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On demanding and obtaining an item from the acquirer in good faith

Case No. 16/06-69/06-10/07

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF PARAGRAPH 2 OF ARTICLE 4.96 OF THE CIVIL CODE OF THE REPUBLIC OF LITHUANIA WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

30 October 2008
Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Toma Birmontienė, Pranas Kuconis, Kęstutis Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Egidijus Šileikis, Algirdas Taminskas, and Romualdas Kęstutis Urbaitis

The court reporter—Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, in its public hearing, on 15 October 2008, considered constitutional justice case No. 16/06-69/06-10/07 subsequent to the following:

(1) the petition of a group of members of the Seimas, consisting of Bronius Bradauskas, Juozas Palionis, Gintautas Mikolaitis, Vytautas Saulis, Algirdas Butkevičius, Algimantas Salamakinas, Jonas Juozapaitis, Edvardas Žakaris, Bronius Pauža, Vytautas Kamblevičius, Virginijus Domarkas, Saulius Bucevičius, Zenonas Mikutis, Valentinas Bukauskas, Vytautas Sigitas Draugelis, Saulius Girdauskas, Antanas Bosas, Loreta Graužinienė, Vydas Gedvilas, Rimantas Bašys, Petras Baguška, Kęstutis Glaveckas, Valentinas Mazuronis, Remigijus Ačas, Vytautas Galvonas, Raimundas Palaitis, Jonas Čekuolis, Liudvikas Sabutis, Eligijus Masiulis, Andrius Endzinas, and Milda Petrauskienė, a petitioner, requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code of the Republic of Lithuania is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution of the Republic of Lithuania and with the principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution of the Republic of Lithuania (petition No. 1B-14/2006);

(2) the petition of the Vilnius Regional Court, a petitioner, requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code of the Republic of Lithuania, to the extent that the state is allowed to retrieve the immovable property from an acquirer in good faith which has been lost due to a crime committed by a state servant is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution of the Republic of Lithuania and with the principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution of the Republic of Lithuania (petition No. 1B-76/2006);

(3) the petition of the Court of Appeal of Lithuania, a petitioner, requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code of the Republic of Lithuania is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution of the Republic of Lithuania and with the constitutional principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution of the Republic of Lithuania (petition No. 1B-11/2007).

By the Constitutional Court’s decision of 18 September 2007 these petitions were joined into one case and it was given reference No. 16/06-69/06-10/07.

The Constitutional Court

has established:

I

1. A group of members of the Seimas, the petitioner, applied to the Constitutional Court with a petition requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution (petition No. 1B-14/2006).

2. The Vilnius Regional Court, the petitioner, considered a civil case. By its ruling, the said court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code, to the extent that the state is allowed to retrieve the immovable property from an acquirer in good faith which has been lost due to a crime committed by a state servant, is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution (petition No. 1B-76/2006).

3. The Court of Appeal of Lithuania, a petitioner, considered a civil case. By its ruling, the said court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law which, according to the petitioner, is consolidated in the Preamble to the Constitution (petition No. 1B-11/2007).

II

The petitions of the petitioners are based on the following arguments.

1. By the impugned legal regulation, the rights of the owner who lost an item due to a crime committed by a person are defended more than of the acquirer in good faith who, according to the petitioners, also becomes an “equal” owner of this item. Under Article 4.96 of the Civil Code, a person, who did not know and could not know that the item was acquired upon payment from a person who had no right to transfer this property shall be considered to be an acquirer in good faith. Good faith is a fundamental principle of private law. The analysis of the impugned provision of the Civil Code permits stating that even though the acquirer of the immovable property who has acquired the item by transaction also becomes its owner, the rights of the initial owner, according to the existing legal regulation, are in such case assessed by priority. Neither the owner of the item nor the acquirer in good faith is equally responsible for the crime due to which the owner has lost the item. The item may be demanded and obtained from the acquirer in good faith regardless of his legitimate expectations, possible improvements of the item, etc. Thus, the situation of two “equal” owners is different and by such legal regulation the constitutional principle of equal rights of all persons is violated.

2. While demanding and obtaining the immovable items from the acquirer in good faith under Paragraph 2 of Article 4.96 of the Civil Code, the needs of society are not satisfied and the acquirer in good faith is not justly compensated for. Under Article 23 of the Constitution, property shall be inviolable and may be taken over only for the needs of society according to the procedure established by law and shall be justly compensated for, thus, by the impugned legal regulation, one violates the rights of ownership of a person.

3. In addition, the Vilnius Regional Court, the petitioner, requesting an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code to the extent that the state is allowed to retrieve the immovable property from an acquirer in good faith which has been lost due to a crime committed by a state servant is not in conflict with the Constitution is additionally grounded on the fact that a state servant is a person authorised by the state, therefore, if the state has lost an immovable item due to criminal actions committed by its authorised person—a state servant—the rights of the state as the owner may not be defended more than the rights of the acquirer in good faith of this item.

