Acquisition of Ownership from a Non-Owner

From Max-EuP 2012

by Ralf Michaels

1. Subject

Almost all legal systems allow for the acquisition of ownership from non-owners under certain circumstances. Acquisition from a non-owner (a non domino), as discussed here, is immediate acquisition, in contrast to acquisitive prescription which generally takes place only after a period of time. Acquisition a non domino also stands in close connection with the transfer of ownership; all prerequisites for the ordinary transfer of ownership (with the exception of the full power of disposal) must be met. In fact, publicity requirements—transfer of possession or registry inscription—serve as requirements for a legal transfer of ownership and simultaneously as a basis for the acquisition of ownership from non-owners and thereby provide double protection for commerce.

Frequently, the discussion concentrates on the acquisition of ownership over movable property from non-owners. But ownership of immovable property can also be acquired under certain circumstances, as can claims, shares and security rights. The acquisition of ownership a non domino encompasses the acquisition from the rightful owner free from pre-existing third party rights.

Doctrinally, acquisition from the non-owner is construed in different ways. In the German model, the acquirer acquires full substantive ownership; views differ as to whether the acquisition should be categorized as derivative and therefore similar to transfer of ownership, or as acquisition of title by operation of law. In the French model, the possession of the acquirer is equated to ownership and protected as such against third parties, though only when the possessor acted in good faith. Finally, according to the English model, ownership cannot, in principle, be acquired from non-owners, but the old owner is barred under certain circumstances from asserting his rights against the acquirer. These constructive differences do not prevent comparison, but they show the problems for a possible unification.

2. Historical development and functions

Three historically separate principles traditionally characterize the law of acquisition in good faith. The first is the principle that it is impossible to transfer another’s rights without that person’s authorization. On this ground, Roman law completely rejected the good faith purchase (D. 50, 17, 54: Nemo plus iuris ad alium transferre potest quam ipse habet D. 41, 1, 20 pr). However, relatively short periods for acquisitive prescription produced a partial functional equivalent for the good faith possessor. After the reception of Roman law in continental Europe, the period for acquisitive prescription was shortened further.

A second principle is that one who gives away his things voluntarily must bear the risk of subsequent loss. This principle underlay Germanic law, in particular: the owner who freely gave a thing out of his own hand could only hold the direct acquirer responsible (Hand muss Hand wahren). This meant at first that even a bad faith third party purchaser was protected; following David Mevius (1609–70), protection began to be limited to acquirers who acted in good faith.

Finally, a third principle, originating especially in commerce, turns on the need to protect good faith acquirers and the security of legal relationships and today provides the most important foundation of the law on acquisition from non-owners. The possibility to buy from non-owners saves the acquirer from having to make extensive and potentially prohibitive investigations, and it secures his legal position against possible claims of the original owner. At the same time, the old owner, who can more easily control the risk, is deterred from carelessly placing his property outside of his possession. However, the risk of involuntary loss of ownership represents a limitation of his right of ownership that needs to be justified. Therefore, the law of acquisition from a non-owner necessitates a difficult balancing between the owner’s interest in keeping his property, the purchaser’s interest in acquiring clean title, and the expediency required by commerce.

3. Tendencies of legal development

Laws on acquisition from a non-owner differ widely. Across Europe, agreement exists only that the acquisition from non-owners is not allowed when the acquirer knows of the lack of ownership. Otherwise, there is a broad spectrum of solutions. On the one hand, Portuguese law completely rejects the acquisition of non-registered property from non-owners. On the other hand, Italian law allows even the acquisition of property that the previous owner involuntarily lost (with the exception of cultural property). Other legal systems lie between these extremes and differ from each other in numerous details.

Convergence is made even more difficult by the differences in various legal systems with respect to the transfer of ownership, especially whether passing of possession is required or not. However, even systems (like the French) that require merely consensus for the transfer of ownership from the owner none the less require actual possession for the acquisition from a non-owner. Sometimes, these doctrinal differences determine whether acquisition actually occurs from the owner or from a non-owner. The case of a double sale is instructive: A first agrees to sell to B without actually handing over the thing sold and then sells and transfers to C. In legal systems with the consensus principle, B has already acquired ownership, and thus C is able to purchase from A only as non-owner and can therefore acquire only on the basis of good faith. In legal systems that require passing of possession for transfer of ownership, by contrast, B has not yet acquired ownership, and C is therefore able to acquire from the owner. However, if C knew of the prior sale to B, all systems limit his legal position by invoking, eg, the doctrine of fraud or, in Scotland, a ‘rule against offside goals’.

