2002.03.12

2000 (Ju) 890

Minshu Vol.56, No.3, at 555

Judgment upon the case concerning the effect of the order to transfer the claim which is an object of subrogation on the basis of a hypothec

A case concerning an objection to the distribution of proceeds

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

Takamatsu High Court, Judgment of March 31, 2000

The effect of an order to transfer the claim which is an object of subrogation on the basis of a hypothec is not affected if the claim is not attached before the order is served to the third party debtor.

The Civil Code Article 304

Preferential rights can be exercised upon the money and other items which the debtor is to receive from the sale, lease, loss of, or damage to the property which is the object of such a right. However, the holder of the preferential right is required to attach the money or other items before payment or transfer.

Article 372

Articles 372, 296, 304, and 351 shall be applied with necessary modification to hypothecs.

Civil Enforcement Law
(Transfer Order)

Article 159

The enforcement court may issue an order to transfer the monetary claim, which has been attached to the attachment creditor in lieu of payment at face value of the claim (hereinafter, 'transfer order'), upon application of the attachment creditor.
2. The transfer order shall be served to the debtor and to the third party debtor.
3. If, until the transfer order is served to the third party debtor, the relevant monetary claim is attached, provisionally attached, or allocation is demanded by another creditor, the transfer order does not come into effect.
4. Against the application as provided in paragraph 1, enforcement appeal is allowed.
5. A transfer order does not have any effect until it comes into force.
6. If an enforcement appeal was lodged on the ground that the documents as provided in article 39, para.1, subpara.7 or 8 have been submitted, the enforcement court shall defer the decision on the appeal unless the transfer order is to be revoked on other grounds.

(the Effect of the Transfer Order)

Article 160

When the attachment order and the transfer order come into force, the claim and the cost of the enforcement shall be deemed to have been paid at the time of the service of the order to the third party debtor at the face value of the claim, insofar as the monetary claim which is the object of the transfer order exists.

(requirements for the enforcement of security rights over a claim and other proprietary rights)

Article 193

Enforcement of security rights whose objects are claims as provided in article 143 and proprietary rights as provided in article 167, para.1 (hereinafter, 'other proprietary rights') commences only when a document which certifies the existence of a security right (securities rights over other proprietary rights which are subject to registration for the transfer other than preferential rights, documents as provided in Article 181, para.1, subparas. 1 to 3, para. 2 or 3) is submitted. The same applies to the exercise of rights by the holder of security rights over the money or other items which the debtor is to receive from the sale, lease, loss of, or damage to the property, creation of real rights on the property, or compulsory purchase or other administrative decisions based upon the Law on Compulsory Purchase of Land (Law No.219, 1951) by virtue of the provisions of the Civil Code and other laws.
2. Provisions of Chapter 2, subchapter 2, section 4 (except for Article 146, para.2, articles 152 and 153) and articles 182 to 184 shall be applicable with necessary modification to the enforcement and exercise of the security rights as provided in the preceding paragraph, and Article 146, para.2, articles 152 and 153 shall be applicable with necessary modification to the enforcement and exercise of the general preferential rights.

1. The judgment of the original instance court shall be modified as follows.

(1) In the list of distribution of proceeds which was prepared on October 20, 1998 by the Uwajima Division of the Matsuyama District Court on the distribution of proceeds case 1998 (Ri) No.154, the amount of distribution to the jokoku appellee B Association shall be reduced from 14,602, 236 yen to 12,516, 721 yen, jokoku appellee C Bank's amount from 8,477, 835 yen to 0 yen, and the amount due to the jokoku appellant shall be increased from 3,426,760 yen to 13,004,110 yen.

(2) The total cost of the case shall be borne by the jokoku appellees.

On the ground of the application for certiorari by the representatives for the jokoku appeal, AZUMA Shunichi and NAKAGAWA Sohta:

1. The outline of the facts lawfully established by the original instance court is as follows:

(1) The jokoku appellant obtained an order to attach 10,570,737 yen of the claim of extra lege A vis a vis Ehime Prefecture as the remaining payment for the land based upon the contract of purchase of land, 3,429,263 yen (hereinafter, the 'Claim P') and the remaining amount of compensation of 30,442,003 yen (hereinafter, 'Claim Q')or the building as indicated in the list of property attached to the judgment of the first instance court (hereinafter, the 'Building') from the Uwajima Division of the Ehime District Court on March 17, 1998, based upon the document of settlement with the power of enforcement signed by A and two other persons. This order was served to the Ehime Prefecture, which is the third party debtor, on the 19th of March and to A on March 23rd, and took effect on April 17, 1998.
Subsequently, the jokoku appellant obtained an order to transfer the entire amount of Claim P and 10,570,737 yen of Claim Q to him on May 6, this order was served to Ehime Prefecture and A respectively on May 7 and came into force on May 20.

(2) At the time the jokoku appellant obtained the transfer order, ex lege, joint stock company D (hereinafter, 'D'), jokoku appellee B Association (hereinafter, 'B'), and jokoku appellee C Bank (hereinafter, 'C Bank') had either a hypothec or a base hypothec in this order on the Building and had had them registered.
D obtained an attachment on March 14, 1998 for 7,357,932 yen of Claim Q, the B for 14,606,236 yen, and C Bank for 8,477,835 yen of the same claim order from the Uwajima Division of the Ehime District Court in exercise of the right of subrogation based upon either the hypothec or the base hypothec on the Building. These orders were served on Ehime prefecture on May 14.

