[비즈한국] The Supreme Court has overturned a lower court ruling that ordered the family of former Namyang Dairy Products Chairman Hong Won-sik to return 32 billion won to Dayou Holdings, an intermediate holding company of Dayou Winia Group. Previously, the appellate court ruled that the agreement between the two sides had effectively become impossible to perform due to an injunction filed by Hahn & Co., which is currently embroiled in a management dispute with former Chairman Hong, and therefore ordered the return of the 32 billion won deposit. However, the Supreme Court ruled that it is difficult to conclude that the obligations under the agreement had become impossible to perform based solely on such circumstances.
The Second Division of the Supreme Court (presided by Justice Eom Sang-pil) overturned the part of the original appellate court judgment that went against former Chairman Hong's side on the 12th, regarding the lawsuit for breach of contract penalties filed by Dayou Holdings against former Chairman Hong, his spouse, and his grandson. The court stated, "The original judgment contains an error in legal interpretation regarding impossibility of performance in bilateral contracts, which affected the ruling." Previously, the Seoul High Court had viewed the 32 billion won deposit received by Hong's side as unjust enrichment and ordered its return to Dayou Holdings.
The lawsuit originated from an agreement signed between the two sides during the Namyang Dairy Products management dispute. In May 2021, former Chairman Hong's side entered into a contract to sell a 53% stake in Namyang Dairy Products to the private equity firm Hahn & Co. for 310.7 billion won. However, subsequent conflicts over the implementation and withdrawal of the contract escalated into legal battles. In November of the same year, Dayou signed a mutual cooperation agreement with Hong's side, agreeing to acquire the stake in Namyang Dairy Products for 320 billion won once the legal disputes were settled and the share transfer became possible. During this process, Dayou paid a 32 billion won partnership deposit.
The agreement included provisions that Dayou would establish a management normalization plan for the target company, and that Hong's side would cooperate by appointing managers or directors designated or dispatched by Dayou to implement the plan. It also stated that if they won the related stock transfer lawsuit, they would sign a share transfer contract at Dayou's request. Following the agreement, Dayou dispatched a management advisory group to Namyang Dairy Products and began normalization efforts.
The alliance did not last long. In March 2022, Dayou Holdings filed a lawsuit seeking the return of the 32 billion won deposit and an additional 32 billion won in penalties, claiming that Hong's side had failed to fulfill their cooperation obligations under the agreement. The primary reason cited was that Hong and his related parties refused to resign as registered directors of Namyang Dairy Products, thereby failing to cooperate with management participation and normalization efforts. Meanwhile, in October 2021, prior to the agreement with Dayou, Hahn & Co. had filed for an injunction to prohibit Hong's side from exercising voting rights, which was granted by the court.
The lower court rulings were conflicting. The Seoul Central District Court dismissed all of Dayou Holdings' claims in November 2022. Conversely, the Seoul High Court, which handled the appeal in December of the following year, partially upheld Dayou Holdings' preliminary claims. While it did not accept Dayou's claim of contract termination, it viewed the cooperation obligations as effectively impossible to perform due to the injunction by Hahn & Co. Consequently, it ordered the return of the 32 billion won deposit, labeling it as unjust enrichment.
However, the Supreme Court's judgment differed. It stated that for performance to be considered impossible in a bilateral contract, objective circumstances must be sufficiently established to show that the creditor can no longer expect the debtor to fulfill their obligations. It held that the circumstances cited by the second trial were insufficient for such a conclusion. The reasons were that the stock transfer lawsuit filed by Hahn & Co. against Hong was still ongoing, and the related injunction was merely a provisional measure effective only until the final court ruling on the merits. The court also noted that Dayou Holdings had signed the agreement while fully aware of the existing dispute and the existence of the injunction.
The Supreme Court ruled, "It cannot be determined that the defendants' obligation to cooperate in management normalization reached a state of impossible performance at the time the injunction was finalized, based on the reasoning that the trust between the plaintiff and defendants necessary for fulfilling cooperation obligations was broken due to factors such as the passage of time, significant changes in the objective circumstances surrounding the target company, and the progress of the lawsuit regarding the termination of the agreement."