Question

Stolen goods and Void Title. In a case where a buyer purchases goods or a lessee leases goods from a thief who has stolen them, the purchase does not acquire title to the goods and the lessee does not acquire any leasehold interest in the goods. The real owner can reclaim the goods from the purchase or lessee. This is called Void Title. Example – Someone steals a truckload of televisions that are really owned by Sears. The thief resells the televisions to City Mart which does not know that the goods were stolen. If Sears finds out where the televisions are, it can reclaim them. Because the thief had no title in the goods, title was never transferred to City Mart. City Mart must return the goods to Sears and can only sue the thief, assuming the thief can ever be found. Voidable Title: Sales or Lease of Goods to Good Faith Purchasers for Value. A seller or lessor has voidable title to goods if the goods were obtained by fraud, if a check is later dishonored, or if he or she impersonates another person. A person with voidable title to goods can transfer good title to a good faith purchase for value or a good faith subsequent lessee. A good faith purchaser or lessee for value is someone who pays sufficient consideration or rent for the goods to the person he or she honestly believes has good title to those goods. The owner cannot reclaim goods from such a purchaser leaving the owner to pursue the thief only. Fact pattern 17.3 John Torniero was employed by Michaels Jewelers, Inc. (Michaels) During the course of his employment Torniero stole pieces of jewelry, including several diamond rings, a sapphire ring, a gold pendant, and several loose diamonds. Over a period of several months, Torniero sold individual pieces of the stolen jewelry to G&W Watch and Jewelry Corporation (G&W) G&W had no knowledge of how Torniero obtained the jewels. Torniero was arrested when Michaels discovered the thefts. After Torniero admitted that he had sold the stolen jewelry to G&W, Michaels attempted to recover it from G&W. G&W claimed title to the jewelry as a good faith purchaser for value. Michaels challenged G&W’s claim to title in court. Who Wins and why? Explain your Answer

Answer 1

Michael Jewelers would win the case as they are the real owner of the jewelry. In this case the jewelry was stolen from Michael Jewelers Inc and Torniero has admitted the theft. Though G&W Watch and Jewelry Corporation has bought the jewels from Torniero in good faith, the purchaser does not acquire title to the goods as it is purchased from a thief because it is a void title where the thief do not have any title in the goods and hence the same cannot be transferred to the purchaser. G&W do not know from where Torniero obtained the goods and cannot believe that Torniero has good title to the goods. Hence the real owner, Michael Jewelers can reclaim the jewelry from the purchaser; G&W. G&W should return the jewelry to Michael Jewelers and can sue only the thief, Torniero. Hence Michael Jewelers would win the case involving G&W’s claim to title in court.