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2016 (Kyo) 26

2017.05.10
2016 (Kyo) 26
Minshu Vo. 71, No. 5
Decision on a case where a bank issued letters of credit for goods imported by an importer and where mortgages by transfer was created over the goods for the benefit of the bank, the Court deemed the bank to have received delivery of the goods from such importer by way of constructive transfer even though the importer had never taken direct possession of the goods
Case of appeal with permission against a ruling of the appeals court to revoke the decision to revoke an order for attachment of receivables and to dismiss the petition
Decision of the Second Petty Bench, dismissed
Osaka High Court, Decision of March 30, 2016
In a case where bank X issued letters of credit (L/C’s) for goods imported by importer Y and where mortgages by transfer was created over the goods for the benefit of X by way of security for, among others, Y’s corresponding obligation to make repayment, X is deemed to have received delivery of the goods from Y by way of constructive transfer even though Y had never taken direct possession of the goods, under the circumstances described in (1) and (2) below.

(1) At the time of creation of the mortgages by transfer over the imported goods for the benefit of X as described above, it had been agreed between X and Y that X would lease the goods to Y and would authorize Y to receive the goods, in light of the actual circumstances of import transactions where it was common that imported goods were received and otherwise handled by a freight forwarder who was authorized to do so by the importer, who resold the goods without taking direct possession of them.

(2) The freight forwarder was authorized by Y to receive and otherwise handle the goods and did actually do so, naturally assuming that a financial institution, as the mortgagee by transfer, was to receive delivery of the goods by way of constructive transfer.
Articles 183 and 304 and Article 369 (mortgage by transfer) of the Civil Code, and Article 45 and Article 53, paragraphs (1) and (2) of the Civil Rehabilitation Act



Civil Code

Article 183 If an agent manifests an intention that The thing possessed by it shall thenceforward be possessed on behalf of its principal, the principal shall thereby acquire possessory rights.

Article 304 (1) A statutory lien may also be exercised against Things including monies that the obligor is to receive as a result of the sale, lease or loss of, or damage to, the subject matter of the statutory lien; provided, however, that the holder of the statutory lien must attach the same before the payment or delivery of the monies or other Thing.

(2) The provisions of the preceding paragraph shall likewise apply to the consideration for real rights established by the obligor on the subject matter of the statutory lien.

Article 369 (1) A Mortgagee shall have the right to receive the performance of his/her claim prior to other obligees out of the immovable properties that the obligor or a third party provided to secure the obligation without transferring possession.

(2) Superficies and emphyteusis can be the subject matter of a mortgage. In such cases, the provisions of this Chapter shall apply mutatis mutandis.



Civil Rehabilitation Act

Article 45 (1) A registration or a provisional registration under the provision of Article 105(i) of the Real Property Registration Act (Act No. 123 of 2004), which is made with respect to real property or a vessel after the commencement of rehabilitation proceedings based on a cause of registration that occurred prior to the commencement of rehabilitation proceedings, may not be asserted as effective in relation to the rehabilitation proceedings; provided, however, that this shall not apply to a registration or provisional registration made by a person entitled to demand registration, without knowledge of the commencement of rehabilitation proceedings.

(2) The provision of the preceding paragraph shall apply mutatis mutandis to a registration or provisional registration with respect to the establishment, transfer or modification of a right, or registration with respect to the establishment, transfer or modification of an enterprise mortgage.

Article 53 (1) A person who has any interest security (meaning a special statutory lien, pledge, mortgage, or a right of retention under the provisions of the Commercial Code or the Companies Act; the same shall apply in paragraph (3)) that exists, at the time of commencement of rehabilitation proceedings, on the rehabilitation debtor's property, shall have a right of separate satisfaction over the property that is the subject matter of the security interest.

(2) A right of separate satisfaction may be exercised without going through rehabilitation proceedings.
1. The appeal from a ruling is dismissed.

2. The cost of the appeal from a ruling shall be borne by the appellant.

3. The decision of prior instance shall be corrected as shown in the Exhibit.
Reasons for the appeal filed by the counsels for the appeal, NAGASAWA Tadashi et al.



