Simultaneous Notice of Claim Assignments in Japan: Who Wins When Multiple Assignees Notify the Debtor at the Same Time?

In the complex world of commercial transactions, the assignment of a single monetary claim to multiple parties, while often unintended, can occur. This scenario, known as competing or double assignment (債権の二重譲渡, saiken no nijū jōto), necessitates clear rules to determine priority among the rival assignees. Japanese law, through its Civil Code and established case law, provides a framework for resolving such conflicts. A particularly intricate situation arises when notices of these competing assignments, each bearing a certified date, reach the obligor simultaneously. This article explores how Japanese law addresses this specific deadlock.

The "Arrival Time Theory": A Brief Recap

Before delving into simultaneous arrivals, it's crucial to recall the general principle governing priority in competing claim assignments in Japan: the "arrival time theory" (到達時説, tōtatsu-ji setsu). Under this doctrine, priority is not determined by the date the assignment agreement was made, nor by the certified date (kakutei hizuke) on the instrument of notice or consent itself. Instead, it is the time at which the notice of assignment, made by an instrument bearing a certified date, reaches the obligor (or when the obligor’s consent, via such an instrument, is definitively established) that dictates superiority among assignees. This principle, established by the Supreme Court of Japan (e.g., Judgment of March 7, 1974, Minshu Vol. 28, No. 2, p. 174), emphasizes the obligor's awareness as the cornerstone of the perfection system against third parties.

The Challenge of Simultaneous Arrival

The arrival time theory effectively resolves most priority disputes based on a temporal sequence. However, what happens if instruments notifying the obligor of different assignments of the same claim, each with a certified date, arrive at the obligor's premises at the exact same moment? This was the core issue addressed by the Supreme Court of Japan in its judgment on January 11, 1980 (Minshu Vol. 34, No. 1, p. 42).

In such cases of simultaneous arrival, the court found that no single assignee can assert priority over the others based on the order of arrival, as there is no discernible temporal difference. Consequently, each assignee who has perfected their assignment through such simultaneously received notice is considered to hold an equal-ranking claim against the obligor.

Rights and Obligations of the Parties in Simultaneous Arrival Cases

The Supreme Court's 1980 ruling and subsequent clarifications have established specific guidelines for the involved parties:

1. The Assignees: Equal Standing, Full Claim

• Equal Status: Each assignee whose notice (with a certified date) arrived simultaneously is recognized as a legitimate creditor with respect to the assigned claim. They stand on an equal footing with other assignees in the same position.
• Right to Demand Full Payment: Each such assignee is entitled to demand the entire amount of the assigned claim from the obligor.
• No Sole Preferential Right: Crucially, none of the assignees can claim to be the sole or exclusive creditor against the other equally-ranking assignees, nor can they make such an assertion against the obligor.

2. The Obligor: Options and Discharge

• No Right to Refuse Payment Based on Multiplicity: The obligor cannot refuse to pay one assignee simply because other assignees with simultaneously received notices also exist. The demand from any one of them is a legitimate claim from a creditor.
• Discharge by Payment to One: If the obligor makes payment of the debt to any one of the assignees whose notice arrived simultaneously, the obligor is validly discharged from the debt to the extent of the payment. This payment is considered a valid performance to a rightful creditor.
• No Obligation to Pay the "First to Demand": The obligor is not legally bound to pay the assignee who first demands payment after the simultaneous notices. Payment to any of the co-ranking assignees, even one who demanded payment later, is valid and discharges the obligor. This gives the obligor some discretion but also places the onus on assignees to secure payment promptly.

The Interplay Among Co-Ranking Assignees: Distribution and Unjust Enrichment

While the obligor can be discharged by paying one of the co-ranking assignees, this raises questions about the relationship among those assignees, especially if the sum of the assigned portions exceeds the original debt amount or if one assignee receives the full payment.

The Supreme Court judgment of March 30, 1993 (Minshu Vol. 47, No. 4, p. 3334) provides significant guidance here, although it directly addressed a case of a deposit made where the order of arrival of an assignment notice and a garnishment order was unclear (which is treated similarly to simultaneous arrival for determining relative superiority). The Court held that if the total amount of the claims of the co-ranking parties (in that case, an assignee and a seizing creditor) exceeds the amount of the deposited funds, each party acquires a right to the deposited funds proportionally (按分, anbun) to their respective claim amounts, based on "principles of fairness" (公平の原則, kōhei no gensoku).