III

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations from Gediminas Sagatys, the representative of the Seimas, the party concerned, were received in which it is stated that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with the Constitution. The position of the Seimas, the party concerned, is based on the following arguments.

1. When one construes the legal regulation consolidated (inter alia, impugned) in Article 4.96 of the Civil Code in a systemic manner, it should be regarded as one detailing the provisions of Articles 23 and 46 of the Constitution regarding the duty of the state to ensure the inviolability of property and to regulate the economic activity so that it would serve the general welfare of the Nation. Under the Constitution, the state is not obliged to recognise and defend the right of ownership to the property which was acquired (which was gained possession of) by a person without a clearly expressed will (consent) of the owner of this property. The transfer of the right of ownership without the owner’s consent is only possible in the exceptional cases provided for in Article 23 of the Constitution.

2. A person may acquire the right of ownership only lawfully. What is acquired unlawfully and in violation of the rights of other persons and legal norms may not be defended. One may not defend a violation of law. While grounding his position that the impugned legal regulation is not in conflict with Paragraph 1 of Article 29 of the Constitution, the representative of the Seimas, the party concerned, refers to the official constitutional doctrine set forth in the Constitutional Court’s ruling of 5 July 2000 whereby the Constitution guarantees the protection of property; property acquired unlawfully does not become property of the person who has acquired it, therefore, such a person does not acquire the rights of ownership which are protected by the Constitution. Thus, under the Constitution, “the collision of the rights of two lawful owners in good faith of one item is impossible”. The right of ownership of the owner to the immovable item does not disappear if he loses the possibility of owning this item in reality due to a crime committed by other persons, it may not be transferred and it does not devolve to other persons irrespective of their subjective characteristics (regardless of whether they are in good faith or not in good faith) or kinds of the transaction (payable or non-payable). The acquirer, to whom such item was transferred, acquires not the right of ownership, but only the right to own the item. Such interpretation of the legal regulation allows one to avoid the problem of dualism of the owners of the same item.

3. The representative of the Seimas, the party concerned, also specified the provision linked to the legal regulation consolidated in Article 143 of the Civil Code of 7 July 1964 which was valid until 1 July 2001 (under which, if the property has been acquired upon payment from a person who had no right to transfer from a person and the acquirer did not know that and could not know that (acquirer in good faith), the owner shall have the right to demand and obtain this property from the acquirer only in the case when the property has been lost by a person, to whom the owner transferred it to own or from whom it was seized or stopped being owned by them irrespective of their will) of the Constitutional Court’s ruling of 8 April 1997 in which, according to the representative of the petitioner, the essentially analogous situation is construed. In the said ruling it was held that the mere fact that owner has the right to demand and obtain the property from its acquirer in good faith providing the owner or another person to whom the owner has transferred it for possession has been lost or seized from either of them or otherwise ceased to be possessed irrespective of their will is “a universally recognised rule of the protection of the right of ownership”.

IV

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations from Paulius Koverovas, State Secretary of the Ministry of Justice of the Republic of Lithuania, and Algimantas Čepas, Director of the Institute of Law, were received.

The Constitutional Court

holds that:

I

1. Paragraph 2 of Article 4.96 of the Civil Code provides: “Immovable item may not be demanded and obtained from an acquirer in good faith with the exception of cases when the owner has lost such item due to a crime committed by other persons.”

The petitioners—a group of members of the Seimas and the Court of Appeal of Lithuania—request an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code, and the Vilnius Administrative Court, a petitioner, requests an investigation into whether Paragraph 2 of Article 4.96 of the Civil Code, to the extent that the state is allowed to retrieve the immovable property from an acquirer in good faith which has been lost due to a crime committed by a state servant, are not in conflict with the Constitution.

It needs to be held that Paragraph 2 of Article 4.96 of the Civil Code, an investigation into the constitutionality of which is requested by the petitioners—a group of members of the Seimas and the Court of Appeal of Lithuania—includes Paragraph 2 of Article 4.96 of the Civil Code to that extent that the state is allowed to retrieve the immovable property from an acquirer in good faith which has been lost due to a crime committed by a state servant, an investigation into the constitutionality of which is requested by the Vilnius Regional Court, a petitioner. Therefore, in all the said petitions to the Constitutional Court, the petitioners request an investigation into the compliance of the same legal regulation—Paragraph 2 of Article 4.96 of the Civil Code—with the Constitution.

2. The petitioners request an investigation into whether the impugned legal regulation is not in conflict, inter alia, with the principle of a state under the rule of law which, according to them, is consolidated in the Preamble to the Constitution. The Constitutional Court has held in its acts more than once that it is impossible to identify the constitutional principle of a state under the rule of law only as one which is consolidated in the Preamble to the Constitution, that the constitutional principle of a state under the rule of law integrates various values consolidated in and protected and defended by the Constitution and includes many interrelated imperatives. Therefore, the petition of the petitioners to investigate the compliance of the impugned legal regulation with, inter alia, the principle of a state under the rule of law which, according to them, is consolidated in the Preamble to the Constitution, should be regarded as a petition requesting an investigation into the compliance of the impugned legal regulation with, inter alia, the constitutional principle of a state under the rule of law.

