2013.04.26

2012 (Kyo) 15

Minshu Vol. 67, No. 4

Decision concerning a case wherein the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, and an order of commencement of reorganization proceedings against the debtor is subsequently made; and the nature of the claim secured by such security

Case of appeal with permission against the ruling to dismiss the appeal against an order of rescission of security

Decision of the Second Petty Bench, quashed and decided by the Supreme Court

Sapporo High Court, Decision of April 12, 2012

1. Where the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, and an order of commencement of reorganization proceedings against the debtor is subsequently made, the claim for damages secured by the deposit money is regarded as a reorganization claim, not as a secured reorganization claim.

2. Where the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, the security beneficiary is entitled to exercise the claim for refund of the deposit money as "any right against any other person who owes debts jointly with the reorganization company" as set forth in Article 203, paragraph (2) of the Corporate Reorganization Act, even after an order of confirmation of the reorganization plan is made for the debtor.

(Concerning 1 and 2) Articles 76, 77, and 259, Article 403, paragraph (1), and Article 405, paragraph (2) of the Code of Civil Procedure, Article 39, paragraph (1) of the Civil Execution Act; (Concerning 1) Article 2, paragraphs (8) and (10) of the Corporate Reorganization Act; (Concerning 2) Article 203, paragraph (2) and Article 204, paragraph (1) of the Corporate Reorganization Act, Article 8, paragraph (1) of the Deposit Act

Code of Civil Procedure
(Method of Providing Security)
Article 76
Security shall be provided by making a statutory deposit of money or securities (including book-entry transfer company bonds, etc. prescribed in Article 129, paragraph (1) of the Act on Book-Entry Transfer of Company Bonds, etc. (Act No. 75 of 2001); the same shall apply in the following Article) that the court considers appropriate, to an official depository within the jurisdictional district of the district court that has jurisdiction over the location of the court that has ordered provision of security, or by any other method specified by the Rules of the Supreme Court; provided, however, that if the parties have made a special contract, such contract shall prevail.

(Defendant's Right over Collateral)
Article 77
With regard to court costs, a defendant shall have the right to receive payment, in preference to other creditors, for the money or securities deposited by law pursuant to the provisions of the preceding Article.

(Declaration of Provisional Execution)
Article 259
(1) With regard to a judgment concerning a claim on a property right, the court, when it finds it necessary, upon petition or by its own authority, may declare that provisional execution may be enforced with or without security.
(2)　With regard to a judgment on a claim for payment of money for a bill or note or a check and a claim for damages at the statutory interest rate that is incidental thereto, the court, by its own authority, shall declare that provisional execution may be enforced without security; provided, however, that when the court finds it appropriate, it may require the provision of security for provisional execution.
(3)　The court, upon petition or by its own authority, may declare that provisional execution may be avoided by providing security.
(4)　A declaration of provisional execution shall be indicated in the main text of a judgment. The same shall apply to a declaration made under the provisions of the preceding paragraph.
(5)　If the court has not made a judicial decision on a petition for a declaration of provisional execution or has not made a declaration of provisional execution when the court should have made it by its own authority, it shall make a supplemental order upon petition or by its own authority. The same shall apply where the court has not made a judicial decision on a petition set forth in paragraph (3).
(6)　The provisions of Articles 76, 77, 79 and 80 shall apply mutatis mutandis to security set forth in paragraphs (1) through (3).

(Judicial Decision of Stay of Execution)
Article 403
In the following cases, the court, upon petition, may make an order of a temporary stay of compulsory execution while requiring or not requiring the provision of security, or simultaneously may make an order to the effect that compulsory execution should be commenced or continued with security or an order of revocation of the executive measure already taken while requiring the provision of security; provided, however, that an order of commencement or continuation of compulsory execution may be made only in the cases set forth in items (iii) through (vi):
(i)　Where an appeal set forth in Article 327, paragraph (1) (including the cases where applied mutatis mutandis pursuant to Article 380, paragraph (2); the same shall apply in the following Article) or an action for retrial is filed, and the circumstances alleged as reasons for appeal appear to be legally well-grounded, a prima facie showing is made on factual matters, and a prima facie showing is made to the effect that execution is likely to cause damage for which compensation cannot be made.
(ii)　Where a final appeal or a petition for acceptance of final appeal is filed against a judgment with a declaration of provisional execution, and a prima facie showing is made with regard to the circumstances under which the judgment in prior instance should be quashed and to the effect that execution is likely to cause damage for which compensation cannot be made.
(iii)　Where an appeal to the court of second instance is filed against a judgment with a declaration of provisional execution or an objection to demand is made against a demand for payment with a declaration of provisional execution (excluding an appeal to the court of second instance and objection to demand set forth in the following item), and a prima facie showing is made to the effect that it cannot be said that there are no circumstances under which the judgment in prior instance or demand for payment should be revoked or modified or that execution is likely to cause substantial damage.
(iv)　Where, with regard to a claim for payment of money for a bill or note or a check and a claim for damages at the statutory interest rate that is incidental thereto, an appeal to the court of second instance is filed against a judgment with a declaration of provisional execution or an objection to demand is made against a demand for payment with a declaration of provisional execution, and a prima facie showing is made with regard to the circumstances under which the judgment in prior instance or demand for payment should be revoked or modified.
(v)　Where an objection is made to a judgment of an action on bills and notes or action on checks with a declaration of provisional execution or an objection is made to a judgment of an action on small claim with a declaration of provisional execution, and a prima facie showing is made with regard to the circumstances under which the judgment in prior instance should be revoked or modified.
(vi)　Where an action set forth in Article 117, paragraph (1) is filed, and the circumstances alleged for modification appear to be legally well-grounded, and a prima facie showing is made on factual matters.

