2023.11.27

2021 (Ju) 1620

Minshu Vol. 77, No. 8

(Civil Case)Judgment concerning whether the lessee of the mortgaged real property may assert against the mortgagee the effect of an agreement reached with the lessor before the mortgagee seizes the claim for rent by exercising the right of extension of a security interest to the proceeds of the collateral, to immediately set off the lessee's claim against the lessor acquired after the registration of the establishment of the mortgage against the corresponding amount of the claim for rent corresponding to the period after the seizure

Case seeking collected money

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

Osaka High Court, Judgment of July 9, 2021

Even if the lessee of the mortgaged real property has reached an agreement with the lessor, before the mortgagee seizes the claim for rent by exercising the right of extension of a security interest to the proceeds of the collateral, to immediately set off the lessee's claim against the lessor acquired after the registration of the establishment of the mortgage against the corresponding amount of the lessor's claim for rent corresponding to the period after the seizure, the lessee may not assert the effect of the agreement against the mortgagee.

(There are a concurring opinion and an opinion.)

Article 304, paragraph (1), Article 372, and Article 505, paragraph (1) of the Civil Code, Article 193, paragraph (1) of the Civil Execution Act

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

2. The appellee of final appeal shall pay 27.90 million yen to the appellant of final appeal.

3. The total court costs shall be borne by the appellee of final appeal.

Concerning the reasons for a petition for acceptance of final appeal stated by the counsel for final appeal, YAMASAKI Kunio and ISHIKAWA Naoki

1. This case is a collection lawsuit in which the appellant of final appeal, which is the revolving mortgagee for a building and has seized the claim for rent by exercising the right of extension of a security interest to the proceeds of the collateral, demands that the appellee of final appeal, which is the lessee of the mortgaged building, pay 27.9 million yen as part of the claim for rent.

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

(1) In January 2017, Nihon Planning Kabushiki Kaisha (hereinafter referred to as the "Lessor") entered into an agreement with the appellee for leasing the building owned by the Lessor, which is indicated in the list of articles attached to the judgment in first instance, (hereinafter referred to as the "Building") to the appellee under the following terms and conditions (hereinafter referred to as the "Lease Agreement"), and on October 1, 2017, the Lessor delivered the Building to the appellee.

a. Period: From October 1, 2017, to September 30, 2027

b. Rent: 1.98 million yen per month (990,000 yen per month for two months from the delivery date); the rent for each month shall be paid by the end of the previous month.

(2) In September 2017, the appellee lent 9.9 million yen to the Lessor, designating the due date for repayment as April 30, 2018, with no interest and with a late payment charge at 20% per annum (hereinafter the claim for this lending is referred to as "Appellee's Claim 1").

(3) On October 26, 2017, the Lessor established a revolving mortgage on the Building for the benefit of the appellant, designating the maximum amount as 474 million yen (hereinafter referred to as the "Revolving Mortgage"), and completed registration of the establishment of this mortgage.

(4) a. In November 2017, Kabushiki Kaisha Buddy Group borrowed 30 million yen from the appellee with no interest, designating the due date for repayment as April 30, 2018, and it also made a commitment to repay 10 million yen obligation owed to the appellee for contract construction by the same date.

b. In November 2017, the Lessor gave joint and several guarantee in writing to the appellee for Buddy Group's obligations referred to in a. above (hereinafter the appellee's claim for joint and several guarantee based on this is referred to as "Appellee's Claim 2," and this claim and Appellee's Claim 1 are collectively referred to as the "Appellee's Claims").

(5) On April 30, 2018, the appellee received repayment of 100,000 yen from the Lessor with regard to the Appellee's Claims, and reached an agreement with the Lessor to change the due date for repayment of the remaining amount of the claim, 49.8 million yen, to January 15, 2019.