3. Thus, in the constitutional justice case at issue, the Constitutional Court will investigate whether Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law.

II

1. The legal regulation impugned by the petitioner is designed for regulating the relations linked to the defence of rights of the owner who lost an item due to a crime committed by other persons, as well as the interaction (conflict) of the rights and interests of the owner and the acquirer (of his property) in good faith.

Thus, in the constitutional justice case at issue, the investigation into the compliance of the impugned provision with the Constitution implies that one must elucidate, on the one hand, what requirements which stem from the Constitution must be heeded while regulating the relations of property linked to defence of the rights of the owner by legal acts, inter alia, when the owner loses his property due to a crime committed by other persons, and, on the other hand, whether according to the Constitution, one may demand and obtain the property from the acquirer in good faith which was lost by the owner due to a crime committed by other persons and, in case one may do so, what guarantees of the rights of the acquirer in good faith stem from the Constitution.

2. It has been mentioned that the Constitutional Court is requested to investigate the compliance of Paragraph 2 of Article 4.96 of the Civil Code with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law.

3. Article 23 of the Constitution provides:

Property shall be inviolable.

The rights of ownership shall be protected by law.

Property may be taken over only for the needs of society according to the procedure established by law and shall be justly compensated for”.

3.1. The provisions of Article 23 of the Constitution, which constitute a whole, reveal the essence of the protection of the rights of ownership (the Constitutional Court’s ruling of 27 May 2002). The Constitutional Court has held in its acts more than once that Article 23 of the Constitution consolidates the principle of inviolability of property. Under the Constitution, the owner has the right to perform any actions in regard of his property, save those prohibited by law, as well as to use his property and determine its future in any way, which does not violate the rights and freedoms of other persons (the Constitutional Court’s rulings of 14 March 2006 and 20 May 2008). On the other hand, the Constitutional Court, while construing the provisions of Article 23 of the Constitution, has more than once held that ownership includes obligations. When using his property, the owner must behave responsibly and carefully.

Under the Constitution, other persons must not violate these rights of the owner, while the state is under obligation to defend and protect property against unlawful encroachment upon it and from other violations. Nobody may seize property arbitrarily and on other than legal basis. The right to demand that other persons do not violate his right of ownership and that the state ensures the protection of his ownership rights is guaranteed by the Constitution to the subject of ownership-the owner (the Constitutional Court’s ruling of 8 July 2005).

3.2. In the context of the constitutional justice case at issue, it needs to be noted that the constitutional principle of inviolability of property would be denied also if after the owner has lost his property due to a crime committed by another person (other persons), the rights of ownership of the owner would not be defended. In this context it needs to be noted that when the owner loses his property due to a crime committed by another person (other persons), it does not mean that he loses the rights of ownership and it does not mean that a person, who acquired such property, becomes the owner of such property. As the Constitutional Court has held, the duty arises for the legislature from Article 23 of the Constitution, inter alia, from Paragraph 2 thereof, to regulate the ownership relations so that the rights of ownership would be protected and defended and that the inviolability of property would be ensured (the Constitutional Court’s ruling of 23 August 2005); the state is under obligation to issue respective laws protecting the rights of ownership and to protect ownership on their basis (the Constitutional Court’s ruling of 14 March 2006). Under the Constitution, the owner shall have the right to retrieve his property when he lost such property due to a crime committed by another person (other persons); such his right is an important constitutional guarantee of the protection of the rights of ownership. It implies the duty of the legislature to establish such legal regulation which would ensure defence of the rights of ownership of the owner who has lost property due to a crime committed by another person (other persons). While establishing it, the legislature must establish how the defence of the rights of ownership of the owner must be ensured, inter alia, when such property cannot be returned due to objective reasons and there are no possibilities of returning it in kind.

3.3. The Constitution, while guaranteeing the protection of ownership, establishes the constitutional right to acquisition of property too, and guarantees the protection of this right (the Constitutional Court’s ruling of 14 March 2002). Under the Constitution, the ways of acquisition of the right of ownership may be varied ones, however, they may not be in conflict with the requirements which stem from the Constitution, inter alia, the principles of justice and good faith.

The legislature, while heeding the norms and principles of the Constitution, must establish the ways and grounds for the acquisition of the right of ownership. It implies the requirement of lawfulness of the acquisition of property. Under the Constitution, one of the essential conditions of lawfulness of transferring the object of ownership (property) to ownership of another person (other persons) is the expression of the resolve (consent) of the owner regarding such transfer of the object of ownership (property) into the ownership of other person (other persons). When the property is transferred to another person without the expression of the resolve (consent) of the owner, such transfer of property is considered to be unlawful and the transferred property is regarded as property acquired unlawfully by another person, unless the transfer of property to ownership of another person (other persons) without the expression of the resolve (consent) of the owner of this property would be constitutionally justified.

