Is it possible to exercise a right of retention on an item that the debtor does not own?

1. What does the theory say?

1. The right of retention is regulated in Section 151s et seq. of the Civil Code:

1. “A person who is obliged to surrender movable property may retain it in order to secure his or her due monetary claim against the person to whom he or she is otherwise obliged to surrender the property. However, it is not possible to retain property that has been taken arbitrarily or fraudulently.”

1. It follows from the wording of the cited provision that the right of retention may be exercised in respect of an item which the creditor is obliged to surrender to the debtor who has not paid the due claim. However, the Civil Code does not stipulate in any provision that the debtor must also own the item.
2. A. Löwy argues similarly: “The wording of the provision in question does not imply that the movable property retained by the creditor must be owned by the debtor. The law states ‘who is obliged to surrender another person’s movable property in their possession’. The creditor is therefore not obliged to examine whether the movable property he has retained is actually owned by the debtor, just as he is not obliged to examine on what basis the debtor provided him with the property. The question of to whom the property should be surrendered is only relevant upon the extinction of the right of retention, inter alia pursuant to the provision of § 151v.”
3. The Supreme Court of the Czech Republic also argues in its judgment under file number 21 Cdo 2264/2005: “A person who has taken possession of an item under a valid contract or for another legal reason is obliged to return (surrender) it to the person who handed it over to them, unless it has been stipulated (agreed) that the item should be returned (surrendered) to someone else. Therefore, when Section 175(1) of the Civil Code refers to “the person to whom he would otherwise be obliged to surrender the item,” this means the person who handed over the item to the creditor under a valid contract or for another legal reason, or another person to whom it was stipulated (agreed) in a valid contract (other legal reason) that the item would be handed over (delivered) and to whom the creditor would therefore return (deliver) the item if he did not retain it. The law does not require (nor would it be possible) the person obliged to surrender another person’s movable property to assess (examine) who (whether the person who handed over the property or someone else) has ownership or other rights to the property that entitle them to hold and use it; in fulfilling this obligation, they may only rely on the contract or other title on the basis of which they validly (in accordance with the law) took possession of the item. (…) Since the creditor’s right of retention entitles them to retain an item that they would “otherwise” have to return (surrender), it follows, among other things, that in order to answer the question of who is the person to whom he would otherwise be obliged to surrender the item, the decisive factor is the situation at the time when the entitled person (creditor) expressed (manifested) his will to retain the item. Even if the criteria relevant for determining to which person the creditor would otherwise “be obliged to surrender the item” were to change (or could change) in the future, this cannot have any legal significance for the creation of the right of retention; a validly established right of retention as a right in rem to another person’s property remains in effect until it expires in one of the ways specified in Section 180(1) and (2) of the Civil Code.
4. The creditor therefore does not even have to examine whether the debtor owns the item and on what basis he has it in his possession. The essential point is that the creditor has a due claim against the debtor and has an obligation to surrender the item to him.
5. Even if, after exercising the right of retention, the creditor learns that the debtor does not own the item, this does not affect the duration of the right of retention, according to the opinions cited. In this case, too, the creditor may retain the item until the debtor or another person, such as the owner of the retained item, pays the claim.
6. The owner of the item, who is not the debtor, may thus find themselves in a situation where they cannot properly use the item in their possession as a result of another person’s debt. If the debtor refuses to pay the claim or does not have the means to do so, it is possible that the only legal way for the owner of the retained item to regain possession of the retained item is to pay the claim on behalf of the debtor.
7. What a creditor with the ambition to exercise a right of retention is obliged to examine follows from the provisions of Section 151s(2) of the Civil Code:

1. “A person to whom the entitled person instructed, when handing over the item, to dispose of it in a manner incompatible with the exercise of the right of retention does not have a right of retention.”

