united-states property common-law equity equitable-relief
&quot;Equity&#39;s darling&quot;: How do U.S. courts overcome bona fide purchasers?
<p>This is a follow-up question to <a href="https://law.stackexchange.com/questions/76933/how-can-a-court-in-the-u-s-overcome-ebay-inc-v-mercexchange-llc-and-order-ma">this question</a> and <a href="https://law.stackexchange.com/questions/76873/if-i-buy-a-stolen-item-from-party-a-and-then-party-a-spends-the-proceeds-who-i/76874#76874">this question</a>; the accepted answers to each appear to conflict the concept of <em>bona fide</em> purchasers.</p>
<p>According to a Wikipedia page on the topic:</p>
<blockquote>
<p>&quot;A bona fide purchaser (BFP) – referred to more completely as a bona fide purchaser for value without notice – is a term used predominantly in common law jurisdictions in the law of real property and personal property to refer to an innocent party who purchases property without notice of any other party's claim to the title of that property. A BFP must purchase for value, meaning that he or she must pay for the property rather than simply be the beneficiary of a gift. Even when a party fraudulently conveys property to a BFP (for example, by selling to the BFP property that has already been conveyed to someone else), that BFP will, depending on the laws of the relevant jurisdiction, take good (valid) title to the property despite the competing claims of the other party. As such, an owner publicly recording their own interests (which in some types of property must be on a court-recognised Register) protects himself or herself from losing those to an indirect buyer, such as a qualifying buyer from a thief, who qualifies as a BFP.&quot;</p>
</blockquote>
<p>This would suggest that any statute that superseded detinue and/or replevin causes of actions in equity would overrule this doctrine.</p>
<p>But looking at it closer, even detinue and replevin would be in conflict with this doctrine; how were they concurrently recognized? What principles may be read out of the equity practice of the courts in the U.S.?</p>
<p>Are <em>bona fide</em> purchasers still recognized in U.S. law, and if so, how does that affect statutory provisions in place of detinue and replevin?</p>

<p><strong>Background</strong></p>
<p>The general common law rule in the U.S. is that someone who transfers property can not give the person receiving the transfer more rights than they have themselves.</p>
<p>But, usually, as set forth more specifically in a number of circumstances set forth below, a bona fide purchaser for value without notice (BFP) has greater rights in the property purchased than the person from whom the BFP purchased the property if there are certain kinds of qualifications or imperfections in the seller's title or rights to the property.</p>
<p>Also, note that for this purpose, a creditor benefitting from a mortgage, deed of trust, lien, or other security interest in property hat is collateral for that obligation is a BFP if the creditor lacks notice of the issue with the debtors interest in the property that is collateral and if the creditor obtained these rights in the collateral for substantially equivalent value (rather than, for example, as a gift or a &quot;sweetheart deal&quot; not entered into a armed length).</p>
<p>With some narrow exceptions, outside of bankruptcy, these are questions of state law, but most of the relevant state statutory law is close to uniform across almost all U.S. jurisdictions, because all U.S. jurisdictions have voluntarily and independently (without any federal mandate or monetary incentive) adopted model laws promulgated by the National Commissioners on Uniform State laws on these subjects.</p>
<p>There is some minor variation in the real property laws pertinent to this matter between U.S. jurisdictions (i.e. the 50 U.S. states, the District of Columbia, and the self-governing territories of the U.S. such as Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa). There are also minor variations in the common law and statutory law regarding invalidating restraints on alienation as contrary to public policy between these jurisdictions. But even in these non-uniform areas, the majority rules are very widely adopted.</p>
<p><strong>Real Property</strong></p>
<p><em>The General Rule In Race-Notice Jurisdictions</em></p>
