On 8 February 1941 the plaintiff and her husband entered into a marriage and succession contract whereby they adopted the regime of universal community of property for the duration of their lives, and instituted each other sole heir. On 16 January 1961 the parties signed a notarial act dissolving this community regime and separating their property. The real property which had theretofore been held in common was taken over by the plaintiff and transferred to her; the appropriate entry was made in the land register on 14 March 1961.
By a second notarial document of 16 January 1961 the plaintiff conveyed this real property to the defendants, a married couple; an entry in their favour was made in the land register on 8 August 1961.
The plaintiff's husband died on 6 February 1964.
The plaintiff now seeks possession of the property and rectification of the land register, on the ground that both contracts of 16 January 1961 are void because on that date her husband lacked the capacity to do business (geschfifts- unffihig), the conveyance being void on the further ground that it understated the purchase price by DM 3,OOO.
The Landgericht allowed the claim, but the Oberlandesgericht dismissed it. On the plaintiff's appeal, that judgment was vacated and the case remanded but only for further findings of fact).
1. The Court of Appeal accepted that on 16 January 1961 the plaintiff's husband was unfit to do business, and it therefore held that the agreement for the separation and division of the community property was void. The conveyance to the defendants, however, was not void under para. 139 BGB because it would have been executed even if the invalidity of the other contract had been appreciated. Nor, the Court of Appeal went on, was the conveyance affected by any of the rules of community property. Finally, if it were true that the official document understated the purchase price by DM 3,OOO, any ensuing formal invalidity of the conveyance was cured by actual transfer and registration (para. 313 par. 2 BGB): while it was true that when the plaintiff made the conveyance, she herself had no title to the property, she obtained title on 6 February 1964 when she became her husband's sole heir, and so the conveyance then became effective under para. 185 par. 2 BGB. 2. The appellant criticises the Court of Appeal for holding that the rules of community property had no effect on the validity of the conveyance, and that the formal defect resulting from the failure to record the full purchase price in the document of conveyance was cured under para. 313 par. 2 BGB. a) As to the rules of community property, the Court of Appeal was right to hold that if the agreement for the separation and division of the community property was void, the plaintiff's husband continued to be administrator of all the community property under Art. 8 I no. 6 of the Law on Equal Rights; it was he who had the power of disposition - under paras 1422 ff. BGB, and therefore the plaintiff had no power to effect the conveyance to the defendants. The court was not, however, correct in saying that para. 185 par. 2 BGB rendered this disposition effective on 6 February 1964, when the plaintiff inherited her husband's estate and thus became sole owner of the property. para. 184 par. 1 BGB provides that such retroactive validation of the conveyance contract requires subsequent authorization. Here the curator of the plaintiff's husband had joined in the claim - a fact the Court of Appeal over- looked - and this fact shows that the necessary authorization must be taken to have been refused. The effect of this refusal to ratify the conveyance was definitively to invalidate the conveyance, whose validity had theretofore been indeterminate (schwebed unwirksam) (BGHZ 13, 179, 187). Once this had happened, the conveyance could no longer become effective in any of the cases specified in para. 185 par. 2 BGB.
There was thus no valid conveyance, and the defendants never acquired title to the property under it.
But this does not mean that the plaintiff must win. Whereas the plaintiff's husband could not even contract to transfer the property to the defendants without her consent (para. 1424 BGB), the plaintiff's own position was different. Her capacity to do business was not affected by the community property regime, and although she could not make a contract to convey community property so as to bind her husband or the property as such, she could perfectly well bind herself personally (references omitted). Nor would such a contractual obligation be rendered void by para. 306 BGB, for when a person sells a thing belonging to another, this is an instance of subjective initial impossibility, not of objective initial impossibility, with which alone that paragraph deals (references omitted). But if the plaintiff is contractually bound to convey the property to the defendants and is now able to transfer it, having become owner of the property as her husband's sole heir, the thing she is claiming from the defendants in this action is the very thing that she is bound to transfer to them. This being so, her claim can be defeated by the exceptio doli under para. 242 BGB (BGHZ 38, 122, 126). b) The appellant also took objection to the Court of Appeal's view that if the conveyance contract was formally defective by reason of the failure to state the whole purchase price, this defect was cured under para. 313 par. 2 BGB. This objection is also based on the husband's refusal to ratify the conveyance by the plaintiff, as evidenced by his joining in in the present claim. The appellant contends that para. 313 par. 2 BGB only applies if there is a valid conveyance, and that there is no such valid conveyance here, because the refusal to ratify made it definitively invalid and therefore insusceptible of validation under para. 185 par. 2 BGB by the plaintiff's subsequent acquisition of sole ownership in the property.
But even so the appellant cannot succeed. Although it must be conceded that para. 313 par. 2 BGB does indeed presuppose a legally valid conveyance (RGZ 94, 147, 150; other references omitted), this conveyance must be taken to be valid by reason of para. 892 BGB, whereby entries in the land register are deemed to be correct in favour of the purchaser of an interest in land. It is true that this provision covers only defects in the entitlement of the transferor, and not defects in the transfer itself, that is, defects in the transaction whereby the recorded right was to be acquired: the acquirer's good faith does not help him if the constitutive agreement is on any ground invalid, be it the incapacity of the contractor, lack of agent's authority, lack of the requisite consent by a public body or a third party, want of real consensus (para. 155 BGB), grounds for rescission for error and so on (references omitted). But none of these factors is present in this case, where the transfer was only ineffective because the plaintiff did not own the property and thus had no power of disposition at the time she made the conveyance. It was therefore a case of lack of title, and such a case, as we have said, does fall within para. 892 BGB. This must have the effect of curing any defect of form in the conveyance under para. 313 par. 2 BGB, because, granted the presumption under para. 892 BGB that the good faith purchaser acquired title from a person entitled to make the transfer, the legal supposition is that a valid transfer has taken place, that the transferor has effectively fulfilled his obligation to transfer. To this extent, good faith acquisition involves performance of the contract: the purpose of the formal requirement of para. 313 par. 1 B∑GB being to protect reliance, its purpose is spent and the want of form can no longer be invoked (see RGZ 85, 272, 274 ...). In other words, a formal defect in a contract to convey real property is cured once the property is acquired in good faith.
The plaintiff asserts, however, that the defendants had actual knowledge that the plaintiff's husband was insane at the time of the conveyance. The Court of Appeal did not investigate this point, so we cannot dismiss the appeal as of now. If it were established that the defendants were not in good faith as, and when, required by para. 892 BGB (see RGZ 116, 351, 354) regarding the proven incapacity of the plaintiff's husband on 16 January 1961, the plaintiff's claim must succeed. Since the necessary facts have not yet been established, the plaintiff's appeal must be allowed, the judgment under appeal vacated, and the matter remanded to the Court of Appeal.
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