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2017 (Kyo) 3

2017.09.12
2017 (Kyo) 3
Minshu Vol.71, No. 7
Decision on the method of distribution of such portion of the amount of dividend payable to a bankruptcy creditor calculated based on the amount of its claim at the time of commencement of the bankruptcy proceedings as exceeding the balance of its claim under substantive law after its receipt of partial payment of its claim from a third party mortgagor made after the commencement of the bankruptcy proceedings
Case of appeal with permission against a ruling of revocation on appeal against a ruling to dismiss an objection to a distribution list
Decision of the Third Petty Bench, dismissed
Osaka High Court, Decision of January 6, 2017
Where a bankruptcy creditor received partial payment of its claim from a third party mortgagor after the commencement of the bankruptcy proceedings and where the amount of dividend payable to the bankruptcy creditor calculated based on the amount of its claim that was determined at the time of commencement of the bankruptcy proceedings exceeds the balance of its claim under substantive law, the amount in excess shall be distributed with respect to such claim.

(There is a concurring opinion.)
Articles 104 and 200 of the Bankruptcy Act



Bankruptcy Act



Article 104

(1) Where two or more persons have the obligation of entire performance respectively, if an order of commencement of bankruptcy proceedings is made against all or some or one of them, their creditor may participate in the bankruptcy proceedings against the respective persons with regard to the whole amount of the claim that he/she holds at the time of commencement of bankruptcy proceedings.

(2) In the case referred to in the preceding paragraph, even if other person(s) who have the obligation of entire performance has made payment to the creditor or conducted any other act with the creditor to cause their debt to be extinguished (hereinafter referred to as "payment, etc." in this Article) after the commencement of bankruptcy proceedings, the creditor, except where the whole amount of the claim is extinguished, may exercise his/her right for the whole amount of the claim that he/she holds at the time of the commencement of bankruptcy proceedings.

(3) In the case prescribed in paragraph (1), a person who has a right to obtain reimbursement to be exercised against the bankrupt in the future may participate in the bankruptcy proceedings with regard to the whole amount of reimbursement; provided, however, that this shall not apply when a creditor has participated in the bankruptcy proceedings with regard to the claim that he/she holds at the time of commencement of bankruptcy proceedings.

(4) Where a creditor participates in the bankruptcy proceedings pursuant to the provision of paragraph (1), if a person who has a right to obtain reimbursement to be exercised against the bankrupt in the future has made payment, etc. to the creditor after the commencement of bankruptcy proceedings, the person who has a right to obtain reimbursement, only where the whole amount of the creditor's claim is extinguished, may exercise the creditor's right as a bankruptcy creditor only to the extent of the right to obtain reimbursement.

(5) The provision of paragraph (2) shall apply mutatis mutandis where a third party who provided his/her property as security in order to secure the bankrupt's debt (hereinafter referred to as a "third party mortgagor/pledgor" in this paragraph) has made payment, etc. to the creditor after the commencement of bankruptcy proceedings, and the provisions of the preceding two paragraphs shall apply mutatis mutandis to a third party mortgagor/pledgor who has a right of exoneration to be exercised thereby against the bankrupt in the future.



Article 200

(1) A bankruptcy creditor who disagrees with the statements in the distribution list may raise an objection to the court within one week after the period of exclusion concerning a final distribution expires.

(2) The court, when it finds an objection raised under the provision to the preceding paragraph well-grounded, shall order a bankruptcy trustee to correct the distribution list.

(3) An immediate appeal may be filed against a judicial decision on the objection raised under the provision of paragraph (1). In this case, the period for filing an immediate appeal against an order to order correction of the distribution list shall be calculated from the day on which it becomes possible for any interested person to make a request for inspection of the written order pursuant to the provision of Article 11(1).

(4) Where a judicial decision to dismiss without prejudice the objection raised under the provision of paragraph (1) and a judicial decision on the immediate appeal set forth in the first sentence of the preceding paragraph (excluding an order to order correction of the distribution list) are made, the written decisions shall be served upon the parties concerned.
The appeal is dismissed.

The cost of appeal shall be borne by the appellant.
Reasons for the Appeal Filed by the Appellant



1. In this case, the appellee, which is a bankruptcy creditor which received partial payment of its claim from a third party mortgagor after the commencement of the bankruptcy proceedings, filed an objection to the distribution list created by the appellant (hereinafter, the “Distribution List”) in which such portion of the amount of dividend payable to the bankruptcy creditor calculated based on the amount of its claim determined at the time of commencement of the bankruptcy proceedings as exceeding the balance of its claim under substantive law (hereinafter, the “Excess Portion”) was supposed to be distributed to the third party mortgagor.

