When is Bona Fide Purchaser Defense available?

BONA FIDE PURCHASER DEFENSE Who may claim it?

The Texas Supreme Court has stated that status as a bona fide purchaser is an affirmative defense to a title dispute. A bona fide purchaser is not subject to certain claims or defenses.

To receive this special protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest.

Notice may be constructive or actual. Actual notice rests on personal information or knowledge. Constructive notice is notice the law imputes to a person not having personal information or knowledge. Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001) (citations omitted); see AMC Mortg. Servs., Inc. v. Watts, 260 S.W.3d 582, 586 (Tex. App.-Dallas 2008, no pet.). See Footnote 2 “[W]hereas actual notice is usually a question of fact for the jury, constructive notice is a legal presumption not to be controverted.” Univ. State Bank v. Gifford-Hill Concrete Corp., 431 S.W.2d 561, 571 (Tex. Civ. App.-Fort Worth 1968, writ ref'd n.r.e.).

A party has constructive notice of instruments properly recorded in the proper county. Tex. Prop. Code Ann. § 13.002 (West 2004); AMC Mortg. Servs. Inc., 260 S.W.3d at 586. A party claiming title through principles of equity has the burden of proving that a subsequent purchaser was not a good faith purchaser. AMC Mortg. Servs., Inc., 260 S.W.3d at 586.

SOURCE: 05-09-00726-CV 5/3/11

Footnote 2:

AMC Mortg. Servs., like the trial court in this case, uses the term “good faith purchaser,” rather than “bona fide purchaser.” AMC Mortg. Servs., 260 S.W.3d at 586 (“To qualify as a good faith purchaser, the party must demonstrate that the purchase was made (1) in good faith, (2) for valuable consideration, and (3) without actual or constructive knowledge of any outstanding claims of a third party.”). Those two terms have the same meaning. See Richards v. Suckle, 871 S.W.2d 239, 242 (Tex. App.-Houston [14th Dist.] 1994, no pet.). We use the term “good faith purchaser” in our analysis in this opinion.

SOURCE: 05-09-00726-CV - Dallas Court of Appeals - 5/3/11

LEGAL TERMS: bona fide purchaser [not purchasor] / good-faith buyer of real estate, actual and constructive notice of interest in land, real property records