Payment in a Foreign Currency
(Supreme Court, 3rd Petty Bench, 15 July 1975)
FACTS
In 1963, a company was established in Okinawa as a subsidiary of the defendant company, which is engaged in civil engineering and construction work. The claimant, which is a bank with a head office in Naha City, lent business working capital to the subsidiary. In 1965, a banking transaction contract was concluded between the claimant and the subsidiary, whose maximum principal amount was increased to 350,000 US dollars in August 1967. On 26 August 1967, a contract of guarantee whose maximum principal amount is 250,000 US dollars and the period is from August 1967 to August 1970 was concluded between the claimant and the defendant for the payment of the debt that the subsidiary bears to the claimant.
In March 1968, the loan from the claimant to the subsidiary at that time was integrated into a loan on three bills with a sum of 330,640 US dollars. However, the subsidiary did not make the payment by 2 April 1968, the date of maturity. Therefore, the claimant claimed 90,000,000 Japanese yen, calculated based on the then fixed exchange rate of 360 yen per US dollar, and late charges against the defendant, which is the guarantor under the contract of guarantee above.
The Nagoya District Court, in the first instance, admitted the claimant’s claim. The defendant appealed to the Nagoya High Court, which dismissed it. The defendant further appealed to the Supreme Court. Among other grounds for appeal, the following points are relevant to payment in a foreign currency.
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The debtor is given the authority to choose a currency to repay the debt under Article 403 of the Civil Code, and the creditor has no choice. Therefore, it is illegal to accept the claim of 90,000,000 Japanese yen that is converted from 250,000 US dollars into the Japanese currency.
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Even if payment in Japanese yen is admitted, the fixed exchange rate was changed to 308 yen per US dollar on 18 December 1971 prior to the date of judgment delivery (24 October 1972), and therefore, the amount should be 77,000,000 Japanese yen.
FINDINGS
The judge held:
Dismissal of appeal.
‘A monetary claim whose amount is specified in a foreign currency is a so-called voluntary claim, and the creditor can claim the debtor in either foreign currency or Japanese currency. Article 403 of the Civil Code only stipulates that if a creditor makes a claim in a foreign currency, the debtor can repay it in the Japanese currency. Meanwhile, when a monetary claim for which the amount of the claim is specified in the foreign currency is repaid in the Japanese currency, the conversion should be made according to the exchange rate at the time of the actual repayment. However, when deciding on a claim in Japanese currency for a monetary claim for which the amount of the claim is specified in a foreign currency, the court should convert the currency according to the exchange rate at the end of the oral argument of the trial. Therefore, even if there was a change in the exchange rate thereafter but before the judgment is delivered, there is no room for consideration.’