Historically, acquisition in good faith could easily be linked to possession because the assumption was generally justified that possession normally goes together with ownership. In the modern credit economy, however, ownership and possession are frequently separate (as is regularly the case in situations of retention of title and property transferred as security). Unencumbered ownership has also become rarer. Possession can therefore no longer be easily used as evidence of ownership; instead, public registers or authorized documents increasingly fulfil this role. At the same time, the exact requirements for good faith become more important, and great differences exist for different kinds of objects, with a particularly high standard for works of art. The trend is to regulate good-faith acquisition in different areas separately (especially cultural property), which makes a comprehensive approach harder to achieve.

In private international law, the acquisition of ownership from non-owners is correctly characterized as a matter of property law. Characterization as a procedural matter (because the old owner’s claim for return of the object is barred) or as tort law is inadequate. Traditionally, widespread agreement existed that the law of the place of the object at the time of purchase determined the effectiveness and the consequences of the good-faith purchase. Diverging from that view, Art 12 Dir 93/7 on the Return of Cultural Objects designates the law of the Member State demanding return and thereby especially protects that state’s interests. Where public registers exist, the place of the register rather than that of the object can also govern, although this is not always conducive to the interests of commerce.

4. Effects of EU law

Before the Lisbon Treaty entered into force, national provisions on acquisition from a non-owner would rarely be in violation of EU law because Art 345 TFEU/295 EC leaves regulation of the system of property to the Member States (property). Accordingly, Art 4(1) Dir 2000/35 leaves the way in which retention of title is dealt with to national law and thus allows the Member States to make the third-party effects of retention of title dependent on its publication (ECJ Case C-302/05 – Commission v Italy [2006] ECR I-1059). Suggestions that the significant differences between the legal systems of Member States create unjustified restraints on free trade in violation of EU law have so far had little influence.

Additionally, there is the question of how far acquisition from non-owners can be reconciled with Art 1 of the First Additional Protocol to the European Convention on Human Rights, and now Art 17(1) of the European Charter of Fundamental Rights. In the national constitutional law of various states (such as the Czech Republic, in which acquisition was introduced not by the legislature but by the Constitutional Court), the constitutionality of such provisions is frequently discussed. In contrast, Art 1 of the First Additional Protocol to the EMRK has not played a major role in private law up to this point. In addition, the ECHR allows the individual states wide-ranging discretion in this area.

5. Unification projects

Differences between domestic laws and complicated policy questions make unification difficult. Acquisition from non-owners has only recently been tackled by European unification projects. The DCFR (Common Frame of Reference (CFR)) contains rules only for movable property in Art VIII.-3:101 and 3:102. Previously, UNIDROIT, under the leadership of Jean Georges Sauveplanne, developed a draft uniform law on the protection of the bona fide purchaser of corporeal movables (1968), based on the Uniform Law on the International Sale of Goods (ULIS 1964) (sale of goods, international (uniform law)). A later draft (1974), in reaction to criticism of the first draft, was more independent from the ULIS and strengthened the position of owners as against that of purchasers. Neither draft was adopted.

More rules exist for the field of cultural property. Directive 93/7 gives Member States a claim for the return of cultural goods unlawfully taken from their sovereign territory but grants the acquirer compensation as the court deems fair according to the circumstances of the case, provided that it is satisfied that the possessor exercised due care and attention in acquiring the object. The question of whether ownership is acquired is left to national law. Articles 3 and 4 of the UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects (1995) also mandate the return of stolen or illegally exported cultural property while providing for compensation for good-faith purchasers. However, the Convention applies only when the object is brought into another state after it is stolen. A similar regulation is contained in Art 7(b)(ii) of the UNESCO Convention on the Protection of Cultural Property of 14 November 1970.

The Cape Town Convention on International Interests in Mobile Equipment (2001) contains, in its Art 29, rules on the position of an acquirer or an asset encumbered with an international interest.

6. Individual questions

For the acquisition of ownership from non-owners, all requirements of the acquisition from owners must be satisfied (with the exception of the authorization by the owner) (Art VIII.-3:101(a) DCFR). Generally, the seller and buyer must in fact be different persons. According to the UNIDROIT Draft of 1974 and Art VIII.-3:101 (1)(c) DCFR, the acquisition must occur for a consideration; this is in accordance with a bare majority of European legal systems and serves the goal of extending special protection to commercial transactions.

Possession plays a special role. The acquirer must normally obtain actual possession of the property or an identification paper (Art 10(1) UNIDROIT Draft 1974; Art VIII.-3:101(1)(b) DCFR). Simple consensual transfer is not even sufficient in systems following the consensus principle; agreement on constructive possession (Besitzkonstitut) is usually not sufficient either. In contrast, if a third party has possession of the object, it should be sufficient when the transferor effectively relinquishes his claim against the actual possessor, as long as the third party possesses the object for the benefit of the acquirer (Art 10(2) UNIDROIT Draft 1974; Art VIII.-3:101 (b), 2:101(1)(e), 2:101, 2:105(2) DCFR).