Property acquired unlawfully does not become property of the person who has acquired it. Thus, such a person does not acquire the rights of ownership which are protected by the Constitution (the Constitutional Court’s ruling of 5 July 2000).

3.4. In this context, it needs to be noted that such situation is possible, where a person acquired property knowing or having to know that the person from whom such property is acquired does not have the right to transfer that property to ownership. Such acquisition of property does not create the rights of ownership to its acquirer. Taking account of the said fact, it needs to be noted that the Constitution does not defend also the rights of such person, who acquires property which has been lost by the owner due to a crime committed by another person (other persons), and he knows or has to know about it, i.e. he acquires the property while behaving not in good faith and unlawfully.

Also such situation is possible, where a person, who seeks to acquire property lawfully, acquires the property which has been lost by the owner due to a crime committed by another person (other persons) while the person, when acquiring it, did not know that and could not know that. In the context of the constitutional justice case at issue, it needs to be noted that even in such case when a person acquires property without knowing or without being able to know that the owner lost it due to a crime committed by another person (other persons), the acquisition of such property may not be treated in itself as creating the rights of ownership to the acquirer of the property. As the Constitutional Court has held more than once, no right can appear on the grounds of unlawfulness.

3.5. While regulating the protection of the rights of ownership, the legislature must ensure a balance of values defended in and protected by the Constitution. The fact that the rights of ownership of the owner who has lost his property due to a crime committed by another person (other persons) must be defended does not mean that one also does not have to defend the rights of such a person who sought to acquire property lawfully and in good faith but who acquired it without knowing that the owner had lost that property due to a crime committed by another person (other persons). The requirement to defend the rights of such person stems from the Constitution, inter alia, the constitutional principle of a state under the rule of law and the constitutional principle of compensation for damage which is consolidated in Article 30 of the Constitution. This constitutional principle is inseparable from the principle of justice entrenched in the Constitution: all the necessary legal preconditions must be created by law in order to justly compensate for the inflicted damage (the Constitutional Court’s ruling of 19 August 2006).

The requirement to defend the rights of a person, who acquired property in good faith which had been lost by the owner due to a crime committed by another person (other persons) stems from Article 46 of the Constitution, inter alia, Paragraph 1 thereof, which also consolidates freedom of individual economic activity and initiative which imply freedom of concluding agreements.

3.6. Under Paragraph 3 of Article 23 of the Constitution, property may be taken over from the owner only when it is necessary for the needs of society and when it is justly compensated for; the property can be taken over for the needs of society where it is justly compensated for only according to the procedure established by law. As the Constitutional Court has held, Paragraph 3 of Article 23 of the Constitution indicates the needs of society, for which property may be seized according to the procedure established by law and must be adequately compensated for. The said needs are interests of either the whole or part of society. The state, while implementing its functions, is constitutionally obligated to secure and satisfy such interests. When property is seized for the needs of society, one must strive for the balance between various legitimate interests of society and its members. The needs of society, for which property is seized, are always particular and clearly expressed needs of society for a concrete object of property. It is permitted to seize property (by adequately compensating for) only for such public needs which would not be objectively met if a certain concrete object of property were not seized. The person whose property is being seized for the needs of society has the right to demand that the established compensation be equivalent in value for the property seized (the Constitutional Court’s rulings of 2 April 2001, 4 March 2003, and 20 May 2008).

In the context of the constitutional justice case at issue it needs to be noted that the imperatives which stem from Paragraph 3 of Article 23 of the Constitution are not applied for the seizing of property from its owner in such cases when the owner retrieves the property lost due to a crime committed by another person (other persons).

3.7. The provisions of Article 23 of the Constitution guarantee the protection of property for all its owners, i.e. natural persons, legal persons, municipalities and the state (the Constitutional Court’s ruling of 27 May 2002). Therefore, under the Constitution, laws have to protect the rights of ownership of all the owners, inter alia, including the right of the state (as the organisation of the entire society).

Under the Constitution, the state is a subject of the right of ownership (the Constitutional Court’s rulings of 27 May 2002 and 30 September 2003). The Constitutional Court has held more than once that the state is the organisation of the entire society. While discharging its functions, the state must act in the interests of society (the Constitutional Court’s rulings of 4 March 2003 and 13 December 2004).

The property that belongs to the state by right of ownership has to be possessed in such a way that it would serve the common welfare of the nation and the general interest of the whole society. State-owned property is one of the means for guaranteeing the public interest, and social harmony. Institutions of state authority and other state institutions which are empowered to adopt decisions concerning the possession, use and disposal of the property which belongs to the state by right of ownership, are not themselves the owners of that property—it belongs to the entire state. Therefore, all state institutions which have the powers to adopt decisions concerning the possession, use and disposal of the property that belongs to the state by right of ownership, must observe the norms and principles of the Constitution (the Constitutional Court’s ruling of 30 September 2003).

