## Facts

- A 1986 Corvette was initially obtained by Jimmy Haddock using a computer-generated check drawn on a nonexistent bank account; the seller delivered the car and an open Oklahoma title.
- Haddock traded the Corvette to Larry Bowen (pickup truck, camper trailer, and $1,000 cash); Bowen confirmed through Oklahoma licensing authorities that the title appeared free of encumbrances but did not register the car.
- Bowen sold the Corvette to Mike Clarkson for $5,500 using the same open title; Clarkson did not register the car.
- Clarkson sold the Corvette to Midway Auto Sales, Inc. for $6,000, still using the open Oklahoma title.
- Six days after Midway’s purchase, law enforcement seized the Corvette as a stolen vehicle and later released it to the original seller.
- Midway sued Clarkson for breach of the warranty of title; Clarkson impleaded Bowen.
- After a bench trial, the circuit court found Bowen and Clarkson to be bona fide purchasers and dismissed Midway’s claim.

## Issues

1. Whether Clarkson breached the UCC warranty of title, Ark. Code Ann. § 4-2-312(1)(a), when Midway lost the Corvette after police seizure.
2. Whether a buyer who acquires goods by fraud obtains voidable title that can transfer good title to a good-faith purchaser for value under Ark. Code Ann. § 4-2-403.
3. Whether the trial court clearly erred in finding Bowen and Clarkson were good-faith purchasers (“honesty in fact”).

## Decision

- The Arkansas Court of Appeals affirmed the dismissal of Midway’s complaint.
- The court held that, although the chain began with fraud, Haddock obtained voidable (not void) title upon delivery, which could pass good title to good-faith purchasers for value under § 4-2-403.
- The trial court’s finding that Bowen and Clarkson acted in good faith was not clearly erroneous under the bench-trial standard of review.
- Because Clarkson had good title, he did not breach the § 4-2-312 warranty of title when selling to Midway, despite the later seizure.

## Legal Principles

- In a sales contract, the seller warrants that the title conveyed is good and the transfer is rightful. Ark. Code Ann. § 4-2-312(1)(a).
- A fraudulently induced purchase with delivery gives the buyer voidable title, not no title; until the seller avoids the transaction, the buyer can transfer good title to a good-faith purchaser for value. Ark. Code Ann. § 4-2-403.
- The rule differs from theft: a thief conveys no title against the true owner, but fraud with delivery can create voidable title capable of passing good title to later good-faith purchasers.
- “Good faith” under the UCC means honesty in fact, and whether a party acted in good faith is generally a fact question.
- In bench trials, appellate review asks whether the trial court’s findings were clearly erroneous or clearly against the preponderance of the evidence.

## Conclusion

The court affirmed that a vehicle obtained by fraud with delivery creates voidable title that can pass good title to good-faith purchasers for value, so a downstream seller who acquired and conveyed such good title does not breach the UCC warranty of title even if the buyer later loses the vehicle to law enforcement action.


Midway Auto Sales, Inc. v. Clarkson, 29 S.W.3d 788 (Ark. Ct. App. 2000)