Ownership Transfer to Buyer of Construction Equipment with Ownership Reservation
Our company manufactures and sells construction equipment. We sold a power shovel to Company A with ownership reservation and delivered it to Company A. However, before the full payment was made to us, we found out that General Civil Engineering and Bridge Construction Contractor B was using the subject machine in an exclusive manner. Contractor B asserts that it acquired the power shovel from Company A through Company C who calls themselves Equipment Sales Agent. In this case, will we be able to get back the power shovel to us? [Court Precedent: Tokyo District Court, December 11, 1996]

In our former Q&A we explained about the “Third Party without Knowledge.” Whether or not your company can get back the power shovel (ownership of the power shovel) DEPENDS ON whether or not Company B is applicable to the "Third Party without Knowledge."
In the above Court Precedent [of December 1996] Tokyo District Court decided that the Contractor B does NOT apply to the “Third Party without Knowledge” because of the following reasons:

- Contractor B is conducting bridge constructions and road constructions, etc. and, therefore, it is assumed that Contractor B recognizes that a power shovel is normally a very expensive item and it is customary that the Deed of Transfer is issued to Buyer;

The fact that the Buyer (representative of Contractor B) did not see the Seller (Company A) indicates that the Buyer (Contractor B) did not try to confirm who is the legitimate owner of the subject equipment, which fact led to the recognition that there was an error on the side of the Buyer (Contractor B). Therefore, Contractor B cannot claim to be the “Third Party without Knowledge.”

Concerning this kind of case, there are divergent discussions about the Deed of Transfer and Court Precedents do not fall on the same judicial ruling. Therefore whether there IS or IS NOT the Deed of Transfer is not the crucial argument. Having said that, when we consider that power shovels are normally expensive items and, moreover, when they look brand new in appearance, it is recommended that the Buyer always doubt whether the payment was completed and it seems necessary to check with the Seller (in the above case, Company A) whether or not it has completed the payment for the subject equipment.

In conclusion it is the critical point for the court’s decision whether or not your company had any doubt about certain matter, when you considered purchasing the power shovel and, if you had any doubt, whether ornot you tried to check the facts.

After you bought a construction equipment, occasionally you may find that it is a stolen machine or its right of ownership may still be held by its manufacturer. In such a case, we hear that if you are a Third Party without Knowledge, you do not have to return the equipment and can keep it. Who is the "Third Party without Knowledge"?

The Purchaser who is a Third Party in relation to the original owner may acquire the right of ownership in a case such as above, if the purchaser DID NOT KNOW that the machine actually belongs to a person other than the make-believe owner and, furthermore, if it could not be helped that he/she did not know that fact. Not Knowing and No Fault in Not Knowing is indispensable to be a Third Party without Knowledge. However, please note that the Original Owner is also entitled to return claim for two (2) years after the theft or loss of the equipment.

Why is it necessary to be registered as "Used Articles Dealer" in order to trade in used construction machinery.

If stolen goods and lost goods are allowed to circulate without the registration system, such crimes as stealing will be likely to increase. In order to prevent such crimes and help recover damage quickly if unfortunately suffered, there are following regulations:

◯ Used Articles Dealer Registration:
Most of used articles including used construction equipment are categorized as "Used Articles". In order to trade in Used Articles, it is necessary to get permission from the Public Safety Commission in each prefecture where trader's business office (trader's home address, if there is no business office) is located.

◯ What "Used Articles Dealer" must observe:
When you have a deal for an item which costs JPY 10000 or over you need to identify the Buyer. Be sure to make: (1) an invoice including Buyer's address, name, means of contact (Tel No. etc), model of the item, serial number; (2) a receipt (if the settlement is made in cash payment.); and preferably (3) a deed of contract, if the deal with the Buyer is the first one ever The trader is required to keep the above data for three (3) years by digital media. Note: Guideline for entering records in the ledger seems to differ from prefecture to prefecture. Please contact your local Public Safety Commision for more details. Google Search → National Public Safety Commission

◯ What are the points to which you should pay attenton in every day trade as a Used Articles Dealer?

➀ Price
Everybody wants to buy things at a low price and sell at a high price. But if things are too cheaper than usual, you should be careful! Especially you should check the owner of the subject machine.

➁ Trustworthiness of the Counterpart
Please pay attention always to the reputation of the dealers. Questionable machine information tends to come along with questionable dealers. Especialy be careful when you make the first deal with a new couonterpart.
If a new dealer was introduced to you by a trustworthy person (staff belonging to Manufacturer, staff belonging to Loan Company), it is recommended that you should get, from the person, as much information as posssible about the new dealer. (You might hesitate to ask. Because you are afraidthat the person might think you are doubtful of him and/or the introduced dealer. But if you feel it necessary, you should do so depending on cases.)

➂ Documents
✣ Invoice (indispensable):Invoice having the counterpart's address and contact information on it is a MUST.
✣ Bank Transfer Receipt, Receipt from the recipient (if the settlement was done in cash) At least one of them is a MUST.
✣ Never make a deal without Invoice/Receipt!
When you make deals without such documents, it is problematic not only from taxation view point but also from possible involvement in antisocial money laundering.

➃ Deed of Transfer
We assume that most people think about the "Form 21" (❉1) used for transferring the title to the car, when they hear the word "Deed of Transfer". However, in the field of construction equipment, "Unified Deed of Transfer"(❉2) issued by Japan Construction Equipment Manufacturers Association is the basic document circulating in the business circle. The penetration rate is not high, unfortunately, amounting only to several % of all the transacted used constraction equipment. The reason may be that construction machinery transaction is not based on the registration system as automobiles are, but the sales methods are diversified.
Still used machines whose manufacture years are relatively new tend to circulate domestically, and Deeds of Transfer are often requested by retail delers, loan companies or leasing companies. So when you are dealing with relatively new equipment, it is advised that you should acquire a Deed of Transfer.

(※１Deed of Transfer "Form 21"）
(※２(Unified) Deed of Transfer is issued only to the "First Transferee" who purchased directly from the manufacturer. You should acquire the Deed from the Transferer to you.)

➄ Possibility of Remaining Debt
Sometimes an end user of a machine, which was bought in an installment plan, tries to sell it for an immediate financing, while the machine has not been fully paid off yet. If the machine is relatively new being manufactured less than 5 years ago, there is a possibility that the payment for the machine has not been completed. Moreover, if an old machine was purchased in an installment plan, it may be very difficult for you to check whether or not there is remaining debt on the machine.

➅ Ownership Seal
Loan companies and leasing companies usually indicate their ownership of their machines by posting seals on noticable places of machines. However, such seals are sometimes posted on inconspicuous places such as engine cover etc. Or there are cases where no seals are posted with no mark of positive administration by loan companies or leasing companies. Please pay attention and if there is a seal posted on a machine, you should check the owner, take a photo of the seal etc. and keep it so that you may be able to avoid a possible trouble in the future.

-----The Trouble Cases communicated to this Site -----

	株式会社 ＪＥＮ（ジェン）	JEN CORP.
	株式会社 徳商事（のりしょうじ）	NORI Enterprise Co., Ltd.
	株式会社 ＮＤＴ（エヌディーティ）	NDT Corporation
	株式会社 ティ・エイチ・アイ	T.H.I. Corp.
	やながわ商事 株式会社	Yanagawa Shoji Co., Ltd.
	株式会社 カネハル	KANEHARU CO., LTD.
	グリーンオークション 株式会社	Green Auction Co., Ltd.