2011.10.25

2009 (Ju) 1096

Minshu Vol. 65, No. 7

Judgment concerning whether or not, in the case of intermediation of individual installment purchase, the contract of advance payment between the purchaser and the intermediary is made void on the grounds that the contract of sale between the purchaser and the distributor is contrary to public order and void

Case to seek declaration of nonexistence of a claim, etc., with an intervener

Judgment of the Third Petty Bench, partially quashed and decided by the Supreme Court, partially dismissed without prejudice

Nagoya High Court, Judgment of February 19, 2009

Even in the case of intermediation of individual installment purchase where the contract of sale between the purchaser and the distributor is judged to be contrary to public order and made void, there is no room for the contract of advance payment between the purchaser and the intermediary, which is separate from the contract of sale, to be made void, unless there are special circumstances where, in light of matters such as the relationship between the distributor and the intermediary, the details and extent of the distributor’s involvement in the procedure for concluding the contract of advance payment, the existence/nonexistence and extent of the intermediary’s recognition of the distributor’s conduct that is contrary to public order, it is reasonable under the principle of good faith to attribute the result of the distributor’s conduct that is contrary to public order to the intermediary, and deny the effect of the contract of advance payment together with the contract of sale.

Article 1, paragraph (2) and Article 90 of the Civil Code, Article 2, paragraph (3), item (ii) and Article 30-4 of the Installment Sales Act (prior to the revision by Act No. 74 of 2008), Article 2, paragraph (4) and Article 35-3-19 of the Installment Sales Act

Article 1 paragraph (2) of the Civil Code
The exercise of rights and performance of duties must be done in good faith.

Article 90 of the Civil Code
A juristic act with any purpose which is against public policy is void.

Article 2, paragraph (3), item (ii) of the Installment Sales Act (prior to the revision by Act No. 74 of 2008)
(Definitions)
(3) The term "intermediation of installment purchases" as used in this Act shall mean the following:
(ii) an act to pay all or part of the amount corresponding to the charge for designated goods or designated rights to a seller or the value of the designated services to a service provider (including payment to the seller or the service provider via a person other than the seller or the service provider) on the condition that the specified seller sells designated goods or designated rights to a purchaser or the specified service provider offers designated services to a service recipient without using a voucher, etc., and to receive the amount from the purchaser or the service recipient in not less than three installments over a period of not less than two months.

Article 30-4 of the Installment Sales Act (prior to the revision by Act No. 74 of 2008)
(1) When a purchaser or a service recipient has received the demand to make the payment set forth in article 30-2, paragraph (1), item (ii) or paragraph (5), item (ii) pertaining to the designated goods or designated rights purchased or the designated services received by the method of purchase or receipt for the intermediation of installment purchase prescribed in Article 2, paragraph (3), item (i) or item (ii), the purchaser or the service recipient may duly assert against the installment purchase intermediary who demands such payment based on the grounds that have arisen with regard to the sale of the designated goods or designated rights against the seller for the intermediation of installment purchases who has sold such goods or rights, or arisen with regard to the provision of the designated services against the service provider for the intermediation of installment purchases who has provided such services.
(2) Any special provisions that run counter to the provisions of the preceding paragraph, which are disadvantageous to a purchaser or a service recipient, shall be void.
(3) When the purchaser or the service recipient, who duly asserts against an installment purchase intermediary pursuant to the provisions of paragraph (1), has received a demand from the installment purchase intermediary to submit a document stating the contents of grounds set forth in said paragraph pertaining to the defense, he/she shall endeavor to submit the document.
(4) The provisions of the preceding three paragraphs shall not apply to payments in installment set forth in paragraph (1), which fall under the following:
(i) payments pertaining to total payments less than the amount specified by Cabinet Order; and
(ii) payments pertaining to the designated goods, the purchase of which constitutes a commercial transaction on behalf of the purchaser (excluding those pertaining to a personal multilevel marketing contract and a personal business opportunity related sales contract).

Article 2, paragraph (4) of the Installment Sales Act
(4) The term "intermediation of individual credit purchases" as used in this Act shall mean an act to pay all or part of the amount corresponding to the charge for goods or designated rights to a seller or the value of the service to a service provider (including payment to the seller or the service provider via a person other than the seller or the service provider) on the condition that the specified seller sells goods or designated rights to a purchaser or the specified service provider offers services to a service recipient without using card, etc., and to receive the amount from the purchaser or the service recipient by the date specified in advance (except for receiving the charge or the value before a date not more than two months from when the purchaser or the service recipient contracted to purchase the goods or rights from said seller or to receive the offering of services from said service provider).

