Recovering property from a good-faith purchaser: why an honest purchase does not guarantee protection

As a general rule, an owner has the right to reclaim their property from someone else's unlawful possession. If the property was acquired for value from a person who had no right to alienate it, and the purchaser did not know and could not have known about the absence of such a right, the owner can only recover the property in cases explicitly provided for by Clause 1 of Article 302 of the Civil Code of the Russian Federation.

In particular, property may be reclaimed from a bona fide purchaser if it:

• Was lost by the owner or by a person to whom the owner had entrusted it;
• Was stolen from the owner or such a person;
• Left the possession of the owner or a person authorized by them in any other way against their will.

Thus, in the case of a purchase for value, the law protects not only the original owner but also the bona fide purchaser. The deciding factor becomes whether or not the owner intended to transfer possession of the property to another person.

For example, if property was stolen or alienated via a forged power of attorney, the owner did not express an intent to transfer it. Under such circumstances, they may demand the return of the property, even if the current purchaser paid for it and was unaware of the violation of the owner's rights.

A different approach is possible when the owner voluntarily transfers property to another person for sale, providing them with documents and the authority to dispose of the property, but fails to receive payment from the transaction. In such a case, the property may be considered to have left the owner's possession voluntarily, which prevents it from being reclaimed from a bona fide purchaser for value.

The invalidity of the transaction under which the property was transferred does not, in itself, mean that the property left the owner's possession against their will. The court must establish the actual circumstances of the transfer of possession and determine whether the owner intended such a transfer (Clause 39 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10, Plenum of the Supreme Arbitration Court of the Russian Federation No. 22 dated 04/29/2010).

For example, an owner might enter into an agreement with an intermediary or issue a power of attorney for the alienation of property. The intermediary's subsequent breach of their obligations, including failure to remit the proceeds to the owner, does not in itself indicate that the property left the owner's possession against their will.

Therefore, a claim to invalidate the initial transaction and a claim to reclaim property from a subsequent purchaser have different burdens of proof. For vindication, it is not enough to prove that the transaction was flawed: it is necessary to confirm the absence of the owner's intent for the property to leave their possession.

An owner seeking the return of property must confirm their title to it and the fact that the property is in the defendant's possession. If the defendant relies on their status as a bona fide purchaser for value, it is also important for the owner to provide evidence that the property left their possession against their will.

Depending on the circumstances of the case, such evidence may include:

• Documents confirming the absence of contractual relations with the person who transferred the property;
• Evidence of loss, theft, or unlawful dispossession of property;
• Information regarding the forgery of a power of attorney, signature, or other documents;
• Documents confirming that the owner did not hand over keys, technical documentation, or other property accessories;
• Criminal case materials, if they confirm the circumstances under which the property was lost.

A purchaser who contests a claim must prove that the transaction was for consideration and that they acted in good faith. Relevant evidence includes the contract, payment records, information from public registries, and the results of checks for potential restrictions, liens, pledges, property searches, and third-party claims as of the transaction date.

A purchaser cannot be considered in good faith if, at the time of the transaction, they were aware of third-party claims to the property that were subsequently deemed valid. Therefore, the dispute evaluates not only what the purchaser actually knew, but also whether they should have exercised due diligence given the nature of the property and the circumstances of the transaction.

When preparing a claim for the recovery of property, it is essential to first determine exactly how it left the owner's possession. If the property was transferred to another person by the owner's will—via a contract, power of attorney, or other agreement—the prospects of a vindication claim against a subsequent purchaser and the possibility of bringing other claims against the party who breached obligations to the owner must be assessed separately.

Conversely, a property purchaser should verify the seller's authority, the existence of third-party rights, and information regarding pledges, liens, and other restrictions before finalizing a deal. In a dispute, documents confirming payment for the property and circumstances demonstrating good-faith acquisition will be of particular importance.

If you intend to recover property from unlawful possession or require protection for a purchaser's rights against such a claim, the C Cases team is ready to evaluate the circumstances of the property's loss, build the necessary evidentiary base, and develop a defense strategy tailored to your specific situation.

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Sources

• Civil Code of the Russian Federation (Part One) No. 51-FZ of November 30, 1994;
• Resolution of the Plenum of the Supreme Court of the Russian Federation No. 10 and the Plenum of the Supreme Arbitration Court of the Russian Federation No. 22 of April 29, 2010, "On Certain Issues Arising in Judicial Practice Regarding the Resolution of Disputes Related to the Protection of Ownership and Other Property Rights";
• Ruling of the First Cassation Court of General Jurisdiction dated June 23, 2022, No. 88-16264/2022 in case No. 2-13/2021;
• Ruling of the First Cassation Court of General Jurisdiction dated May 18, 2022, in case No. 88-12429/2022;
• Ruling of the First Cassation Court of General Jurisdiction dated March 30, 2022, No. 88-9123/2022;
• Appellate Ruling of the Moscow Regional Court dated December 1, 2021, in case No. 33-33005/2021.