Judgement of TS dated 14th September 2007

The High Court rejected the appeal by the commercial entity Betacar, SA who appealed against a previous judgement given by the Provincial Court of Palma, Mallorca involving a double sale of real estate.

The appeal in the High Court had disputed the judgements in the courts of first instance and in the Provincial Court of Palma, Mallorca, both of which had declared in favour of the existence of the first sale and purchase agreement entered into by the commercial company Ibiza MM22, SL. The court ruled that there existed an obligation on the selling party to accept payment of the outstanding purchase price from Ibiza MM22, SL and in doing so grant the corresponding sale and purchase agreement deed, as opposed to fulfilling a later agreement with Betacar, SA which the seller favoured.

By means of a private contract, Mrs Isabel sold to Ibiza MM22, SL a property estate that was registered with the Land Registry of Palma. The parties undertook to grant a public deed of sale within 160 days following the date of signing the private contract, at the moment of which the purchaser would then receive actual possession of the property estate. Due to the delay of one of the payments the Seller appeared before a notary to terminate the contract on the grounds of lack of payment of part of the purchase price. After the outstanding sum was recorded by the notary, Ibiza MM22, SL offered the sum in full to the Seller which the Seller in turn rejected alleging that it had already effectively terminated the contract. The Seller did not adhere to the contractual requirement to grant the sale and purchase agreement deed with Ibiza MM22, SL and a few days later sold said property estate to Betacar, SA whom through the seller knew prior to entering into the agreement of the existence of the private contract of sale and purchase signed by Ibiza MM22, SL, and registered the sale and purchase agreement at the Land Registry.

The judgement at first instance and in the Provincial Court of Appeal considered the allegations presented by Ibiza MM22, SL and declared that: i) by means of private contract, the company had acquired the estate and the seller was obliged to accept receipt of the full payment and to grant the sale and purchase agreement deed and ii) that the sale granted by the seller in favour of Betacar, SA is not valid due to the absence of the property being sold and/or the sale of said property belonging to someone else and in doing so declaring the validity of sale in favour of the Claimant and ordering the seller to pay compensation in favour of Ibiza MM22, SL in addition to any costs consequential from the process.

In the occurrence of a double sale the High Court established that even though in the private contract of sale and purchase signed with Ibiza MM22, SL it was established that 'the purchaser receives possession of the property estate in the moment in which the public deed is signed", the "ratio dicidendi" of the judgement is not to apply the preference established in article 1473.2 of the CC for the assumptions of double sale of the real estate, given that the third party had known of the existence of the private contract of sale and purchase signed with Ibiza MM22, SL and therefore "collaborated in the unjust manoeuvre, or in the least knew of it and therefore does not deserve protection."

In relation to the breach of the principle of good faith, recognised by article 1473.2 of the CC, the High Court establishes that the knowledge of the third party that existed of the prior sale and purchase agreement means that a lack of good faith in this case does not give rise to the application of the abovementioned article 1473.2.

Judgement on TS dated 4th of July 2007

The controversy in this judgement lies in the preference of third party owners in the situation where real estate is subject to a seizure order.

Faced with a seizure order of real estate property in favour of Banco Exterior de España, SA, of property belonging to the commercial company Club Beach Inmobiliaria, SA there was an allegation of the existence a third party right and on such grounds it was requested that the pre-emptive registration of the seizure order over the property be removed. The court at first instance no.2 of Las Palmas passed the judgement in favour of the Claimant and demanded the lifting of the seizure order over the property.

The Provincial Court of Las Palmas of Gran Canaria who confirmed the judgement at first instance rejected the intervening appeal by Banco Exterior de España.

Banco Exterior de España, SA further appealed in the high court alleging an infraction of the jurisprudence doctrine on the basis that the valid ownership of title was not in existence at the date of bringing the claim for seizure, and that it is only the title of ownership at the time of the seizure order that is legitimate to give rise to a right of the third party and not the title of ownership after the seizure order.