Article 35-3-19 of the Installment Sales Act
(1) When a purchaser or a service recipient has received the demand to make the payment set forth in article 35-3-8, item (iii) pertaining to a sales contract for the intermediation of individual credit purchases or a service contract for the intermediation of individual credit purchases, he/she may duly assert against the individual credit purchase intermediary, who demands the payment, on the grounds having arisen against the seller for the intermediation of individual credit purchases or the service provider for the intermediation of individual credit purchases pertaining to the contract.
(2) Any special provisions that run counter to the provisions of the preceding paragraph, which are disadvantageous to a purchaser or a service recipient, shall be void.
(3) When the purchaser or the service recipient, who duly asserts against an individual credit purchase intermediary pursuant to the provisions of paragraph (1), has received a demand from the individual credit purchase intermediary to submit a document stating the contents of grounds set forth in said paragraph pertaining to the defense, he/she shall endeavor to submit the document.
(4) The provisions of the preceding three paragraphs shall not apply to payments by installment set forth in paragraph (1) and those pertaining to total payments less than the amount specified by Cabinet Order.

1. The judgment in prior instance is quashed with respect to the part for which the appellant of final appeal lost the case concerning the claim of the appellee of final appeal.
2. The appeal to the court of second instance filed by the appellee of final appeal is dismissed with prejudice on the merits with regard to the part mentioned in the preceding paragraph.
3. The remaining part of the final appeal filed by the appellant of final appeal is dismissed without prejudice.
4. The total court costs shall be divided into two, one part of which shall be borne by the appellant of final appeal, and the other by the appellee of final appeal.

Concerning the reasons for petition for acceptance of final appeal argued by appeal counsels, SAWA Kenji, et al.
1. The appellee of final appeal concluded a contract of sale of jewelry with a distributor, which is a member store of the defendant who withdrew from litigation in the first instance (hereinafter the distributor and the defendant shall be referred to as the “Distributor” and the “Intermediary,” respectively), and also concluded a contract of advance payment of the purchase price with the Intermediary. The appellant of final appeal has taken over the business of the Intermediary by business transfer. In this case, (i) on the grounds that the contract of sale is contrary to public order and void and therefore the contract of advance payment is also void or that the appellee has rescinded his manifestation to apply for the contract of advance payment pursuant to Article 4, paragraph (1), item (i) or paragraph (3), item (ii) of the Consumer Contract Act, as applied mutatis mutandis pursuant to Article 5, paragraph (1) of said Act, and accordingly, based on the right to claim return of unjust enrichment, the appellee claims against the appellant a refund of the amount that the appellee had already paid to the appellant under the contract of advance payment; and (ii) on the grounds that he has suffered damage arising from the conduct of the Distributor due to the Intermediary’s negligence of its duty to investigate on the conduct of its member store, and accordingly, the appellee also claims against the appellant damages in tort equivalent to the amount that the appellee had already paid to the appellant as well as legal fees. On the other hand, the appellant demands that the appellee pay the unpaid amount of installment money under the contract of advance payment. Since no appeal has been lodged against the part of the determination of the court of prior instance that denied the establishment of a tort and dismissed the appellee’s claim for damages equivalent to legal fees, the judgment in prior instance concerning this part is not included in the scope of review by this court.