<p>In real property law, U.S. jurisdictions have predominantly adopted a state &quot;race-notice&quot; statute which provide that bona fide purchasers for value take title to property free of any unrecorded interest in the property at the time of the transfer. There are narrow exceptions to this rule for void titles arising, for example, from a forged deed or a &quot;wild deed&quot;, when the adverse possession deadline has not yet expired. Adverse possession is almost always governed by a state statute. <strong>Title 11 of the United States Code</strong>, i.e. the U.S. Bankruptcy Code, however, applies in cases where the sale is by a bankruptcy trustee or debtor-in-possession in lieu of a bankruptcy trustee, and provides even greater BFP protections.</p>
<p>Under a race-notice statute regime, by statute or as supplemented by common law cases, a buyer of real property is deemed to have constructive notice, however, of all properly indexed real property records and of anything that can be discerned from a physical inspections of the property (including, for example, the existing of a unrecorded leasehold interest of a tenant in possession of the property).</p>
<p>As noted above, a creditor for whom real estate is collateral for a debt (most frequently a mortgage lender) has the same BFP rights with respect to its collateral interest in the property, as a buyer of outright ownership of the property who receives a deed does in BFP's ownership interest in the property.</p>
<p><em>General Rules For Registered Title And Pure Race Recording Statutes</em></p>
<p>A tiny percentage of U.S. real estate is subject to what is usually called <strong>Torrens' Title</strong> or <strong>registered title</strong> which has been copied by most non-U.S. common law jurisdictions from Australia that originally invented the system, or a &quot;pure race&quot; recording statute. Property subject to these system of noting real property rights that allows a purchaser to avoid unregistered interests in that real property even if the transferee has notice of the unregistered interests or is not a transferee for value, effectively affording BFP-type protections to a group of people greater than just BFPs.</p>
<p><em>Common Exceptions To The General Rules</em></p>
<p>Notwithstanding this, there are often state law exceptions to the general protections for BFPs in real property purchases which are less generous to them than the general rule that apply to a property tax treasurers sales (if conducted in an irregular fashion), sheriff's sales (if conducted in an irregular fashion), purchases from governmental entities (if made with apparent authority but not actual authority), unrecorded utility liens, unrecorded utility easements not discoverable by inspection, easements by prescription, and unrecorded HOA liens.</p>
<p><em>Other Real Property Litigation From Which BFPs Are Not Protected</em></p>
<p>Sometimes, however, a BFP's claim to real property can be litigated in a dispute over what exactly it was that the BFP purchased.</p>
<p>For example, suppose that a BFP receives a deed to land not specifically including or excluding mineral rights, which once had severed mineral rights that arguably came into subsequent common ownership. If there was a merger of the mineral rights into the surface rights under the applicable law, the BFP also gets the mineral rights. If there was not a merger, however, the BFP gets only the surface rights.</p>
<p>A BFP of an undivided co-ownership of real property is also not immune to a lawsuit to partition the real property. This is sometimes provided for by a state statute and is sometimes a matter of common law.</p>
<p><strong>Personal Property</strong></p>
<p><em>The Role Of The Uniform Commercial Code</em></p>
<p>Many rights of BFPs in personal property are governed by the <strong>Uniform Commercial Code</strong>, which has been adopted in close to its current draft by all U.S. jurisdictions with only stylistic variation from the uniform act text in most cases. This originally had Article 1 which contained general provisions, and Articles 2-9 which contained substantive provisions. It has since been amended to add Articles 2A (personal property leases) and 4A (electronic fund transfers), and in most jurisdictions, to omit Article 6 (bulk sales governing sales of substantially all of the assets of a business in a de facto transfer of ownership transaction).</p>
<p>Unlike European civil and commercial codes, however, this is supplemented by principles of common law and equity, and by more specific state and federal statutes that often supply essential terms.</p>
<p><em>The General Rule For Personal Property, Tangible and Intangible</em></p>