1. The exclusion of the right of retention may thus arise as a result of the will of the parties, who may agree on this when entering into the obligation. Nota bene, in theory, there is also the opinion that contractual exclusion of the right of retention is not possible, as its legal regulation is of a mandatory nature. We do not agree with this view, as the contractual freedom of the parties must be respected to the fullest extent possible in a modern and legal state. If the parties agree at the negotiating table that the condition for their future cooperation will be the exclusion of the right of retention, we see no reason why the legislator should prevent them from doing so, especially with a provision of a private law nature.
2. In addition to the above, the exclusion of the right of retention may also result from the nature of the matter in cases where the creditor had an obligation to transfer the matter to a third party. Likewise, it is not possible to retain a matter that has been taken fraudulently or arbitrarily, for example, obtained by theft or by taking advantage of a mistake.

1. Are there any opposing views?

1. It should be added that there are also opposing views on whether it is possible to effectively exercise a right of retention on an item that the debtor does not own. According to A. Graban: “It is also necessary to examine the legal title on the basis of which the creditor has the item in his possession. It is not decisive whether the debtor is the owner of the retained item or not. The creditor does not have to know the owner of the item.  I am of the opinion that in the case of stolen property, the creditor could retain it, provided, of course, that he is unaware that it is stolen,   but if the owner demanded its return, he would be obliged to return it. The same applies if an entrepreneur rents a warehouse and stores goods (movable property) obtained from another entrepreneur in this warehouse, e.g. on the basis of a commission contract. If the tenant fails to pay the rent for the warehouse and the goods are removed from the warehouse (Section 672(2) of the Civil Code), the creditor is entitled to retain all goods in the warehouse, regardless of whether they belong to the tenant or to third parties. is entitled to retain all goods located in the warehouse, regardless of whether they belong to the lessee or to third parties.  However, if third parties demand the release of the goods and prove their ownership of the goods, the creditor is  obliged to release them.
2. In other words, even though it is possible to exercise a right of retention on an item that the debtor does not own, if the actual owner of the item begins to demand its return and proves that they are the owner of the item, the creditor should, according to these opinions, return the item to the owner.
3. The counterargument to this view is the idea that the right of retention is a right in rem to another’s property and therefore applies erga omnes (to all). A creditor who has retained an item that does not belong to the debtor would thus, in accordance with the law, acquire a right in rem to another person’s property, which he would otherwise be obliged to return to the debtor, and this right must, by its nature, apply to everyone, including the actual owner of the item. The owner of an item who provides it to another person must expect that this item may be accidentally or intentionally destroyed, lost, or stolen. They must also expect the risk that a right of retention may be exercised in relation to the item in question.
4. If they want to avoid this risk or minimize its harmful consequences, they can do so contractually, for example by agreeing on penalties for breaching the obligation to act in such a way that no lien is exercised on the item, or they may choose not to provide the item to other persons at all.

1. Conclusion

1. In view of the above, it can be concluded that it is possible to exercise a right of retention on an item that the debtor does not own. The creditor is not obliged to investigate who owns the item or on what basis the debtor provided it to them.
2. The question of whether the creditor can continue to exercise the right of retention even after the actual owner of the retained item, who is not the creditor’s debtor, begins to claim the return of the item is problematic.
3. As we have stated, in our opinion, due to the nature of rights in rem and their effect on everyone in conjunction with the wording of Section 151s(1) of the Civil Code, which does not imply that the creditor may exercise the right of retention only on property owned by the debtor, the right of retention also applies to the owner of the item, even if they are not the creditor’s debtor. In other words, in our opinion, the creditor may exercise the right of retention on an item that he is otherwise obliged to return to the debtor, even if the debtor does not own the item, and may continue to retain the item until his claim is duly satisfied (unless the right of retention expires in another way), even if the actual owner begins to claim the return of the item.

¹ LÖWY, Alexandra. § 151s [Authority to detain property]. In: ŠTEVČEK, Marek, DULAK, Anton, BAJÁNKOVÁ, Jana, FEČÍK, Marián, SEDLAČKO, František, TOMAŠOVIČ, Marek et al. Civil Code I. 2nd edition. Prague: C. H. Beck, 2019, p. 1422, marg. no. 4.

² GRABAN, Adrián. [Right of retention] Available at https://docplayer.cz/108095001-Judr-adrian-graban-univerzita-p-j-safarika-pravnicka-fakulta.html and in the Bulletin of the Slovak Bar Association (3/2006)