This is the same time line as episode 9, so Tetsunosuke and Tatsunosuke are still out on the errand for Hijikata. Yamanami watches Hijikata as he trains himself. Yamanami apologizes to Hijikata for opposing him all the time and wanted to be demoted to an accountant. Even though he held the highest martial arts rank, he said that after the incident with Serizawa Kamo (He was the Chief of the Shinsengumi until he was ordered to be assassinated. Read the history section for more details), his sword became rusted. Hijikata argued that him, Souji, and Kondo all had a part in the incident and their sword didn't become rusted. It is because Yamanami didn't want to do it in the first place; Hijikata forces him to draw his sword and insists that he can kill again. Yamanami became angry and threw his sword down, he opposes the way Hijikata run things, and anything that gets in the way gets killed. He doesn't want to be manipulated by Hijikata anymore. The scene flashes back to the night they ass (thetvdb.com)