2021.03.02

2020 (Ju) 763

Minshu Vol. 75, No. 3

Judgment concerning a case in which the court determined that approval for disposition of property given under Article 22 of the Act on Regulation of Execution of Budget Pertaining to Subsidies, etc. is lawful as approval given based on the conditions under Article 7, paragraph (3) of the same Act

Case seeking return of unjust enrichment

Judgment of the Third Petty Bench, quashed and decided by the Supreme Court

Tokyo High Court, Judgment of December 5, 2019

Under the circumstances held in the judgment, including those mentioned in (1) to (3) below, approval for disposition of property acquired through an indirectly subsidized business, etc. on the condition of payment of the amount equivalent to a subsidy provided to a subsidized entity, etc. by an organ that was delegated authority from the head of a ministry or agency that is given as approval under Article 22 of the Act on Regulation of Execution of Budget Pertaining to Subsidies, etc. is lawful as approval given based on the conditions under Article 7, paragraph (3) of the same Act to the effect that when a subsidized entity, etc. intends to give approval for disposition of property acquired through a business to an indirectly subsidized entity, etc., it must obtain approval of the aforementioned organ in advance.

(1) The approval under Article 22 of the same Act is intended to prevent the occurrence of a situation in which property acquired through a subsidized business, etc. is disposed of without obtaining said approval and ceases to be used by the subsidized business, etc. in line with the purpose of grant of the subsidy, etc. The approval based on the aforementioned conditions under Article 7, paragraph (3) of the same Act is also intended to prevent the occurrence of a situation in which the purpose of grant of a subsidy cannot be achieved without obtaining said approval.

(2) In the case of disposition of property with approval under Article 22 of the same Act, a decision to grant a subsidy, etc. is never rescinded pursuant to Article 17, paragraph (1) of the same Act. In the same manner, a decision to grant a subsidy is never rescinded due to disposition of property conducted with approval based on the aforementioned conditions under Article 7, paragraph (3) of the same Act. In addition, in giving approval under Article 22 of the same Act, it is possible to impose the condition that a subsidized entity, etc. pay the amount equivalent to the whole or part of the subsidy, etc. In the same manner, in giving approval based on the aforementioned conditions under Article 7, paragraph (3) of the same Act, it is also possible to impose the condition that a subsidized entity, etc. pay an amount not exceeding the amount of the granted subsidy.

(3) There are no circumstances suggesting that an organ that gave the aforementioned approval for disposition of property under Article 22 of the same Act would not have given approval based on the aforementioned conditions under Article 7, paragraph (3) of the same Act if it had possessed the recognition that it could not give said approval under Article 22 of the same Act.

(There is a concurring opinion.)

Article 7, paragraph (3) and Article 22 of the Act on Regulation of Execution of Budget Pertaining to Subsidies, etc.

Act on Regulation of Execution of Budget Pertaining to Subsidies, etc.

Article 7 (1) If the head of a ministry or agency makes a decision to grant a subsidy and it is necessary to achieve the purpose of the grant of the subsidy, etc. specified by laws and regulations and budget, the head of the ministry or agency is to impose conditions for the following matters:
(i) where distribution of expenses required for a subsidized business, etc. is changed (excluding minor changes specified by the head of the ministry or agency), the requirement to obtain approval of the head of the ministry or agency;
(ii) matters concerning contracts to be concluded for conducting a subsidized business, etc. and other matters concerning the method of using expenses required for the subsidized business, etc.;
(iii) where the content of a subsidized business, etc. is changed (excluding minor changes specified by the head of the ministry or agency), the requirement to obtain approval of the head of the ministry or agency;
(iv) in the case of suspending or discontinuing a subsidized business, etc., the requirement to obtain approval of the head of the ministry or agency; and
(v) where a subsidized business, etc. is not completed within the scheduled period or where it becomes difficult to perform a subsidized business, etc., the requirement to promptly report the head of the ministry or agency to that effect and receive instruction therefrom.
(2) If it is found that completion of a subsidized business, etc. brings considerable income to the relevant subsidized entity, etc., the head of the relevant ministry or agency may impose the condition that the subsidized entity, etc. should pay the amount equivalent to the whole or part of the granted subsidy, etc. to the State unless the payment does not go against the purpose of grant of the subsidy, etc.
(3) The provisions of the preceding two paragraphs do not preclude the head of a ministry or agency from imposing conditions necessary for achieving the purpose of grant of a subsidy, etc. specified by laws and regulations and budget, in addition to the conditions provided in these provisions.

