2012.05.28

2009 (Ju) 1567

Minshu Vol. 66, No. 7

Judgment concerning whether or not the right to indemnification acquired by a guarantor falls within the scope of bankruptcy claims in cases where the guarantor acquires said right by paying a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded without being entrusted by the principal debtor before the commencement of the proceedings

Case to seek refund of deposit

Judgment of the Second Petty Bench, partially quashed and remanded, partially dismissed without prejudice

Osaka High Court, Judgment of May 27, 2009

1. Where a guarantor pays a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded without being entrusted by the principal debtor before the commencement of the proceedings, the right to indemnification that the guarantor acquires against the bankrupt (the principal debtor) through such payment falls within the scope of bankruptcy claims.

2. Where a guarantor pays a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded without being entrusted by the principal debtor before the commencement of the proceedings, a set-off sought by the guarantor, on the basis of his/her right to indemnification acquired through such payment, against the claim held by the bankrupt (the principal debtor) against the guarantor is impermissible pursuant to Article 72, paragraph (1), item (i) of the Bankruptcy Act as applied by analogy.

(There are concurring opinions concerning 1 and 2.)

(Concerning 1 and 2) Article 462 of the Civil Code, Article 2, paragraph (5) of the Bankruptcy Act; (Concerning 2) Article 67, paragraph (1) and Article 72, paragraph (1), item (i) of the Bankruptcy Act

Article 462 of the Civil Code
　If a person, who has become a guarantor without the entrustment of the principal obligor, has performed the obligation or has otherwise in exchange for his/her own property procured the release from liability of the principal obligor, the principal obligor must reimburse the guarantor to the extent that the principal obligor was enriched at the time of such performance of the obligation.
(2) A person who has become a guarantor against the will of the principal obligor shall have the right to obtain reimbursement only to the extent that the principal obligor is actually enriched. In such case, if the principal obligor asserts that he/she had, prior to the day of the demand for reimbursement, grounds for set-off against the obligee, the guarantor may demand that the obligee perform the obligation which would have been extinguished by operation of such set-off.

Article 2, paragraph (5) of the Bankruptcy Act　
(5) The term "bankruptcy claim" as used in this Act means a claim on property arising against the bankrupt from a cause that has occurred before the commencement of bankruptcy proceedings (including the claims listed in the items of Article 97), which does not fall within the scope of claims on the estate.

Article 67, paragraph (1) of the Bankruptcy Act
(1) A bankruptcy creditor, if he/she owes a debt to the bankrupt at the time of commencement of bankruptcy proceedings, may effect a set-off without going through bankruptcy proceedings.

Article 72, paragraph (1), item (i) of the Bankruptcy Act
(1) A person who owes a debt to the bankrupt may not effect a set-off in the following cases:
(i)　Where the person has acquired another person's bankruptcy claim after the commencement of bankruptcy proceedings.

1. The judgment in prior instance is quashed with respect to the parts indicated in (1) to (6) below:
(1) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for B, to seek payment of 239,509 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment;
(2) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for C, to seek payment of 7,213,218 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment;
(3) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for D, to seek payment of 419,052 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment;
(4) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for E, to seek payment of 732,615 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment;
(5) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for F, to seek payment of 470,985 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment; and
(6) the part concerning the part of the claim of A, the initial final appellant prior to succession who served as a bankruptcy trustee for G, to seek payment of 2,000,000 yen with money accrued thereon at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment.
2. The case is remanded to the Osaka High Court with regard to the parts mentioned in (1) to (6) of the preceding paragraph.
3. The remaining parts of the final appeals filed by the appellants of final appeal are dismissed without prejudice.
4. The appellants of final appeal shall bear the costs of the final appeals relating to the preceding paragraph.

Concerning the reasons for petition for acceptance of final appeal argued by the appeal counsel, KIRIYAMA Masami, SHIMADA Shuichi, and SAKAGAWA Yuichi (except for the reasons excluded)
1. In this case, the initial appellants of final appeal prior to succession, who served as bankruptcy trustees for six bankrupts, seek against the appellee of final appeal the payment of refund money arising due to the cancellation of the contracts for current account transactions between the respective trustees and the appellee, with delay damages accrued on such refund money. The appellee argues that, without being entrusted by the bankrupts, it concluded contracts of guarantee with the creditor of the bankrupts for the bankrupts' debts before the commencement of bankruptcy proceedings against the bankrupts, and then after bankruptcy proceedings commenced, it performed the obligation of guarantee in accordance with said contracts of guarantee and thereby acquired the right to indemnification against the respective bankrupts, and accordingly it seeks a set-off on the basis of its right to indemnification against each bankrupt's claim on refund money. After the conclusion of oral argument in the prior instance, all of the initial appellants resigned as bankruptcy trustees and the current appellants newly appointed as bankruptcy trustees for the respective bankrupts have succeeded to the initial appellants and taken over court proceedings for this action.