2. The outline of the facts legally determined by the court of prior instance is as follows.
(1) A. Having received a telephone solicitation in March 2003, the appellee met with a female salesperson of the Distributor on March 29, and as solicited by her, he concluded a contract of sale with the Distributor to purchase a ring and two other items (hereinafter referred to as the “Goods”) at a price of 1,575,000 yen in total (hereinafter this contract shall be referred to as the “Contract of Sale”).
During the period until the appellee concluded the Contract of Sale, the female salesperson talked to him for a long time and solicited him to purchase jewelry, showing suggestive behavior such as holding his hands. Meanwhile, several colleagues of the female salesperson came and coercively urged the appellee to purchase jewelry, so the appellee could not tell them that he would like to go home, and finally concluded the Contract of Sale. According to the appraisal made by several jewelry shops on a later day, the Goods are worth about 100,000 yen in total.
B. Upon concluding the Contract of Sale, the appellee signed the credit contract application form addressed to the Intermediary, which was prepared by the female salesperson, thereby making an application for a contract of advance payment to the Intermediary who engages in the business of intermediation of individual installment purchase as prescribed in Article 2, paragraph (3), item (ii) of the Installment Sales Act (prior to the revision by Act No. 74 of 2008; the same shall apply hereinafter) (hereinafter this business shall be referred to as “intermediation of individual installment purchase”), in which the Intermediary shall pay in advance the price for the Goods to the Distributor and the appellee shall pay the Intermediary said price and installment payment fees, totaling 2,189,250 yen, in 60 installments over the period between May 2003 and April 2008 (hereinafter this contract shall be referred to as the “Contract of Advance Payment”).
On March 30, 2003, the Intermediary, by having its personnel in charge make a phone call to the appellee, confirmed with him about his intention to apply for the Contract of Advance Payment as well as its content, and concluded the Contract of Advance Payment. Upon this confirmation, the appellee did not make any particular complaint to said personnel about the conclusion of the Contract of Sale or Contract of Advance Payment
C. Around May 2003, the appellee received the delivery of the Goods from the Distributor, and during the period from this month to September 2005, he paid a total of 1,060,850 yen as installment money under the Contract of Advance Payment (hereinafter this amount shall be referred to as the “Amount Already Paid”).
(2) The Intermediary has traded with the Distributor since no later than around 2002. Around January 23, 2003, the Intermediary concluded a membership contract with the Distributor (hereinafter referred to as the “Membership Contract”).
With regard to the sales conduct of the Distributor, about 70 requests for consultation were brought from purchasers to regional consumer affairs centers in 2002. However, it was not until April 15, 2003, that the Intermediary received a request from a purchaser for discontinuation of payment with regard to its transaction with the Distributor. It does not seem that the Intermediary, before that day, had received any complaints or requests for consultation from consumer affairs centers with regard to the sales conduct of the Distributor, concerning cancellation or rescission of contracts.
(3) Around May 2004, the appellant took over the Intermediary’s business of intermediation of individual installment purchase by business transfer.
(4) Around October 7, 2005, the appellee sent to the appellant a document in which he stated, “I would strongly desire to cancel the contract,” and on January 15, 2006, he notified the appellant that he would return the goods, so he would like his debt to be settled as bad debts.
The appellee has not paid any installment money under the Contract of Advance Payment since October 2005, and of said amount of the installment money, a total of 1,128,400 yen remains unpaid (hereinafter this amount shall be referred to as the “Unpaid Amount”).
(5) The Distributor has suspended or discontinued its business.
(6) The appellant has invoked extinctive prescription for the appellee’s right to rescind under the provisions of the Consumer Contract Act, arguing that this right has been extinguished by prescription because the appellee did not exercise it within six months from the time when ratification became possible.

3. Given the facts mentioned above, the court of prior instance dismissed with prejudice on the merits the appellant’s claim for payment of the Unpaid Amount, on the grounds that the Contract of Sale is contrary to public order and void, and upheld part of the appellee’s claim for refund of the Amount Already Paid based on his right to claim return of unjust enrichment, holding as follows.
(1) The intermediation of individual installment purchase is based on a trilateral contract by which an intermediary joins a bilateral transaction of sale between a purchaser and a distributor, so the three parties are basically united under the contract. Therefore, if sales are made void or otherwise changed, such an event should be reflected in the legal relationship concerning the payment of the sales price to the extent possible. Where a contract of sale is contrary to public order and void, if the purchaser may refuse the intermediary’s request for payment of unpaid amount pursuant to the provisions of Article 30-4, paragraph (1) of the Installment Sales Act, but may not claim refund of the amount already paid against the intermediary, the purchaser would find such a consequence to be imbalanced.
(2) Comprehensively taking into consideration the circumstances of the case, including (i) the Distributor, on behalf of the Intermediary, carried out the application procedure which is a preparatory activity for the conclusion of the Contract of Advance Payment, (ii) at the time of the conclusion of the Contract of Advance Payment, it was not totally impossible for the Intermediary to become aware that the Distributor was subject to complaints made by the consumer affairs centers, and (iii) it is practically impossible for the appellee to collect from the Distributor money equivalent to the Amount Already Paid, it should be concluded that because the Contract of Sale is contrary to public order and void, the Contract of Advance Payment ceases to be effective due to lack of purpose, and consequently, the appellee is entitled to claim refund of the Amount Already Paid against the appellant, based on the right to claim return of unjust enrichment.