(Restriction on Disposition of Property)
Article 22 A subsidized entity, etc. must neither use, nor transfer, nor exchange, nor lend, nor provide for security any property specified by Cabinet Order, which it acquired through a subsidized business, etc. or property for which utility was increased therethrough, against the purpose of grant of the subsidy, etc. without obtaining approval of the head of the relevant ministry or agency; provided, however, that, this does not apply to the cases specified by Cabinet Order.

The judgment in prior instance is quashed, and the judgment in first instance is revoked.

The claim of the appellee of final appeal is dismissed.

The total court costs shall be borne by the appellee.

Concerning reasons for a petition for acceptance of final appeal stated by the counsel for final appeal, TATEUCHI Hisashi, et al. (except for the reasons excluded)

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

(1) In fiscal 2005, Utsunomiya City (hereinafter referred to as the "City") formulated a biomass use and utilization district plan, including the development, installation, etc. of a high-rate composting facility, while designating Kabushiki Kaisha Eco City Utsunomiya (hereinafter referred to as "Eco City") as the responsible entity for the business, with the aim of establishing a recycling system for business food waste and promoting the assured dissemination and adoption of recycling.

(2) Upon receiving delegation of authority from the Minister of Agriculture, Forestry and Fisheries, the Head of the Kanto Regional Agricultural Administration Office made a decision, by January 18, 2006, to grant 261,138,000 yen in total to the appellee (hereinafter referred to as the "Decision to Grant") as a grant for the use, utilization, and development of biomass included in FY2005 Grant for Biomass Ring Creation. Pursuant to Article 7, paragraph (3) of the Act on Regulation of Execution of Budget Pertaining to Subsidies, etc. (hereinafter referred to as the "Act"), the Decision to Grant was subject to the condition that when the appellee, which is a subsidized entity, "intends to give to an indirectly subsidized entity approval for disposition of property, which the entity acquired through business or property for which utility was increased therethrough, it must obtain approval of the Head of the Kanto Regional Agricultural Administration Office in advance" (hereinafter referred to as the "Condition for the Decision to Grant").

By January 18, 2006, the Governor of Tochigi Prefecture (hereinafter referred to as the "Prefectural Governor") made a decision to grant the amount equivalent to the amount of the Decision to Grant to the City, which is an indirectly subsidized entity, as the FY2005 Subsidy for Expenses for Biomass Ring Creation Business, and the mayor of the City (hereinafter referred to as the "City Mayor") made a decision to grant the same amount to Eco City, which is an indirectly subsidized entity, as Utsunomiya City Biomass Use and Utilization Subsidy.

Every time a subsidy based on the Decision to Grant was granted by the appellant, the appellee granted a subsidy to the City, and in each of those cases, the City granted a subsidy to Eco City.

(3) Eco City developed and installed a composting facility (hereinafter this composting facility is referred to as the "Facility") by using the aforementioned subsidy as the major financial source. On June 8, 2006, the Head of the Kanto Regional Agricultural Administration Office, the Prefectural Governor, and the City Mayor gave approval for the provision of the Facility for security to the appellee, the City, and Eco City, respectively, upon receipt of an application from each of them. On August 10, 2006, Eco City created a revolving mortgage on the Facility.

(4) In October 2008, Eco City suspended operations at the Facility. On December 25, 2009, a petition for secured real property auction was filed for the Facility, and on January 20, 2010, an order of commencement of secured real property auction was given. Regarding the Facility, by May 13, 2011, Eco City, the City, and the appellee filed an application for approval for disposition of property with the City Mayor, the Prefectural Governor, and the Head of the Kanto Regional Agricultural Administration Office, respectively. A written application pertaining to an application filed by the appellee on May 13, 2011 (hereinafter referred to as the "Application") contains, at the beginning, a statement to the effect that the Application is filed under Article 22 of the Act, and a statement, "unintended use (in the case of suspending a subsidized business)," as the classification of disposition of the Facility.