It needs to be noted that state institutions, while adopting decisions regarding possession, use and disposal of property which belongs to the state by right of ownership, must follow the norms and principles of the Constitution and under no circumstances may they act ultra vires, i.e. by exceeding their powers. The ultra vires acting by state institutions or officials may not be identified, without reservations, with the acting by the state itself. In the context of the constitutional justice case at issue it needs to be noted that if state officials, when acting ultra vires, commit a crime, it does not mean that such their criminal deed may be identified with action (failure to act) of the state itself and the state, as the owner, may not retrieve the property which has been lost due to a crime committed by a state official.

It also needs to be noted that in the cases when damage was inflicted upon a person by unlawful actions of the state institutions or actions of the officials, this person, under the Constitution, has the right to claim for just compensation for this damage in court.

As the Constitutional Court held in its ruling of 19 August 2006, if the law, let alone other legal act, established such legal regulation whereby the state would fully or partially avoid the duty to justly compensate for material and/or moral damage inflicted by unlawful actions of state institution or officials, it would mean not only that the constitutional concept of compensation for damage is disregarded and that this is not line with the Constitution (inter alia, Paragraph 2 of Article 30 thereof), but it would also undermine the raison d’être of the state itself, as the common good of the whole society.

In this context it needs to be noted that the situations may occur when the state for certain reasons temporarily in fact possesses and uses the property which does not belong to it by right of ownership (the Constitutional Court’s ruling of 30 September 2003). The Constitutional Court has held in its acts more than once that on the grounds of arbitrary acts of the occupation government could not appear, nor did appear any lawful state or public property, since no law (right) can appear on the basis of unlawfulness, thus, the property seized from the people in such a manner should be regarded only as property which is in fact possessed by the state. In such a situation, where the state in fact temporarily possesses and uses the property which does not belong to it by right of ownership, the said property must also be possessed and used by heeding the same constitutional requirements as in the possession and usage of property which belongs to the state by right of ownership (the Constitutional Court’s rulings of 30 September 2003 and 5 July 2007). In this case the guarantees of the protection of the right of ownership which stem from Article 23 of the Constitution are also applied.

4. Paragraph 1 of Article 29 of the Constitution provides: “All persons shall be equal before the law, the court, and other State institutions and officials.”

The Constitutional Court has held in its acts more than once that the constitutional principle of the equality of persons before the law consolidates formal equality of all persons, that this principle includes the obligation to legally assess homogeneous facts in the same manner and prohibits any arbitrary assessment of essentially the same facts in a different manner, that it does not permit any discrimination of persons or granting them privileges, however, it does not deny the possibility of establishing, by means of a law, different (differentiated) legal regulation with regard to persons of certain categories who are in different situations. The constitutional principle of the equality of persons does not deny the possibility of treating persons differently by taking account of their status and situation. The problem of the equality of persons in laws may not be properly decided in each situation without assessing whether the peculiarities of legal regulation with regard to them are established reasonably (the Constitutional Court’s rulings of 13 November 1997, 23 October 2002, and 30 June 2008).

II

On the compliance of Paragraph 2 of Article 4.96 of the Civil Code with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law.

1. It has been mentioned that the Constitutional Court is requested to investigate the compliance of Paragraph 2 of Article 4.96 of the Civil Code, in which it is prescribed that the immovable item may not be demanded and obtained from an acquirer in good faith with the exception of cases when the owner had lost such item due to a crime committed by other persons, with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law.

2. On 18 July 2000, the Seimas adopted the Republic of Lithuania’s Law on the Confirmation, Entry into Effect and Implementation of the Civil Code by Article 1 of which it confirmed a new Civil Code. In Article 2 of this law, it was prescribed that “the Civil Code shall come into effect as from 1 July 2001 with the exception of those provisions of the Code, the terms of coming into effect of which are established by this law.” The specified reservation “with the exception of those provisions of the Code, the terms of coming into effect of which are established by this law” did not include Article 4.96 of the Civil Code, inter alia, Paragraph 2 thereof impugned by the petitioners. Thus, the provision of the Civil Code which is impugned by the petitioners came into effect on 1 July 2001.

Article 4.96 titled “Demanding and Obtaining an Item from an Acquirer in Good Faith” of the Civil Code provides:

1. If a movable item was acquired upon payment from a person who had no right to transfer this property, and the acquirer did not and could not know this (acquirer in good faith), the owner shall have the right to demand and obtain the item from the acquirer only if the item belongs to the owner or to a person to whom the owner had given it into possession, if the item was lost or stolen from one of these, or if it stopped being in their possession against their will. The owner may claim these demands within three years from the moment of the loss of the item.

2. An immovable item may not be demanded and obtained from an acquirer in good faith with the exception of cases when the owner has lost such item due to a crime committed by other persons.