2. The outline of the facts confirmed by the court of prior instance is as follows.
(1) B, C, D, E, F, and G (hereinafter they may be referred to individually or referred to collectively as "B, et al.") had contracts for current account transactions concluded with the appellee, a company engaged in the banking business (hereinafter these contracts shall be collectively referred to as "Contracts for Current Account Transactions").
(2) On April 28, 2006, the appellee, without being entrusted by B, et al., concluded contracts of guarantee with H, the trading partner of B, et al., to provide guarantee for debts on credit purchases and debts on negotiable instruments assumed by B, et al. to H during the period from said day to April 27, 2007, up to the maximum amount of guarantee agreed under the contracts (hereinafter these contracts shall be collectively referred to as the "Contracts of Guarantee"). The maximum amount of guarantee was 24 million yen for B, 12 million yen for C, 8 million yen for D, 2 million yen for E, 2 million yen for F, and 2 million yen for G.
(3) On August 31, 2006, all of B, et al. were given an order of commencement of bankruptcy proceedings, and the initial appellants prior to succession were appointed as their bankruptcy trustees.
(4) On March 27 and 28, 2007, for the purpose of performing the obligation of guarantee in accordance with the Contracts of Guarantee, the appellee paid the debts of B, et al. to H, namely, 24 million yen as B's debt, 7,230,428 yen as C's debt, 2,702,700 yen as D's debt, 732,615 yen as E's debt, 470,985 yen as F's debt, and 2 million yen as G's debt.
(5) On May 9, 2007, the initial appellants prior to succession cancelled the Contracts for Current Account Transactions pursuant to the procedures respectively specified in these contracts.
(6) On June 12, 2007, the appellee manifested its intention to the initial appellants prior to succession to set off the right to indemnification that the appellee acquired through the abovementioned payment of debts, against the claims held by B, et al. against the appellee under the Contracts for Current Account Transactions, at the corresponding amounts. As a result of the set-offs of the abovementioned claims at the corresponding amounts, the debts owed by the appellee to B, et al. would be extinguished in an amount of 239,509 yen in relation to B, 7,213,218 yen in relation to C, 419,052 yen in relation to D, 732,615 yen in relation to E, 470,985 yen in relation to F, and 2 million yen in relation to G (hereinafter these set-offs shall be collectively referred to as the "Set-offs").

3. The court of prior instance dismissed with prejudice on the merits all of the claims of the initial appellants prior to succession, making a determination on the validity of the Set-offs as follows.
(1) Where a guarantor has acquired the right to indemnification by paying a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded before the commencement of the proceedings, such right to indemnification falls within the scope of bankruptcy claims even if the guarantor concluded said contract of guarantee without being entrusted by the principal debtor.
(2) Acquisition of a bankruptcy claim as set forth in Article 72, paragraph (1), item (i) of the Bankruptcy Act can be interpreted as referring to the case where a claim which may arise in the future is acquired before it actually arises. The appellee should be deemed to have acquired the right to indemnification in question, as a claim which may arise in the future, at the time of conclusion of the Contracts of Guarantee which preceded the commencement of bankruptcy proceedings against B, et al. Accordingly, the analogical application of the provisions of said item to the Set-offs is denied, and the Set-offs sought by the appellee are judged to be permissible.

