Certificate of Title tricky?

Question

Clay, a resident of Texas, purchased a nearly new Cadillac from a seller from New York for the unusually low price of $4,000. The seller explained that he was in town to take delivery of another automobile that he had just inherited from his late father. The seller produced a certificate of title. After Clay had possession of the Cadillac for several months, he sold it to James for $3,800. After James had driven the car for two months, he was stopped by the police for a minor traffic violation. When the police routinely checked the VIN through their computer, it was discovered that the car had been stolen from Santiago in New York and that the certificate of title was forged. When Santiago learned that is car had been located, he claimed ownership.

My question to you...yes or no

1. Will Santiago be able to recover his Cadillac?

2. Will the certificate of title Clay obtained from the out-of-town seller entitle him to ownership?

3. Is Clay a good-faith purchaser?

Answer 1

This fact scenario deals with the bonifide purchaser of goods for value area of law. Different jurisdictions have different interpretations; however, I shall answer the questions as in the majority of jurisdictions.

1. Santiago cannot recover his Cadillac, if there has been a sale of his vehicle, despite the defect in title, to a bonafide purchaser for value. Bonifide Purchaser for value would mean that the purchaser would have no reason to suspect title was questionable, and the purchaser paid value for the vehicle.

Due to the "unusually low price," $4,000.00, of the vehicle paid by Clay, Clay should have been put on notice that there may be a title defect, or other defect. Thus, Clay may not be a BPV.

As to James, he purchased the Cadillac for even less money, $3,800.00, than what Clay had paid. Absent any extra wear and tear caused by Clay's usage of the vehicle for several months, this price should have put James on notice that there may be something suspect about the title of the vehicle.

Other facts are needed. If the value of the vehicle was substantially lowered due to Clay's usage, James is a BPV, and Santiago would not be entitled to the Cadillac.

However, if the value of the Cadillac remained substantially the same from the time Clay received the vehicle, to the time James received the vehicle, then James is arguably not a BPV, and Santiago should get his Cadillac.

2. No. It is defective through forgery.

3. Probably not. See #1.

Answer 2

Clay is a good-faith purchaser. I don't know much about TX property laws, but there are specific statutes in TX relating to just this type of situation. A "good-faith" purchaser may not be enough. The evaluation is similar to that of a purchase of a house. Clay would have to be a Bonifide Purchaser to have any chance. Santiago may be able to recover his car, and probably will be able to, but it may not be the best thing for him to do.