(3) Subsequently, the Ehime Prefecture deposited the entire amount of P and Q claims which was 33,871,835 yen.
(4) The Uwajima Division of the Ehime District Court, in order to distribute the deposited amount, prepared a distribution list as attached to the judgment of the first instance court (Distribution List (1)) on October 20 of the same year. The jokoku appellant objected to part of the payment to the B, 2,095,405 yen, and the entire payment of 8,477,835 yen to the C Bank.
2. The present case involves an objection on the part of the jokoku appellant to the amount of distribution in the above distribution list, who claims that the amount due to the jokoku appellant should be increased from 3,426,760 yen to 14,000,000 yen, the amount due to the jokoku appellee B should be reduced from 14,606,232 yen to 12,510,831 yen, and the amount due to the jokoku appellee C Bank should be reduced from 8,477,835 yen to nil, arguing that the order to transfer the claim has precedence over the subrogation by the jokoku appellees and the D.
The original instance court, by quoting the judgment of the Supreme Court which acknowledged the attachment of a claim for rent by subrogation on the basis of hypothec after the transfer of the claim for the rent was assigned to a third party and became eligible to be set up against a third party (Supreme Court, 1997 (O) No.419, judgment of the Supreme Court, the second petit bench, Minshu vol.52, No.1, p.1), ruled that the subrogation by the jokoku appellees and the D had precedence over the earlier transfer order and dismissed the claim of the jokoku appellant.
3. However, the above conclusion of the original instance court cannot beupheld. The reasons are as follows:

(1) [Summary] Even when the monetary claim which is the object of the order of transfer (hereinafter, 'the transferred claim') can be an object of subrogation on the basis of a hypothec, if until the time when the transfer order is served on the third party, the hypothecary creditor did not attach the transferred claim, the effect of the transfer order is not affected. If the attachment order and the transfer order take effect, the transferred claim is deemed to have been allotted to the payment of the claim and the cost of enforcement, and the hypothecary creditors are not entitled to assert the effect of the hypothec any more. This is because the system of transfer orders has adopted a legal form of transferring the attached claim to the creditor who attached the claim as a means of realising the attached claim in order to satisfy, in an exclusive manner, a monetary claim of the creditor, who attached the claim on the condition that other creditors had not attached the claim as provided by Article 159, para.3 of the Law on Civil Enforcement, at the time the transfer order was served on the third party debtor (Article 159, para.3, article 160 of the Law on Civil Enforcement). On the other hand, in the light of the fact that in order for the hypothecary creditor to extend the effect of the hypothec by way of subrogation to the attached claim, this creditor himself is required to attach the transferred claim (Supreme Court, 2001 (Jyu) No.91, judgment of the Supreme Court, the First Petit Bench, October 25, 2001, Minshu vol.55, No.6, p.975), that this attachment is subject to the same rules as the attachment for the enforcement of claims (ibid., Article 193, para.1, second part, para.2, and Article 194), and that it is clear from the wording of the law that the attachment as provided in Article 159, para.3 of the Law includes attachment by subrogation, there is no reason to treat attachment by subrogation differently from attachment by enforcement. Otherwise, it will be against the purpose of providing for transfer orders. The facts of the judgment of the Supreme Court quoted in the original judgment are different from the present case, and the citation is inappropriate.
(2) In the present case, according to the above-cited facts, the attachment as the subrogation of the rights of the debtor by the jokoku appellees on the basis of the hypothec and base hypothec cannot prevent the effect of the transfer order obtained by the jokoku appellant. The part of Claim Q which is an object of the transfer order shall be allocated for the exclusive satisfaction of the jokoku appellant's claim, and the jokoku appellees are not entitled to assert the effect of their hypothec or base hypothec. The ruling of the original instance court which found that the claim of the jokoku appellant was without grounds, based upon a view different from the above, contains an error which apparently affects the judgment, and thus, the argument of the representatives for the jokoku appeal has grounds.
4. Therefore, the total of Claim P of 3,429,263 yen and the part of Claim Q which is an object of the transfer order, 10,570,737 yen, 14,000,000 yen, shall be allocated to the jokoku appellant and 19,874,653 yen, which is the remaining amount of the deposit after deducting the above amount, shall be allocated to D and the jokoku appellees in accordance with their rank. According to this calculation, the jokoku appellant is entitled to receive the procedural cost of 5,800 yen and 13,994,110 yen as part of the payment, the allocation to the jokoku appellee, C Bank, shall be reduced from 8,477,835 yen to nul, and the allocation to the jokoku appellee, B, shall be reduced from 14,606,236 yen to 12,516,721 yen.
Thus, the claim by the jokoku appellant has grounds to the extent that the list of allocation of funds should be modified as above, and therefore shall be accepted, and the remaining part of the claim shall be dismissed. The judgment of the original instance court and the first instance court shall be modified in accordance with item 1 of the main text of the judgment.
Therefore, the justices unanimously rule as the main text of the judgment.

Justice KANATANI Toshihiro
Justice CHIKUSA Hideo
Justice OKUDA Masamichi
Justice HAMADA Kunio