1. In this case, the appellee, which is a bank that issued L/C’s at the request of the appellant, which is an importer, for goods imported by the appellant, filed a petition for attachment of accounts receivable for the imported goods resold by the appellant, by way of exercise of the appellee’s real subrogation rights based on its mortgages by transfer over the imported goods, after a decision was made for the commencement of the appellant’s rehabilitation proceedings. The point at issue is whether or not the appellee received delivery of the aforementioned imported goods by way of constructive transfer.

2. According to the records, the background of this case is as follows.

(1) On September 5, 2012, the appellant and the appellee entered into a bank transaction contract, a master agreement on L/C transactions, and a trust receipt agreement with each other, whereby the parties agreed: (i) that, with respect to goods imported by the appellant by having an L/C issued by the appellee, the appellee would have an obligation to make compensation to the exporter’s bank or other financial institution in accordance with the terms of the L/C, whereas the appellant would have an obligation to make repayment to the appellee; (ii) that the appellant would create mortgages by transfer over the aforementioned imported goods for the benefit of the appellee by way of security for the appellant’s obligation to make repayment mentioned above; and (iii) that the appellee would lease the aforementioned imported goods to the appellant and would authorize the appellant to receive, clear the customs for, transport, dispose of and otherwise handle the goods.

(2) During the period from December 25, 2014 to January 29, 2015, the appellee issued three L/C’s for the appellant’s import of the goods listed in the list of goods shown in the Exhibit to the decision of prior instance (hereinafter, the “Goods”). During the period from January 22, 2015 to February 19, 2015, the appellee performed its obligations to make compensation under these L/C’s, thereby obtaining, among other claims, claims against the appellant for performance of the appellant’s repayment obligations listed in 2 (1) and (2) of the list of security interests, secured obligations and asserted claims shown in the Exhibit to the decision of prior instance.

(3) The appellant entered into an import contract for the Goods with the seller of the Goods, which were, in accordance with the contract, transported by ship from China to Osaka South Port, arriving at the port during the period from January 5, 2015 to February 5, 2015. Around that time, the appellant authorized a freight forwarder (hereinafter, a “forwarder”) to receive the Goods, clear them through customs, and transport them to the purchasers of resold Goods.

(4) By February 6, 2015 at latest, the appellant sold part of the Goods (hereinafter, the “Resold Goods”) to Takisada-Osaka Co., Ltd. or a third-party debtor which is the successor company of Takisada-Osaka Co., Ltd. (hereinafter collectively, the “Purchaser”).

(5) During the period from January 5, 2015 to February 6, 2015, the forwarder authorized as described in (3) above received the Goods at Osaka South Port, cleared them through customs, and transported the Resold Goods, either directly or through a subcontractor carrier, to the destinations designated by the Purchaser. The appellant never took direct possession of the Goods.

In this regard, it was common in an import transaction that the imported goods were received and cleared through customs by a forwarder authorized by the importer, who resold the goods without ever taking direct possession of the goods. Additionally, it was common in an L/C transaction that a mortgage by transfer was created over the imported goods for the benefit of the financial institution which issued the L/C. The forwarder authorized by the appellant as described above had been notified that the Goods were imported through an L/C transaction.

(6) On February 9, 2015, the appellant filed a petition for commencement of its rehabilitation proceedings and on February 20, 2015, received a decision to commence the same. As a result of filing the above petition, all obligations of the appellant corresponding to, among other claims, the appellee’s claims for performance of the appellant’s repayment obligations described in (2) above, became immediately due and payable in accordance with the bank transaction contract mentioned in (1) above.

(7) On March 31, 2015, the appellee filed with the Osaka District Court a petition for attachment of the appellant’s accounts receivable from third-party debtors for the Resold Goods (hereinafter, the “Accounts Receivable from Resale”), by way of exercise of the appellee’s real subrogation rights based on its mortgages by transfer created over the Goods in accordance with the agreement on the creation of mortgages by transfer described in (1) above (hereinafter, the “Mortgages by Transfer”), using, as the claim asserted, the part corresponding to the cost of import borne by the appellee for the import of the Resold Goods out of the appellee’s claim for performance of the appellant’s repayment obligations described in (2) above (hereinafter, the “Petition”). On March 26, 2015, the Osaka District Court issued an order for attachment of receivables in response to the Petition.

