Right of Preference does not exonerate sellers from their guarantee of peaceful possession

The First Hall of the Civil Court of 12 May 2014 in the lawsuit ‘Camland Limited –v- Saviour Borg, Joseph Borg, Carmelo Borg, George Borg, Alfred Borg, Mariana Borg and Dolores Borg’, held that a seller of immoveable property is bound to give a guarantee of peaceful possession even if there is a remote chance that a third party may have a right of preference on the same property.

In their application, Camland Limited claimed that it had signed a promise of agreement (konvenju) on 30 January 2009 with the defendants Borg, in order for the company to purchase land in St Julians. 

The agreement was registered with the Commissioner of Inland Revenue, but the defendants failed to sign the final public deed. The company asked the court to order them to appear on the contract and if they fail to do so, to nominate a notary and curator for the sale to go through.

The defendants rebutted this claim by saying that they had to first offer this property to Prof Victor Borg Costanzi or else England San Fournier & Son, as dictated in the public deed of 13 June 1962 in the acts of Notary Francis Micallef. As a result they could not sell the property under the conditions of the 2009 agreement and therefore guarantee peaceful possession of this property.

Mr Justice Mark Chetcuti considered the facts of the case where the parties signed a promise of sale agreement in 2009 and the plaintiffs were forced to file a judicial letter against the defendants once the contract was not signed. The defendants are claiming that they were unaware of the 1962 contract that gave rise to a right of preference to third parties. 

The 1962 contract states that in the event of any future transfers of the property, the original owners were to be offered the same property with the same conditions of the emphyteusis that was being created. 

Mr Justice Chetcuti found that the parties to the 2009 agreement were unaware of the 1962 contract and the right of preference. Carmel Camilleri of the plaintiff company had held under oath in his affidavit that he had entered into four previous contracts of other parts of the same land. There was no problem and the 1962 contract issue was not raised. Everything came about because the Notary had to examine the causa mortis of the sellers since there was a discrepancy on the size of the land. Since a correction of the causa mortis had to be made, the notary who drafted the correction discovered the 1962 contract and its condition. This took place after the promise of sale was signed by the parties to this case. 

The Court in its judgement held that it was not being asked to decide on the validity of the 1962 condition, but it was asked whether the sale contract could be signed and include a guarantee of peaceful possession. 

The defendants are claiming that they were unaware of the 1962 contract that gave rise to a right of preference to third parties

The Court commented that the sellers should have known about this clause before signing the agreement and therefore, cannot now raise the plea that the action was instituted before the land was offered to the third parties. The plaintiff procedurally had no option but to institute this action and if it did not, it would lose its rights. 

The promise to sell the property established an obligation on the parties and according to Article 1409 of the Civil Code; even if there is no mention of the guarantee of peaceful possession in the contract of sale, the seller is all the same bound by this guarantee. The defendants did not eliminate this guarantee from the promise of sale agreement. 

On the other hand once they discovered the 1962 contract, they did not do anything to establish what their position was. They were passive on the situation and just decided not to appear on the contract. 

The Court went on to say that the sellers are not precluded from selling this property as they promised to do and there was no danger to the peaceful possession of the property. From 1962 to date nobody raised their right from the contract. 

Therefore, there is no obstacle for the sellers to transfer the property and the right of preference cannot be used as an excuse for them not to appear on the contract. Mr Justice Chetcuti then moved to uphold the company’s request and ordered that the sale proceed.

Dr Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates

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