(6) On January 15, 2019, the appellee reached an agreement with the Lessor to waive the benefit of time for the obligation of 49.8 million yen in total, which consists of the total amount of rent under the Lease Agreement for the period from April 2019 to January 2020 (19.8 million yen) and part of the amount of rent under the same agreement for the period from February 2020 to February 2022 (30 million yen; 1.2 million yen each month), and to effect a set-off between the claim concerning this obligation (hereinafter referred to as the "Claim for Rent") and the Appellee's Claims at the corresponding amount (hereinafter referred to as the "Set-off Agreement").

(7) On August 7, 2019, as the exercise of the right of extension of a security interest to the proceeds of the collateral based on the Revolving Mortgage, the appellant filed with the Osaka District Court a petition for an order of seizure, while designating the part of the claim for rent under the Lease Agreement regarding the rent that would be due at the time of service of an order of seizure and thereafter, up to 40 million yen, as the claim to be seized. Based on this petition, on August 9, 2019, an order of seizure was issued (hereinafter referred to as the "Order of Seizure"). The Order of Seizure was served upon the appellee on August 14, 2019, and was served upon the Lessor on December 9, 2019 (hereinafter the claim for rent seized based on the Order of Seizure is referred to as the "Seized Claim").

(8) By May 19, 2021, the appellee paid the appellant, as payment of the Seized Claim, 12.1 million yen in total, which consists of 780,000 yen for each month from February 2020 to April 2021 (as calculated by deducting 1.2 million yen, which is covered by the Set-off Agreement, from 1.98 million yen, which is the monthly amount of rent), and 400,000 yen for May 2021.

(9) The appellant alleges that by means of the Order of Seizure, it has seized 40 million yen in total as part of the Claim for Rent, which consists of 39.6 million yen for the period from September 2019 to April 2021 and 400,000 yen for May 2021, which corresponds to the period after the Order of Seizure was served upon the appellee, and seeks payment of the part of the claim in the amount that remains after deducting the amount already paid as mentioned above from this total amount (hereinafter referred to as the "Claim for Future Rent"). The appellee disputes against it, alleging that the effect of the Set-off Agreement can be asserted against the appellant.

3. Under the abovementioned facts of the case, the court of prior instance dismissed the appellant's claim, holding as summarized below.

Where the lessee of the mortgaged real property, before the mortgagee effects a seizure as the exercise of the right of extension of a security interest to the proceeds of the collateral, manifests the intention to set off the lessee's claim against the lessor against the lessor's claim concerning the obligation to pay rent not yet due, while waiving the benefit of time for that obligation, there is no reason to negate the effect of the set-off, and even if the mortgagee, after that, seizes the claim for rent not yet due, there is no room for the seizure to become effective. This also applies in the case where a set-off is effected based on an agreement, and therefore, the appellee may assert the effect of the Set-off Agreement against the appellant.

4. However, the abovementioned determination by the court of prior instance cannot be affirmed, for the following reasons.

(1) Before the mortgagee seizes the claim for rent as the exercise of the right of extension of a security interest to the proceeds of the collateral, the lessee of the mortgaged real property may, in principle, assert against the mortgagee the effect of a set-off between the lessee's claim against the lessor and the lessor's claim for rent. However, as the fact that a mortgage is effective against the claim for rent due to extension of a security interest to the proceeds of the collateral may be considered to be publicly announced by the registration of the establishment of the mortgage, it cannot be said that, after the claim for rent has been seized as the exercise of the right of extension of a security interest to the proceeds of the collateral, the lessee's expectation for setting off the lessee's claim against the lessor that is acquired after the registration of the establishment of the mortgage (hereinafter referred to as the "claim acquired after registration") against the lessor's claim for rent corresponding to the period after the seizure (hereinafter referred to as the "claim for future rent") should be protected in preference to the effect of the mortgage, and it should instead be said that the lessee cannot assert against the mortgagee the set-off between the lessee's claim acquired after registration and the lessor's claim for future rent. This also applies in the case where the lessee has reached an agreement with the lessor in advance that the lessee would set off the claim acquired after registration against the corresponding amount of the claim for future rent whenever these claims become eligible to be set off against each other (for the above holding, see 1999 (Ju) 1345, the judgment of the Third Petty Bench of the Supreme Court of March 13, 2001, Minshu Vol. 55, No. 2, at 363).