On May 17, 2011, the Head of the Kanto Regional Agricultural Administration Office gave approval for the Application on the condition of payment of the amount equivalent to the amount of a national subsidy pertaining to the price of disposition of the Facility (hereinafter this approval is referred to as the "Approval" and the aforementioned condition imposed thereon is referred to as the "Restriction"). On May 18, 2011, the Prefectural Governor gave approval for the aforementioned application filed by the City, and the City Mayor gave approval for the aforementioned application filed by Eco City.

On September 29, 2011, the Facility was sold through secured real property auction procedures.

(5) On January 27, 2012, the appellee was required to pay 196,590,956 yen by the Head of the Kanto Regional Agricultural Administration Office as the aforementioned amount equivalent to the amount of a national subsidy and on February 15, 2012, the appellee paid the same amount to the appellant (hereinafter referred to as the "Return").

2. In this case, the appellee argues that the appellant obtained 196,590,956 yen as enrichment through the Return without legal cause because the Approval lacks a statutory premise and the Restriction is also not found to be legally effective. Based on this argument, the appellee demands the appellant's payment of the same amount as above based on a claim for return of unjust enrichment.

3. Based on the aforementioned facts, the court of prior instance ruled as follows: the Approval should be considered to have been given not based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act but based on Article 22 of the Act; the same Article provides for disposition of property by a subsidized entity, etc. that received grant of a subsidy, etc. from the State (Article 2, paragraph (3) of the Act), and it is not applicable to this case concerning disposition of property by Eco City, which falls under an indirectly subsidized entity, etc. (paragraph (6) of the same Article); therefore, there is an error in use of provisions of law as a ground. The court of prior instance then determined as summarized below and concluded that the appellee's claim should be accepted.

The Approval cannot be considered as an administrative act with a legal basis as an act conducted on the basis of the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act based on the theory of conversion of an illegal act. In addition, based on the Condition for the Decision to Grant, enforcement of a security right without intervention of the intention of a person who established the security right is considered not to be subject to approval. The Approval is an invalid approval without legal basis that was given to the transfer of ownership through exercise of the security right for the Facility, and the Restriction imposed on to the Approval is also invalid. Therefore, at any rate, the Return can be considered to have been made without legal cause.

4. However, the aforementioned determination of the court of prior instance cannot be upheld for the following reasons.

(1) It is not considered that in giving approval to the appellee's initial establishment of a security right on the Facility, the Head of the Kanto Regional Agricultural Administration Office also gave approval for a subsequent situation in which Eco City would become unable to use the relevant property in line with the purpose of grant of the subsidy due to enforcement of the security right and thus use it for unintended purposes. Therefore, it should be said that it was necessary to also obtain approval for the aforementioned unintended use from the Head of the Kanto Regional Agricultural Administration Office based on the Condition for the Decision to Grant. The Approval was given in response to the Application in which the classification of disposition is stated as "unintended use (in the case of suspending a subsidized business)," and it is considered to have been given for the unintended use of the Facility. Therefore, the Approval cannot be considered to lack a legal basis if it can be considered to be one given on the basis of the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act.

(2) The purpose of the Act is to prevent unlawful filing of an application for grant of a subsidy, etc. and unlawful use of a subsidy, etc. and otherwise promote proper execution of budget pertaining to a subsidy, etc. and appropriate making of a decision to grant a subsidy, etc. (Article 1). Article 22 of the Act provides that a subsidized entity, etc. must neither use, nor transfer, nor exchange, nor lend, nor provide for security any property, which a subsidized entity acquired through a subsidized business, etc., against the purpose of grant of the subsidy, etc. without obtaining approval of the head of a relevant ministry or agency, thereby restricting disposition of property. This Article is considered to have been established because the purpose of grant of a subsidy, etc. cannot be achieved if property acquired through a subsidized business, etc. is disposed of and ceases to be used by the subsidized entity, etc. in line with said purpose. Such approval is intended to prevent the occurrence of the aforementioned situation without obtaining said approval. The Condition for the Decision to Grant under Article 7, paragraph (3) of the Act is also considered to be intended to restrict disposition of property acquired by an indirectly subsidized entity, etc. against the purpose of grant of the subsidy. Approval given by the Head of the Kanto Regional Agricultural Administration Office when the appellee, which is a subsidized entity, gave approval for disposition of the relevant property, is intended to prevent the occurrence of a situation in which said purpose cannot be achieved without obtaining the approval. In this manner, approval under Article 22 of the Act and approval based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act can be considered to have a common purpose.

