Summary of Kotis v. Nowlin Jewelry, Inc. (1992), Court of Appeals, TX, 844 S.W.2d 920
P, Appellee= Nowlin
D, Appellant= Kotis
Procedural posture: Trial court (bench trial) found for P. D appealed.
Facts: Appellant purchased a watch from a thief who had obtained it from appellee with a forged check. D contacted P, asking about the transaction. He refused to give his name or information, but eventually did provide it. He claimed in the phone call that he did not want the watch and did not have it. He would not tell how much the thief was asking for in reselling the watch. When Nowlin found the check to be forged, the called D but he refused to talk to them, instead directing them to his attorney. The trial court rendered judgment, declaring that Nowlin was the sole owner of the watch and denied appellant’s counterclaim contending that he was a BFP.
Issues: Did original purchaser (thief, Sitton) receive the watch through a transaction of purchase? >Yes. (Error)
Did Sitton have a voidable title to the watch? >Yes. (Trial court erred.)
Did Nowlin have legal and equitable title to the watch at all times relevant to the lawsuit? >No. (Error)
Does Kotis qualify as a good faith purchaser? >No. (Correct)
Holding: Watch belongs to Nowlin. Trial court erred in determining that Sitton in determining that Sitton had not received the watch via a transaction of purchase, that he did not have voidable title, and that Nowlin had title at all times relevant. Kotis does not qualify as a BFP, and therefore has no title to the watch.
Rationale: Sitton: Watch was delivered to him voluntarily and in exchange for a check, even if that check was a forgery. (Yes to transaction of purchase.) Under UCC, Sitton did have a voidable title. Because Sitton had voidable title at some point, Nowlin did not have legal and equitable title at all times relevant to the lawsuit. Kotis: Not a good faith purchaser, court found that Kotis knew the transaction to be illegal (very low price, calls to Nowlin, consultation of a lawyer) and therefore cannot qualify as a BFP. ‘An unreasonably low price is evidence the buyer knows the goods are stolen.’
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 thief had a voidable, rather than a void title to the watch. Further, while a transferor with voidable title can transfer good title to a good faith purchaser under § 2.403(a), the test for good faith is the actual belief of the buyer. 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.