A Bill of Sale and Proving Violin Ownership
In 1967, violinist David Margetts lost the Duke of Alcantra Stradivari violin, a valuable instrument which was made late in Stradivari’s life for the Duke himself. Margetts did not own the violin. Rather, it was on loan from UCLA. Margetts didn’t recall whether he left the violin on the roof of his car and drove off or whether it was stolen from his vehicle while he was buying groceries. Nevertheless, he joined a surprisingly large group of musicians who have misplaced instruments worth hundreds of thousands of dollars or more.
The violin seemed to have vanished into thin air until 27 years later, a Petaluma, California violin dealer identified it when it was left at his shop for repair work. It had been found by the side of the road and made its way into the hands of an instrument dealer who gave it to her nephew in 1979. The nephew’s wife, Teresa Salvato, was a violinist and received the violin as part of a divorce settlement. Ms. Salvato’s teacher had dropped the violin off for repair years later in 1994.
A Wall Street Journal article describing the recovery of the violin and the subsequent dispute between Ms. Salvato and UCLA regarding ownership of the Duke of Alcantra is interesting for two reasons. The article was written by reporter Daniel Pearl, who less than eight years later would become world-famous after being kidnapped and murdered by terrorists in Pakistan. The article also is interesting in its description of the legal theory pursued by Ms. Salvato’s attorney in claiming that she should be able to keep the violin because UCLA could not prove its chain of title back to the Duke himself.
Documentation of a change in ownership of tangible personal property also is important in commercial real estate transactions. This is the first of a series about documents signed at a commercial real estate closing. This article is about bills of sale, which transfer title to tangible, personal property.
What is a Bill of Sale
Like deeds, bills of sale transfer ownership of property. Bills of sale, however, transfer ownership of tangible personal property, such as computer equipment, furniture, or violins.
Most real estate transactions also involve the purchase and sale of tangible personal property. For example, sale of an apartment building might include sale of refrigerators and stoves, lobby furnishings, and exercise equipment in the fitness center. Sale of a self-storage complex would include office equipment, and sale of an office would likely include restroom supplies, office equipment, and lobby furnishings. The seller should use a bill of sale to transfer title to the personal property.
Bills of sale does not transfer title to real estate or to intangible property, such as copyrights, accounts receivable, or trade secrets.
What to Put in a Bill of Sale
At minimum, a bill of sale should include four things: a statement of consideration, description of the property, warranty of title, and the transferor’s signature. As with a deed, the transferee’s signature usually isn’t necessary.
Consideration–If the property isn’t a gift, the bill of sale should state that the transferee has given consideration, or something of value, for the property. Unless the property is a gift, the transfer might be voidable if there is no consideration. Frequently, a bill of sale might state “For consideration of $10.00 and other good and value consideration, the receipt and sufficiency of which is hereby acknowledged.” This is an adequate statement by the transferor that it received consideration for the transfer.
Description of the Property–The bill of sale should describe the transferred property. Ideally, the bill of sale will include (frequently as an exhibit) a list of the transferred property. In a real estate transaction, the bill of sale also might include a general statement that it includes “all property owned by transferor and located at the real estate.”
Transferors should be careful that the property description covers only property “owned by transferor,” so it does not cover leased property or property owned by tenants. Transferors also should be cautious about language that refers to “all property used in the operation of the real estate.” That language might cover property owned by the transferor located at another site and is not exclusively related to the real estate.
Transferees should insist on an itemized inventory and confirm that it includes all property they expect to receive in the transaction. It is not unheard of for a real estate seller to remove significant personal property from the real estate before the closing and then to sign a bill of sale that transfers only property at the real estate, giving the transferee/buyer no recourse.
Warranties–Every bill of sale should include a warranty by the transferor that it owns the property free and clear of all encumbrances. If the parties have agreed upon additional warranties regarding property condition, fitness for a particular purpose, or the like, that, too should be included in the bill of sale. Otherwise, the transferor should be sure that the bill of sale expressly excludes those warranties and is transferring the property “as-is.”
Signature– Only the transferor’s signature is required on the bill of sale. Unlike a deed, witnesses and a notary acknowledgment aren’t necessary. Sometimes, a transferee may also sign a bill of sale acknowledging acceptance of terms affecting the transferee’s remedies or imposing obligations on the transferee. These might include limitations on warranties, the time after the closing when the transferee can sue transferor, or a requirement that the winner pay the loser’s attorney fees in any litigation.
Other Ways of Transferring Title
Although a bill of sale usually will be used to transfer ownership of tangible personal property in a real estate transaction, it is not the only way of transferring title to personal property.
Ms. Salvato likely took title to the Duke of Alcantra Strad through a court order in her divorce. Genevieve Vedder, who donated the Duke of Alcantra to UCLA, also may have taken title through a court order, but one issued in connection with her husband’s estate. Someone taking title through a bankruptcy court or foreclosure similarly would receive documentation from the court or bankruptcy trustee transferring ownership.
Although a bill of sale should be used to transfer most tangible personal property in a commercial real estate transaction, transfers of vehicles is done via a certificate of title. Transfers of intangible property, such trademarks, domain names, and accounts receivable should be transferred either through specialized forms or an assignment. Transfers of contracts and leases typically occur through an assignment and assumption document.
As Ms. Salvato’s attorney aptly pointed out, it is likely that Mrs. Veder’s husband and owners before him may not have had formal documents transferring title to the violin. They may just have exchanged money for the violin without any paperwork. And the lack of formal paperwork showing the sale made provided a basis for Ms. Salvato to question UCLA’s title.
Regardless of the document used, buyers should be sure that they receive documentation transferring title to all assets they are purchasing. Otherwise they and subsequent buyers could face the same battle UCLA faced when recovering the Duke of Alcantra.
© 2018 by Elizabeth A. Whitman
Any references clients and their legal situations have been modified to protect client confidentiality.
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