Almost all of us jurists have article 1.124 of the Civil Code (CC) in mind, as it is one of the most frequently cited in the frequent cases of non-fulfilment of reciprocal obligations. And, although we are not unaware that this precept – of “broad spectrum” and intense repercussion – grants the contracting party “in bonis” the power to choose between the demand for performance of what has been agreed and the termination of the obligations contracted, in both cases with the compensation of the damages and harm inflicted, we sometimes forget that article 1.124 CC has two final paragraphs: the first of them is intended to establish the possibility of the Court granting a period of grace to the defaulting debtor for the performance of his obligations, and the second of them – the subject of the present commentary – safeguarding the rights of third parties in good faith.
We will now analyse the content and doctrine of the Supreme Court Judgment (STS) 47/2026, of 21 January, in relation to the effectiveness of the contractual termination due to non-performance of a property purchase contract, requested by the seller; and its impact on the preventive annotations of seizure made in favour of third parties, due to debts not settled by the buyer.
1. Retroactive effect of the Contractual Termination (Ex Tunc)
The doctrine established by the First Chamber of the Supreme Court in this decision is based on the nature of the power of termination provided for in Article 1124 of the Civil Code (CC). The Court reiterates that termination due to non-performance in single-tract contracts, such as sale and exchange contracts, has ex tunc and not ex nunc restitutory effects.
The termination of the contract entails the obligation of the parties to reciprocally restitute the benefits received, returning to the pre-existing legal state as if the business had not been concluded. This consequence is based on the reference that Art. 1124 CC makes to Art. 1295 CC (for rescission) and the analogous application of Art. 1123 CC (for rescission conditions), as well as Art. 1303 CC relating to nullity. Thus, the seller recovers the availability of his performance and the ownership of the property under the same legal conditions in which it was transferred, which may entail the recovery of the property free of the charges imposed by the defaulting buyer.
2. Legal Nature of the Attachment and the Annotation Preventive
Secondly, the judgement further elaborates on the distinction between rights in rem as such and the attachment of property, whether administrative or judicial.
In this sense, the attachment does not constitute a right in rem or a title transferring ownership, but rather the assignment of specific assets to a process to guarantee a future or current procedural execution, in application of the “Ius persequendi” (to pursue the asset, even if its ownership changes after the attachment) and the “Ius prioritatis” (guarantee to the sequestrator of preference in his right according to the temporal order of annotation).
The annotation in the Property Register (RP) is not constitutive of the seizure – since this exists from the moment it is decreed, in accordance with art. 587.1 LEC) – but fulfils the function of preventing subsequent third party purchasers from claiming ignorance of the seizure (legal cognoscibility).
3. The Third Party Registrar against the Contractual Resolution.
The core point of STS 98/2026 is the delimitation of who deserves the protection of the registry system against the effects of the contractual termination: the Supreme Court is categorical in stating that the beneficiary of a preventive annotation of seizure does not enjoy the benefits of the public faith of the registry granted by articles 32, 34 and 37 of the Mortgage Law (LH). If the debtor’s title lapses retroactively due to the termination of the legal purchase and sale transaction, the attachment is considered to have been made on a property that “did not belong to the attached debtor”. As exceptions to the above principle, the following are worth mentioning:
- The express resolutory condition, which is dealt with in Article 37, First LH. Although it is a remedy alien to the present case, the judgement cites a consolidated line of case law, in the sense of giving real effectiveness to the express resolutory condition registered in the Land Registry, thus allowing “the re-registration in favour of the transferor and the cancellation of the subsequent entries, without the need for the consent of the owners” (STS 505/2013, of 24 July).
- The affections in rem, which are maintained over the transferred assets even if the title of ownership lapses, as they affect the property (for example, community expenses, property tax, etc.). The aforementioned judgement states that “It is a different matter whether the above statement should be qualified depending on whether the debts to which the liens recorded in the registry history of properties 37.813, 37.814, 37.815 and 37.816 are debts in respect of which the law establishes a real affectation of the property in the event of transfer or change of ownership of the rights over the same. A real affectation which, given its nature, is protected by the registry principles of priority (art. 17 LH) and of unenforceability of the unregistered act (arts. 606 CC and 32 LH), and, therefore, is enforceable against the seller who exercises the termination action”.
However, in the present case, the termination of the sale and purchase due to non-compliance (decay of title) overlaps with the recorded seizure, which is cancelled. The Court expresses it in the following words:
The termination of the contract has an ex tunc character, and causes the restitution of the benefits and the return to the pre-existing legal state, as if the business had not been concluded, so that the seller recovers the property in the same legal conditions in which it was transferred. The termination is enforceable against third parties, subject to the exceptions mentioned above. The annotation of seizure is a precautionary, security and publicity measure, the purpose of which is to prevent third parties acquiring the property after the seizure from being protected by the public faith of the registry from the moment it is made. The seizure grants a privilege, not a real right, and the annotation fulfils the function of making this privilege public against third parties, without attributing to the annotator the status of third party for the purposes of art. 34 LH or the protective benefits of the public faith of the registry, granted by arts. 32, 34 and 37 LH, which is why it is affected by the property setback that the resolution entails and which entails that the annotation was made on a property that did not belong to the seized debtor. We are not dealing with holders of registered rights, but rather, we insist, with an insurance measure.
4. Difference in the treatment of garnishees and holders of rights in rem.
Given that the garnishee is not the holder of a real right but a mere beneficiary of an insurance measure with procedural origin, the contractual termination causes the extinction of the preventive annotation. If the termination has ex tunc effects, the purchaser was never the definitive owner. If the buyer is not the owner, the lien on his property cannot subsist on an object that has left (or technically never entered in an unassailable form) his estate.
However, unlike liens, bona fide third parties who acquire rights in rem (such as a mortgage or a property) and register their title in the Land Registry in good faith are protected by Articles 34 and 37 LH. In these cases, these titleholders would retain their rights despite the termination of the contract, giving rise to a derivative right of compensation of the seller (to whom the property would have to be returned as it was transferred) against the buyer in the event that what has been transferred is irreclaimable or has been encumbered.
As we have explained, STS 47/2026 consolidates a doctrine that prioritises the restitutory effectiveness of the contractual termination against precautionary measures of third party creditors (seizures), based on the fact that the latter do not enjoy the protection of the public faith of the registry as they are not third party acquirers of real rights.