Even if the lessee has reached an agreement with the lessor before the abovementioned seizure is effected to immediately set off the claim acquired after registration against the corresponding amount of the claim for future claim, the same explanation as discussed above applies, that is, the fact that a mortgage is effective against the claim for rent due to extension of a security interest to the proceeds of the collateral is publicly announced by the registration of the establishment of the mortgage and it cannot be said that the lessee's expectation for setting off the lessee's claim acquired after registration against the lessor's claim for future rent should be protected in preference to the effect of the mortgage. In this case, it should be said that the above agreement is nothing more than an agreement to create a situation where the claim for future rent can be set off as a claim to be set off, and then set off this claim before the abovementioned seizure, and that it is inappropriate to give preference to the effect of the set-off over the effect of the mortgage because this would unduly harm the mortgagee's interest.

Consequently, it is appropriate to consider that even if the lessee of the mortgaged real property has reached an agreement with the lessor to immediately set off the claim acquired after registration against the corresponding amount of the claim for future claim, before the mortgagee seizes the claim for rent by exercising the right of extension of a security interest to the proceeds of the collateral, the lessee may not assert the effect of the agreement against the mortgagee.

(2) When this case is examined based on the above, regardless of whether the Set-off Agreement became effective before the service of the Order of Seizure upon the appellee, if the claim to be set off, which is to be extinguished at the corresponding amount of the Claim for Future Rent based on the Set-off Agreement is Appellee's Claim 2 that was acquired after the registration of the establishment of the Revolving Mortgage, the appellee may not assert the effect of the Set-off Agreement against the appellant.

According to the abovementioned facts of the case, the sum of 100,000 yen, which was repaid on April 30, 2018, and 9.9 million yen as the part of the Claim for Rent, which corresponds to the period before the service of the Order of Seizure (the claim for rent for the period from April to August 2019), is to be first appropriated for Appellee's Claim 1, and as a result, Appellee's Claim 1 (9.9 million yen) is extinguished in whole. Therefore, Appellee's Claim 2 remains as the only claim to be set off, which is to be extinguished at the corresponding amount of the Claim for Rent due to the effect of the Set-off Agreement. In this case, the appellee may not assert the effect of the Set-off Agreement against the appellant, who is the revolving mortgagee that has seized the Claim for Future Rent by exercising the right of extension of a security interest to the proceeds of the collateral.

5. The determination by the court of prior instance that is contrary to the above contains a violation of law or regulation that has clearly influenced the judgment. The counsel's arguments are well-grounded, and the judgment in prior instance should inevitably be quashed. According to the explanation given above, there are grounds for the appellant's claim to seek payment of the Claim for Future Rent (27.9 million yen), and therefore the judgment in first instance that dismissed this claim should be revoked and the claim should be upheld.

For the reasons stated above, the Court unanimously decides as set forth in the main text of the judgment. There is a concurring opinion stated by Justice MIURA Mamoru and an opinion stated by Justice KUSANO Koichi.

The concurring opinion by Justice MIURA Mamoru is as follows.

I agree with the majority opinion, but I would like to give some supplementary comments regarding the determination that Appellee's Claim 2 is the only claim to be set off, which is to be extinguished at the corresponding amount of the Claim for Rent due to the Set-off Agreement.

The Set-off Agreement is an agreement to set off the Claim for Rent against the corresponding amount of Appellee's Claim 1 and Appellee's Claim 2, but it does not seem to include an agreement on appropriation regarding a set-off. In light of the provisions of Articles 512 and 489 of the Civil Code prior to the amendment by Act No. 44 of 2017 and in consideration of the benefit of payment of the Appellee's Claims, it is considered that the sum of 100,000 yen, which was repaid on April 30, 2018, and 9.9 million yen as the part of the Claim for Rent, which corresponds to the period before the service of the Order of Seizure, is to be first appropriated for Appellee's Claim 1. In that case, as Appellee's Claim 1 has been extinguished in whole as a result of this appropriation, Appellee's Claim 2 is the only claim to be set off, which is to be extinguished at the corresponding amount of the Claim for Future Rent due to the effect of the Set-off Agreement.