(Provision of Security)
Article 405
(2) The provisions of Articles 76, 77, 79 and 80 shall apply mutatis mutandis to the security set forth in the preceding paragraph.

Civil Execution Act
(Stay of Compulsory Execution)
Article 39
Compulsory execution shall be stayed if any of the following documents has been submitted:
(i)　An enforceable authenticated copy of a judicial decision containing a statement to the effect that a title of obligation (excluding an execution deed) or a declaration of provisional execution shall be revoked or a statement to the effect that compulsory execution shall not be permitted
(ii)　An authenticated copy of a final and binding judgment declaring invalidity of a settlement, acknowledgment, mediation or labor tribunal judgment pertaining to a title of obligation
(iii)　An authenticated copy of a record or any other document prepared by a court clerk which proves that any of the titles of obligation set forth in Article 22(ii) to (iv)-2 has ceased to be effective due to withdrawal of the action or any other grounds
(iv)　An authenticated copy of a record of a judicial settlement or mediation containing a statement to the effect that compulsory execution shall not be carried out or that a petition for such compulsory execution shall be withdrawn, or an authenticated copy of a judgment document of a labor tribunal judgment that has the same effect as a judicial settlement pursuant to the provisions of Article 21(4) of the Labor Tribunal Act (Act No. 45 of 2004) or an authenticated copy of the record set forth in Article 20(7) of said Act
(v)　A document proving that security for avoiding compulsory execution has been provided
(vi)　An authenticated copy of a judicial decision containing a statement to the effect that a stay of compulsory execution and revocation of a disposition of execution shall be ordered
(vii)　An authenticated copy of a judicial decision containing a statement to the effect that a temporary stay of compulsory execution shall be ordered
(viii)　A document containing a statement to the effect that an obligee received performance or consented to granting grace of performance after establishment of a title of obligation

Corporate Reorganization Act
(Definitions)
Article 2
(8) The term "reorganization claim" as used in this Act means a claim on property arising against the reorganization company from a cause that has occurred before the commencement of reorganization proceedings, as well as the following claims, where these claims do not fall within the scope of secured reorganization claim or common benefit claim:
(i) a claim for interest arising after the commencement of reorganization proceedings;
(ii) a claim for damages or penalty for a default arising after the commencement of reorganization proceedings;
(iii) a claim for expenses for participation in reorganization proceedings
(iv) a claim prescribed in Article 58, paragraph (1) (including cases where applied mutatis mutandis pursuant to paragraph (2) of said Article);
(v) the other party's claim for damages arising in cases where a bilateral contract is cancelled pursuant to Article 61, paragraph (1);
(vi) a claim for damages under Article 58, paragraph (2) of the Bankruptcy Act (Act No. 75 of 2004) as applied mutatis mutandis pursuant to Article 63;
(vii) a claim under Article 59, paragraph (1) as applied mutatis mutandis pursuant to Article 63 (excluding such claim held by the reorganization company); and
(viii) a right prescribed in Article 91-2, paragraph (2), item (ii) or item (iii);
(10) The term "secured reorganization claim" as used in this Act means a claim secured by any security right (limited to a special statutory lien, pledge, mortgage, or a right of retention under the provisions of the Commercial Code (Act No. 48 of 1899) or the Companies Act (Act No. 86 of 2005)) that exists on the property of the reorganization company as of the time of commencement of reorganization proceedings, which arises from a cause that has occurred before the commencement of reorganization proceedings or which falls under the items of paragraph (8) (excluding a common benefit claim), to the extent that the claim is secured by the security right on the assumption that the property that is the subject matter of the security right retains its market value as of the time of commencement of reorganization proceedings; provided, however, that any claim for damages or penalty for a default, which forms part of the secured claim (excluding a company bond), shall be limited to such claim that has arisen before one year elapses after the commencement of reorganization proceedings (or before an order of confirmation of the reorganization plan is made if it is made within such one-year period).