Extrapolating from this principle to cases of multiple assignees with simultaneous notice:

• If an obligor pays the full amount to one assignee (Assignee X), and other co-ranking assignees (Assignees Y and Z) exist, Assignees Y and Z may have a right to claim their respective shares from Assignee X.
• The basis for such a claim could be unjust enrichment (不当利得, futō ritoku), as Assignee X would have received more than their proportional share at the expense of other equally entitled parties.
• Some legal scholars have suggested that the act of one assignee receiving full payment could be viewed as a form of "private execution" (一種の私的執行, isshu no shiteki shikkō), implying a subsequent duty to account to other entitled parties.
• Another approach is to consider the rights of the co-ranking assignees as analogous to "joint and several claims" (連帯債権, rentai saiken - Article 432 et seq. of the Civil Code). In such a framework, an assignee who receives payment is typically obliged to distribute the proceeds among the other joint and several creditors according to their internal shares. If an assignee with a valid security interest (perfected simultaneously with others) receives the full debt amount, they would internally hold the portions attributable to other assignees in a manner akin to a trustee or be liable for distribution.

Thus, while an obligor can achieve discharge by paying one assignee, the matter does not necessarily end there. The recipient assignee may face claims from other co-ranking assignees for a proportional distribution of the recovered funds.

The Obligor's Right to Deposit (供託, Kyōtaku)

When faced with multiple claimants, an obligor might consider making a statutory deposit (供託, kyōtaku) with a local Legal Affairs Bureau to obtain a discharge. This is particularly relevant when the obligor is unable to determine with certainty which creditor is entitled to payment ("creditor uncertainty" - 債権者不確知, saikensha fukakuchi, under Article 494, Paragraph 2 of the Civil Code).

However, a distinction is made based on the nature of the obligor's predicament:

• Truly Simultaneous Arrival: If it is clear that the notices of assignment from multiple assignees arrived simultaneously, the obligor cannot make a deposit on the grounds of creditor uncertainty. This is because, as established, the obligor can validly pay any of these co-ranking assignees and be discharged from the debt. There is no legal uncertainty for the obligor regarding whom to pay to obtain a discharge.
• Unclear Order of Arrival (到達時先後不明, tōtatsu-ji sengo fumei): If the notices were received, but it is genuinely unclear which notice arrived first, the situation is different for the obligor. In this scenario, the obligor can make a deposit due to creditor uncertainty. The Supreme Court has indicated that while the priority among the assignees themselves in an "unclear order" case should be treated as if their notices arrived simultaneously, this does not preclude the obligor, who is genuinely unable to determine the rightful recipient, from utilizing the deposit system to avoid the risk of double payment or default. A directive from the Ministry of Justice (dated May 18, 1993, Minji IV No. 3841) following the aforementioned Supreme Court judgment (March 30, 1993) confirmed that Legal Affairs Bureaus should continue to accept deposits for creditor uncertainty even if the uncertainty stems from the unclear order of assignment notices.

In cases where a deposit is validly made due to unclear arrival order, the deposited funds are then subject to claims by the assignees (and/or other competing claimants like seizing creditors). As per the Supreme Court judgment of March 30, 1993, the right to claim the return of the deposited funds (供託金還付請求権, kyōtakukin kanpu seikyūken) is to be divided among the co-ranking claimants proportionally to their respective claim amounts.

Practical Considerations

The rules surrounding simultaneous arrival of assignment notices highlight several practical points:

• For Assignees: Prompt and verifiable delivery of notices is paramount. In situations anticipated to involve multiple assignments, exploring direct communication and consent from the obligor, rather than relying solely on notices, might offer greater certainty. If simultaneous arrival occurs, assignees must be prepared to potentially share the proceeds.
• For Obligors: Meticulous record-keeping of the exact time of receipt of any notices of assignment is crucial. If notices genuinely arrive simultaneously, the obligor has the flexibility to pay any of the perfecting assignees. If the order is unclear, a statutory deposit may be the safest course of action to avoid potential liability.
• Burden of Proof: Establishing the exact timing of arrival can be contentious. The party asserting priority or the validity of a particular action (like payment or deposit) will often bear the burden of proving the facts supporting their position.

Conclusion

The Japanese legal framework, primarily through judicial interpretation of the Civil Code, addresses the scenario of simultaneously arriving notices of competing claim assignments by treating all such perfecting assignees as having equal rank. No single assignee gains automatic priority. While the obligor can be discharged by paying any one of them, the recipient assignee may then owe a proportional share to the other co-ranking assignees, often based on principles of fairness and reflecting the amounts of their respective claims. A critical distinction exists between truly simultaneous arrival (where the obligor cannot deposit for creditor uncertainty) and an unclear order of arrival (where the obligor can make such a deposit, and the funds are then distributed proportionally). These rules aim to balance the interests of competing assignees and the obligor, though they underscore the complexities inherent in multiple assignments of the same claim.