The opinion by Justice KUSANO Koichi is as follows.

I agree with the conclusion of the majority opinion, but the reasons based on which I reached that conclusion are somewhat different from those of the majority opinion, so I would like to explain my opinion in detail below.

1. The mortgage system (Article 369 and the following of the Civil Code) has a social significance in that it enables financial transactions using the value of the mortgaged real property as collateral (hereinafter referred to as "collateral value"), while allowing the owner of the real property to continue to use and make profit from the real property. This social significance has been further solidified by the case law under which, as the extension of a security interest to the proceeds of the collateral (Articles 372 and 304 of the Civil Code), the effect of the mortgage is allowed to extend to the claim for rent, which can be regarded as the fruits acquired from the real property.

According to the above, in examining legal issues concerning a mortgage, it may be appropriate to interpret law from the perspective of how it is possible to achieve both the efficient use of and profit-making from the mortgaged real property and the efficient raising of funds with the use of the collateral value of the mortgaged real property, or to put it differently from a broader viewpoint, the perspective of how it is possible to maximize the sum of benefits that citizens would enjoy in relation to the mortgage system.

2.(1) In this case, the mortgagee has seized the claim for future rent by exercising the right of extension of a security interest to the proceeds of the collateral, but the lessee of the mortgaged real property refuses to pay the claim for future rent, asserting a set-off by an agreement against the claim acquired after registration that the lessee holds (for the convenience in discussion, a statutory set-off is selected as the premise of the discussion below instead of a set-off by an agreement; the difference between a statutory set-off and a set-off by an agreement is stated in 4.). In this case, there are two possible theories to be adopted for interpretation: a view that considers that the abovementioned set-off can be asserted against the mortgagee (hereinafter referred to as the "theory of giving preference to a set-off"); and a view that considers that the abovementioned set-off cannot be asserted against the mortgagee (hereinafter referred to as the "theory of giving preference to extension of a security interest to the proceeds of the collateral"). Which of these theories should be adopted is examined below, from the perspective of maximizing the sum of benefits that citizens would enjoy.

(2) First, the theory of giving preference to a set-off means that the collateral value of the claim for future rent (hereinafter referred to as the "collateral value of the claim for rent") can be separated from the collateral value of the mortgaged real property to make the collateral value of the claim for rent available only with regard to the claim held by the lessee of the real property. At first glance, the consequence of this theory may seem to indicate that the collateral value of the mortgaged real property is merely divided into two and the total amount of the collateral value generated from the real property is not reduced, but rather, the opportunity for the effective use of the collateral value is expanded by increasing the separability of the collateral value.

However, while the collateral value generated by a mortgage can be enjoyed by any creditor simply by having the obligor establish a mortgage, the collateral value of the claim for rent cannot be enjoyed unless the creditor holds the status of the lessor of the mortgaged real property. As a result, if the theory of giving preference to a set-off is adopted, the owner of the real property must suffer disadvantage from abandoning the efficient fund raising or abandoning the efficient use of or profit-making of the real property. The specific reasons for this consequence are explained below.

According to the theory of giving preference to a set-off, first of all, even if the owner (lessor) of the mortgaged real property wishes to raise funds by establishing a mortgage on the real property for the benefit of a person who is able to raise funds most efficiently under given conditions and provide the funds to the owner (or in other words, a person who is ready to provide funds to the owner under the conditions that are most favorable for the owner; hereinafter referred to as an "efficient fund provider"), the collateral value of the mortgaged real property after the separation of the collateral value of the claim for rent therefrom may be insufficient, in which case the owner of the real property may abandon the idea of raising funds itself. Next, even if the owner of the mortgaged real property is able to raise funds to cover the shortage corresponding to the collateral value of the claim for rent from the lessee of the mortgaged real property to whom the collateral value of the claim for rent is available, the lessee may not always be an efficient fund provider. Furthermore, if the creditor determines that the mortgaged real property does not have a sufficient collateral value except for the collateral value of the claim for rent and the creditor itself becomes the lessee of the real property, this would enable the owner of the real property to raise funds efficiently using the collateral value of the real property, but the creditor may not always be a person who can use the real property most efficiently under given conditions (that is, a person who is ready to lease the real property from the owner under the conditions that are most favorable for the owner; hereinafter referred to as an "efficient real property user").

