A car was stolen from the Yunost Hotel car park. The hotel has compensated the victim for damage by paying the cost of the car to him. Afterwards, the car, which was reported missing, was found and was parked at the police station. Since the car could be returned to its owner, the hotel required the owner to return the paid damage compensation. It was found out that the car owner's location is unknown, and the car was sold to a third party by a used car shop. Since the hotel is in a difficult financial situation, can the paid damage compensation be returned and what should be done for it?

Certainly, the hotel has the right to get the paid money back. In this case we can speak about liability for compensation of damage from unjust enrichment, where a debtor is the car owner, and the hotel is a creditor. Enrichment means money had and received without legal grounds, though in our case on legal grounds but which afterwards lapsed. Damage compensation is a lawful way of getting money. Since the victim's assets can be made up by returning the car, the legal grounds for receiving and having money as damage compensation lapse. The car owner unlawfully keeps what had lost its effect. More over, because of the damage compensation the hotel found itself in a difficult financial situation which is directly connected with the actions which resulted in unjust enrichment. For unjust enrichment liability it does not matter whether unjust enrichment is the result of behavior of the victim, the enriched or the third parties. The behavior of the car buyer (lawful or unlawful) or the nature of legal facts that caused this liability (initial damage compensation) also do not matter.

Unjust enrichment liability arises in respect of returning the paid amounts, including interest added on the basis of the average bank interest rate used at the location of the creditor to the total amount of the paid money when the car owner learned or had learned that the car was found. The damage compensation does not result in transfer of the ownership of the car. The ownership is not also transferred if it is impossible to locate the owner or if he abandoned his property until its ownership is lawfully acquired by a third party. In this case, the lawfulness of selling the car by a used car shop can be doubted because legalization of a stolen car could take place. First, a car is subject to mandatory registration with the traffic police. The traffic police can register a car under "new license plates" for various reasons on the basis of a sale contract with a bona fide or a mala fide acquirer when it is impossible (undesirable) to prove or deny registration. As a rule, denials are appealed at court and the court awards registration. On which grounds can the court adopt a decision? We must admit that at present there are no regulations to decide the fate of the car found by the traffic police. In practice, the traffic police transfer the car to a factual (title) owner using a "deposit" on the basis of which the factual acquirer (bona fide or mala fide) can go to court and require recognition of his ownership.

The first basis on which the court can adopt its decision is art. 226 of the RF CC ("Chattels Abandoned by the Owner"). The court states the fact of transfer of ownership of an "abandoned" chattel the right to which, as the court assumes, was waived by its owner. However, in our case a positive decision of the court cannot be lawful since it is difficult to prove that the car was abandoned voluntarily. First, at the time of the trial it may be reported missing. Second, the lawful owner did not annul the registration of the car with the traffic police as is prescribed by the law. Pursuant to art. 236 of the RF CC, as we know, waiver of a chattel can be effected by the actions undertaken by an owner that demonstrate his abatement from ownership, use and disposal of the chattel without intentions to reserve any rights to it. However, the lawful owner did not undertake any such actions since he did not declare abandonment of the car or refuse its acceptance, leaving alone the absence of actions to annul the registration of the car with the traffic police. Thus, art. 226 of the RF CC on acquisition of an abandoned chattel cannot be applied, and the court ruling on transfer of the car to a new owner does not conform with the law. These conclusions are also applicable to cases connected with "trover" or "acquisitive prescription".

The second basis on which the court can adopt its decision is the property rights proved by a sale contract. Once the sale contract is effected, the car must be registered with the traffic police. A sale contract alone is not sufficient for registration. Identification and technical specifications of the car must be validated (certificate, chassis, information on manufacturer). Traffic police must not only validate identification features but also check whether a car is reported missing. In our case the car was reported missing, and other person's name was indicated in the certificate. Based on these facts the car could not be registered. On the basis of the facts found during the check a criminal case on forgery must have been initiated (car certificate). The car must have been detained until the situation is cleared. Even if no criminal actions are found in the car acquirer's behavior, the car cannot be registered. If the car was registered, the registration was carried out against the rules, i.e. unlawfully (probably the car was registered on the grounds of presumption of bona fides and reasonableness of the acquirer, which could not be applied if the car was reported missing). As far as the court decision on transfer of the ownership on the grounds of presumption of bona fides is concerned, if implication of the acquirer cannot be established, it does not conform with the law since it is possible to establish, based on the study by experts, that identification specifications in the contract are different and specifications on the car body were amended. On the grounds of annulment of the court decision, the unlawful registration of the car by the traffic police can be recalled.

Thus, even if the car was acquired by a third party, it is possible to demand return of the paid compensation on account of damage compensation by recognizing the car sale contract null and void and reclaiming it from unlawful use by another party. Use of the car by a new owner is unlawful even if he acquired the chattel bona fide and did not know that the used car shop did not have the right to alienate the car. It is sufficient that the car was stolen disregarding whether it was put in storage at the guarded car park where it was stolen or whether it was stolen directly from the owner. In this case priority is given to a lawful owner whose property disappeared against his will. A subsequent owner is entitled to claim the return of the paid money and damage compensation by the used car shop. The used car shop is involved in the case as a buyer who has to prove that the acquirer knew and must have known that the car was sold unlawfully. The involvement of the used car shop in the case can have a prejudicial meaning if a regressive claim is laid.

Since the initial owner cannot be located, the Yunost Hotel is entitled to enter the case as a third party being a creditor in liability for compensation of damage in respect of unjust enrichment and laying a claim for the disputable chattel (car). Third parties can enter the case on the grounds of an individual claim in respect of the subject of the dispute.

Thus, the Yunost Hotel is entitled to mount a suit to declare the sale contract void, to assign the ownership of the car to the initial owner and to sell it forcibly on account of compensation of the paid amounts under the liability for unjust enrichment. Once the Yunost Hotel declares its entering the case as the third party, the claim may include the state duty, travelling expenses and fees for legal services. In order to avoid the sale procedure at the request of the interested party the court can consider transferring the ownership of the car to the creditor at its assessed cost without taking into account additional expenses for organizing the sale on account of returning property unjustly gained. If a judge in his decision denies the Yunost Hotel's claim, it cannot be appealed. In this situation the only way is to defend the right under general conditions, i.e. to lay a claim and initiate a new suit to claim damage from unjust enrichment.