[1] Where Article 64 of the Commercial Code provides for the five-year extinctive prescription period for the right to claim restitution of unjust enrichment applies

[2] Extinctive prescription period of the claim for return of unjust enrichment upon illegal dividend (=10 years)

[1] Article 64 of the Commercial Act provides for the extinctive prescription of five years for a claim for return of unjust enrichment, where a claim for return of unjust enrichment is sought based on a contract that is a commercial activity, and the legal relationship needs to be resolved rapidly to the same extent as that of the commercial transaction relationship in light of the background and cause of the claim occurrence, the status of the parties

However, if the contents of the right to claim restitution of unjust enrichment do not seek the return of the performance itself or it is not recognized that such a prompt resolution is not necessary, Article 64 of the Commercial Act is not applicable and the period of civil extinctive prescription of ten years is applied, barring any special circumstance

[2] A company may distribute profits within the extent of the amount of its net assets stated in the balance sheet, the sum of the capital reserve and the earned surplus reserve accumulated during the period for the settlement of accounts, the amount of earned surplus reserve accumulated in the period for the settlement of accounts, and the amount of earned surplus reserve accumulated in the period for the settlement of accounts (Article 462(1) of the Commercial Act). If a company satisfies certain requirements, interim dividends may be paid, but there shall be possible profits available for the payment of dividends (Article 462-3(1) and (2) of the Commercial Act). If a company distributes profits or interim dividends although there is no possible profit, if a company does not make a dividend or interim dividend, it shall

The right to claim the return of unjust enrichment cannot be seen as a claim arising out of a commercial activity to which Article 64 of the Commercial Act applies, since a company distributes profits acquired by the company to its shareholders inside the scope of its business or commercial activity for its business. Accordingly, the right to claim the return of unjust enrichment pursuant to illegal dividend cannot be deemed as having arisen based on a fundamental commercial activity. In particular, in a case where the dividend or interim dividend has been implemented even without the distributable profits, the right to claim the return of unjust enrichment from the shareholder is essential to promote the company’s capital adequacy and protect the company’s creditors, and thus, it is unnecessary to promptly determine the exercise of the right to claim the return of unjust enrichment for the recovery of unjust enrichment. Accordingly, the right to claim the return of unjust enrichment due to illegal dividend is subject to Article 162(1) of the Civil Act, and the Civil

[1] Articles 162(1) and 741 of the Civil Act, Article 64 of the Commercial Act / [2] Articles 162(1) and 741 of the Civil Act, Articles 64, 462(1), and 462-3(1) and (2) of the Commercial Act

[1] Supreme Court Decision 2001Da47825 Decided June 14, 2002, Supreme Court Decision 2016Da271257 Decided September 10, 2019

Korea

Gold Mine Enterprise Co., Ltd. and one other (Law Firm Lee & Lee, Attorneys Kim Jong-ap et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2001Na1448 decided May 2, 2012

Gwangju High Court Decision 2019Na21803 decided January 8, 2020

All appeals are dismissed. The costs of appeal are assessed against the Defendant’s Intervenor, and the remainder are assessed against the Defendants.

The grounds of appeal are examined.

1. The facts found by the court below are as follows.

A. The Intervenor joining the Defendant each holds 70% of the total shares in the Defendant Intervenor’s Intervenor’s Intervenor’s Intervenor’s Intervenor’s Intervenor’s Intervenor’s Intervenor’s Intervenor’s 77,00 shares (77,00 shares) and 30% of the total shares (33,00 shares).

B. On November 16, 2010, the Plaintiff decided and notified the Defendant’s Intervenor’s Intervenor of comprehensive real estate holding tax for the year 2010, and the corporate tax for the year 2010, July 1, 2011, respectively. On March 6, 2018, the Intervenor’s Intervenor paid only part of the Defendant’s Intervenor’s Intervenor’s corporate tax, additional tax, etc., and the Plaintiff has the obligation to pay delinquent tax amounting to KRW 5,015,78,60,00 in total with respect to

C. On December 20, 2010, the Intervenor: (a) held a temporary general meeting of shareholders on December 20, 2010, decided to provide interim dividends to shareholders; and (b) distributed KRW 6,45,959,451 to Defendant Gold-gu Enterprise Co., Ltd.; and (c) KRW 2,762,554,050 to Defendant Sejong Co., Ltd. (hereinafter “instant interim dividends”).