In addition, if a subsidized entity, etc. disposes of property with the approval of the head of a ministry or agency under Article 22 of the Act, a decision to grant a subsidy, etc. is never rescinded pursuant to Article 17, paragraph (1) of the Act. In the same manner, the Decision to Grant is never rescinded due to disposition of property conducted by an indirectly subsidized entity with the approval of the Head of the Kanto Regional Agricultural Administration Office based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act. In giving approval under Article 22 of the Act, it is considered possible to impose the condition that a subsidized entity, etc. pay the amount equivalent to the whole or part of the subsidy, etc. In the same manner, in giving approval based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act, it is also considered possible to impose the condition that the appellee pay the amount not exceeding the amount of the granted subsidy, taking into account that the whole of the Decision to Grant may be rescinded if said approval has not been obtained. Based on this, it is not disadvantageous to the appellee to consider the Approval given under Article 22 of the Act as approval given based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act.

Furthermore, there are no circumstances suggesting that if the appellee and the Head of the Kanto Regional Agricultural Administration Office had possessed the recognition that the Approval could not be given under Article 22 of the Act, the appellee would not have filed an application for approval based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act, which has a common purpose with Article 22 of the same Act, and the Head of the Kanto Regional Agricultural Administration Office would not have given approval based on the same.

(3) According to the consideration made above, the Approval can be considered to be lawful as approval given based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act.

As mentioned above, it is considered possible to impose the condition that the appellee pay the amount not exceeding the amount of the granted subsidy in giving approval based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act. Taking this into account, it is possible to impose the Restriction to the effect that the Approval is given on the condition of payment of the amount equivalent to the amount of the national subsidy, which does not exceed the granted amount of 261,138,000 yen, when giving the Approval. There are no other circumstances that give a basis to the impossibility of imposition of the Restriction. Therefore, the Restriction can also not be considered to be invalid.

Based on these, the Return was made as performance of the obligation to pay based on the Restriction. Therefore, it cannot be considered to lack a legal cause.

5. The determination of the court of prior instance that is different from the above contains a violation of laws and regulations that has clearly influenced the judgment. The counsel's arguments are well-grounded as arguments to this effect, and the judgment in prior instance should inevitably be quashed. According to the explanations made above, the appellee's claim is groundless. Therefore, the judgment in first instance is revoked, and the same claim should be dismissed.

Accordingly, the Court unanimously decides as set forth in the main text of the judgment. There is a concurring opinion of Justice UGA Katsuya.

The concurring opinion stated by Justice UGA Katsuya is as follows.

I agree with the Court's opinion. However, I would like to express my concurring opinion concerning two points that were not excluded by this Court out of the reasons for a petition for acceptance of final appeal, that is, the subject matter of the Approval and conversion of an illegal act into a legal act.

Regarding the first point, the Approval is, after all, considered to be intended for exemption from the obligation to manage property acquired through an indirectly subsidized business, etc. in accordance with the purpose of grant of the subsidy, etc., taking the following points into account: the classification of disposition is stated as "unintended use (in the case of suspending a subsidized business)" in the written application for the Application; even if property acquired by using an indirect subsidy, etc. is disposed of without the Approval, the civil effect thereof is not affected, and the Decision to Grant can be rescinded under the provisions of Article 17 of the Act on the grounds of violation of the Condition for the Decision to Grant. Therefore, it is considered that the Approval was given for the situation in which it becomes impossible for an indirectly subsidized entity, etc. to use property, which it acquired by using a subsidy, etc. or indirect subsidy, etc., in accordance with the purpose of grant of the subsidy, etc. due to enforcement of a security right.

However, if it is possible to consider that approval for the establishment of a security right also includes approval for unintended use at the time of enforcement of the security right, it is meaningless to obtain approval again at the time of enforcement of the security right. Then, it is possible to give such approval at the time of establishment of a security right on the condition of return of the amount equivalent to the amount of a subsidy at the time of enforcement of the security right. Some administrative organs seem to adopt such operation. However, even if a security right is established, a situation where the security right must be enforced does not necessarily arise. Therefore, in the cases where approval for the establishment of a security right was given without imposing a condition as mentioned above, including this case, it seems to be impossible to say that the approval for the establishment of a security right naturally implicates approval for unintended use at the time of enforcement of the security right.