<p>BFPs of personal property receive non-voidable title if they receive a transfer from someone with voidable title, but not if they receive a transfer from someone with void title (e.g. a thief). Thus, a BFP of someone with void title, such as someone whose chain of title is rooted in larceny, loses to the true owner in a replevin lawsuit (but someone whose title is rooted in a transfer secured through fraud in the inducement, in contrast, may have voidable rather than void title). This is governed primarily by <strong>Article 2 and 2A of the Uniform Commercial Code</strong> and by <strong>Title 11 of the United States Code</strong>, i.e. the U.S. bankruptcy code (in cases where the sale is by a bankruptcy trustee or debtor-in-possession in lieu of a bankruptcy trustee).</p>
<p><em>Terminology</em></p>
<p>The term &quot;detinue&quot; to describe certain actions seeking possession of tangible personal property has largely fallen into desuetude. The &quot;plain English&quot; terminology for a replevin or detinue claim as a stand alone legal cause of action is &quot;claim and delivery&quot;, and is called &quot;repossession&quot; in the context of an action to enforce a debt secured by a non-possessory security interest (i.e. a personal property mortgage) or non-possessory lien.</p>
<p><em>Personal Property Security Interests</em></p>
<p>In the case of a non-possessory security interest (i.e. personal property mortgage) or a non-possessory lien such as an agricultural lien or tax lien in property property, a transferee for value takes free of the lien <strong>if it is not recorded in the relevant state's Uniform Commercial Code filings</strong> (or in  the case of select kinds of personal property in another designated filing location such as a national registry of aircraft liens, or intellectual property rights arising under federal law, or a motor vehicle certificate of title), even if the transferee has notice of the &quot;unperfected&quot; non-possessory personal property lien (the original party to the security interest agreement is bound by it even if it is not &quot;perfected&quot; by being filed in the relevant place). This is governed primarily by <strong>Articles 2A and 9 of the Uniform Commercial Code</strong>, and by statutes setting forth special filing requirements for certain kinds of property like intellectual property, aircraft, and motor vehicles.</p>
<p><em>Negotiable Instruments</em></p>
<p>A BFP transferee of a negotiable instrument is called a &quot;<a href="https://en.wikipedia.org/wiki/Holder_in_due_course" rel="nofollow noreferrer">holder in due course</a>&quot; and takes free basically of defenses to the negotiable instrument arising from the underlying transaction in which the negotiable instrument was given as consideration. this is governed by <strong>Articles 3 and 4 of the Uniform Commercial Code</strong> enacted in all U.S. jurisdictions.</p>
<p>Article 3 of the Uniform Commercial Code does most of the heavy lifting, however, together with Federal Reserve regulations governing the payment system, while Article 4 plays a lesser supporting rule.</p>
<p>Fact patterns involving BFPs rarely arise under Article 4A of the Uniform Commercial Code governing electronic fund transfers, because usually EFTs are two party transactions rather than often involving a long chain of transferees the way negotiable instruments (such as checks, money orders, and simple promissory notes) do.</p>
<p><em>Other Negotiable Or Transferrable Documents</em></p>
<p>Similar (but not identical) protections are afforded to BFPs in connection with letters of credit, which are governed by <strong>Article 5 of the Uniform Commercial Code</strong>, negotiable warehouse receipts, which are governed by <strong>Article 7 of the Uniform Commercial Code</strong>, and with respect to certain interests in &quot;securities&quot; which are governed primarily in this regard by <strong>Article 8 of the Uniform Commercial Code</strong>.</p>
<p><strong>Fraudulent Transfers/Conveyances And Preferences</strong></p>
<p>With only the rarest exceptions, BFPs are also immune to liability in a fraudulent transfer (i.e. confusingly, a liability as a transferee who received insufficient consideration from an insolvent person to thwart creditors, not a truly forged deed), or preference lawsuit (essentially the same thing in bankruptcy). This is governed either by the <strong>Uniform Fraudulent Transfer Act</strong> (which is more modern and the majority rule in U.S. jurisdictions), the <strong>Uniform Fraudulent Conveyance Act</strong> (a legacy statute on the books in the remaining U.S. jurisdictions), or Title 11 of the United States Code, i.e. the U.S. Bankruptcy Code, in all U.S. jurisdictions.</p>