(Scope of Effect of Reorganization Plan)
Article 203
(2) A reorganization plan shall not affect any rights held by reorganization creditors, etc. against the reorganization company’s guarantor or any other person who owes debts jointly with the reorganization company, or any security provided by persons other than the reorganization company in the interest of reorganization creditors, etc.

(Discharge from Reorganization Claims, etc.)
Article 204
(1) When an order of confirmation of the reorganization plan is made, the reorganization company shall be discharged from its liabilities for all reorganization claims, etc., except for the following rights, and all of the shareholders’ rights and security rights existing on the reorganization company’s property shall be extinguished:
(i) rights approved pursuant to the provisions of the reorganization plan or provisions of this Act;
(ii) claims for retirement allowance held by persons who were, as of the time after the commencement of reorganization proceedings, the reorganization company’s directors, etc. (meaning directors, accounting advisors, auditors, representative directors, executive officers, representative executive officers, liquidators or representative liquidators) or employees, and who continue to hold these posts after the order of confirmation of the reorganization plan;
(iii) claims for a fine, etc. arising prior to the commencement of reorganization proceedings prescribed in Article 142, item (ii); and
(iv) claims for tax, etc., for which the reorganization company has been punished by imprisonment with work or a fine for avoiding or attempting to avoid payment of the claim, receiving a refund by a wrongful means, or collecting but failing to pay the claim that is due to be paid, or for which the reorganization company, in cases where it received notice issued under Article 14, paragraph (1) of the National Tax Law Violation Control Act (Act No. 67 of 1900) (including cases where applied mutatis under the Local Tax Act (Act No. 226 of 1950)), has avoided or attempted to avoid payment of the claim, received refund, or failed to pay the claim, if such claims have not been filed.

Deposit Act
Article 8
(1) A person who demands return of the deposited property shall be required to prove his/her right as specified by the Minister of Justice.

The decision in prior instance is quashed, and the decision in first instance is revoked.
The petition for rescission of security is dismissed.
The appellee shall bear the total court cost.

I. Concerning the reasons for appeal argued by the appeal counsel, AKAFUCHI Yukihiko and AKIYAMA Shingo
1. In this case, the appellee, who is the trustee for a reorganization company, Company A (its trade name was changed to Company B as of March 1, 2012; hereinafter referred to as "Company A" throughout the period before and after this change of the trade name), filed a petition for rescission of the security that Company A had provided upon filing an appeal against a judgment with a declaration of provisional execution. The appellee alleges that since the claim for damages secured by said security was not filed as a reorganization claim or secured reorganization claim during Company A's reorganization proceedings, Company A has been discharged from its liability for this claim upon an order of confirmation of the reorganization plan, and as a result, the grounds for providing the security have ceased to exist (hereinafter the state in which the reorganization company is discharged from its liability for a reorganization claim or secured reorganization claim shall be referred to as "forfeiture").

2. According to the case records, the outline of the case is as follows.
(1) On September 30, 2009, the appellant filed an action with the Sapporo District Court, Otaru Branch, to seek return of unjust enrichment against Company A (hereinafter referred to as the "Action on the Merits"). On February 19, 2010, said Branch rendered a judgment on the Action on the Merits with a declaration of provisional execution, upholding the appellant's claim in whole (hereinafter referred to as the "judgment in first instance on the merits").
(2) On March 8, 2010, Company A filed an appeal against the judgment in first instance on the merits, and also filed a petition for stay of compulsory execution. On April 5, 2010, the Sapporo District Court, Otaru Branch, made an order to stay compulsory execution based on the judgment in first instance on the merits until the rendition of a judgment on the Action on the Merits by the court of second instance, while requiring Company A to provide seven million yen as security (hereinafter referred to as the "Security").
(3) On October 31, 2010, the Tokyo District Court made an order of commencement of reorganization proceedings against Company A, and appointed the appellee as the trustee.
(4) Around January 27, 2011, the appellant filed claims including the claim for return of unjust enrichment submitted in the Action on the Merits, totaling 9,590,029 yen, as reorganization claims during Company A's reorganization proceedings, and said claim for return of unjust enrichment was determined under Article 150, paragraph (1) of the Corporate Reorganization Act. However, the appellant did not file the claim for damages secured by the Security (hereinafter referred to as the "Claim for Damages"), either as a reorganization claim or as a secured reorganization claim.
(5) On October 31, 2011, the Tokyo District Court made an order of confirmation of the reorganization plan for Company A (hereinafter referred to as the "Order of Confirmation"). As a result, the Claim for Damages was forfeited.

