## Facts

- Nowlin Jewelry, Inc., a jewelry store, delivered a gold ladies Rolex “President” watch with a diamond bezel to Steve Sitton after Sitton tendered a forged check for $9,438.50 and falsely claimed authorization to use it.
- The next day, Sitton sold the watch to Eddie Kotis, a used-car dealer, for $3,550—about one-third of the retail purchase amount—in an informal transaction at Kotis’s car lot.
- Kotis telephoned the jewelry store and spoke with Cherie Nowlin; he initially did not identify himself and later, after learning the check had not cleared, stated he did not have or want the watch and declined to disclose the price being discussed.
- After the store learned the check would not be honored, John Nowlin called Kotis; Kotis refused to discuss the matter and referred Nowlin to counsel.
- Kotis’s attorney later suggested Nowlin could repurchase the watch; Nowlin declined.
- Nowlin sought a declaratory judgment of ownership; Kotis counterclaimed, asserting title as a good-faith purchaser for value.
- After a bench trial, the district court declared Nowlin the sole owner and awarded attorney’s fees; it also concluded Sitton did not take through a “transaction of purchase” under Texas UCC § 2.403(a) and that Kotis was not a good-faith purchaser.

## Issues

1. Whether Sitton acquired the watch through a “transaction of purchase” under Tex. Bus. & Com. Code § 2.403(a), giving him voidable (not void) title.
2. Whether Kotis qualified as a good-faith purchaser for value, such that Sitton’s voidable title could pass good title to Kotis.
3. Whether the declaratory judgment awarding ownership (and attorney’s fees) to Nowlin should be affirmed.

## Decision

- The court held Sitton obtained the watch through a “transaction of purchase” because Nowlin voluntarily delivered it, despite fraud; Sitton therefore had voidable title under § 2.403(a).
- The court held Kotis was not a good-faith purchaser for value, based on the suspiciously low price and Kotis’s evasive and misleading conduct after contacting Nowlin.
- Because Kotis lacked good-faith purchaser status, Sitton could not transfer good title to Kotis.
- The court affirmed the judgment declaring Nowlin the sole owner of the watch and affirming the award of attorney’s fees.

## Legal Principles

- Under Tex. Bus. & Com. Code § 2.403(a) (UCC § 2-403), a person with voidable title may transfer good title to a good-faith purchaser for value, including when delivery was procured by fraud or by a check later dishonored.
- When an owner voluntarily delivers goods to a wrongdoer induced by fraud, the wrongdoer typically acquires voidable title rather than void title.
- “Good faith” requires honesty in fact and, for merchants, observance of reasonable commercial standards; conspicuously suspicious circumstances and dishonest or evasive conduct can defeat good-faith purchaser status.
- A buyer who fails good faith does not take good title from a seller with voidable title, and the original owner’s superior claim to the goods prevails.

## Conclusion

The court concluded that although the fraudster acquired voidable title because the jeweler voluntarily delivered the watch, the buyer’s suspicious purchase circumstances and misleading conduct defeated good-faith purchaser status; title therefore remained with the jeweler, and the declaratory judgment and attorney’s fees award were affirmed.


Kotis v. Nowlin Jewelry, Inc., 844 S.W.2d 920 (Tex. App.—Houston [14th Dist.] 1992)