4. We affirm the determination of the court of prior instance on the point mentioned in 3(1) above, but cannot affirm the determination on the point mentioned in 3(2) above, on the following grounds.
(1) A guarantor, upon paying a debt of the principal debtor, acquires the right to indemnification against the principal debtor in accordance with the provisions of the Civil Code (Articles 459 and 462), and this rule applies equally in the case where guarantee is provided as entrusted by the principal debtor and in the case where it is provided without such entrustment (hereinafter the guarantor who concludes a contract of guarantee without being entrusted by the principal debtor shall be referred to as the "guarantor without entrustment"). Thus, the right to indemnification arises by operation of law as a result of payment by the guarantor without entrustment, and accordingly, even where payment by the guarantor without entrustment takes place after the commencement of bankruptcy proceedings, if the contract of guarantee has been concluded before the commencement of bankruptcy proceedings against the principal debtor, the relationship of guarantee, which is the basis for giving rise to the right to indemnification, can be deemed to have been created before the commencement of the bankruptcy proceedings. In this respect, the right to indemnification should be regarded as a "claim on property arising from a cause that has occurred before the commencement of bankruptcy proceedings" (Article 2, paragraph (5) of the Bankruptcy Act). Consequently, it is appropriate to construe that in cases where the guarantor without entrustment pays a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded before the commencement of the proceedings, the right to indemnification that the guarantor acquires against the bankrupt (the principal debtor) through such payment falls within the scope of bankruptcy claims.
(2) We examine whether or not a set-off on the basis of a bankruptcy claim acquired in the abovementioned process is permissible.
A. A set-off is a reasonable system designed to enable the parties who have the same type of claims against each other to settle their mutually opposed claims and debts in a simplified method, so as to process their creditor-debtor relationships in a smooth and fair manner. The creditor, by exercising the right of set-off, is able to receive the same benefit as receiving payment of his/her claim with certainty and sufficiently, even when the debtor's funds are insufficient, and to this extent, from the standpoint of the creditor, the right of set-off functions in such a manner as if the right holder holds a security interest in the form of a debt (see 1964 (O) No. 155, judgment of the Grand Bench of the Supreme Court of June 24, 1970, Minshu Vol. 24, No. 6, at 587). Protecting the bankruptcy creditor's expectation for such security function of a set-off generally does not run counter to the purpose of the bankruptcy system, wherein fair and equal treatment of creditors who hold bankruptcy claims is the fundamental principle. This may be the reason why Article 67 of the Bankruptcy Act in principle permits a set-off sought by a bankruptcy creditor who owes a debt to the bankrupt at the time of commencement of bankruptcy proceedings so that such bankruptcy creditor is able to collect his/her claim in preference to general bankruptcy creditors without going through bankruptcy proceedings, and treats the right of set-off in the same manner as the right of separate satisfaction.
At the same time, during bankruptcy proceedings wherein fair and equal treatment of creditors who hold bankruptcy claims is the fundamental principle, a set-off sought by a bankruptcy creditor who owes a debt to the bankrupt at the time of commencement of bankruptcy proceedings may, in some cases, result in the abovementioned fundamental principle being ignored, and therefore, may be impermissible for the purpose of bankruptcy proceedings. Probably because of this, Articles 71 and 72 of the Bankruptcy Act prohibit a set-off in such cases, and Article 72, paragraph (1), item (i) of said Act in particular, from such a viewpoint, prohibits a set-off from being sought by a person who owes a debt to the bankrupt by acquiring another person's bankruptcy claim after the commencement of bankruptcy proceedings.
B. In cases where a person who owes a debt to the bankrupt concludes a contract of guarantee as entrusted by the bankrupt (the debtor) before the commencement of bankruptcy proceedings, and then pays a debt of the bankrupt after the commencement of the proceedings in accordance with said contract of guarantee and thereby acquiring the right to indemnification, other bankruptcy creditors must tolerate a set-off sought by said person on the basis of his/her right of indemnification thus acquired, even during bankruptcy proceedings, wherein fair and equal treatment of creditors who hold bankruptcy claims is the fundamental principle, and such person's expectation for a set-off is reasonable and deserves to be protected under Article 67 of the Bankruptcy Act. However, looking at the case where a guarantor without entrustment pays a debt of the bankrupt after the commencement of bankruptcy proceedings against the bankrupt in accordance with the contract of guarantee concluded before the commencement of the proceedings, thereby acquiring the right to indemnification, permitting a set-off sought by the guarantor on the basis of his/her right of indemnification thus acquired is equal to permitting the creation of a claim which may be treated preferentially during bankruptcy proceedings, independently of the bankrupt's intention or any statutory cause. It is difficult to construe the guarantor's expectation for a set-off in such case in the same manner as in the case where a guarantor concludes a contract of guarantee as entrusted by the bankrupt.
A set-off sought by the guarantor without entrustment on the basis of his/her right to indemnification acquired as mentioned above is similar to a set-off sought by a person who owes a debt to the bankrupt by acquiring another person's claim after the commencement of bankruptcy proceedings and thereby making this claim eligible to be set off against the bankrupt's claim against the person, in the sense that both claims become eligible to be set off against each other as a result of the change of the person entitled to exercise the bankruptcy claim during bankruptcy proceedings, which takes place independently of the bankrupt's intention after the commencement of bankruptcy proceedings. There is no difference between such a set-off sought by the guarantor without entrustment and a set-off prohibited under Article 72, paragraph (1), item (i) of the Bankruptcy Act, because both set-offs are impermissible for the purpose of bankruptcy proceedings, wherein fair and equal treatment of creditors who hold bankruptcy claims is the fundamental principle.
Consequently, it is appropriate to construe that where a guarantor without entrustment pays a debt of the principle debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee concluded before the commencement of the proceedings, a set-off sought by the guarantor, on the basis of his/her right to indemnification acquired through such payment, against the claim held by the bankrupt (the principal debtor) against the guarantor, is impermissible pursuant to Article 72, paragraph (1), item (i) of the Bankruptcy Act as applied by analogy.

5. According to the above, the determination of the court of prior instance that permitted the Set-offs sought by the appellee contains a violation of laws and regulations that apparently affects the judgment. The appeal counsel's arguments are well-grounded on this point, and the judgment in prior instance should inevitably be quashed with respect to: (i) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for B, to seek payment of 239,509 yen; (ii) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for C, to seek payment of 7,213,218 yen; (iii) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for D, to seek payment of 419,052 yen; (iv) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for E, to seek payment of 732,615 yen; (v) the part concerning the part of the claim of A, the initial appellant of final appeal prior to succession who served as a bankruptcy trustee for F, to seek payment of 470,985 yen; and (vi) the part concerning the part of the claim of A, the initial final appellant prior to succession who served as a bankruptcy trustee for G, to seek payment of 2,000,000 yen; as well as the part concerning the claims to seek the payment of money accrued on these amounts at the rate of 6% per annum for the period from May 10, 2007, until the completion of payment. With regard to these parts, we remand the case to the court of prior instance to have the claims amended based on the current appellants' succession to the rights of the initial appellants, which took place after the conclusion of oral argument in the prior instance.
We dismiss without prejudice the remaining parts of the final appeals because the appellants have not submitted a document stating the reasons for petition for acceptance of final appeal.

Therefore, the judgment has been rendered in the form of the main text by the unanimous consent of the Justices. There are concurring opinions by Justice SUDO Masahiko and Justice CHIBA Katsumi.

