Registration Invalid, Donation Remains... Supreme Court: "Difficult for Creditors to Recover Unjust Enrichment"

Ownership Returned to Cooperative Complex via Registration Transfer Before Bankruptcy
But Underlying Donation Act Remains Valid
Bankruptcy Trustee Files Unjust Enrichment Lawsuit Over Possession
Supreme Court: "Cannot Be Considered Unjust Enrichment"

The Supreme Court has ruled that if a bankrupt company donates buildings or other assets to a foundation and even completes the registration transfer, but later only the "registration act" is invalidated and the foundation's name is removed from the registry, the foundation's possession is not considered unjust enrichment as long as the donation itself remains valid.

According to the legal community on October 22, the First Division of the Supreme Court (Presiding Justice Noh Taeak) dismissed the appeal on September 11 and finalized a ruling against the plaintiff in a lawsuit filed by the bankruptcy trustee of a cooperative complex seeking the return of unjust enrichment from a foundation. The cooperative complex had purchased land in the Digital Media City (DMC) from the Seoul Metropolitan Government and constructed a new building. In August 2008, it prepared a donation certificate to donate the eighth floor of the building and cash to the foundation, and in November of the following year, completed the registration of ownership transfer.

The issue arose when the cooperative complex was unable to repay its debts in 2010. Creditors filed a lawsuit in 2012 regarding the donation act, and in July 2018, the registration in the foundation's name was restored to the cooperative complex. The bankruptcy trustee of the cooperative complex then argued, "Since the registration act was invalidated, the donation act was also extinguished," and claimed, "The foundation possessed and used the real estate without legitimate grounds from November 2009 to July 2018," filing a lawsuit to recover unjust enrichment.

The key issue was whether, in cases where the underlying donation act is not invalidated but only the registration act is, Foundation B is liable to return unjust enrichment for possessing and using the real estate. Both the first and second instance courts ruled in favor of Foundation B, dismissing the plaintiff's claims. The Supreme Court reached the same conclusion, stating, "As long as the donation act, which is the cause of the change in rights, is not invalidated, the foundation still has the right to possess and use the real estate."

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