2. Of the grounds of appeal, determination on the part of the main claim(tax claim) (ground of appeal Nos. 1, 2, and 3)

For the reasons indicated in its reasoning, the lower court determined that the claim against the Plaintiff’s Intervenor was lawful, on the grounds that the claim amounting to KRW 5,015,788,600 against the Plaintiff’s Intervenor was not extinguished due to the completion of prescription, and that the Plaintiff’s primary claim against the Defendants in subrogation of the Defendant’s Intervenor was lawful. In so doing, the lower court rejected the main defense

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not exhaust all necessary deliberations or did not err by exceeding the bounds of the principle of free evaluation of evidence against logical and empirical rules, thereby adversely affecting the conclusion of the judgment.

3. Of the grounds of appeal, determination on the scope of the primary claim (the ground of appeal No. 4)

For the reasons indicated in its holding, the lower court determined that the amount to be returned by the Defendants to the Defendant Intervenor’s Intervenor with unjust enrichment was KRW 5,015,788,60, and delay damages, which amounted to the sum of the Plaintiff’s tax claims, and KRW 2,762,54,050, and delay damages, which amounted to KRW 5,015,788,60, and KRW 5,015,788,60, in collaboration with the Defendant Gold Corporation.

Examining the reasoning of the lower judgment in light of the relevant legal principles and records, the lower court did not err in its judgment by misapprehending the legal doctrine on the establishment and scope of the right to claim restitution of unjust enrichment due to unlawful and invalid interim dividends, contrary to what is alleged in

4. Of the grounds of appeal, determination on the statute of limitations period of subrogation claim (the grounds of appeal No. 5) regarding the claim(the right to claim restitution of unjust enrichment due to illegality and invalidation of interim dividend)

A. (1) Even a claim for return of unjust enrichment is a claim for the return of the performance itself based on a contract which is a commercial activity. Article 64 of the Commercial Act, which provides for a five-year extinctive prescription, provides for the extinctive prescription for the case where there is a need to promptly resolve the legal relationship in light of the developments leading up to the occurrence of the claim, the grounds therefor,

However, in cases where the content of the right to claim restitution of unjust enrichment does not seek the return of performance itself, or where it is not recognized that such a prompt resolution is not necessary, Article 64 of the Commercial Act shall not apply, barring any special circumstance, and the period of civil extinctive prescription of ten years shall not apply (see Supreme Court Decisions 2001Da47825, Jun. 14, 2002; 2016Da271257, Sept. 10, 2019, etc.).

2) The Company may distribute profits within the scope of the net asset value on the balance sheet, the sum of the capital reserve and the earned surplus reserve accumulated during the period for the settlement of accounts, the amount obtained by deducting the earned surplus reserve to be accumulated in the period for the settlement of accounts (Article 462(1) of the Commercial Act). If a company satisfies certain requirements, interim dividends may be paid, but there shall be possible profits available for the payment of dividends (Article 462-3(1) and (2) of the Commercial Act). If a company distributes profits or interim dividends even though there is no possible profit, it would be deemed that the said provision would be null and void, and the Company may exercise its right to claim for the return of unjust profits

The right to claim the return of unjust enrichment cannot be seen as a claim arising out of a commercial activity to which Article 64 of the Commercial Act applies, since a company distributes profits acquired by the company to its shareholders inside the scope of its business or commercial activity for its business purposes. Accordingly, the right to claim the return of unjust enrichment pursuant to illegal dividend cannot be deemed as having arisen based on a fundamental commercial activity. In particular, in a case where the profit distribution or interim dividend has been carried out even though there is no distributable profit, the right to claim the return of unjust enrichment from the shareholder is essential to promote the company’s capital adequacy and protect the company’s creditors, and thus, there is no need to promptly determine the exercise of the right to claim the return of unjust enrichment for the recovery of unjust enrichment. Accordingly, the right to claim the return of unjust enrichment due to illegal dividend is governed by Article 162(1) of the Civil

B. The lower court determined to the effect as above, on the grounds of the illegality and invalidity of the interim dividend of this case, that the Civil Extinctive Prescription should be applied to the Defendant’s claim for return of unjust enrichment on behalf of the Defendant joining the Defendant. Such determination by the lower court is in accordance with the aforementioned legal doctrine. In so doing, it did not err by misapprehending the legal doctrine on the period of extinctive prescription

5. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Ki-taik (Presiding Justice)