2. According to records, the circumstances of this case are as described below:

(1) In September 2011, Yamako Kogyo Stock Company (hereinafter, the “Bankrupt Company”) received an order of commencement of bankruptcy proceedings, for which the appellant was appointed as its bankruptcy trustee.

(2) The appellee had guaranteed two loan obligations owed by the Bankrupt Company to Osaka Shinkin Bank, and paid in subrogation to Osaka Shinkin Bank the full amount of the principals of such obligations as well as the full amount of interest and part of the delay damages thereon that had accrued up to the day before the date of the order of commencement of bankruptcy proceedings (a total of 56,511,233 yen). In the Bankrupt Company’s bankruptcy proceedings, the appellee filed proofs of its bankruptcy claims, including the principal of its right to obtain reimbursement acquired as a result of its payment in subrogation mentioned above (hereinafter the claim corresponding to such principal is referred to as the “Bankruptcy Claim”).

(3) Person A had created a revolving mortgage over his/her real property for the benefit of the appellee in order to secure the Bankrupt Company’s obligation to indemnify the appellee. In October 2012, A paid 25,939,092 yen out of the proceeds from the sale of the said real property as payment of the Bankruptcy Claim.

As a result of this payment in subrogation, the balance of the Bankruptcy Claim was reduced to 30,572,141 yen.

(4) In August 2015, A filed, in the Bankrupt Company’s bankruptcy proceedings, proofs of its right to obtain reimbursement in the amount of 25,939,092 yen obtained as a result of its payment in subrogation described in (3) above, as its bankruptcy claim as a preliminary measure.

(5) In the investigation of bankruptcy claims, the appellant approved the amount of the Bankruptcy Claim and, with respect to A’s right to obtain reimbursement mentioned in (4) above, made the following statement in its statement of approval or disapproval: “Approved to the extent that the right has the nature of exercise in subrogation of the underlying claims within the limits of the right to obtain reimbursement granted under Article 104, paragraph (4) of the Bankruptcy Act due to the full extinguishment of the amount of the Bankruptcy Claim as a result of the dividend.”

(6) With respect to the Bankruptcy Claim, the Distribution List stated the balance after the payment described in (3) above as the distributable amount, with the following statement in the corresponding “Remarks” section: “Because, although the amount of dividend calculated is 45,124,808 yen, the balance of the Bankruptcy Claim is 30,572,141 yen and the amount of dividend cannot exceed this amount.” With respect to A’s right to obtain reimbursement described in (4) above, the Distribution List stated 14,552,667 yen as the distributable amount, with the following statement in the corresponding “Remarks” section: “As a dividend in response to exercise in subrogation of the underlying claims under Article 104, paragraph (4) of the Bankruptcy Act due to the full extinguishment of the balance of the Bankruptcy Claim as a result of the dividend (i.e., as a dividend corresponding to the difference between the amount of dividend calculated for the Bankruptcy Claim and the balance of the claim).”

3. The court of first instance dismissed the appellee’s objection to the Distribution List, on such grounds as that the Excess Portion should be distributed to the holder of the right to obtain reimbursement who made partial payment of the claim. In contrast, the court of prior instance stated that the Excess Portion cannot be distributed to the aforementioned holder of the right to obtain reimbursement and, by ruling as follows, revoked the decision in the first instance and remanded this case to the court of first instance:

So long as the claim in question is extinguished as a result of a dividend corresponding to part of the amount of dividend calculated based on the amount of such claim determined at the time of commencement of the bankruptcy proceedings, the Excess Portion should not be distributed with respect to such claim but should be distributed with respect to other bankruptcy claims.

