[비즈한국] Honorary Chairman Cho Yang-rai of Hankook & Company000240 Group has won the appellate trial in a lawsuit filed against his second daughter, Cho Hee-won, for the return of 33.3 billion won in unjust enrichment. Honorary Chairman Cho had previously paid gift taxes on behalf of Ms. Cho Hee-won, but after tax authorities canceled the gift tax assessment and refunded the amount to her, he filed the lawsuit to reclaim the taxes he had paid on her behalf. Ms. Cho Hee-won argued that the lawsuit was filed improperly due to the Honorary Chairman's mental limitations, but the court dismissed this claim.
On the 14th, the 20-2 Civil Division of the Seoul High Court (Presiding Judge Kim Kwan-yong) dismissed the appeal filed by Ms. Cho Hee-won in the unjust enrichment lawsuit brought by Honorary Chairman Cho Yang-rai. Consequently, the first-instance ruling, which ordered Ms. Cho Hee-won to pay 33.3 billion won in unjust enrichment to the Honorary Chairman, remains in effect. The appellate court ruled, "Even after comprehensively reviewing the evidence submitted in the first trial and the evidence submitted to this court, the factual findings and judgments of the first trial are recognized as legitimate."
The dispute originated from the stocks that Honorary Chairman Cho Yang-rai gifted to Ms. Cho Hee-won. In 1996, the Honorary Chairman gifted 253,200 shares of Hankook Tire to Ms. Cho Hee-won, covering the associated gift taxes himself. Ms. Cho Hee-won used the stock dividends to purchase an additional 125,620 shares of the same company in 2009. In 2012, Hankook Tire was split into the holding company Hankook & Company and Hankook Tire & Technology161390. The following year, Ms. Cho Hee-won acquired shares of Hankook Tire Worldwide through a contribution in kind of the split shares.
The tax authorities initially viewed this stock acquisition process as a trust under a borrowed name. They determined that the actual owner of the newly acquired shares was Honorary Chairman Cho, making the process a gift. In 2018, the authorities imposed a total of 182.1 billion won in gift taxes on Ms. Cho Hee-won. Honorary Chairman Cho, designated as a joint taxpayer, paid 32.7 billion won of this amount. However, in 2021, as their request for tax adjudication was accepted, 179.9 billion won in gift taxes was canceled. Ms. Cho Hee-won received a refund of the 33.3 billion won (including interest) that the Honorary Chairman had paid on her behalf.
Honorary Chairman Cho Yang-rai filed a lawsuit against Ms. Cho Hee-won in 2024, demanding the return of the refunded gift tax. The basis of the suit is that Ms. Cho Hee-won obtained an unjust benefit by receiving a refund of taxes paid by him without any contribution of her own. In April last year, the Seoul Central District Court ruled in favor of Honorary Chairman Cho. Ms. Cho Hee-won immediately appealed the ruling.
The largest shareholder of Hankook & Company, the holding company of Hankook & Company Group, is Chairman Cho Hyun-bum. In 2020, founder Honorary Chairman Cho Yang-rai sold his entire stake in Hankook & Company to his second son, Chairman Cho Hyun-bum. Chairman Cho became the largest shareholder (42.03%), surpassing his older brother, former advisor Cho Hyun-sik (18.93%), his older sister, Cho Hee-won (10.61%), and the head of the Hankook Tire Foundation, Cho Hee-kyung (0.81%). Hankook & Company Group is the 27th largest corporate group in Korea (with fair assets of approximately 22 trillion won), encompassing 25 subsidiaries, including the tire manufacturer Hankook Tire & Technology.
Family disputes began after Honorary Chairman Cho Yang-rai gifted his shares. In July 2020, shortly after the share transfer, the eldest daughter Cho Hee-kyung, second daughter Cho Hee-won, and eldest son Cho Hyun-sik filed for a limited guardianship over the Honorary Chairman, claiming he lacked the capacity to handle affairs due to mental limitations. This request was dismissed in the first instance in 2022 and again in the appellate and re-appellate trials in 2024. A mental assessment conducted during the appellate trial concluded that the Honorary Chairman had no impairments in his cognitive or volitional capabilities at that time.
This lawsuit was filed during the period when the appeal regarding the limited guardianship of Honorary Chairman Cho Yang-rai was ongoing. During the first trial of this case, Ms. Cho Hee-won argued that because the Honorary Chairman had difficulty making decisions due to mental limitations, it could not be considered that the lawsuit was filed through a legitimate delegation based on his true intent. However, the first-instance court dismissed Ms. Cho Hee-won's argument, stating that based on evidence including documents for the issuance of a seal registration certificate, it was confirmed that the Honorary Chairman had legally delegated the litigation to his legal representative.
In the appellate trial of the unjust enrichment case, Ms. Cho Hee-won again raised the issue of Honorary Chairman Cho Yang-rai's mental limitations. She argued that the lawsuit was improper, claiming that the confirmation letter stating the Honorary Chairman had delegated the lawsuit to his representative was stamped against his will. However, the appellate court deemed this argument groundless, citing the confirmation letter submitted during the appeal. The court stated, "The first-instance judgment, which recognized that the filing of this lawsuit was based on a legitimate delegation, is recognized as just."