The concurring opinion by Justice SUDO Masahiko is as follows.
I am in agreement with the conclusion of the majority opinion and the reasons attached thereto, but I would like to give some additional comments on the reasons from my own point of view, focusing on the aspect of substantial equality.
1. (1) The permissibility of the set-offs disputed in the present case, in short, comes down to the issue of interpretation of Article 67 of the Bankruptcy Act, which arises in the face of a conflict between two opposing demands, that is, the demand for equal payment on the basis of the fact that the right to indemnification?which the person who became a guarantor without entrustment before the commencement of bankruptcy proceedings acquires against the principal debtor by paying a debt of the principal debtor after the commencement of the proceedings (hereinafter the right to indemnification acquired by the guarantor in such case may also be referred to as the "right to indemnification acquired after the commencement of bankruptcy proceedings")?falls within the scope of bankruptcy claims, on one hand, and the demand for preferential payment on the basis of the fact that a set-off is not actually a security interest but functions in such a manner as if the person who holds a claim against another holds a security interest in the form of a debt owed to the latter, on the other. In this connection, since insolvency laws such as the Bankruptcy Act cannot be independent of the dominant view in the world of trade which mainly involves the stakeholders related to the debtor but can be understood as reflecting such dominant view, it may be necessary and productive to conduct examination from this standpoint when interpreting this Article.
(2) Where a debtor falls into insolvency (or becomes bankrupt) due to his/her non-exempt property becoming insufficient to satisfy all claims held against him/her by multiple creditors, each creditor faces a pressing problem of how to collect his/her claim as much as possible and strives to be ahead of others in an attempt to secure his/her claim even by using force, which could bring about an anarchic and unfair situation. Therefore, with regard to the processing of matters concerning claims and debts of the debtor toward the debtor's liquidation or rehabilitation, insolvency laws basically aim to realize the principle of equality among creditors who hold general, unsecured claims in the form of equal payment in proportion to the amount of claim, while awarding preferential payment for secured claims. This is because our common sense of law does not admit such an anarchic and unfair situation, and in particular, the dominant view in the world of trade which mainly involves the stakeholders related to the debtor (hereinafter the term "world of trade" shall specifically mean the world of trade which mainly involves the stakeholders related to the debtor), upon the commencement of insolvency proceedings, basically demands equal payment in proportion to the amount of claim, and also generally demands the realization of substantial equality by requiring that there should be reasonable grounds for unequal treatment. More specifically, the dominant view in the world of trade demands proportional, equal payment on the basis that claims of the same nature are equal to each other under substantive law, such as the Civil Code. With regard to secured claims, said dominant view finds reasonable grounds in allowing the debtor freedom of secured trading wherein the debtor can use his/her own property as security for his/her debt in normal times, and also finds reasonable grounds in allowing the creditor who holds a secured claim to collect his/her claim in preference to others upon the commencement of insolvency proceedings against the debtor, because if the entitlement to such preferential payment established as a security interest were to be overthrown just because insolvency proceedings have commenced against the debtor, the creditor would not be able to feel safe when engaging in secured trading, and this would impede economic activities in society. From this standpoint, the dominant view in the world of trade admits preferential treatment for the creditor who holds a secured claim as substantial equality.
(3) Thus, the provisions of insolvency laws, such as the Bankruptcy Act, are somewhat reflecting the dominant view in the world of trade. This, conversely, means that in some situations where proportional, equal payment under the principle of equality among creditors and preferential treatment for secured claims are found to be against substantial equality according to the dominant view in the world of trade, these rules could be subject to changes by way of legislation to partially revise substantive law, including the Civil Code, or practical arrangements in the operations by courts and trustees, etc. having jurisdiction or authority to deal with insolvency cases (for example, preferential payment to creditors who hold small claims, restrictions on the enforcement of claims by the bankrupt company's manager against the company, and treatment of security interests as secured reorganization claims under the Corporate Reorganization Act). Assuming so, it can be said that the interpretation of insolvency laws, such as the Bankruptcy Act, should also be in line with the dominant view in the world of trade effective at the time of commencement of insolvency proceedings and thereafter, and accordingly the interpretation of Article 67 and other clauses of the Bankruptcy Act should also be founded on the aspect of substantial equality. In that case, with regard to a set-off sought by a creditor against his/her debt to the bankrupt, Article 67 of the Bankruptcy Act should be interpreted as admitting the validity of a set-off in cases where the set-off is considered to be consistent with substantial equality in light of the dominant view in the world of trade effective at the time of commencement of bankruptcy proceedings and thereafter, and Articles 71 and 72 of said Act should be interpreted as denying the validity of a set-off in cases where the set-off is considered to be inconsistent with substantial equality in light of such dominant view. In this respect, it is said that a creditor's reasonable expectation for a set-off deserves to be protected, and such reasonable expectation can be recognized when a set-off is considered to be consistent with substantial equality in light of the dominant view in the world of trade. Furthermore, this leads to the conclusion that if, on the contrary, a set-off formally appears to meet the requirement under Article 67 of the Bankruptcy Act but is likely to bring about a consequence that is inconsistent with substantial equality, such a set-off is judged to be a set-off that cannot be reasonably expected and therefore it should be excluded from the application of this Article. After all, considering that a set-off is not actually a security interest but fulfills a security function, the applicability of Article 67 of the Bankruptcy Act depends on whether or not reasonable grounds can be found in admitting preferential treatment as described above according to the dominant view in the world of trade, or in other words, whether or not a basis for justification can be found for admitting such preferential treatment as substantial equality.

