"Illegal Funds Cannot Be Considered a Contribution to Marital Assets in Divorce"... Why the Supreme Court Overturned the Appellate Ruling

Acts Lacking Social Legitimacy, Such as Bribery
Civil Law Principle Reaffirmed: No Legal Protection
Potential Precedent for Upholding the Special Property Principle

The key issue in the Supreme Court appeal of the "Chey Tae-won and Roh So-young divorce case" was whether the Supreme Court would accept the appellate court's finding that 30 billion won in slush funds from former President Roh Tae-woo served as the "seed money" for the growth of SK Group. The Supreme Court ruled that illegal funds cannot be considered joint contributions during marriage and have no legal value for protection, overturning the lower court's decision and remanding the case to the Seoul High Court.

On October 16, the legal community assessed this ruling as "a reaffirmation of the civil law principle that individuals who engage in socially unacceptable acts, such as bribery, are not protected by law." By pointing out the appellate court's misunderstanding of legal principles and deciding to remand the case, the Supreme Court has increased the likelihood that the scope of property division in divorce cases involving high-net-worth individuals or business executives will be narrowed in the future.

The First Division of the Supreme Court (Presiding Justice Seo Kyunghwan) determined that the 30 billion won in slush funds from former President Roh Tae-woo, presented by Director Roh's side, could not be deemed to have made a substantial contribution to the initial capital formation of SK Group. The court noted that the inflow route and use of the funds were not specified, and that the appellate court's recognition of these funds as a "tangible or intangible contribution" without the removal of illegality was a misinterpretation of the law.

"Illegal Funds Do Not Constitute Joint Property Contribution"

This ruling reconfirms that, for slush funds or other illegal funds to be considered as contributing to the formation of marital joint property, it must be proven that these funds were used in the actual formation of capital through legal channels. Mere circumstances of fund inflow are insufficient grounds for property division. The illegality of the funds became a key reason for the remand. The Supreme Court stated, "Since Roh Tae-woo's act (the payment of 30 billion won) lacks legal value for protection, it should not be considered as a contribution by the defendant (Director Roh) in property division."

This can also be interpreted as a reaffirmation of the Supreme Court's consistent principle that "special property (assets owned by one spouse prior to marriage or acquired in their own name during marriage) is, in principle, not subject to division." Since the 1990s, the Supreme Court has consistently maintained the legal principle that "assets acquired before marriage or through inheritance or gifts are, in principle, not subject to property division."

Scope of Recognition for Intangible Contributions Likely to Narrow

The legal community expects that the scope for recognizing "intangible contributions" will be somewhat limited as a result of this ruling. An attorney who primarily handles divorce cases stated, "This decision can be seen as an attempt to distinguish between illegal funds and special property in order to uphold legal order." Another attorney specializing in family law commented, "The Supreme Court essentially restrained the appellate court's approach of recognizing intangible factors such as social reputation or political background as contributions," and predicted, "Going forward, contributions to property formation in divorce cases are likely to be recognized only in cases where specific actions and causal relationships are proven."

Meanwhile, unlike most family law cases brought before the Supreme Court, which are usually dismissed without a hearing, this case was dubbed the "divorce case of the century" due to the vast scale of the assets and the complexity of the legal issues, resulting in a prolonged trial. The case was concluded approximately one year and three months after it was filed with the First Division of the Supreme Court on July 8 of last year. Last month, on the 17th, it was decided that the case would not be referred to the Grand Bench, and the ruling was delivered by a smaller panel of four justices on this day.