4. However, the above ruling of the court of prior instance is not acceptable, for the following reasons:

With respect to cases where two or more persons each have an obligation to fully perform one and the same obligation (hereinafter a person who has an obligation to fully perform a payment is referred to as a “Full Obligor”), Article 104, paragraphs (1) and (2) of the Bankruptcy Act provide: that even if another Full Obligor makes payment, etc. after the commencement of a Full Obligor’s bankruptcy proceedings, the relevant claim shall be, in the context of the bankruptcy proceedings, deemed to exist in the amount as at the time of commencement of the bankruptcy proceedings unless the whole amount of the claim is extinguished as a result of such payment, etc.; that the creditors may exercise their rights based on the above assumption; and that the amounts of dividends payable to the creditors shall be calculated based on the aforementioned amount of claim. Specifically, Article 104, paragraphs (1) and (2) of the Bankruptcy Act acknowledge that there is a gap between the amount of claim based on which the amount of dividend is calculated and the amount of claim under substantive law, on the one hand, in light of the fact that providing two or more Full Obligors works to make it more secure that the payment of the claim will be made by accumulating non-exempt property. As a result, these paragraphs are understood as permitting the occurrence of a situation where the creditor may receive a dividend in an amount in excess of the amount of its claim under substantive law (in this regard, it is another matter that the creditor who received such a dividend has an obligation to refund the amount of such excess as unjust enrichment to the holder of a right to obtain reimbursement who made partial payment of the obligation).

According to the proviso to paragraph (3) of Article 104 of the Bankruptcy Act, on the other hand, if a creditor has participated in the bankruptcy proceedings with regard to the claim that he/she holds at the time of commencement of the bankruptcy proceedings, the holder of a right to obtain reimbursement is not allowed to participate in the bankruptcy proceedings. It should be understood, therefore, that the holder of a right to obtain reimbursement who made partial payment of the claim is not allowed to file proofs of his/her right to obtain reimbursement as a bankruptcy claim as a preliminary measure with the intention of participating in the distribution procedure if any Excess Portion arises in respect of the claim. In addition, based on Article 104, paragraph (4) of the Bankruptcy Act, it is understood that if the whole amount of the claim is extinguished only after the creditor has received the dividend, the rights held by the creditor may not be exercised by the holder of a right to obtain reimbursement as a bankruptcy creditor at the time of distribution of such dividend.

Furthermore, Article 104, paragraph (5) of the Bankruptcy Act applies paragraph (2) of the same article mutatis mutandis to cases where a third party mortgagor/pledgor makes payment, etc. to the creditor after the commencement of the bankruptcy proceedings and applies paragraphs (3) and (4) of the same article mutatis mutandis to a third party mortgagor/pledgor who has a right to obtain reimbursement from the bankrupt. It is therefore appropriate to understand that a case where partial payment was made by a third party mortgagor/pledgor should be deemed equivalent to a case with a Full Obligator.

Therefore, if a bankruptcy creditor receives partial payment of its claim from a third party mortgagor/pledgor after the commencement of the bankruptcy proceedings and if the amount of dividend calculated based on the amount of claim determined at the time of commencement of the bankruptcy proceedings exceeds the balance of the claim under substantive law, the portion in excess should be distributed with respect to such claim.

5. The ruling by the court of prior instance, which is different from the above discussion, is illegal in that it erred in the interpretation and application of law.

However, based on the above discussion, the decision of first instance, which dismissed the appellee’s objection, is unreasonable. The ruling by the court of prior instance, which revoked the decision of first instance and remanded this case to the court of first instance, is acceptable in conclusion. The reasons for the appeal filed by the appellant are not acceptable, in that they only point out illegalities that do not affect the conclusion of the decision of prior instance.

Accordingly, the Court unanimously decides as set forth in the main text. However, there is a concurring opinion of one of the justices, KIUCHI Michiyoshi.

The concurring opinion of the justice, KIUCHI Michiyoshi, is as follows:

1. In the distribution list in this case, the amount of the appellee’s determined bankruptcy claim should be the amount of the appellee’s claim which is eligible to participate in the distribution procedure, and the amount of dividend payable to the appellee should be calculated based on the said amount, by distributing the bankruptcy estate to each of the eligible claims. As for the right to obtain reimbursement proofs of which were filed by A (hereinafter, “A’s Claim”), the amount of claim which is eligible to participate in the distribution procedure and the amount of dividend payable to A should both be nil.

The reason for this is basically Article 104, paragraphs (1) and (2) of the Bankruptcy Act, which acknowledges that there is a gap between the amount of claim based on which the amount of dividend is calculated and the amount of claim under substantive law. In the context of the distribution procedure, the distribution list must also inevitably be as described above.