For registered property the legal situation varies. Where a register, such as the German Grundbuch, has legal force, entry into the register is both necessary and sufficient as a basis for acquisition; however, if the acquirer affirmatively knows that the register is false, he may be liable to the old owner. In contrast, where the register only affects the third-party effects of a legal transfer or is only declarative, the acquirer cannot automatically trust the content of the register. Overall, considerable differences between different legal systems and registers still exist.

Furthermore, the acquirer must act in good faith. Some legal systems require good faith regarding the seller’s actual ownership. By contrast, UNIDROIT Draft 1974 (Art 7(1)) and DCFR Art VIII.-3:102(1)(d) require merely good faith regarding the seller’s authority to transfer. According to the UNCITRAL-Legislative Guide on Secured Transactions (2007), unencumbered acquisition in the transferor’s course of business is excluded only when the acquirer has affirmative knowledge of a third party’s security interest. That places the protection of commerce higher than many national legal systems. Regarding the precise standard of care required for good faith, enormous differences exist not only between legal systems but also between different objects. Standards are higher for objects such as cars and works of art than for other objects. Much is judge-made law; a systematic empirically based elaboration of criteria would be desirable.

According to most legal systems, acquisition from the non-owner is generally excluded when the owner lost possession involuntarily. The owner should only be burdened with losing title when he himself created the risk by giving up possession of the property. Therefore, no ownership can normally be acquired over stolen property (except in Italy) (Art 11 UNIDROIT Draft 1974; Art VIII.-3:101(2) DCFR). In some national legal systems exceptions exist, especially for commercial transactions and acquisition in auctions. The DCFR, emulating Dutch law, only protects purchases made in the normal course of business of the seller. However, like the UNIDROIT Draft 1974 and Dutch law, the DCFR does not protect the owner who lost possession in any way other than through theft. This is rather extreme for situations where the owner lost possession through no fault of his own.

Historically, certain objects were exempted from good-faith purchase, especially public property and church property. A similar tendency currently exists for cultural objects; see Art VIII.-3:101(2) s 2 DCFR.

If the prerequisites for the acquisition from non-owners are satisfied, the purchaser acquires the full rights over the property free from the rights of third parties (Art 5(2) UNIDROIT Draft 1974; Art VIII.-3:102 DCFR). In some legal systems, the acquired right is nevertheless, under certain circumstances, burdened with the previous owner’s right to claim restitution of the property from the purchaser as long as he provides compensation for the purchase price. In recent laws, however, such a right has been rejected. The UNIDROIT Draft 1974 and the DCFR oppose it. However, for unique goods, especially works of art, such a right of return against compensation can establish a more just balance between the owner’s interest in retaining the property and the purchaser’s economic interests. In some cases, such a solution may encourage the purchaser’s cooperation because he knows that his negative interest would be protected. On this ground, such a right to return against compensation is found in several modern regulations regarding the protection of cultural objects.

Literature

Jean Georges Sauveplanne, ‘La protection de l’acquéreur de bonne foi d'objets mobiliers corporels’ [1961] UNIDROIT Yearbook 43, translated in a shorter version as ‘The Protection of the Bona Fide Purchaser of Corporeal Movables in Comparative Law’ (1965) 29 RabelsZ 651; Saul Levmore, ‘Variety and Uniformity in the Treatment of the Good-Faith Purchaser’ (1987) 16 JLS 43; Werner Hinz, ‘Die Entwicklung des gutgläubigen Fahrniserwerbs in der europäischen Rechtsgeschichte’ (1995) 3 ZEuP 398; Karsten Thorn, Der Mobiliarerwerb vom Nichtberechtigten (1996); Dieter Krimphove, Das europäische Sachenrecht (2006); Margareth Prisching, Gutgläubiger Erwerb an beweglichen Sachen im Rechtsvergleich (2006); John Henry Merryman, ‘The Good Faith Acquisition of Stolen Art’ in John Jackson, Máximo Langer and Peter Tillers (eds), Crime, Procedure and Evidence in a Comparative Context: Essays in Honour of Professor Mirjan Damaska (2008) 275; Arthur F Salomons, ‘The Purpose and Coherence of the rules on Good Faith Acquisition and Acquisitive Prescription in the European Draft Common Frame of Reference: A tale of two gatekeepers’ (2011), <http://ssrn.com/abstract=1749484.>

Retrieved from Acquisition of Ownership from a Non-Owner – Max-EuP 2012 on 06 October 2022.

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