Generally, the sale of stolen goods does not effectively transfer ownership. However, under the market overt rule, if goods were openly sold in designated markets between sunrise and sunset, its source could not be questioned, and effective title of ownership was conveyed. This article will explore this principle further, with reference to Jewish law and Israeli law, focusing primarily on the two main facets of the market overt rule in Israeli law: the requirement of registration and acquisition in good faith.
Jewish Law
The principle originated in Jewish law centuries ago. Torah law states that anytime an object comes into someone’s possession, however, received, they are obligated to return it to the identified owner.
However, as in civil law, Jewish law makes certain provisions for objects acquired in good faith in an open marketplace. The Talmudic sages established a regulation called takanat hashuk, that enables the recovery of lost property whilst preventing a person from suffering a loss if they purchase merchandise in good faith. Good faith applies if the person lacks knowledge that the goods are stolen, and they are not reasonably expected to have such knowledge. Takanat hashuk ensures that the inadvertent purchase of a stolen object does not result in a complete loss. It, therefore, does not affect people’s willingness to buy and allows general commerce to continue to thrive.
When a buyer purchases merchandise in good faith, and upon receiving it they discover that it is stolen, the buyer is still obligated to return the lost object, but the original owner must reimburse the buyer for the price of the purchase.
The requirement for the payment is to stimulate market activity; the reason behind the return is that the original owner values the object especially highly. This is economically justified because the fact that the original owner abstained from selling the object, even though he could have recovered the same amount of money as the thief, demonstrates that he values it more highly than the thief did and more than the purchaser does, as far as we are aware. From a psychological standpoint, it is commonly believed that people become increasingly attached to their property over time.
The market overt rule is subject to multiple conditions. Firstly, if the original owner is considered to have given up hope of ever retrieving the object, the subsequent owner may attain full ownership, otherwise known in secular law as “clear title”. Secondly, according to the Rambam, if the seller has a shady reputation which can easily be ascertained, the buyer’s acquisition has not been made in good faith; the buyer may be obligated to return the stolen item(s). Rabbi Yitzchak ben Shmuel disagrees with the Rambam’s view, affirming that even if the seller is a known thief, the buyer should be reimbursed for the return of the goods unless he was aware that the object he bought was stolen.
Israeli Law
The Israeli law on the market overt rule contains portions of the Jewish law approach, but also introduced various regulations that change the picture.
The Fundamentals of Law 1980 established that if a new legal question arises where no solution can be found in legislation, case law, or by way of analogy, the court should respond in light of the principles of freedom, justice, fairness, and peace of Jewish law and Israeli heritage.
In the application of this legal source, Israeli land law has the requirements of registration and acquisition in good faith, in order for property ownership rights to be legally transferred to the buyer.
The requirement of registration
Israeli land law upholds that a transaction in immovable property requires registration in order for ownership to be obtained by the purchaser. The time of registration is regarded as the time at which the Registrar approves the transaction for registration.
If a right to a property has been bought as stated in section 508, the previous owner of the right is allowed, within a year from the date of the purchase, to buy it from the buyer or whoever bought it from the buyer without any payment, only paying its value at the time of the purchase, unless during this time there has been a serious change in its value. The buyer of this right according to this section will pay back the buyer regarding any other expenses he had while purchasing the right.
The person registered by the Land Registry as having a right in the property may transfer it to the purchaser as long as the right is registered in the registry in the name of the purchaser.
The main function of registration is to provide clear and accurate information regarding the owner of the property, and how free the owner is to confer his rights. A buyer is expected to examine the registration books in the Land Registry before entering into a transaction, and it is their fault if they fail to do so and are therefore deprived of the property right that they sought to purchase.
Acquisition in good faith
In a case where a person acquires a right in property and relies in good faith on the registration, their right is valid even if the registration is incorrect.
The purchaser is not required to investigate details, as this may reveal important facts that change the situation and are not obvious on the surface. Good faith does not require a “degree of piety”; if we raise the threshold of the degree of good faith required too high, we are likely to harm the daily trading life, which is the essence of a vibrant and thriving economy.
The test for good faith is a subjective one. As soon as a “red light” comes on in the buyer’s head due to the circumstances of the case or various details they discover during their examination, they will not be considered to have acted in good faith unless they properly examine the seller’s property rights status. The more warning signs apparent to the buyer, the higher the threshold for the good-faith test.
By: Ayal Doctors