Legal Updates

A gift recipient’s right will prevail a later foreclosure, if it has been proven that the gift was given in good faith A gift recipient’s right will prevail a later foreclosure if the gift was given in good faith

September 29, 2016

A father granted his children land assets as a gift but the children did not record the transfer or even a cautionary note on such gift.  Several years later a foreclosures was imposed on the property. The gift recipients filed a motion to Court arguing that the foreclosures are to be canceled and that their ownership rights should be registered under their name.

The Court held that in general in the competition between the right of a foreclosure and the right of a first purchaser in a real estate transaction, the right of the purchaser, which was first in time, prevails even when there was no cautionary note recorded regarding the purchaser’s right to the land.  However, in gift transactions the opening point is that a late foreclosure would prevail.  But this premise is subject to the test of good faith of the grantor and the apprehension that the obligation to grant a gift was motivated by the desire to conceal property assets from creditors. In the present case, the Court accepted the claim of the children after it was shown that the father’s undertakings to grant his children gifts were real commitments, given by the father in bona fide, with true intention to grant the gift upon the children’s marriage and after all doubt of concealing assets from creditors were removed.