3. The court of prior instance held that (i) in light of the wording in Article 2, paragraph (10) of the Corporate Reorganization Act, it is a matter of course that the Claim for Damages falls within the scope of secured reorganization claims, and that (ii) as the Claim for Damages was forfeited due to the Order for Confirmation, the grounds for providing the Security should be deemed to have ceased to exist, and in conclusion, it upheld the petition for rescission of the Security.

4. However, we cannot affirm the abovementioned holdings of the court of prior instance, on the following grounds.
(1) Where the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, the security beneficiary, who is a creditor, is entitled to receive payment in preference to other creditors (Article 405, paragraph (2) and Article 77 of the Code of Civil Procedure). It is appropriate to construe that this rule means that the security beneficiary has a claim for refund of the deposit money, or more specifically, the security beneficiary is exclusively entitled to receive the payment of the deposit money by exercising the claim for refund of the deposit money against the official depository, and thereby receive the payment of the secured claim in preference to other creditors. It is inappropriate to interpret said rule as vesting the security beneficiary with a special statutory lien or any other security right prescribed in Article 2, paragraph (10) of the Corporate Reorganization Act. Consequently, where the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, and an order of commencement of reorganization proceedings against the debtor is subsequently made, the claim for damages secured by the deposit money should be regarded as a reorganization claim, not as a secured reorganization claim.
(2) The Code of Civil Procedure allows the measure to require the debtor to provide money as security upon the stay of compulsory execution as petitioned by the debtor's appeal against a judgment with a declaration of provisional execution, and grants said preferential entitlement to the beneficiary of such security, who is a creditor. The purpose of this rule may be to separate the deposit money from the debtor's non-exempt property so that the security beneficiary will be able to be compensated for certain for any loss arising from the stay of compulsory execution. Hence, it is contrary to such purpose and prejudicial to the security beneficiary's interest and therefore inappropriate to construe that the security beneficiary's claim for refund of the deposit money is subject to restrictions due to the debtor's reorganization proceedings.
Consequently, where the debtor files an appeal against a judgment with a declaration of provisional execution, and compulsory execution is stayed accordingly, while requiring the debtor to provide money as security, it is appropriate to construe that the security beneficiary is entitled to exercise the claim for refund of the deposit money as "any right against any other person who owes debts jointly with the reorganization company" as set forth in Article 203, paragraph (2) of the Corporate Reorganization Act, even after an order of confirmation of the reorganization plan is made for the debtor. If it is construed otherwise, it would be inevitable to construe that even where the security beneficiary files the secured claim as a reorganization claim, his/her claim for refund of the deposit money would be affected due to said secured claim being modified as provided in the reorganization plan upon an order of confirmation of the reorganization plan. Such view is considerably prejudicial to the security beneficiary's right and therefore unacceptable.
(3) Upon the commencement of reorganization proceedings against the debtor, the security beneficiary is no longer able to exercise the secured claim against the debtor outside the reorganization proceedings. On such occasion, it is considered that the security beneficiary is able to receive refund of the deposit money by filing an action against the trustee to seek a declaration that he/she has a claim for refund of the despite money, obtaining a final and binding judgment for him/her, and attaching a transcript thereof to a written request for delivery of deposited property, which is required to be submitted under Article 24, paragraph (1), item (i) of the Ordinance on Deposit. This also applies where the security beneficiary does not file the secured claim during said reorganization proceedings and the secured claim is therefore forfeited.
(4) Consequently, even if the Claim for Damages has been forfeited due to the Order of Confirmation, this does not immediately mean that the grounds for providing the Security have ceased to exist.

5. According to the explanation given thus far, the abovementioned holdings of the court of prior instance contain violation of laws and regulations that apparently affects the decision. The appeal counsel's arguments are well-grounded, and the decision in prior instance should inevitably be quashed. As we find no such circumstances showing that the grounds for providing the Security have ceased to exist, we revoke the decision in first instance that upheld the appellee's petition for rescission of the Security and dismiss this petition.

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

Justice ONUKI Yoshinobu
Justice TAKEUCHI Yukio
Justice CHIBA Katsumi
Justice ONIMARU Kaoru