The Presumption of Good Faith of the Rights in Rem Owner

By rights in rem we refer to those rights that a person has over a thing as a consequence of a legal relationship. (thing “real property”). These rights are characterized for being opposable to any third party. The Mortgage Law lists several rights; mortgage, usufruct, occupancy… But we are going to focus on the property as the “definitive” real right that it is. And, in particular, we proceed to analyze the figure of third party in good faith.

There are multiple examples that can be raised to analyze the third party in good faith, especially from the perspective of the acquirer. Lets think of the case of heirs who, without knowing the existence of co-heirs, sell a property separately and in duplicate. Or, the seller who, knowing of a double and erroneous immatriculation of his property, sells it twice. Or of the property that having been adjudicated in auction, later on a third possessor/acquirer appears.

Let’s see what happens with the third acquirer. Whether or not he can be considered a bona fide third party. That is to say, we will examine what the Law says about who is to be considered a bona fide third party. If the knowledge of the circumstances of the sale defines for the jurisprudence if good faith exists.  All this, studying the treatment that the Civil Code and the Mortgage Law give to the good faith.

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Good faith acquirer definition

The legal encyclopedia tells us that a possessor in good faith is one who believes that his acquisition is free of any defect. It is, therefore, a “psychological state” that the acquirer believes that his acquisition is valid.  On the contrary, the acquirer in bad faith is the one who knows that his acquisition title is flawed.

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Transfer of mortgages

The mortgage loan transfer is a somewhat complex institution. It is a legal business, by means of which the mortgagee assigns, with just cause, its credit to a third party

Regulation of the good faith through the Civil Code

The third party in good faith is regulated in the Civil Code and the Mortgage Law. We will begin by analyzing the precepts of the Civil Code that regulate this figure:

Article 434 CC

“Good faith is always presumed, and to the one who affirms the bad faith of a possessor corresponds the proof”.

This precept establishes the presumption that the possessor is always in good faith. Whoever affirms the contrary, will have to prove such circumstance.

Imagine that your Aunt donates a house to you. But that house belongs to the husband married to your Aunt in regime of separation of property. You occupy the house and 20 years later, your aunt’s husband dies, and his heirs claim the house.

Article 433 CC

“It is considered as possessor of good faith the one who ignores that in his title or way of acquiring it there is a defect that invalidates it. A person who is in the opposite case is deemed to be in possession in bad faith”.

Lets continue with the example of the donation mentioned above. If the heir does not prove that the donation was accepted knowing the lack of title, he could be considered a possessor in good faith.

Article 1950 CC

(…) The good faith of the possessor consists in the belief that the person from whom he received the thing was the owner of it, and could transmit his dominion. (…).

To put this article in context, we will continue with the case of inheritance.

Let’s think that your Aunt has no known wealth. And what she donated to her is a mansion valued at several million euros. And it turns out that your Uncle, a multi-millionaire, was known for his greed, even towards his own wife.

With this background, you will have a hard time proving that you accepted the donation convinced that the mansion belonged to your Aunt.

Keep in mind that our jurisprudence does not admit a literal interpretation of article 1950. It requires proving certain diligence on the part of the acquirer that makes excusable a possible error in its acquisition.

In this sense interprets art. 1950 the STS 4615/2014 of 8/October/2014, interpretation that is peaceful in our courts.

Regulation of the good faith through the Mortgage Law.

We now turn our attention to the good faith of third parties acquiring Real Rights, on the content of the Mortgage Law. And we proceed to analyze the literal content of article 34.

We could say that article 34 is the “mortgage” reflection of articles 434, 433 and 1950 of the Civil Code. And that, to that reflection the LH makes some “added more”. Article 34 of the LH states

The acquisition of the person who in good faith and onerously acquires rights from the person who is entitled to transfer them will be maintained.

He will be maintained in such acquisition, once he has registered his right.

And it will be maintained, even if later the grantor’s right is annulled for causes that were not recorded in the same Registry.

The good faith of the third party is always presumed as long as it is not proved that he knew of the inaccuracy of the Register.

The acquirers in gratuitous title will not enjoy more registry protection than the one that had its originator or transferor.

We will continue with the example of the donation by an Aunt to her Nephew to put this article in perspective.

Note that the Mortgage Law requires that it be an onerous acquisition. The beneficiary of the donation that is being used as an example, would not be held as a bona fide purchaser. The donation, like the inheritance or the legacy, are forms of acquisition at no cost.

In addition, if it is an onerous transfer, the acquirer in good faith, must have registered his right in the Land Registry.

In the case of gratuitous acquisitions, the acquirer does not have more rights than those corresponding to the transferor. Contrary to what happens with onerous acquisitions, as we have seen.

Court interpretation of Article 34LH

The jurisprudential interpretation of this article is also peaceful and we bring, as an example, the following judgments of the Supreme Court:

• STS 299/2019 of February 5.
• STS 511/2010 of June 20.
• STS 144/2015 of May 19.

From these three judgments it can be concluded that, according to the Supreme Court (SC):

1. Article 34 LH protects acquisitions ad non domino. That is, acquisitions by transfer of who had no power of disposal to alienate. And it does so saving the defect of ownership or power of disposition of the transferor.
2. The SC tells us that art. 34 LH has its own substantive nature to protect:

• • To whoever in good faith acquires for valuable consideration from the registrant and then registers his right.
  • That it is not necessary to previously annul the title of the transferor.

And up to here, our approach to the third party of good faith holder of Real Rights. As we always say, this is not an exhaustive study nor can it be considered legal advice. If you find yourself in any kind of situation similar to this one, please consult a lawyer. You can find us in the contact details that appear in our web site.

If this article has been of interest, we also suggest you to read the following article published on our website: About third party occupants