Kotis v. Nowlin Jewelry, Inc.

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

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Citation844 S.W.2d 920 (Tex. App. 1992)

Brief Fact Summary.

Sitton obtained a watch from Plaintiff in a fraudulent manner. Defendant purchased the watch from Sitton. Subsequently, Sitton was indicted for forgery and theft. Plaintiff brought a declaratory action requesting the court to find that it was the sole owner of the watch. Defendant filed a cross claim seeking the court to find that he was a good faith purchased of the watch, being entitled to hold an posses it. The trial court held in Plaintiff’s favor because Defendant did not obtain the watch through a “transaction of purchase” as required by law.

Synopsis of Rule of Law.

One who knows that he or she is buying stolen items is not a good faith purchaser of the items, even if the thief received the goods by a voluntary transfer from the rightful owner of the times. 

Points of Law - Legal Principles in this Case for Law Students.

The test for good faith is the actual belief of the party in question, not the reasonableness of that belief.

View Full Point of Law

Steve Sitton obtained a gold rolex watch from Nowlin Jewelry, Inc., Plaintiff, in a fraudulent manner by forging a check to purchase the watch in the amount of $9,438.50. Eddie Kotis, Defendant, a used car dealer, bought the watch from Sitton for $3,550 in Defendant’s car lot. Upon a Defendant’s friend’s advice, Defendant spoke to Plaintiff to find out whether Sitton had financed the watch. Further, Defendant spoke with Cherie Nowlin, who was the wife of Nowlin’s president, John Nowlin. At first, Defendant did not identify himself or reveal the price Sitton’s was asking for the watch. Additionally, Defendant stated that he did not have the watch nor want it. Once John Nowlin became aware that Sitton’s check would not be honored by the bank, John Nowlin called Defendant. Defendant refused to speak to John. Instead, Defendant referred John to Defendant’s attorney. Later, Sitton was indicted for forgery and theft. Plaintiff brought a declaratory action seeking the court to finds that it was the watch’s sole owner. Defendant filed a counterclaim seeking the court to find that he was a good faith purchaser of the watch, thus, being entitled to possess and hold title to the it. The trial court found that Plaintiff was the only owner of the watch. Additionally, the court held that Sitton did not obtain the watch through a “transaction of purchase,” within the meaning of Tex. Bus. & Com. Code Ann. § 2.403(a), with Plaintiff. Under the statute, a person with voidable title is entitled to transfer good title to a good faith purchaser for value only if the goods were delivered through fraud, provided the goods were delivered under a “transaction of purchase.” On appeal, Defendant asserted that the trial court improperly found that Sitton did not obtain the watch through a transaction of purchase with Plaintiff, Sitton did not have voidable title, and Defendant did not have good title because he was not a good faith purchaser.

Issue.

Whether one who knows that he or she is buying stolen items is a good faith purchaser of the items.

Held.

No, one who knows that he or she is buying stolen items is not a good faith purchaser of the items, even if the thief received the goods by a voluntary transfer from the rightful owner of the times.

Discussion.

One who knows that he or she is buying stolen items is not a good faith purchaser of the items, even if the thief received the goods by a voluntary transfer from the rightful owner of the times. A voluntary transaction can only constitute a “transaction of purchase” because a thief, one who wrongfully takes goods against the true owner’s will, is not a purchaser. In this case, Sitton received the watch through a voluntary transfer from Plaintiff in a fraudulent method. Thus, the trial court properly found that Sitton did not obtain the watch through a “transaction of purchase,” meaning Sitton lacked voidable title. Nonetheless, Defendant’s assertion about a lack of good title is overruled because Defendant was not a good faith purchaser. The court determines whether one has purchased something in good faith by evaluating the party’s actual belief, not the belief’s reasonableness. Here, Defendant did not believe that his purchase was lawful when he purchased the watch. When Defendant contacted Cherie Nowlin, Defendant refused to identify himself, did not reveal Sitton’s asking price, nor did Defendant say the was did not have the watch or want it. Likewise, Defendant later refused to speak with John Nowlin, but rather, Defendant told John to contact his attorney. Furthermore, when an item is priced at an unreasonably low price that is evidence that the buyer knows that the goods are stolen. In this case, Defendant knew that $3,550 was an extremely low purchase price for the watch.  Therefore, trial court’s holding is affirmed.