintiff and actually paid the amount in arrears to the account.

Rather, the Plaintiff appears to have tried to effectively pay the amount in arrears, which is the cause of the instant seizure, in order to release the attachment of the instant real estate it acquired. Although the Plaintiff indicated the remitter as the Plaintiff, it may be deemed that the payment was made additionally in order to clarify that the said payment was related to the instant real estate owned by the Plaintiff.

In addition, the defendant also received the amount of delinquent taxes through the delinquent account opened to receive local taxes from Puty, and released the seizure of this case on the premise that the tax liability of Puu has been extinguished.

In light of the above circumstances and the facts and records recognized by the court below, it is reasonable to view that the Plaintiff paid the amount of delinquent taxes in the name of Puho under Article 70(2) of the Framework Act on Local Taxes and Article 47(1) of the former Enforcement Decree of the Local Tax Act.

B. As such, the Plaintiff’s payment of the amount in arrears to the Defendant under the name of Pu, a taxpayer, is valid as a performance of tax liability, and accordingly, the Defendant’s tax claim against Puu has ceased to exist. Therefore, even if the seizure of this case is null and void, it cannot be deemed that there is no legal ground for the Defendant to pay the amount in arrears, and pursuant to Article 70(3) of the Framework Act on Local Taxes and Article 47(2) of the former Enforcement Decree of the Local Tax Act,

4. Nevertheless, the lower court determined otherwise on the erroneous premise that the above delinquent amount was paid in the name of the Plaintiff, not the Plaintiff, a taxpayer, solely on the ground that the seizure of this case was null and void. Ultimately, the lower court erred by misapprehending the legal doctrine on the payment of tax liability or unjust enrichment by a third party, thereby adversely affecting the conclusion of the judgment. The allegation contained in the grounds of appeal on this point is with merit.

5. Therefore, without examining the remaining grounds of appeal, we reverse the part against the defendant among the judgment below, and remand this part of the case 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 Kim Shin (Presiding Justice)