4. However, we cannot affirm the holdings of the court of prior instance mentioned above, on the following grounds.
(1) The intermediation of individual installment purchase is, in legal terms, premised on separate contracts, that is, a contract of advance payment between the purchaser and the installment purchase intermediary (hereinafter referred to as the “intermediary”), and a contract of sale between the purchaser and the distributor. Therefore, although it cannot be denied that these contracts are closely related with each other in economic and practical terms, it is inappropriate to consider that the purchaser can necessarily assert against the intermediary any grounds that have arisen under the contract of sale. The provisions of Article 30-4, paragraph (1) of the Installment Sales Act are solely intended to newly recognize by law, from the perspective of protecting purchasers, that the purchaser may assert against the intermediary such grounds that have arisen under the contract of sale (see 1984 (O) No. 1088, judgment of the Third Petty Bench of the Supreme Court of February 20, 1990, Saibanshu Minji No. 159, at 151).
Assuming so, even in the case of intermediation of individual installment purchase where the contract of sale between the purchaser and the distributor is judged to be contrary to public order and made void, it is appropriate to construe that there is no room for the contract of advance payment between the purchaser and the intermediary, which is separate from the contract of sale, to be made void, unless there are special circumstances where, in light of matters such as the relationship between the distributor and the intermediary, the details and extent of the distributor’s involvement in the procedure for concluding the contract of advance payment, the existence/nonexistence and extent of the intermediary’s recognition of the distributor’s conduct that is contrary to public order, it is reasonable under the principle of good faith to attribute the result of the distributor’s conduct that is contrary to public order to the intermediary, and deny the effect of the contract of advance payment together with the contract of sale.
(2) This reasoning can be applied in this case as follows. The Distributor is nothing more than a member store of the Intermediary, and a capital relationship or any other close relationship cannot be found between the Distributor and the Intermediary. The Intermediary did not entrust the Distributor with the entire procedure for concluding the Contract of Advance Payment, but the Intermediary itself confirmed with the appellee regarding his intention to apply for the Contract of Advance Payment as well as its content, and thereby concluded the Contract of Advance Payment. In addition, it was only after the appellee continued to pay installment money by contract for a long period of time that he raised an objection to the payment of installment money under the Contract of Advance Payment. Before the conclusion of the Contract of Advance Payment, the Intermediary had not received complaints from other purchasers or advice from the public authorities with regard to the sales conduct of the Distributor. According to these facts, such special circumstances cannot be found in this case, nor can any other facts that could constitute such special circumstances be found. Consequently, the Contract of Advance Payment should not be deemed to be void just because the Contract of Sale is contrary to public order and void. The appellee may not claim refund of the Amount Already Paid against the appellant, who has succeeded to the Intermediary’s business, by alleging that the Contract of Advance Payment is void.

5. The holdings of the court of prior instance mentioned above that are contrary to this reasoning contain violation of laws and regulations that apparently affects the judgment. The appeal counsels’ arguments are well-grounded, and the judgment in prior instance should inevitably be quashed with respect to the part for which the appellant lost the case concerning the appellee’s claim.
According to the facts mentioned above, the appellee cannot be found to have exercised the right to rescind under the provisions of the Consumer Contract Act within six months from the time when ratification became possible. Therefore, it is obvious that his right to rescind has been extinguished by prescription pursuant to Article 7, paragraph (1) of said Act, and the appellee’s claim for refund of the Amount Already Paid by reason of the rescission under the provisions of the Consumer Contract Act is groundless. Also according to the facts mentioned above, the Intermediary cannot be found to have neglected its duty to investigate the conduct of its member store, so the appellee’s claim for damages in tort equivalent to the Amount Already Paid is also groundless. In conclusion, the judgment in first instance that dismissed both claims with prejudice on the merits is justifiable, and the appeal to the court of second instance filed by the appellee should be dismissed with regard to the quashed part of the judgment in prior instance.
The appellant also filed a petition for acceptance of final appeal with respect to the part of the judgment in prior instance for which the appellant lost the case concerning the request for payment of the Unpaid Amount, but has not submitted any statement of reasons for final appeal. We therefore dismiss without prejudice the part of the final appeal against said part of the judgment in prior instance.

Therefore, the judgment has been rendered in the form of the main text by the unanimous consent of the Justices.

Justice NASU Kohei
Justice TAHARA Mutsuo
Justice OKABE Kiyoko
Justice OTANI Takehiko
Justice TERADA Itsuro