Pharmacy owner wins back half of W250m key money after hospital shuts down

It cost 250 million won ($189,000) to acquire the operating rights to a pharmacy in front of a general hospital. Then the hospital ran into financial trouble and effectively ceased operations — and that is when the dispute began.

The contract included a special clause: if the hospital closed within one year, the seller would refund half the key money. A, who had purchased the pharmacy rights, demanded the return of 125 million won — half of the 250 million won paid. The request was refused.

B, who had transferred the pharmacy rights, interpreted the term "closure" differently, rebuffing A by arguing it referred to the date of the official business deregistration filing. Since that filing came one year and eight months after the contract was signed, B argued no refund was owed.

The dispute ultimately ended up in court. The question was whose interpretation would prevail.

According to the facts established by the court, A and B entered into a contract over the operating rights to a pharmacy located in front of a general hospital in Gyeonggi Province. In February 2024, A paid B 250 million won in key money. Under the special clause, if the hospital closed within one year of the final payment date, B was required to return half the key money to A.

Just six months later, however, the hospital began showing signs of financial distress — wage arrears and other problems surfaced and were reported in the media. Many of the hospital's medical staff and other employees subsequently resigned. The hospital continued operating with a sharply reduced patient count before ultimately suspending operations entirely, exactly one year after A and B had signed their contract.

The two sides could not agree on whether "closure" in the contract meant the actual cessation of the hospital's operations or the date of the official deregistration filing.

The court sided with A, ruling that B was required to return half the key money.

Judge Kang Seong-dae of the Suwon District Court's Civil Division 23 ruled entirely in A's favor in August in the key money refund suit, in which A sought an order for B to pay 125 million won. The court also ordered B to bear the litigation costs.

The court cited Supreme Court precedent holding that when a dispute arises over the interpretation of a contract, the court must consider comprehensively and reasonably the motive and circumstances behind the agreement, its purpose, and the true intent of the parties.

Applying that standard, the court found that "closure" as used in the special clause "means closure as the actual cessation of business operations, and it is difficult to read it as referring to the filing of a business closure report."

The court grounded that conclusion in the nature of the pharmacy's value, noting that a substantial portion of the operating rights derived from the expectation of prescription drug sales generated by the nearby general hospital.

The court added that the parties appeared to have structured the special clause so that a refund of part of the key money could be sought depending on whether the hospital closed, with the refund amount varying based on whether the expected operating period had been met.

B argued that "closure" meant the filing of a closure report, but the court said the special clause contained "no reference whatsoever to a 'filing,'" and that a business closure filing "is no more than an administrative or tax-related matter that can be delayed depending on the hospital's own intentions and internal circumstances."

Taking all of these factors together, the court concluded that it was "difficult to find that the parties had defined 'closure' in the special clause as the filing of a closure report."

The ruling was finalized on Sept. 4. B did not appeal the first-instance decision.