Regarding the second point, it is necessary to strictly limit the cases where conversion of an illegal act into a legal act is found in order to prevent the hollowing-out of the administrative principle by law. As mentioned in the Court's opinion, in this case, conversion of an illegal act into a legal act is found in consideration of the following circumstances: [i] the administrative act before the conversion (approval under Article 22 of the Act) and the administrative act after the conversion (approval based on the Condition for the Decision to Grant under Article 7, paragraph (3) of the Act) have a common purpose; [ii] the legal effect of the administrative act after the conversion does not have a more disadvantageous effect on interested persons than that of the administrative act before the conversion; [iii] it is not the case that an organ is considered to have ceased to conduct the administrative act after the conversion instead of the administrative act before the conversion if it has known a defect in the administrative act before the conversion (originally, Article 6, paragraph (3) of the Tochigi Prefectural Regulation for Grant of Subsidies, etc. provides that in making a decision to grant a subsidy, etc. under the same Regulation, "if the subsidy falls under an indirect subsidy, etc. provided in the Act on Regulation of Execution of Budget Pertaining to Subsidies, etc. and the head of a ministry or agency imposes a condition for the indirect subsidy, etc. under the provisions of Article 7 of the same Act, the governor is to impose the same condition as said condition"; therefore, the appellee should have been able to recognize that the Condition for the Decision to Grant is under the provisions of Article 7, paragraph (3) of the Act; and, the appellee is considered to have been able to recognize that the Approval should have been given on the basis of the Condition for the Decision to Grant). The judicial precedent of this Court that found conversion of an illegal act into a legal act (1950 (O) No. 236, the judgment of the Grand Bench of the Supreme Court of July 19, 1954, Minshu Vol. 8, No. 7, at 1387) can also be considered to be rendered on a case that satisfies all the requirements mentioned in [i] to [iii] above. On the other hand, the judicial precedents of this Court that did not find conversion of an illegal act into a legal act (1950 (O) No. 383, the judgment of the First Petty Bench of the Supreme Court of December 28, 1953, Minshu Vol. 7, No. 13, at 1696; 1950 (O) No. 212, the judgment of the First Petty Bench of the Supreme Court of January 14, 1954, Minshu Vol. 8, No. 1, at 1; 1964 (Gyo-Tsu) No. 33, the judgment of the Second Petty Bench of the Supreme Court of April 21, 1967, Saibanshuminji No. 87, at 237) can be considered to be rendered on cases that do not satisfy any of the requirements mentioned in [i] to [iii] above. In this manner, the Court's opinion conforms to the conventional judicial precedents of this Court and is not at all one that expands the cases where conversion of an illegal act into a legal act is found.

Incidentally, the requirements mentioned in [i] to [iii] above are requirements necessary to find conversion of an illegal act into a legal act, but do not necessarily seem to be necessary and sufficient requirements. For example, converting an illegal act into a legal act by making a reference to a fact which has not been examined in administrative trial proceedings in litigation proceedings goes against the purport of adoption of administrative trial proceedings, and I think that the propriety of finding conversion of an illegal act into a legal act in litigation proceedings should be carefully examined in such case. In addition, in the case of an administrative disposition with dual effects, which has an effect not only on the other party to the disposition but also on third parties, it is necessary to consider whether or not finding of conversion of an illegal act into a legal act causes infringement of the rights and interests of third parties. In this manner, it cannot be said that conversion of an illegal act into a legal act is necessarily found in all cases if the requirements mentioned in [i] to [iii] above are satisfied. However, in this case, there are no special circumstances based on which conversion of an illegal act into a legal act should be denied, and there is no need to discuss that point. I think that neither the Court's opinion nor the judicial precedents of this Court that found conversion of an illegal act into a legal act in the past referred to requirements other than those mentioned in [i] to [iii] above as there were no such special circumstances.

Justice HAYASHI Michiharu

Justice TOKURA Saburo

Justice HAYASHI Keiichi

Justice MIYAZAKI Yuko

Justice UGA Katsuya