Judgments of the Supreme Court

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2017 (Ju) 468

Date of the judgment (decision)

2018.02.23

Case Number

2017 (Ju) 468

Reporter

Minshu Vol. 72, No. 1

Title

Judgment concerning extinctive prescription for a mortgage itself when a claim to be secured by the said mortgage is subject to the effects of an order of grant of discharge

Case name

Case to seek the procedure for making a registration to cancel the provisional registration of the creation of a revolving mortgage for a building

Result

Judgment of the Second Petty Bench, dismissed by the Supreme Court

Court of the Prior Instance

Fukuoka High Court, Judgment of November 30, 2016

Summary of the judgment (decision)

When a claim to be secured by a mortgage is subject to the effects of an order of grant of discharge, Article 396 of the Civil Code shall not apply and the said mortgage itself lapses by extinctive prescription of 20 years provided in Article 167, paragraph (2) of the said code in relation to an obligor and a mortgagor.

(There is a concurring opinion.)

References

Article 167, paragraph (2) and Article 396 of the Civil Code, and Article 253, paragraph (1), main clause of the Bankruptcy Act



Civil Code

(Extinctive Prescription of Claim)

Article 167

(2) Any property right other than the claim or ownership shall be extinguished if not exercised for twenty years.

(Extinctive Prescription of Mortgages)

Article 396 No mortgage shall be extinguished by prescription in relation to obligors and mortgagors unless it is extinguished simultaneously with the claim the mortgage secures.

Bankruptcy Act

(Effect of an Order of Grant of Discharge, etc.)

Article 253 (1) When an order of grant of discharge becomes final and binding, the bankrupt shall be discharged from his/her liabilities for bankruptcy claims, except for a liquidating distribution through bankruptcy proceedings;

Main text of the judgment (decision)

The final appeal is dismissed.

The cost of the final appeal shall be borne by the appellant.

Reasons

Reasons for the petition for acceptance of the final appeal argued by the counsel for the final appeal, TAKAKI Tateyasu:

1. The outline of facts lawfully determined by the court of prior instance is as follows:

(1) On February 13, 2001, the appellant created a revolving mortgage on a part of a building that he possessed as indicated in the list of articles in Attachment 1 of the judgment in first instance, whose maximum amount was three million yen, the scope of claims to be secured by which was a loan transaction, whose obligor was the appellant and whose mortgagee was the appellee (hereinafter referred to as the “Revolving Mortgage”). On the same day, the creation of the revolving mortgage to that effect was provisionally registered.

(2) On February 13, 2001, the appellant entered into a loan agreement (hereinafter referred to as the “Agreement”) with the appellee and, thereafter, borrowed and repaid money in accordance with the Agreement. However, she stopped repayment after September 28, 2005, when she repaid the last time.

(3) On November 24, 2005, the appellant became subject to an order for commencement of bankruptcy proceedings and, at the same time, to an order for discontinuance of bankruptcy proceedings.

Since the appellant became subject to the aforementioned order for commencement of bankruptcy proceedings, the principal to be secured by the Revolving Mortgage was fixed. The claim to be secured by the Revolving Mortgage is a claim that the appellee holds against the appellant in accordance with the Agreement (hereinafter referred to as the “Loan Claim”).

(4) On January 26, 2006, an order of grant of discharge was made for the appellant. The said order was fixed on February 24 of the same year.

The Loan Claim is subject to the effects of the aforementioned order of grant of discharge.

2. In this case, the appellant seeks against the appellee the procedure to make a registration of the cancellation of the aforementioned provisional registration, asserting that the extinctive prescription for the Loan Claim was completed and the Revolving Mortgage lapsed.

3. The court of prior instance, based on the aforementioned facts, decided that the appellant’s claims should be dismissed, determining as follows:

(1) Because the Loan Claim is subject to the effects of an order of grant of discharge, there is no concept of the running of extinctive prescription with regard to that claim.

(2) Because no mortgage shall lapse by extinctive prescription in relation to an obligor and a mortgagor unless it lapses simultaneously with a claim to be secured by the mortgage pursuant to Article 396 of the Civil Code, the appellant’s claims are groundless without pausing to determining other points.

