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Bona Fide Purchaser--Without Title John E View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by University of Kentucky Kentucky Law Journal Volume 36 | Issue 2 Article 2 1948 Bona Fide Purchaser--Without Title John E. Howe Creighton University Follow this and additional works at: https://uknowledge.uky.edu/klj Part of the Property Law and Real Estate Commons Right click to open a feedback form in a new tab to let us know how this document benefits you. Recommended Citation Howe, John E. (1948) "Bona Fide Purchaser--Without Title," Kentucky Law Journal: Vol. 36 : Iss. 2 , Article 2. Available at: https://uknowledge.uky.edu/klj/vol36/iss2/2 This Article is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal by an authorized editor of UKnowledge. For more information, please contact [email protected]. BONA FIDE PURCHASER-WITHOUT TITLE1 By JoHN E. HoWEv The legal mind in time of confusion resorts to the use of ancient maxims and Latin phrases in an effort to bring order from chaos. Unless that mind has a fundamental traming m Latin and Legal History-and few minds have such training- the use of such material tends to further mire the person in the depths of misunderstanding. Judicial decisions based on such reasoning are entirely worthless, as the propounders themselves fail to have a basic concept of the idea or thought that is being advanced. If we seek further we will find that it is not uncommon for the teacher, attorney and student of law to justify decisions of the courts through the use of these phrases. If the legally trained are given a hypothetical case wherein Jones purchases a wagon from Smith, the true owner being Green, a diversity of opinion will arise as to the outcome of the case wherein Green brings an action to forecast the result from the facts that have been given, but many persons would hold that Green should be allowed to recover the wagon. When asked the reason for their decision they would reply that the doctrine of caveat emptor applies, and therefore Jones is not protected. Another segment of the ques- tioned persons would hold that Jones has a right to retain the wagon, and they in turn would reason that this result was proper for the simple reason that Jones was a bona fide pur- chaser, and that the bona fide purchaser is always permitted to keep the subject matter of the sale. The thought that the bona fide purchaser should be pro- tected and the doctrine of caveat emptor are basically divergent. In fact, the words, bona fide purchaser, have caused no end of confusion in the study of the law. Possibly much of this con- * LL.B., Kentucky; LL.M., Michigan. Instructor, Creighton Um- versity School of Law Omaha (2) Neb. Cases involving the bona fide purchaser may be divided into three main classes; cases wherein the vendor has legal title, cases in which the vendor has an equitable title, and those instances wherein the vendor has no title to pass to the vendee. Each class presents its own problem, and the result in any given case depends on the type of title which the vendor possessed. NEGOTIA3LE INSTRU3IENTS-B. F P fusion results from the fact that these words are employed as a descriptive term, and also as an absolute rule of law. Essentially the naked term is merely descriptive of a certain type of pur- chaser, and if the words are used to indicate a rule of law then the entire rule should be stated, no attempt at brevity being made by resort to the descriptive phrase itself. Such a procedure will be followed in this discussion, the phrase, bona fide purchaser, being used to designate a purchaser. in good faith for value. With this definition in mind it will then be possible to discuss the primary problem of the bona fide purchaser from the vendor who has neither equitable nor legal title. From that discussion it should then be possible to formulate certain rules which will show the protection afforded such a purchaser by the courts. CHtARACTERISTICS o THE BONA FIDE PURCHASER Accepting the statement that the term, bona fide purchaser, refers to a type of purchaser, it then becomes necessary to dis- cover the actual elements that must be present in order for the purchaser to come within the category An analysis of the cases will reveal that there are two prime requisites needed in order for one to be a bona fide purchaser, the purchase must be made in good faith and value must be given the vendor.2 From a practical standpoint the element of good faith will give little trouble. The question is one that is primarily for the jury, and they must decide the.issue from the evidence which is presented to them on the trial of the case. Conceding the point that the jury must determine whether or not the purchase was made in good faith, there is some dispute concering the question of whether good faith is a lack of bad faith or a lack of negligence on the part of the purchaser. Under the former view the requirements of good faith are somewhat liberalized mnarmuch as the purchaser must actually act in bad faith to except himself from the classification. The attitude of finding actual bad faith has met with favor m cases involving negotiable instruments.3 In the early English cases dealing with negotiable instruments the courts were in- 2There are statements to the effect that a bona fide purchaser must also have title to the article. If such a requirement is essential the term is under consideration as a rule of law and not as a de- scriptive term. 'NEGOTIABLE INSTRUMENTS LAW § 56. KENTUCKY LAW JouRNAL elined to hold that the purchase was made in good faith if there was an absence of bad faith.4 Then, for some unexplained reason, there was a strong condemnation of the existing law, and the court went to the opposite extreme, decreeing that a purchase under suspicious circumstances prevented the purchase from being one that was made in good faith5 Evidently this narrow idea of absence of negligence met with disfavor, because the rule soon changed, and the courts adopted the view that the purchase was made in good faith as long as there was an absence of gross negligence in the purchase. 6 Thus in the space of a few years the English courts ran the gamut of possible decisions, and upon completing the circle, they arrived at their original view-a purchase was made in good faith as long as it was made without actual bad faith or without gross negligence on the part of the purchaser. In the United States the common law decisions regarding purchase of negotiable instruments show that the various courts adopted one or the other of the English views, some of the states adopting the original bad faith rule, while in other jurisdictions the suspicious circumstance. thought prevailed. This conflict in the decisions was resolved in favor of the bad faith rule up-on the adoption of the Negotiable Instruments Law. Section 56 of the law provides "To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith." The cases which have been decided since the adoption of the uniform law conclusively prove that the suspicious circumstance test has been abolished, and that we now use the more lenient bad faith test. Even though the cases follow the rule that good faith is a lack of bad faith it is interesting to note that the quoted section provides that there is a. lack of good faith if the pur- chaser has-" knowledge of such facts that his action in taking the instrument amounted to bad faith." It can thus be seen that the 'Lawson v Weston, 4 Esp. 56 (1801), Peacock v. Rhodes, 2 Doug. 633 (1781). 'Slater v. West, 3 Car. & P 325 (1828) Gill v. Cubit, 3 B. & C. 466 (1824) 'Uther v. Rich, 10 Ad. & El. 784 (1839), Goodman v. Harvey, 4 Ad. & El. 870 (1836) Backhouse v Harrison, 5 B. & A. 1098 (1834). NEGOTIABLE IN-STRUMENTs-B. F P jury can find that certain suspicious circumstances in a given case amount to notice of such facts as to make the purchase one that is made in bad faith. For this reason it might be possible to find that a purchase was not made in good faith, even though bad faith was not shown in the transaction. The discussion regarding the element of good faith as ap- plied to negotiable instruments may also be said to state the law regarding purchases of other forms of personalty The question of good faith in those cases must be determined by the jury, but in those states that have adopted the Uniform Sales Act there is little question but that good faith is shown by proving absence of actual bad faith. Section 76 of the act provides that a thing is done in good faith when it isdone honestly, irrespec- tive of the fact that it may have been done negligently s There is also evidence that this same result is reached in the absence of the specific statutory provision.9 The question of value is a topic which could be discussed endlessly if one desired to investigate the Instorical development of the problem.
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