2. The amount of the appellee’s claim which is eligible to participate in the distribution procedure and the amount of dividend payable to the appellee

The claim of which the appellee filed proofs (i.e., the Bankruptcy Claim), in the total amount of 56,240,102 yen, was determined in the investigation of claims and is stated as the amount of determined claim in the list of bankruptcy creditors.

Article 198, paragraphs (1) through (3) of the Bankruptcy Act specify the requirements for participating in the distribution procedure with regard to (i) a denied/disputed bankruptcy claim, (ii) a bankruptcy claim that is a claim subject to a condition precedent or claim which may arise in the future, and (iii) a claim with a right of separate satisfaction. Unlike these claims, in the case of a determined bankruptcy claim the statement of the amount of determined bankruptcy claim in the list of bankruptcy creditors has the same effect as a final and binding judgment, and the creditor is eligible to participate in the distribution procedure based on the amount of his/her determined claim.

Therefore, in the distribution list, the amount of the appellee’s determined claim should be the amount of the appellee’s claim which is eligible to participate in the distribution procedure, and assertions that should be made during the claim investigation procedure provide no grounds for any objection to such distribution list. The bankruptcy proceedings contain no procedure for modifying statements in the determined list of bankruptcy creditors. Unless the effect of these statements, which is the same as a final and binding judgment, is reversed by such means as an action to oppose execution filed outside the proceedings, the distribution list, in which the amount of determined claim is stated as the amount of claim which is eligible to participate in the distribution procedure, cannot be modified. As for a creditor who received payment from a Full Obligor after an order of commencement of bankruptcy proceedings was made, there are no provisions for adjusting dividends that would be equivalent to the provisions intended for a creditor who received payment, after an order of commencement of bankruptcy proceedings was made, from any property located in a foreign country and belonging to the bankruptcy estate (Article 201, paragraph (4) of the Bankruptcy Act).

The amount of dividend payable to each creditor is determined by allocating the (total) distributable amount in the order specified in Article 194 of the Bankruptcy Act. In the present case, the Bankruptcy Claim is ranked pari passu with other general bankruptcy claims. The amount of dividend corresponding to the Bankruptcy Claim must therefore be calculated on a pro-rata basis according to the amount of the claim.

In the distribution list created by the appellant, while the amount of the appellee’s determined claim is stated as the amount of the appellee’s claim which is eligible to participate in the distribution procedure, the amount of dividend payable to the appellee is stated as 30,572,141 yen, which was obtained by subtracting 14,552,667 yen from the prorated amount. However, there are no legal grounds that would allow such a subtraction.

3. Whether or not A’s Claim is eligible to participate in the distribution procedure

Proofs of A’s Claim were filed as a preliminary measure, and the appellant approved the claim “to the extent that the right has the nature of exercise in subrogation of the underlying claims within the limits of the right to obtain reimbursement granted under Article 104, paragraph (4) of the Bankruptcy Act due to the full extinguishment of the amount of the Bankruptcy Claim as a result of the dividend.”

The aim of the preliminary filing and the aim of the appellant’s approval are not entirely clear. However, even if proofs of a claim which is preconditioned upon the full extinguishment of the Bankruptcy Claim as a result of a dividend are filed and even if the claim is approved in the claim investigation, the condition precedent must be satisfied within the period of exclusion concerning a distribution in order for this claim to participate in the distribution procedure. In the present case, no dividend can be distributed within the period of exclusion concerning a distribution, nor will the Bankruptcy Claim be extinguished entirely, which makes it impossible to satisfy the condition within the period of exclusion concerning a distribution . Even assuming that the condition precedent is for the appellee to obtain a right to claim dividends enough to fully extinguish the balance of its claim, the appellee will obtain a right to claim dividends based on a dividend notice from the bankruptcy trustee, which is given only after the distribution list has been determined. Therefore, this condition cannot be satisfied either within the period of exclusion concerning a distribution.

In addition, since the appellee is eligible to participate in the distribution procedure based on the whole amount of the Bankruptcy Claim as described in the preceding paragraph, A’s Claim, no matter for what purpose it was made preliminary or conditionally, cannot participate in the distribution procedure in conjunction with the Bankruptcy Claim unless the Bankruptcy Claim is modified by such means as an action to oppose execution.
Justice KIUCHI Michiyoshi

Justice OKABE Kiyoko

Justice YAMAZAKI Toshimitsu

Justice TOKURA Saburo

Justice HAYASHI Keiichi
(This translation is provisional and subject to revision.)