4. Nevertheless, the determination in the aforementioned 3-(2) of the court of prior instance is not acceptable, while that in the aforementioned 3-(1) is acceptable. The reasons for that are as follows:

(1) With regard to a claim subject to the effects of an order of grant of discharge, it should be said that a creditor cannot seek performance of obligation by filing a lawsuit with the aim of having it compulsorily performed and that, therefore, there is no concept of the running of extinctive prescription whose starting point is “when it has become possible to exercise the right” as prescribed in Article 166, paragraph (1) of the Civil Code (refer to Supreme Court Judgment 1997 (O) 426, the Judgment of the Third Petty Bench on November 9, 1999, Minshu Vol. 53, No. 8, p. 1,403). It is construed that this should apply to a case in which a claim subject to the effects of an order of grant of discharge is secured by a mortgage.

(2) (a) Article 396 of the Civil Code provides to the effect that no mortgage shall lapse by extinctive prescription in relation to an obligor and a mortgagor unless it lapses simultaneously with a claim to be secured by the mortgage. In light of its literal meaning, it is appropriate to construe that this provision assumes that there may be a case in which a claim to be secured by a mortgage lapses by extinctive prescription. Otherwise, it results in recognizing the existence of a mortgage that does not lapse even if it has not been exercised for a long period, but it is difficult to consider that the Civil Code assumes the existence of such a mortgage.

(b) In addition, it should be said that a mortgage falls under “(a)ny property right other than the claim or ownership” in Article 167, paragraph (2) of the Civil Code.

The appellant argues to the effect that the period of extinctive prescription for a mortgage itself, a claim to be secured by which is subject to the effects of an order of grant of discharge, is five years (Article 522 of the Commercial Code) or ten years (Article 167, paragraph (1) of the Civil Code) according to the type of the claim to be secured by the mortgage. However, construing in such way is equivalent to having a concept of the running of extinctive prescription in the aforementioned case and conflicts with the aforementioned (1). Furthermore, it results in the creation of a system of extinctive prescription that is not provided for under the law. Therefore, the appellant’s argument is not acceptable.

(c) Consequently, it is appropriate to construe that, when a claim to be secured by a mortgage is subject to the effects of an order of grant of discharge, Article 396 of the Civil Code shall not apply and the said mortgage itself lapses by extinctive prescription of 20 years provided in Article 167, paragraph (2) of the said code in relation to an obligor and a mortgagor.

(3) Those described above should also apply to a revolving mortgage, a principal to be secured by which is fixed.

5. According to the background described above, the decision of the court of prior instance is illegal in that it erred in the interpretation and application of laws and regulations, since it determined that the appellant’s argument should be dismissed on the grounds that a mortgage, a claim to be secured by which has no concept of the running of extinctive prescription because of the effects of an order of grant of discharge, does not lapse by extinctive prescription pursuant to Article 396 of the Civil Code in relation to an obligor and a mortgagor.

Nevertheless, because it is obvious under the aforementioned facts that 20 years have not passed since the time when the Revolving Mortgage could be exercised, the appellant’s claim is groundless.

Therefore, the conclusion of the court of prior instance that decided that the appellant’s claim should be dismissed is acceptable. The appellant’s argument is not acceptable.

Accordingly, the Court unanimously decides as set forth in the main text. However, there is a concurring opinion of one of the justice, YAMAMOTO Tsuneyuki.

The concurring opinion of the justice, YAMAMOTO Tsuneyuki, is as follows:

I would like to make a short supplementary statement with regard to the reasons why Article 396 of the Civil Code should not apply when a claim to be secured by a mortgage is subject to the effects of an order of grant of discharge.

It is construed that the purpose of the provision of Article 396 of the Civil Code is that a mortgage itself should not lapse by extinctive prescription in relation to an obligor and a mortgagor because it is against good faith if they argue that the mortgage lapses by extinctive prescription without making a payment for a claim to be secured by the mortgage. When a creditor cannot seek the compulsory performance of obligation by filing an lawsuit because a claim to be secured by a mortgage is subject to the effects of an order of grant of discharge like this case, it cannot be said that it is against good faith even if an obligor and a mortgagor argue that the mortgage lapses by extinctive prescription without making a payment for such claim to be secured by the mortgage. Therefore, the said article should not apply to a case in which a claim to be secured by a mortgage is subject to the effects of an order of grant of discharge in light of the purpose of the said article as described above.

Presiding Judge

Justice ONIMARU Kaoru

Justice YAMAMOTO Tsuneyuki

Justice KANNO Hiroyuki

(This translation is provisional and subject to revision.)