2. A set-off sought by a bankruptcy creditor who owes a debt to the bankrupt at the time of commencement of bankruptcy proceedings, except when it falls under the case prescribed in Article 72 of the Bankruptcy Act, can be found to be supported by a basis for justification for admitting it as substantial equality according to the dominant view in the world of trade in most cases, and therefore the bankruptcy creditor's expectation for a set-off is deemed to be reasonable and eligible to be covered by Article 67 of the same Act. However, it is difficult to construe the present case in the same manner as such cases.
(1) First, in the case where the same type of claims actually exist in a state where they are opposed to each other and due at the time of commencement of bankruptcy proceedings (a state where they are eligible to be set off against each other), the basis for justification for a set-off obviously lies in the existence of the claims in that state because it is permitted as a rule to make a set-off effective in such case, and therefore, even where a claim held by a bankruptcy creditor is collected in preference to other general bankruptcy claims, such treatment may be admitted as substantial equality according to the dominant view in the world of trade. More specifically, vesting a security function in a set-off will contribute to the safe conduct of trade and smooth execution of economic activities, or otherwise it could prejudice these benefits. Also in this case, it may be possible to consider that there actually exists a relationship in which a claim held by the party seeking a set-off and a claim held by the opposing party are connected with each other, with the former party's debt functioning as a reserve fund for his/her claim, and that the existence of such relationship serves as a sort of public notice and enables the party seeking a set-off to assert against a third party the effect of his/her right of set-off. Assuming so, the creditor's expectation for a set-off is obviously reasonable in this case, which may be an ordinary situation where a set-off is permissible under Article 67 of the Bankruptcy Act. In this sense, since a set-off sought by a guarantor without entrustment on the basis of his/her right to indemnification acquired through payment before the commencement of bankruptcy proceedings meets the abovementioned condition that the same type of claims actually exist in opposition to each other at the time of commencement of bankruptcy proceedings, the guarantor's expectation for a set-off is considered to be reasonable and therefore Article 67 of the same Act applies automatically and the validity of the set-off is admitted.
(2) Secondly, a debtor, in normal times before going bankrupt, has freedom of economic activities and is free to dispose of any of his/her claims which form his/her non-exempt property. Accordingly, if the debtor, before the commencement of bankruptcy proceedings against him/her, sets aside any of his/her claims of his/her own will as the subject of a set-off that may be sought by his/her creditor in the future, a basis for justification can be found for admitting such a set-off as substantial equality according to the dominant view in the world of trade. From this point, if a guarantor, as entrusted by the debtor to provide guarantee before the commencement of bankruptcy proceedings (entrusted guarantee), seeks a set-off on the basis of the right to ex post facto indemnification acquired by paying a debt of the debtor after the commencement of the proceedings, such a set-off can be deemed to be effected by virtue of the fact that the debtor, before the commencement of bankruptcy proceedings against him/her, has set aside any of his/her claims of his/her own will as the subject of a set-off that may be sought by his/her creditor on the basis of the right to ex post facto indemnification in the future. In that case, a basis for justification can be found for admitting such a set-off as substantial equality according to the dominant view in the world of trade, and eventually the guarantor's expectation for the set-off is considered to be reasonable. In consequence, in this case, Article 67 of the Bankruptcy Act applies automatically and the validity of the set-off is admitted.
(3) Thirdly, since the concept of substantial equality according to the dominant view in the world of trade plays a decisive role in the process of determining the applicability of Article 67 of the Bankruptcy Act as explained above, if a transaction, wherein a guarantor without entrustment owes a debt to the principal debtor and provides guarantee by using such debt as a reserve fund for his/her claim, has been established as a kind of credit transaction and recognized as a trade practice, it can be said that such trade practice has been generally accepted and the relationship, in which a claim held by the party seeking a set-off and a claim held by the opposing party are connected with each other, with the former party's debt functioning as a reserve fund for his/her claim, has become common. As a result, the dominant view in the world of trade can find a basis for justification for admitting this trade practice as substantial equality, and therefore the expectation of a guarantor without entrustment to seek a set-off on the basis of the right to indemnification acquired after the commencement of bankruptcy proceedings can be considered to be reasonable as well. In that case, Article 67 of the Bankruptcy Act can apply to such a set-off and the validity of the set-off can be admitted.
(4) However, looking at the set-offs disputed in the present case, sought by the appellee, who is a guarantor without entrustment, on the basis of the right to indemnification acquired after the commencement of bankruptcy proceedings, first of all, the appellee's right to indemnification acquired through payment did not yet actually exist at the time of commencement of bankruptcy proceedings, and thus the set-offs in question fail to meet the condition that the same type of claims actually exist in opposition to each other, or that the appellee's right to indemnification and the claims held by B, et al. against the appellee are connected with each other, and that the appellee's debts function as a reserve fund for its right to indemnification. Secondly, as B, et al. did not entrust the appellee to provide guarantee for them, the set-offs in question also fail to meet another condition, namely, that B, et al. set aside their claims on deposit of their own will as the subject of set-offs that may be sought by the appellee on the basis of the right to indemnification in the future. Furthermore, there is nothing in the circumstances which implies that a transaction, wherein a guarantor without entrustment owes a debt to the principal debtor and provides guarantee by using such debt as a reserve fund for his/her claim, has become an established practice. In view of these points, with regard to the set-offs sought by the appellee, who is a guarantor without entrustment, on the basis of the right to indemnification acquired after the commencement of bankruptcy proceedings, a basis for justification cannot be found for admitting such set-offs as substantial equality according to the dominant view in the world of trade. Nor can a basis for justification be found anywhere else. Thus, it is difficult to construe the appellee's expectation for set-offs in the same manner as in the case where a guarantor without entrustment pays a debt of the principal debtor before the commencement of bankruptcy proceedings against the principal debtor or where an entrusted guarantor pays a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor.