3. If an item was acquired without recompense from a person who had no right to transfer its ownership, the owner shall have the right to demand and obtain the item in all cases. This rule shall apply to movable as well as immovable items.

4. The rules of this article shall not apply when the item was sold or otherwise transferred in compliance with a procedure for the enforcement of court decisions.”

Even though the Civil Code has been amended and supplemented more than once, Article 4.96 thereof, inter alia, the impugned Paragraph 2 of the same article, has not been amended or supplemented.

3. The Civil Code, inter alia, Article 4.96 thereof, Paragraph 2 of which is impugned by the petitioners, consolidates the institute of vindication—the requirement for the owner who does not possess his item to return the item which is possessed unlawfully—which was known as far back as in Roman Law. Borrowing the Roman Law, this institute, as one of the institutes of defence of the rights of the owner, became naturalised also in the civil law of other states (such as France, Italy, etc.). This institute was also known in the civil law of the interwar Lithuania.

4. The legal regulation impugned by the petitioner which is designed to defend the rights of the owner when he has lost property due to a crime committed by other persons, should be construed, in a systemic manner, in the context of the corresponding provisions of the Civil Code.

4.1. Article 4.95 of the Civil Code provides that the owner shall have the right to demand and obtain an item from the extraneous unlawful possession. Article 4.96 of the Civil Code establishes the conditions under which the owner has the right to demand and obtain his item from the extraneous unlawful possession when the acquirer of such item is in good faith. Under the legal regulation established in Paragraphs 1 and 2 of this article which consolidated the institute of limited vindication, an item (movable and immovable) shall be returned to the owner from the acquirer in good faith only in certain cases. Under Paragraph 3 of Article 4.96 of the Civil Code, if an item was acquired without recompense from a person who had no right to transfer its ownership, the owner shall have the right to demand and obtain the item in all cases, i.e. this paragraph consolidates unlimited vindication.

Paragraph 2 of Article 4.96 of the Civil Code, whose compliance with the Constitution is doubted by the petitioners, consolidates the institute of limited vindication. Under Paragraph 2 of Article 4.96 of the Civil Code, an immovable item may be demanded and obtained from an acquirer in good faith if the owner had lost such item due to a crime committed by other persons.

4.2. While construing the impugned legal regulation in the context of this constitutional justice case, it is important to reveal the concepts of the owner and the acquirer in good faith according to the Civil Code.

4.2.1. The concept of the owner may be revealed in various aspects (the owner as a holder of the right of ownership and as an acquirer of the right of ownership) by construing the legal regulation consolidated in most articles (paragraphs thereof) of the Civil Code, inter alia, Paragraph 1 of Article 4.37, Articles 4.39, 4.47 and 4.48. When the concept of the owner in the context of the constitutional justice case at issue is revealed, i.e. when it is revealed in the aspect of the person who acquires the right of ownership, a person, who lawfully acquired the right of ownership on one of the grounds established in the Civil Code or on the grounds which are not in conflict with this code, is considered to be the owner (Article 4.47 of the Civil Code).

Under Paragraph 1 of Article 4.93 of the Civil Code, the Republic of Lithuania guarantees equal protection of the rights for all owners.

4.2.2. The concept of the owner in good faith is in various aspects revealed in various articles (paragraphs thereof) of the Civil Code, inter alia, Paragraph 3 (“Possession shall be deemed to be in good faith when the person who takes possession is convinced that nobody has more rights to the item that he is taking over than himself”) of Article 4.26 of the same code, Paragraph 1 (“<...> item was acquired upon payment from a person who had no right to transfer this property, and the acquirer did not and could not know this (acquirer in good faith) <...>”) of Article 4.96 of the same code.

4.2.3. Natural and legal persons may be subjects of the right of ownership, inter alia, the state which participates in the civil relations on the same grounds as other participants of these relations (Article 2.36 of the Civil Code).

4.2.4. The grounds for acquisition of the right of ownership are specified in Article 4.47 of the Civil Code (these are, inter alia, contracts and other grounds established by law). Under Paragraph 2 of Article 4.23 of the Civil Code, possession of an item shall be considered to be lawful when the item is acquired on the same grounds as the right of ownership.

Under Paragraph 1 of Article 4.48 of the Civil Code, the right of ownership may be transferred only by the owner or by a person, who has been authorised to do so by the owner. Therefore, in those cases when the item is acquired without the resolve of the owner, save certain cases provided for in the Civil Code (inter alia, when the item has been sold or transferred otherwise in compliance with the procedure for the enforcement of court decisions (Paragraph 4 of Article 4.96 of the Civil Code)), the acquisition of the item does not in itself mean also the appearance of the right of ownership to that item, i.e. the person who acquired that item (acquirer) does not become the owner of that item, but he becomes only the actual possessor of this item.

