Unauthorized disposal of a house for sale, three steps to bona fide acquisition.

[2] Compiled from: Shandong High Court
 
Case review
Mr. Zhou and Ms. Luo were husband and wife. On February 8, 2012, Mr. Zhou and Ms. Luo went through divorce procedures at the Civil Affairs Bureau, agreeing that a house purchased during the existence of their marriage would belong to Ms. Luo. The house remained registered under Mr. Zhou’s name, and no property transfer procedures were completed.

 
 

On January 21, 2014, Ms. Luo died suddenly from an illness. On July 6, 2015, Mr. Zhou sold the disputed property to Tang Mougang and entered into a real estate sales contract, which has been fully performed, and ownership of the property has been transferred to Tang Mougang. Zhou Mouli, the daughter of Mr. Zhou and Ms. Luo, filed a lawsuit with the court on the grounds that the disputed property belonged to her mother, Ms. Luo, and that upon her mother's death, the property should belong to her personally, requesting that Tang Mougang be ordered to return the property.
 
 
[1] Court Opinion
The court held that the house sold by Zhou to Tang Mougang was owned by the plaintiff's mother Luo, and the defendant's sale constituted unauthorized disposition. However, in this case, the property title of the disputed house was registered under the defendant Zhou's name, and Tang Mougang had reason to believe that Zhou had ownership and disposal rights over the house. Moreover, the sale price was not lower than the market price, and the house had been legally registered under the third party Tang Mougang's name, meeting the requirements for bona fide acquisition. Tang Mougang lawfully acquired ownership of the house in good faith.
 
Ultimately, the court dismissed the plaintiff Zhou Mouli's claim.
 
 
Civil Code of the People's Republic of China
Article 311  
If an unauthorized person transfers immovable or movable property to a transferee, the owner has the right to recover it; unless otherwise provided by law, the transferee acquires ownership of the immovable or movable property if the following conditions are met:
(1) The transferee was in good faith at the time of the transfer of the immovable or movable property;
(2) Transfer at a reasonable price;
(3) The immovable or movable property transferred has been registered as required by law, or if registration is not required, has been delivered to the transferee.
If the transferee acquires ownership of the immovable or movable property in accordance with the preceding paragraph, the original owner has the right to claim damages from the person without the right to dispose.
Where a party acquires other real rights in good faith, the provisions of the preceding two paragraphs shall apply by reference.
 
Article 313  
After a bona fide transferee acquires movable property, the original rights on such movable property are extinguished, unless the bona fide transferee knew or should have known of such rights at the time of the transfer.

 

 
[1] The author's perspective
Bona fide acquisition refers to a situation in the transfer of movable or immovable property where the transferor is not the owner of the property, but the transferee has reasonable grounds to believe that the transferor has the right to dispose of the property, pays a reasonable price, and the movable property has been delivered or the immovable property has been registered for transfer, the transferee may still acquire ownership of the property. Bona fide acquisition applies to both movable and immovable property. This system is based on the public trust in possession and registration: for movable property, the possessor can be trusted as the owner; for immovable property, the registered right holder can be trusted as the owner. Transactions conducted by the transferee based on such trust in possession or registration should be protected, even if the transferor is not actually the owner, the bona fide transferee may still acquire ownership. To some extent, bona fide acquisition restricts ownership, as the original owner cannot recover the property from the bona fide transferee, but it is necessary to maintain transaction security and reduce transaction costs.
 
Good faith acquisition is a special circumstance of acquiring ownership and a restriction on ownership. Therefore, the law has clearly defined the constitutive requirements for good faith acquisition, and only when the conditions stipulated by law are met can it be determined that good faith acquisition is constituted. Article 311 of the Civil Code stipulates the conditions for good faith acquisition: first, the transferee must be in good faith and unaware that the transferor has no right to dispose of the property. Second, the transferee has paid a reasonable price. Third, the transferred property, if registration is required, has been registered, and if registration is not required, has been delivered to the transferee. All three conditions must be met simultaneously; otherwise, good faith acquisition is not constituted.