Scope of third parties under Article 177 of the Japanese Civil Code - An easy-to-understand explanation of court cases involving squatters (Japan Supreme Court ruling of December 19, 1950)

100 Selected Civil Law Cases I [9th Edition] No.56
Civil Law Article 177 Third Party Scope (1) ~ Squatters
(Supreme Court Decision, December 19, 1950)

This time, we are looking at "Third Parties under Civil Law Article 177."

Are squatters considered "third parties"?

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photo credit: byronv2 knightly combat via photopin (license)

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Let's start by looking at the case.

Case

A signed a contract to sell a building he owns to X.

X has not yet registered the transfer of ownership of the building.

A lease agreement has previously been concluded between A and Y for this building, and Y has been occupying the building.

Following the transfer of ownership of the building, X, who has become the new lessor, agrees to terminate the lease agreement with Y, who occupies the building.

However, as Y continued to occupy the building after that, X filed a lawsuit against Y, seeking eviction of the building based on his ownership rights.

In response, Y refuses to vacate the building, arguing that "X has not registered the building, so he cannot exercise a right to claim return based on ownership rights."

That's the case.

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Let's take a look at the general flow of the argument.

First,

X has acquired ownership of the building in question from A (Articles 555, 176).

However, X has not yet registered the transfer of ownership.
According to Article 177, X, who has not yet completed the registration, "cannot assert against third parties" his acquisition of the building ownership.

The public notice system in Article 177 is as follows:

"If any real rights are established or changed, please register and publicize that fact so that everyone can know. If you don't register, you won't be able to assert your rights against third parties."

In other words, once you register, your rights can be asserted against third parties and you can rest assured! This makes it possible to carry out real estate transactions with peace of mind and ensures smooth real estate transactions.

The law states that "if you do not register, your rights cannot be asserted against third parties." In other words, by imposing the penalty of not being able to assert your rights if you do not register, it is essentially forcing you to register.

Registration costs money, such as registration and license taxes, so no one would register otherwise (^.^;

According to Article 177, if Y is a "third party" under the same article, X, who has not yet completed registration, cannot assert his/her acquisition of ownership of the building against Y.

Conversely, if Y is not a "third party" under the same article, X can assert his/her acquisition of ownership of the building against Y even without registration.

So, does "Y, who continues to occupy the building without legitimate title after the lease agreement has already ended," constitute a "third party" under Article 177? That's the theme of this article.

Let's take a look at the ruling.

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Ruling

Y is "an unlawful occupant of the building in question without any title," and does not fall under the category of a "third party" under Article 177.

Therefore, X can assert against Y the right to acquire ownership of the building even without registration.

That's what it says.

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In the previous two articles, we looked at "third parties" in Article 177, including "treacherous and malicious persons."

As a review, let's take a closer look...

What exactly is a "third party"?

If interpreted literally, everyone other than the parties involved is a third party.

But there is no need to include unrelated passers-by as "third parties."

Because it's unregistered, you can't assert your rights against passers-by? You can't assert your ownership of the land against passers-by, so you have to surrender the land? That can't be the case.

Therefore, "third parties" need to be interpreted in a more limited way, rather than as everyone.

Case law has stated that a person who is not a party or its universal successor,

"A person with a legitimate interest in asserting a registration defect."

That's a tricky phrase, isn't it? You'd like to say, "Why don't you say it in simpler terms?"

In the above example, for Y to be a "third party," he needs to be "a person with a legitimate interest in asserting X's registration defect (lack of registration)."

So, what kind of person is a "person with a legitimate interest"?

It's an expression that seems easy to understand, but is difficult to understand.

A "person with a legitimate interest" is...

It is something that can be understood as such through the accumulation of precedents.

So, what do the precedents say?

From a viewpoint, it is proposed to use differentiated criteria, namely,

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Objective requirements (rights or legal status of the person considered to be a third party)

First of all,

"As an objective requirement (rights or legal status of a third party), a person who asserts rights without a legitimate title does not qualify as a person with a legitimate interest in asserting a registration defect." (Dalian Decision, December 15, 1966)

Specifically, a "squatter" does not qualify as such. (Grand Decision, November 11, 1920)

"Squatters" are not in a position where their continued possession is legally recognized. There is no need to allow the acquirer of real rights to assert the non-existence of registration and to accept the refusal to vacate. It seems possible to do that.

A "person without rights = illegal occupant" like Y in this case does not meet this objective requirement and does not qualify as a "third party."

The current case also stated that

illegal occupants do not qualify as "third parties" under Article 177 of the Civil Code.

Subjective requirements (their subjective aspects)

The next issue for those who meet the objective requirements is the subjective requirements (their subjective aspects).

As we saw in the previous two articles, the question is whether or not the person is a "treacherous malicious person".

In other words, the discussion of a "treacherous malicious person" is that, as an objective requirement, the person is recognized as having a legitimate right, but the subjective requirements (their subjective aspects) are problematic and the person is denied as a "third party". This is the procedure that will be followed.

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Summary

Whether or not a person is a "third party" under Article 177.

When making this judgment, it is proposed to use two distinct criteria:

- objective requirements (the rights or legal status of the person considered to be a third party)

- subjective requirements (their subjective aspects).

An "illegal possessor" like Y in this case is deemed not to meet the objective requirements and therefore not to be a "third party".

Since it has been denied objectively, there is no need to question the subjective aspect.

There is no need to even discuss the issue of a treacherous malicious person; the applicability of the "third party" is denied.

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That's all for now.