Khaberni - The Dubai Primary Civil Court ruled to dismiss a lawsuit filed by a creditor company, which in it demanded the annulment of a contract for the sale of a luxury real estate unit and the cancellation of its registration, based on the premise that its original owner owed about 73 million dirhams, noting that «he gifted it to his wife so that it would not be seized for the benefit of the company, before the wife sold it to a third party».
The court considered that the latest buyer was acting in good faith, and that his recorded contract remains valid.
In detail, a creditor company filed a legal action against a woman and a company, demanding the annulment of a real estate sale contract executed between the first defendant (the gifted wife) and the second defendant (the purchasing company), and addressing the competent authority to cancel the registration of the contract, and secondarily ruling the transaction invalid against it.
The company stated that it was a creditor to the husband of the first defendant (her husband) for an amount of 20 million US dollars (about 73 million and 450 thousand dirhams), under a fully supported commercial judgment affirmatively on appeal, and that when it commenced the enforcement proceedings, it turned out that the debtor’s funds were insufficient, and inquiries from the concerned authority revealed that he had previously disposed of the unit in question by gifting it to his wife.
It explained that it initiated legal action to declare the transaction invalid, and an appellate judgment was issued invalidating the gift, but it was surprised by a subsequent transaction involving the sale from the wife to another company, under a contract registered before the judgment of the gift's invalidation was issued, which was considered a legal obstacle preventing execution on the property.
The defendants' agents attended, and the purchasing company argued that it bought the unit with an officially registered contract, paid the price and the registration fees, stating that it was not aware of any previous dispute.
Upon reference to the competent authority's book, it was proven that the sale occurred before the issuance of the judgment invalidating the gift.
The court clarified in its ruling reasons that the property title deeds issued by the Land and Property Department enjoy absolute probative value in proving real estate rights, and the requirements of justice and confidence in transactions necessitate the protection of the bona fide third party who contracted based on the land registry data without knowledge of a defect in their predecessor’s title.
Based on the jurisprudence established by the Supreme Court of Cassation, a transaction executed between an owner whose title is invalid and a bona fide third party remains effective against the rightful owner as long as the third party acted in good faith and committed no fault or negligence in determining the truth.
Given that it was proven that the sale contract in dispute was executed and recorded before the issuance of the judgment invalidating the gift, and that the documents submitted did not prove the purchasing company's bad faith or knowledge of the dispute, the transaction by the company remains effective against the creditor company.
The court, in a presence ruling, dismissed the lawsuit originally and provisionally, and ordered the plaintiff to pay the fees and expenses and an amount of 1000 dirhams for attorney fees.