<p><strong>Public Policy Limitations On Restraint Against Alienation</strong></p>
<p><em>The First Sale Doctrine</em></p>
<p>Also, while it isn't strictly a BFP question, the <a href="https://en.wikipedia.org/wiki/First-sale_doctrine" rel="nofollow noreferrer">first-sale doctrine</a> that provides that a buyer of a good at a first retail sale of a good takes free of all intellectual property claims that apply to that particular good, is closely akin to the BFP doctrines. This is largely a matter of federal patent, trademark, and copyright law.</p>
<p><em>Other Public Policy Invalidating Restraints On Alienation</em></p>
<p>State statutory and common law public policies against undue restrains on alienation (including, but not limited to, the rule against perpetuities) also often operate similarly to BFP protections.</p>
<p>For example, certain common law future interests in real property (e.g. defeasible estates such as the future interest holders of property held in &quot;<a href="https://en.wikipedia.org/wiki/Fee_tail" rel="nofollow noreferrer">fee tail</a>&quot;) are eliminated by a transfer to a BFP under state law in many states.</p>
<p><strong>Analysis</strong></p>
<p>These analysis questions pertain, in particular, to tangible personal property which can be subject to detinue or replevin claims (a.k.a. &quot;claim and delivery&quot;, or &quot;repossession&quot; claims), so the answers to these omit issues related to intangible personal property and real property addressed above.</p>
<blockquote>
<p>This would suggest that any statute that superseded detinue and/or
replevin causes of actions in equity would overrule this doctrine.</p>
</blockquote>
<p>Detinue and replevin causes of action are often creatures of court rule that aren't expressly created by any statute. Both detinue and replevin are claims for relief that arise in law, rather than equity.</p>
<p>The BFP doctrine can be, and sometimes is, overridden by statute, although it is more common for BFP rights to be expressly stated in a statute as exceptions to the unstated common law default general rule that one can only transfer property to the extent that you own it.</p>
<blockquote>
<p>But looking at it closer, even detinue and replevin would be in
conflict with this doctrine; how were they concurrently recognized?
What principles may be read out of the equity practice of the
courts in the U.S.?</p>
</blockquote>
<p>There are lots of transactions that don't involve BFP rights or where BFPs do not have special rights relative to other transferees of tangible personal property. Those are the predominant cases in which detinue and replevin claims are brought. These mostly include the following five categories of cases:</p>
<ol>
<li><p>Actions to repossess property that is collateral for a debt subject to a duly &quot;perfected&quot; security interest or lien filed or registered in the appropriate place, following a default on the underlying debt, where the creditor chooses not to avail itself of its right to repossess the collateral without court process in order to reduce creditor liability risks, or because this cannot be done without a breach of the peace.</p>
</li>
<li><p>Actions to repossess property in the possession of the primary party to the debt and security agreement that is collateral for a debt subject security agreement (even if the security interest or lien is not &quot;perfected&quot;), following a default on the underlying debt, where the creditor chooses not to avail itself of its right to repossess the collateral without court process in order to reduce creditor liability risks, or because this cannot be done without a breach of the peace.</p>
</li>
<li><p>Actions to recover possession of property when the person in possession of it did not acquire possession of the property by sale (e.g. an ex-roommate, or a seller holding goods on a consignment basis).</p>
</li>
<li><p>Actions to recover possession of property from someone who is not a BFP and has voidable title to the property, by someone with a superior claim to title to the property to the person in possession of it (e.g. someone who acquired the property through a gift that was a voidable fraudulent transfer, or through their own fraud in the inducement of a sale).</p>
</li>
<li><p>Actions against BFPs whose chain of title to the tangible personal property is rooted in larceny.</p>
</li>
</ol>