4.2.5. According to Paragraph 1 Article 4.26 of the Civil Code, possession of an item may be lawful and unlawful. It needs to be noted that the provision “possession of an item shall be considered to be lawful unless the opposite is proven” of Paragraph 2 of Article 4.23 of the Civil Code means the presumption of lawfulness of possession. Possession of an item shall be considered to be lawful when the item is acquired on the same grounds as the right of ownership (Paragraph 2 of Article 4.23 of the Civil Code); possession of an item which was acquired by force, in a clandestine manner or otherwise by violating legal acts shall be considered to be unlawful (Paragraph 3 of Article 4.23 of the Civil Code).

4.3. While construing the impugned legal regulation in a systemic manner in the context of the Civil Code, inter alia, in the context of the aforesaid articles, the conclusion should be drawn that the owner is considered to be a lawful acquirer in good faith, however, the person, even though he was in good faith when he acquired the property that had been lost by the owner due to a crime committed by other persons, is not equated to the owner of that item. Thus, under the Civil Code, the legal status of the owner and that of the acquirer in good faith are not the same.

5. It has been mentioned that, under Paragraph 2 of Article 4.96 of the Civil Code, the immovable item may be demanded and obtained from an acquirer in good faith if the owner had lost such item due to a crime committed by other persons.

The impugned legal regulation should also be construed, inter alia, in the context of the legal regulation established in certain articles (paragraphs thereof) of the Criminal Code of the Republic of Lithuania.

5.1. On 26 September 2000, the Seimas adopted the Republic of Lithuania’s Law on the Confirmation and Entry into Force of the Criminal Code, by Article 1 of which it approved the Criminal Code, and under Article 2 of which, the date of coming into force of the Criminal Code had to be established by means of a separate law. On 29 October 2002, the Seimas adopted the Republic of Lithuania’s Law on the Procedure of the Entry into Effect and Implementation of the Criminal Code as Confirmed by Law No. VIII-1968 of 26 September 2000, the Code of Criminal Procedure, as Confirmed by Law No. IX-785 of 14 March 2002, and the Code of Execution of Punishments as Confirmed by Law No. IX-994 of 27 June 2002. Article 1 of this law prescribed that the new Criminal Code shall become effective as of 1 May 2003; under Paragraph 1 of Article 47, upon coming into effect of the new Criminal Code, the Criminal Code which had been valid until then became null and void.

5.2. Under Article 10 (wording of 26 September 2000) of the Criminal Code, criminal deeds are divided into crimes and criminal offences. At the time of adoption and coming into effect of the Civil Code which includes the provision impugned by the petitioners, the old Criminal Code was in effect, under which, criminal deeds were not divided into crimes and criminal offences—they were called crimes.

In this context it needs to be noted that, as the Constitutional Court has held more than once, crimes are violations of law by which human rights and freedoms as well as other values protected and defended by the Constitution are especially grossly violated, negative impact is made on the living conditions, the subsistence level of people, and by which the fundamentals of life of the state and society are encroached upon (the Constitutional Court’s rulings of 8 May 2000, 29 December 2004 and 16 January 2006). It also needs to be noted that the Constitution does not prevent usage of other words or formulas in laws and other legal acts than those used in the text of the Constitution (the Constitutional Court’s ruling of 16 January 2006). In this context it also needs to be noted that when in laws and other legal acts one uses the words or formulas to describe the same phenomena which are different from those used in the text of the Constitution, it is important not to use them incorrectly thus creating preconditions for negating the particularity of the regulation established in the Constitution.

5.3. Thus, upon coming into effect of the new Criminal Code, the notion “crime” which is used in Paragraph 2 of Article 4.96 of the Civil Code includes both forms of the criminal deed: crimes and criminal offences.

5.4. Under the new Criminal Code, subjects of the criminal liability shall be both natural and legal persons. In this context it needs to be noted that Paragraph 5 (wording of 5 July 2004) of Article 20 of the Criminal Code provides, inter alia, that the state, state and municipal institutions and establishments shall not be liable under this code.

6. It has been mentioned that the doubts of the petitioners regarding the compliance of Paragraph 2 of Article 4.96 of the Civil Code with Article 23 of the Constitution are virtually substantiated by the fact that the acquirer in good faith, who has acquired an item which was lost by the owner due to a crime committed by other persons, according to the petitioners, also becomes an “equal” owner of this item. According to the petitioners, by demanding and obtaining the immovable item from the acquirer in good faith according to Paragraph 2 of Article 4.96 of the Civil Code, the needs of society are not satisfied and the acquirer in good faith is not justly compensated for, therefore, the impugned legal regulation violates the rights of ownership of a person.

7. In this ruling it has been held that Article 23 of the Constitution consolidates the principle of inviolability of property. This principle would be denied if the rights of ownership of the owner would not be defended after the owner lost his property due to a crime committed by another person (other persons). When the owner loses his property due to a crime committed by another person (other persons), it does not mean that he loses the rights of ownership, and it does not mean that a person, who acquired such property, becomes its owner. Under the Constitution, the owner has the right to retrieve his property which has been lost due to a crime committed by another person (other persons); such his right is an important constitutional guarantee of the protection of the rights of ownership. It implies the duty of the legislature to establish such legal regulation which would ensure the defence of the rights of ownership of a person which lost his property due to a crime committed by another person (other persons).