What is more, a mortgage is effective exclusively against the secured claim (in the case of a revolving mortgage, effective "exclusively up to the maximum amount"), and if the collateral value of the mortgaged real property remains even after it is appropriated for the claim of the creditor, who is the first-rank mortgagee, other creditors are also entitled to enjoy the remaining collateral value of the same real property as subordinated mortgagees. In view of this, it is difficult in the first place to find any positive significance in making the collateral value of the mortgaged real property separable by adopting the theory of giving preference to a set-off.

(3) On the other hand, if the theory of giving preference to extension of a security interest to the proceeds of the collateral is adopted, unlike the theory of giving preference to a set-off, the owner of the mortgaged real property is able to raise as much funds as possible from an efficient fund provider by using the collateral value of the real property as a whole, including the collateral value of the claim for rent, to the maximum extent, and at the same time, the owner is able to lease the real property to an efficient real property user, irrespective of who is to be selected as a fund provider. In other words, according to the theory of giving preference to extension of a security interest to the proceeds of the collateral, the owner of the mortgaged real property can both achieve the efficient use of and profit-making from the real property and the efficient raising of funds by using the collateral value of the real property to the maximum extent.

(4) According to the above, from the perspective of maximizing the sum of benefits that citizens would enjoy, it is clear that the theory of giving preference to extension of a security interest to the proceeds of the collateral should be affirmed and the theory of giving preference to a set-off should be denied.

3. Here, I would attach two qualifications to what has been discussed in the previous section as it would be helpful in clarifying the range for which this opinion applies.

First, if the claim acquired after registration is a claim arising from an agreement which can be regarded as the important part of a lease agreement, such as the claim for refund of a security deposit (hereinafter referred to as a "lessee's inherent claim"), there may be cases where the theory of giving preference to extension of a security interest to the proceeds of the collateral should be denied and the theory of giving preference to a set-off should be affirmed. This is because: [i] by recognizing both the lessee's own claim and the lessor's claim for future rent as having the collateral effect of a set-off, it would be easy to form an agreement concerning terms and conditions of a lease agreement efficiently; at the same time, [ii] the net value of profit generated from the lease of real property can be considered as the sum of the discount cash flow paid by the lessee to the lessor (its core is the payment for the claim for rent), minus the net value of the sum of the discount cash flow paid by the lessor to the lessee (its core is the payment for the lessee's own claim), and therefore, there is room to consider that even if a set-off is allowed between the lessee's own claim and the lessor's claim for future rent, this would not undermine the principle of extending the effect of the mortgage to the fruits of profit from the mortgaged real property.

Second, what is discussed in this opinion only relates to whether a set-off can be effected between the lessee's claim acquired after registration and the lessor's claim for future rent, and it does not contain any implication regarding whether a set-off can be effected between the claim acquired by the lessee against the lessor before the registration of a mortgage and the lessor's claim for rent, or between the lessee's claim and the lessor's claim for rent corresponding to the period before the seizure is effected. This is because in these cases, there are other points that need to be considered (e.g., the significance of public announcement of registration and the effect of a seizure).

4. When this case is examined based on the above, the theory of giving preference to extension of a security interest to the proceeds of the collateral should necessarily be applied to a set-off between Appellee's Claim 2, which is a claim acquired after registration and which is not the lessee's own claim, and the Claim for Future Rent. It is difficult to find any reason for modifying this conclusion with regard to the case of a set-off by an agreement, which differs from a statutory set-off only in terms of the formality requirements under law. Therefore, I agree with the conclusion of the majority opinion.

Justice MIURA Mamoru

Justice KUSANO Koichi

Justice OKAMURA Kazumi

Justice OJIMA Akira