A construction company sold a land, but the purchaser could not register a cautionary note or ownership transfer because the company was not yet registered as owner at the land registry. Ten years later the purchaser registered a cautionary note but in the meanwhile the land was resold by the company and a cautionary note was registered on the name of the second purchaser.
The Court held that the rule is that in the competition between two contradicting transactions the first in time will prevail unless the second purchaser acted in good faith and purchased for consideration and its transaction was duly recorded while acting in good faith. Failure to register a cautionary note by the first purchaser constitutes a breach of the duty to act in good faith towards the second purchaser and therefore may lead to the second purchaser’s priority even if the second did not complete the transaction by recording it in the land registry. Here there was no legal possible to record a cautionary note and both purchasers fell victim to fraud by the company and the second purchaser entered into the transaction based on the company's representations rather than the registration itself. Thus, recording of a cautionary note by the first purchaser would not have prevented the legal accident. Under such circumstances the first purchaser is entitled to receive the land.