3. On the other hand, the case prescribed in Article 72, paragraph (1), item (i) of the Bankruptcy Act represents completely the same situation as that in the present case in terms of the interests of the parties concerned because in both cases, a set-off fails to meet both the condition that the same type of claims actually exist in opposition to each other at the time of commencement of bankruptcy proceedings and the condition that the debtor sets aside his/her claim of his/her own will as the subject of a set-off that may be sought by the creditor on the basis of the right to indemnification in the future, and also because the case described in said item has not yet been accepted as an established practice. Needless to say, we must be very careful not to reject a set-off by easily applying the provisions of the Bankruptcy Act by analogy, as this could adversely affect the predictability and impede the smooth execution of economic activities. Nevertheless, in so far as it concerns the set-offs disputed in the present case, the applicability of Article 67 of the Bankruptcy Act is denied according to the reasoning shown above, whereas with regard to the applicability of Article 72, paragraph (1), item (i) of the same Act, which prescribes the case that represents completely the same situation as that in the present case in terms of the interests of the parties concerned, it may be appropriate to interpret that said Article only enumerates typical cases where a set-off goes against substantial equality and does not limit cases where this clause shall apply so strictly as to completely preclude its application by analogy. Based on this interpretation, it may be permissible to apply this Article by analogy to the present case wherein set-offs are sought by the appellee, who is the guarantor without entrustment, on the basis of the right to indemnification acquired after the commencement of bankruptcy proceedings, by regarding the present case as being equivalent to the case prescribed in paragraph (1), item (i) of said Article.

4. According to the above, Article 67 of the Bankruptcy Act cannot be applied to the Set-offs sought by the appellee, and it is appropriate to apply by analogy Article 72, paragraph (1), item (i) of the same Act, and in conclusion, the validity of the Set-offs should be denied.
For the sake of caution, I would add that, as explained earlier, nothing implies that a transaction of guarantee without entrustment?wherein a guarantor without entrustment provides guarantee on condition that the guarantor owes a debt to the principal debtor and will seek a set-off against the principal debtor's claim on the basis of the right to ex post facto indemnification that the guarantor is to acquire after the commencement of bankruptcy proceedings against the principal debtor?has become an established practice, nor can any trends be found which suggest that financial institutions taking deposit, etc. (see Article 2, paragraphs (1) and (2) of the Deposit Insurance Act) will be willing to engage in this type of transaction in the future. It is implausible that these financial institutions would face difficulty in carrying out their business operations or that the development of the banking industry would be hindered unless a set-off against the debtor's claim is permitted. It is also difficult to conceive that the prohibition of such a set-off would considerably hinder debtors from raising more funds or obtaining greater credit opportunities.

5. What I have explained above may also apply to cases involving civil rehabilitation and corporate reorganization (see Article 93-2, paragraph (1), item (i) of the Civil Rehabilitation Act, and Article 49-2, paragraph (1), item (i) of the Corporate Reorganization Act).

The concurring opinion by Justice CHIBA Katsumi is as follows.
In connection with the court opinion that the right to ex post facto indemnification acquired by a guarantor without entrustment after the commencement of bankruptcy proceedings against the principal debtor falls within the scope of bankruptcy claims and that a set-off sought by the guarantor on the basis of this right to indemnification is impermissible pursuant to Article 72, paragraph (1), item (i) of the Bankruptcy Act as applied by analogy, I would like to give some comments on the following points.
1. A contract of guarantee concluded without being entrusted by the principal debtor (hereinafter referred to as a "contract of guarantee without entrustment"), and management without mandate
The conclusion of a contract of guarantee without entrustment is in the sphere of events in which the principal debtor is not involved and therefore cannot be regarded as an economic activity for which the debtor is aware of his/her responsibility. In this respect, it is different from the conclusion of a contract of guarantee as entrusted by the principal debtor (hereinafter referred to as a "contract of entrusted guarantee"). On the grounds of this difference, one could consider that the right to ex post facto indemnification acquired by the guarantor by paying a debt of the principal debtor after the commencement of bankruptcy proceedings against the principal debtor in accordance with the contract of guarantee without entrustment does not even fall within the scope of bankruptcy claims because this right arises from the cause which is outside the bankrupt's sphere, or more specifically, one could consider that there is no need to think that, as in the case of an ordinary conditional claim, the right to ex post facto indemnification has already arisen conditionally, by regarding the conclusion of a contract of guarantee without entrustment as the cause of the right. According to this view, under the circumstances of the present case, the contract of guarantee without entrustment gives existence to a relationship equivalent to a creditor-debtor relationship between the guarantor and the bankrupt at the time when the guarantor performs the obligation of guarantee after the commencement of bankruptcy proceedings, and in this sense, it is argued that the right to ex post facto indemnification arises from the performance of the obligation of guarantee, which constitutes management without mandate, at the time of such performance (which takes place after the commencement of bankruptcy proceedings). This argument leads to the conclusion on the present case that the right to ex post facto indemnification should not be treated as a bankruptcy claim, and accordingly, a set-off between this right and the bankrupt's claim on the current deposit should not be permitted. Logical efforts to draw this conclusion can be found with this argument.
However, even where a contract of guarantee is concluded without entrustment, or where it is uncertain whether or not the debtor desires such a contract to be concluded, the conclusion of the contract eventually takes effect to some extent in granting credit to the debtor, and when viewed from the aspect of management without mandate, one must say that management without mandate was performed for the benefit of the principal debtor at the time of conclusion of the contract of guarantee, rather than at the time of performance of the obligation of guarantee. Furthermore, under a contract of entrusted guarantee, an entrusted guarantor acquires the right to ex ante indemnification in some cases, which arises from the conclusion of the contract of guarantee. There is no reason to consider differently with regard to the cause of the right to ex post facto indemnification. It should be considered that the right to ex post facto indemnification also arises from the conclusion of the contract of guarantee and it arises before the obligation of guarantee is performed, as a conditional claim that is subject to the condition of such performance. In that case, even where the conclusion of the contract of guarantee without entrustment is an event outside the debtor's sphere, the right to ex post facto indemnification arises in the same mechanism regardless of whether it is under a contract of guarantee without entrustment or a contract of entrusted guarantee, and therefore the right to ex post facto indemnification cannot be considered otherwise than as arising from the conclusion of the contract of guarantee, with or without entrustment. It must be said that there is no basis for considering that, only in the case of a contract of guarantee without entrustment, the right to ex post facto indemnification arises from the performance of the obligation of guarantee, not from the conclusion of the contract of guarantee. Accordingly, it is interpreted that the right to ex post facto indemnification disputed in the present case arose from the conclusion of the contract of guarantee without entrustment, and as this event took place before the commencement of bankruptcy proceedings, said right is regarded as a conditional bankruptcy claim. Hence, it is after all difficult to adopt the interpretation that the right to ex post facto indemnification arose from the performance of the obligation of guarantee that took place after the commencement of bankruptcy proceedings.