(8) The appellant filed an appeal against execution, demanding a revocation of the order mentioned in (7) above, on such grounds as that the appellee was not allowed to exercise the aforementioned real subrogation rights because, while it was required that the Mortgages by Transfer be perfected at the time of commencement of rehabilitation proceedings in order for the appellee to exercise its real subrogation rights based on the Mortgages by Transfer, the appellee failed to perfect the Mortgages by Transfer due to its inability to receive delivery of the Goods from the appellant by way of constructive transfer, since the appellant had not taken direct possession of the Goods.

The Osaka District Court made a decision to revoke the aforementioned order and to dismiss the Petition pursuant to the provisions of Article 20 of the Civil Execution Act and Article 333 of the Code of Civil Procedure. In response, the appellee filed an appeal against execution of this decision. The court of prior instance acknowledged that the appellee received delivery of the Goods by way of constructive transfer, thereby perfecting the Mortgages by Transfer. The court thus ruled that the aforementioned decision should be revoked and an order for attachment of receivables issued.

3. According to the background described above, while the appellant has never taken direct possession of the Goods over which the Mortgages by Transfer was created, it was common in an import transaction that a forwarder authorized by the importer received and otherwise handled imported goods, which were resold by the importer without ever taking direct possession of the goods. Under these actual circumstances of import transactions, it was agreed between the appellant and the appellee that, while mortgages by transfer would be created for the benefit of the appellee over goods for which the appellee would, by issuing L/C’s, have obligations to make compensation, the appellee would lease the goods to the appellant and would authorize the appellant to receive, clear the customs for, transport, dispose of and otherwise handle the goods. On the other hand, the appellant’s authorizing the forwarder to receive and otherwise handle the Goods was naturally based on the assumption that L/C’s would be issued for the import of the Goods and that the financial institution which issued the L/C’s would receive delivery of the Goods by way of constructive transfer as the mortgagee by transfer. The forwarder did actually receive the Goods as authorized to do so as described above.

Under these facts, it is appropriate to understand that the appellee, which is the bank that issued L/C’s for the import of the Goods, received delivery of the Goods from the appellant by way of constructive transfer. It should then follow that the appellee may exercise the Mortgages by Transfer as rights of separate satisfaction in the event of commencement of the appellant’s rehabilitation proceedings, and is thus allowed to attach the Accounts Receivable from Resale by way of exercise of the appellee’s real subrogation rights based on the Mortgages by Transfer.

4. The decision by the court of prior instance is acceptable as being in line with the above. The Supreme Court precedent referred to in the appellant’s argument is not appropriate for this case, due to differences in the factual background. The appellant’s argument is not acceptable.

5. In light of the reasons for the decision of prior instance, it is evident that the decision of prior instance intended to issue an order for attachment of receivables, and there are manifest errors in the description of the parties and the main text of the decision of prior instance. The Court thus correct them ex officio as stated in paragraph 3 of the main text hereof.

Accordingly, the decision is unanimously rendered as described in the main text. (Exhibit)

1. The following text is added to the description of the parties of the decision of prior instance:

“(Address omitted)

Third-party debtor: Stylem Co., Ltd.

Representative and Representative Director of the above: z”

2. Paragraph 1 of the main text of the decision of prior instance is replaced by the following:

“1. The decision of prior instance is revoked.

2. In response to the appellant’s petition, the appellee’s receivables from the third-party debtors, as listed in the list of attached receivables shown in the Exhibit, shall be attached based on the security interests listed in 1 of the list of security interests, secured obligations and asserted claims shown in the Exhibit, in order to appropriate these receivables to the payment of the asserted claims listed in 3 of the said list.

3. The appellee shall not collect or otherwise dispose of the receivables attached pursuant to the preceding paragraph.

4. The third-party debtors shall not pay to the appellee the receivables attached pursuant to paragraph 2.”
Justice ONUKI Yoshinobu

Justice ONIMARU Kaoru

Justice YAMAMOTO Tsuneyuki

Justice KANNO Hiroyuki
(This translation is provisional and subject to revision.)