Supreme Court: "The Criterion for Determining Ownership of Domestic Property by Japanese Corporations Before Liberation Is the Location of the Head Office"

"Japanese Corporations Without Domestic Headquarters Before Liberation Can Have Owned Property Classified as Reversion Property"
First Interpretation Standard Issued for Article 2, Paragraph 3 of the Reversion Property Act

Supreme Court building in Seocho-dong, Seoul.

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that whether property owned by a Japanese corporation before liberation belongs to the Republic of Korea should be determined based on whether the corporation's head office or principal place of business was located domestically.

The Supreme Court's Third Division (Presiding Justice Lee Heung-gu) overturned the lower court's ruling that dismissed the claim by Korea Rural Community Corporation against the Republic of Korea for ownership transfer registration, which had excluded the property from state-owned assets on the grounds that the land was registered under a Japanese corporation in the land register. The case was remanded to the Gwangju District Court on the 24th.

The court stated, "The lower court erred in its interpretation of Article 2, Paragraph 3 of the Act on the Handling of Property Belonging to the State and failed to conduct necessary fact-finding, which affected the judgment," as the reason for the reversal and remand.

This case arose over land A, which is used as a dam embankment for a reservoir in Gwangsan-gu, Gwangju Metropolitan City.

There was no registration for land A, but the land register recorded that ownership was transferred on May 14, 1920, to a Japanese corporation named Dongsan Farming Co., Ltd.

After liberation, Gwangsan County managed the reservoir and land A, but in 1977, management rights were transferred to a nearby Farmland Improvement Association under the Rural Modernization Promotion Act. Subsequently, all rights and obligations held by the Farmland Improvement Association were comprehensively succeeded by the Agricultural Infrastructure Corporation due to institutional changes, which later changed its name sequentially to Korea Rural Community Corporation and Korea Rural & Fishery Corporation.

In August 2020, Korea Rural & Fishery Corporation filed a lawsuit against the government requesting the transfer of ownership of land A.

The claim was based on the argument that the government originally acquired the land under the Farmland Reform Act, but under the Rural Modernization Promotion Act of June 1977, the rights and obligations, including ownership of land A, were comprehensively succeeded by the Farmland Improvement Association, and later by Korea Rural & Fishery Corporation, thus obligating the government to transfer ownership.

However, the first trial court did not accept Korea Rural & Fishery Corporation's claim.

At the time of the trial, Article 5, Clause 1, Subparagraph (a) of the Farmland Reform Act stipulated that farmland confiscated or nationalized under treaties equivalent to laws belonged to the government. The plaintiff, Korea Rural & Fishery Corporation, only claimed that the defendant, the Republic of Korea, originally acquired land A under this provision but failed to specify or prove under which treaty equivalent to law the land belonged to the Republic of Korea.

Korea Rural & Fishery Corporation's claim for ownership transfer registration presupposed that the Republic of Korea had acquired ownership of the land, but the court concluded it was difficult to recognize this based solely on the plaintiff's claim.

After winning the first trial, on March 23, 2021, the Republic of Korea, at the request of Gwangsan-gu, Gwangju, completed ownership preservation registration in the name of the Republic of Korea, citing land A as unregistered land under the name of a Japanese corporation and thus state-owned property.

The second trial court, although differing in reasoning, upheld the conclusion of the first trial and dismissed Korea Rural & Fishery Corporation's appeal.

Article 2, Paragraph 3 of the Act on the Handling of Property Belonging to the State states, "For profit corporations or cooperatives established in Korea before August 9, 1945 (short calendar year 4278), whose stocks or shares belonged to Japanese institutions, nationals, or organizations, such stocks or shares shall be deemed to have belonged to the state."

The second trial court cited the Supreme Court ruling that, under this provision, for corporations or cooperatives established in Korea before August 9, 1945, whose stocks or shares belonged to Japanese institutions, nationals, or organizations, the property subject to state ownership is the stocks or shares of the corporation or cooperative, not the property owned by the corporation or cooperative itself. Therefore, land A itself could not be state-owned property, and the Japanese corporation Dongsan Farming, registered as the owner in the land register, still held ownership.

Ultimately, the court concluded, "The ownership preservation registration in the name of the defendant, the Republic of Korea, is invalid," and "Therefore, the plaintiff's claim based on the premise that the defendant acquired ownership in this case is without merit."

However, the Supreme Court found problems with the second trial court's judgment.

It stated that the mere fact that the registered owner in the land register is a Japanese corporation does not mean the property is not state-owned; rather, it should have been examined whether the corporation's head office or principal place of business was in Korea.

Dongsan Farming Co., Ltd. was a corporation with its head office in Tokyo, Japan, not domestically.

The court premised, "Under Article 2, Paragraph 3 of the Act on the Handling of Property Belonging to the State, property owned by a profit corporation established domestically before August 9, 1945, whose stocks or shares belonged to Japanese institutions or nationals, is excluded from state-owned property, and the stocks or shares become state-owned property. However, 'a profit corporation established domestically' means a corporation established with its principal place of business or head office in Korea."

The court added, "The lower court should have examined and judged whether Dongsan Farming fell under this category and accordingly determined the applicability of the provision, but it applied Article 2, Paragraph 3 of the Act on the Handling of Property Belonging to the State without such examination, merely because Dongsan Farming was a Japanese corporation, and ruled that the land in question was not state-owned property." The court stated, "This constitutes a misinterpretation of the law and failure to conduct necessary fact-finding, which affected the judgment," as the reason for reversal and remand.

A Supreme Court official said, "This ruling is significant in that it clarifies for the first time the criteria for determining whether property located in Korea owned by Japanese corporations before liberation qualifies as state-owned property by elucidating the interpretation of Article 2, Paragraph 3 of the Act on the Handling of Property Belonging to the State."

This content was produced with the assistance of AI translation services.