2. The right to ex post facto indemnification under a contract of guarantee without entrustment, and a set-off on the basis of such right
Where a contract of guarantee without entrustment was concluded before the commencement of bankruptcy proceedings, the right to ex post facto indemnification arising from the performance of the obligation of guarantee after the commencement of the proceedings cannot meet the definition of a bankruptcy claim in strict terms, as explained above, but when it is involved in bankruptcy proceedings, or when it raises the issue of permissibility of a set-off in particular, it should be differentiated from the right to ex post facto indemnification arising from the conclusion of a contract of entrusted guarantee, on the following grounds.
A contract of entrusted guarantee differs from a contract of guarantee without entrustment because the former is concluded through the involvement and based on the intention of the debtor. As it is shown in the fact that the conclusion of a contract of entrusted guarantee gives rise to the right to ex ante indemnification under certain conditions, the debtor desires this contract in order to obtain credit and assumes that settlement through a set-off will be made when necessity arises in the future, thus the debtor admits a kind of security function of a set-off. This is why, in the event that the principal debtor falls into insolvency (e.g. receives an order of commencement of bankruptcy proceedings), bankruptcy creditors other than the guarantor would think that they have to tolerate settlement through a set-off by the guarantor on the basis of the right to indemnification arising from the contract of entrusted guarantee. Presumably based on this idea, Article 67 of the Bankruptcy Act permits such a set-off while regarding the guarantor's expectation for settlement through a set-off as being reasonable and worth protecting, as explained in the court opinion.
However, in the case of a contract of guarantee without entrustment, the right to ex ante indemnification does not arise from the beginning; only the right to ex post facto indemnification may arise provided that certain conditions are met. As explained above, the conclusion of this contract is an event in the sphere where the principal debtor is not involved and it cannot be regarded as an economic activity for which the debtor is aware of his/her responsibility. Therefore, although this contract could eventually benefit him/her, the debtor would neither assume that settlement through a set-off will be made when necessity arises in the future, nor admit the security function of the right to indemnification from the beginning, and accordingly, bankruptcy creditors other than the guarantor would not think that they have to tolerate a set-off sought by the guarantor. Since it is rarely expected during bankruptcy proceedings that all bankruptcy creditors will be awarded distributions from the bankruptcy estate for the full amount of their claims, it is unacceptable among general bankruptcy creditors that only some of them have preference to others in collecting claims, and they all demand equal treatment. Here, the situation is under the strong control of the principle of equality. When a guarantor seeks a set-off on the basis of his/her right to ex post facto indemnification under a contract of guarantee without entrustment, other bankruptcy creditors must strongly feel inequality and would not tolerate settlement through such a set-off. This feeling is not caused merely by an emotional reaction or aspiration of bankruptcy creditors but it comes from the fact that permitting a set-off by the guarantor runs counter to the fundamental principle of bankruptcy proceedings. In this respect, there are reasonable grounds for differentiating the right to ex post facto indemnification under a contract of guarantee without entrustment from such right under a contract of entrusted guarantee in terms of treatment under law. In other words, the assessment of the right to ex post facto indemnification under a contract of guarantee without entrustment as explained thus far may not go so far as to be the grounds for excluding such right from the scope of bankruptcy claims, but it can be reasonable grounds for differentiation to the extent that the right to ex post facto indemnification under a contract of guarantee without entrustment should not be accepted as the basis for settlement outside bankruptcy proceedings or preferential collection of claims, unlike the case where settlement through a set-off is permitted on the basis of the right of separate satisfaction established based on the debtor's decision or the right to ex post facto indemnification arising under the contract of entrusted guarantee.

