Kotis v. Nowlin Jewelry, Inc.

844 S.W.2d 920 (Tex. App. 1992)

 

RULE:

Under Tex. Bus. & Com. Code Ann. § 2.403(a), a transferor with voidable title can transfer good title to a good faith purchaser. Good faith means honesty in fact in the conduct or transaction concerned. Tex. Bus. & Com. Code Ann. § 1.201(19). The test for good faith is the actual belief of the party and not the reasonableness of that belief. 

FACTS:

Appellant buyer purchased a watch from a thief who had obtained it from appellee seller with a forged check. The trial court rendered judgment, declaring that appellee was the sole owner of the watch and denied appellant's counterclaim contending that he was a good faith purchaser under Tex. Bus. & Com. Code Ann. § 2.403(a). In affirming, the court found that the thief induced appellee to deliver the watch to him voluntarily, so the trial court erred in finding that the thief did not receive the watch through a transaction of purchase under§ 2.403(a). The evidence showed that appellant was familiar with the price of the watch, knew that he was buying it at an unreasonably low price, and had lied several times to appellee. Thus there was evidence supporting the trial court's finding that appellant did not act in good faith. Finally, attorney fees were proper under the Declaratory Judgment Act, Tex. Civ. Prac. & Rem. Code Ann. § 37.009.

ISSUE:

Can a person who knows that the purchases made are stolen items be considered a buyer in good faith?

ANSWER:

No.

CONCLUSION:

Under § 2.403(a), a transferor with voidable title can transfer good title to a good faith purchaser. Good faith means "honesty in fact in the conduct or transaction concerned." The test for good faith is the actual belief of the party and not the reasonableness of that belief. There are sufficient facts to uphold the trial court's findings even if the judge had accepted as true the buyer's testimony that, despite his statements, he had already purchased the watch when he called the owner. The testimony indicated that the buyer was familiar with the price of Rolex watches and that $ 3,550.00 was an extremely low price for a mint condition watch of this type.  An unreasonably low price is evidence the buyer knows the goods are stolen. Although the test is what the buyer actually believed, the court agreed with appellee that it need not let this standard sanction willful disregard of suspicious facts that would lead a reasonable person to believe the transaction was unlawful. The court found sufficient evidence to uphold the trial court's findings regarding the buyer's lack of status as a good faith purchaser. 

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