In view of this situation, the High Court passed a judgment in favour of the financial company claiming that the real estate did not belong to the company subject to the seizure order and that the third party right was initiated by a distinct company from the company which acquired the real estate after the date on which the seizure order was made.

In conformity with jurisprudence the seizure order of real estate is effective from the date it is executed and not from the date it was later filed with the registry. As such, the High Court ruled that what is relevant and to be considered when receiving the demands of a third party is not only if the property belongs to the claimant but if at the same time the third party can prove it has a right over the property. The burden is on the third party to prove the existence of the right of ownership in its favour at the date of the seizure order, without it being sufficient to demonstrate the existence of the right of ownership in favour of the prior owner.

Finally it was determined that to release the seizure order over the property which had been previously granted on the basis that those goods belong not to the executor but to the third party, that this third party must be able to evidence that the goods were legally in their possession prior to the time in which they were subject to the seizure order.

Judgement of the DGRN dated 21st March 2007

In this judgement the General Body of Registries and Notaries analysed the provisions of article 19 of Law 38/1999 of the Building Order and the obligation that the amount covered by the ten-year insurance corresponds to the value of the premises resulting from new work undertaken.

In this case the Land Registry rejected the registration of a deed declaring the termination of new work claiming that the amount insured against in the ten-year insurance policy, which formed part of the deed, was inferior to the value of the new work declared.

Following this, the notary authorising the deed lodged an appeal against the qualification of the registrar claiming that there did not exist any obligation by law requiring the amount insured in a 10-year insurance policy to coincide with the increased value of the property deriving from the new work.

The General Body of Registries and Notaries has resolved this question, indicating that the requirement of the ten-year insurance is required to comply not only with the principle established in article 19 of the Building Order but also with article 20 of that law and the resolution of this General Body of Registries and Notaries dated 3 December 2003 that together establishes which is the minimum sum of the capital to be insured, the cost of carrying out the work which includes any professional fees that were incurred in doing so.

In relation to the obligation that the value of the ten-year insurance policy had to be equivalent to the additional value of the new work declared, the General Body of Registries and Notaries establishes that the concepts of cost of execution and value of the new work are not equivalent documents. The final cost of carrying out the work, including those professional fees incurred in doing so, must refer to the resources employed in carrying out the works and the total amount is the one that has to be covered by the ten-year insurance. Whilst the concept of the value of the additional work completed is a wider concept in that it includes not only the costs of carrying out the works but also other aspects, fundamentally the increase of value added by the construction, which is not a figure derived as a direct consequence of the material cost of carrying out the work.

In virtue of the above, it is the final cost of carrying out the work and not its value that is to be the object of the ten-year insurance resolving the judgement against the opinion of the registrar and in favour of the claimant.

Judgement of the DRGN dated 29th June 2007

The General Body of Registries and Notaries analysed the overriding priority of details contained in the Cadastral Reference in the event where a discrepancy exists between the surface area of real estate that is detailed in a deed and the details included in the Cadastral Reference.

After the grant of the deed of sale and purchase of real estate, the registrar of the property proceeded to register the same without registering the Cadastral Reference claiming not to register said reference as a consequence of doubts had about the data provided by said reference and the status of the estate (articles 41,45a and 48.2 of the RDI 1/2004 dated 5 March). In conformity with these articles the corrections are not to be registered if reasonable doubts exist of the registrar as to the identity of the estate or the cadastral modifications.

In this situation the buyer of the estate, the company Rio Rita, SL lodged an appeal against the qualification of the registrar claiming that, amongst other things, they had submitted the Cadastral Reference together with technical reports accrediting the boundaries of the estate.

The General Body of Registries and Notaries considered the appeal declaring that the mere existence of doubt by the registrar, all the more when these doubts are dispelled in the appeal, is not sufficient to prevent the reflection of the Cadastral Reference sufficiently evidenced by the document provided.