3. The regulatory domain of Article 67 of the Bankruptcy Act and the regulatory domain of Articles 71 and 72 of the same Act
Settlement through a set-off is permissible when mutually opposed claims exist and become eligible to be set off against each other. A set-off may basically be possible if it meets the conditions prescribed in the Civil Code. However, during bankruptcy proceedings wherein fair and equal treatment of creditors who hold bankruptcy claims is the fundamental principle, settlement through a set-off by one bankruptcy creditor would result in enabling the creditor to collect his/her claim in preference to other bankruptcy creditors. Hence, whether or not settlement through a set-off is permissible at all and in what cases it is permissible may be matters of great concern during bankruptcy proceedings. The Bankruptcy Act regulates these matters separately within the domain of Article 67 and the domain of Articles 71 and 72, and therefore it is necessary to examine which regulatory domain applies to the case of settlement through a set-off sought on the basis of the right to ex post facto indemnification under a contract of guarantee without entrustment, as one disputed in the present case.
Unlike a set-off on the basis of the right to ex post facto indemnification under a contract of entrusted guarantee, as explained above, there may be reasonable grounds for precluding settlement through a set-off on the basis of the right to ex post facto indemnification under a contract of guarantee without entrustment disputed in the present case, but the fact that this matter falls upon the regulatory domain of Articles 71 and 72 of the Bankruptcy Act, which prescribe the cases where a set-off is prohibited, rather than the regulatory domain of Article 67 of the same Act, must be established not only from the understanding of the legislative policy that underlies Article 67, etc., but also as an interpretation theory of the relevant clauses.
Looking at Article 72, paragraph (1), item (i) of the Bankruptcy Act, which may be the primary legal basis, this clause prohibits a bankruptcy creditor from acquiring another person's bankruptcy claim independently of the bankrupt's intention after the commencement of bankruptcy proceedings, thereby making his/her debt owed to the bankrupt eligible to be set off against such other person's claim and making settlement through a set-off, because such manner of settlement goes against the principle of fair and equal treatment during bankruptcy proceedings. In the present case, the guarantor without entrustment who owed a debt to each bankrupt performed the obligation of guarantee after the commencement of bankruptcy proceedings and acquired the right to ex post facto indemnification, thereby making this right eligible to be set-off against its debt to each bankrupt. Thus, although the guarantor had no right or claim that could be set-off against each bankrupt's claim against it at the time of commencement of bankruptcy proceedings, it created the situation, just as described by the court opinion, where two opposing claims were eligible to be set off against each other as a result of the change of the person entitled to exercise the bankruptcy claim during bankruptcy proceedings, which took place independently of each bankrupt's intention. In this respect, the set-offs disputed in the present case are similar to a set-off sought by a person who owes a debt to the bankrupt by acquiring another person's claim after the commencement of bankruptcy proceedings and thereby making this claim eligible to be set off against the bankrupt's claim against the person, and there is no difference between the set-offs disputed in the present case and a set-off prohibited under Article 72, paragraph (1), item (i) of the Bankruptcy Act, because both set-offs are impermissible for the purpose of bankruptcy proceedings wherein fair and equal treatment of bankruptcy creditors is the fundamental principle. According to this view, the matter of permissibility of the set-offs disputed in the present case falls upon the regulatory domain of Article 72, paragraph (1), item (i) of the Bankruptcy Act, not the regulatory domain of Article 67 of the same Act.

4. Applicability by analogy of Article 72, paragraph (1), item (i) of the Bankruptcy Act
Since prohibiting in certain cases settlement through a set-off, which is permissible under the Civil Code, may result in a sort of infringement of property rights, such prohibition basically must have a clear legal basis. However, in the society of trading, where a variety of new commercial transactions are being carried out one after another, it is not easy to identify typical cases which involve the issue of settlement through a set-off as soon as they emerge and take legislative measures, including revising the Bankruptcy Act, promptly. If it is possible to deal with these cases by interpreting the existing provisions of the Bankruptcy Act, it may be acceptable as an interpretation approach to apply these provisions by analogy or mutatis mutandis. According to the fundamental principle of the Bankruptcy Act?fair and equal treatment of bankruptcy claims?, the Set-offs, which are contrary to this principle, can be understood based on the abovementioned view. Also in line with this view, the court opinion determines that there is no difference between the Set-offs and the set-off prohibited under Article 72, paragraph (1), item (i) of the Bankruptcy Act and allows this clause to be applied by analogy to the present case. This approach adopted by the court opinion is not intended to expand the scope of application of this clause to an unfair extent and it can be deemed to be within the allowable limit of interpretation.
There may be a concern that, if a financial institution, etc. which concluded a contract of guarantee without entrustment has acquired the right to ex post facto indemnification by performing the obligation of guarantee after the commencement of bankruptcy proceedings against the principal debtor but it is restricted from making settlement through a set-off of this right against its debt (deposit liability) owed to the bankrupt pursuant to Article 72, paragraph (1), item (i) of the Bankruptcy Act as applied by analogy, such restriction could directly impede the business of providing guarantee without entrustment. However, it is possible in the future for such a guarantor without entrustment to set in advance the amount of consideration for acquiring a claim against the bankrupt from the creditor at a reasonable price on the supposition that settlement through a set-off will be subject to such restriction. Furthermore, in cases where the claim on deposit held by the bankrupt is a claim on the current deposit, as it happened in the present case, the amount of deposit in the current account changes from day to day and it may be hard to ascertain whether any amount enough for a set-off, etc. will remain in the account at the time of bankruptcy. Therefore, the restriction on settlement through a set-off will not directly impede the business of providing guarantee without entrustment.

Justice CHIBA Katsumi
Justice FURUTA Yuki
Justice TAKEUCHI Yukio
Justice SUDO Masahiko