It has also been held that when a person acquires property without knowing or without being able to know that the owner has lost it due to a crime committed by another person (other persons), the acquisition of such property may not be treated in itself as creating the rights of ownership to the acquirer of property.

It has been mentioned that the imperatives which stem from Paragraph 3 of Article 23 of the Constitution are not applied for the seizing of property from its owner in such cases when the owner retrieves the property lost due to a crime committed by another person (other persons).

Thus, by the legal regulation established in Paragraph 2 of Article 4.96 of the Civil Code, under which an immovable item may be obtained from an acquirer in good faith only in the cases when the owner lost such item due to a crime committed by other persons, one does not deviate from the imperatives consolidated in Article 23 of the Constitution.

8. In the context of the constitutional justice case at issue it needs to be noted that in its ruling of 8 April 1997, the Constitutional Court held that, in addition to other things, the fact that Article 143 of the Civil Code prescribes that the owner has the right to demand and obtain the property from its acquirer in good faith providing the owner or another person to whom the owner has transferred it for possession has been lost or seized from either of them or ceased to be possessed irrespective of their will is a universally recognised rule of the protection of the right of ownership.

It needs to be noted that the legal regulation established in Paragraph 1 of Article 143 of the Civil Code which was effective until 1 July 2001 and the legal regulation established in Article 4.96 of the Civil Code which includes the provision impugned by the petitioners are analogous in the aspect that under certain conditions established in the Civil Code the property could be demanded and obtained from the acquirer in good faith.

9. Taking account of the arguments set forth, the conclusion should be drawn that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 of the Constitution.

10. It has been mentioned that the doubts of the petitioners regarding the compliance of the impugned legal regulation with Paragraph 1 of Article 29 of the Constitution are virtually substantiated by the fact that the owner of the item and the acquirer in good faith are equally not liable for the crime due to which the owner has lost the item; the item may be demanded and obtained from the acquirer in good faith regardless of his legitimate expectations, possible improvements of the item, etc. Therefore, the situation of the two “equal” owners is different, and by such legal regulation one violates the constitutional principle of all persons’ equality before the law.

11. The Constitutional Court has held in its acts more than once that the constitutional principle of the equality of persons before the law which is consolidated in Paragraph 1 of Article 29 of the Constitution establishes formal equality of all persons before the law, that this principle includes the obligation to legally assess homogeneous facts in the same manner and prohibits any arbitrary assessment of essentially the same facts in a different manner, that it does not permit any discrimination of persons or granting them privileges, however, it does not deny the possibility of establishing, by means of a law, different (differentiated) legal regulation with regard to persons of certain categories who are in different situations. The constitutional principle of the equality of persons does not deny the possibility of treating persons differently by taking account of their status and situation.

12. Taking account of the fact that the legal status of the owner and the acquirer in good faith is not the same, and that they are in different positions, the conclusion should be drawn that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Paragraph 1 of Article 29 of the Constitution.

13. Having held that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution, it needs also to be held that the legal regulation established in Paragraph 2 of Article 4.96 of the Civil Code does not violate the legitimate expectations of the acquirer in good faith—one of the essential elements of the principle of a state under the rule of law—either.

Therefore, while taking account of the arguments set forth, the conclusion should be drawn that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with the constitutional principle of a state under the rule of law as well.

14. Having held in this constitutional justice case that Paragraph 2 of Article 4.96 of the Civil Code is not in conflict with Article 23 and Paragraph 1 of Article 29 of the Constitution and with the constitutional principle of a state under the rule of law, it should be noted that, under the Constitution, the rights of also such a person, who sought to acquire property lawfully and in good faith, but has acquired it without knowing that the owner had lost that property due to a crime committed by another person (other persons), must be defended. It has been mentioned that the requirement to defend the rights of such person stems from the Constitution, inter alia, the constitutional principle of a state under the rule of law, the constitutional principle of compensation for damage inflicted upon a person which is consolidated in Article 30 of the Constitution, and Article 46 of the Constitution.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

To recognise that Paragraph 2 (Official Gazette Valstybės žinios, 2000, No. 74-2262) of Article 4.96 of the Civil Code of the Republic of Lithuania is not in conflict with the Constitution of the Republic of Lithuania.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is pronounced in the name of the Republic of Lithuania.

Justices of the Constitutional Court: Armanas Abramavičius
                                                                      Toma Birmontienė
                                                                      Pranas Kuconis
                                                                      Kęstutis Lapinskas
                                                                      Zenonas Namavičius
                                                                      Ramutė Ruškytė
                                                                      Egidijus Šileikis
                                                                      Algirdas Taminskas
                                                                      Romualdas Kęstutis Urbaitis