Also known as: innocent purchasers for value · bona fide purchaser · BFP · good faith purchaser for value
Written by attorneys — see sources below.
A purchaser who acquires property in good faith for valuable consideration without notice of prior adverse claims. The status shields the purchaser from unrecorded or defective prior interests under recording statutes and limits recovery in conversion actions against subsequent transferees.
Horizon Retail REIT purchased a shopping center from MetroMall Corp. for fair market value. The Carter Family Trust held an unrecorded equitable interest from prior construction financing. Horizon had no actual or record notice of the trust's claim. Horizon's status as an innocent purchaser for value gave it superior title to the property and the right to collect rent from the tenant.
A buyer acquired land from a seller who had previously conveyed an unrecorded interest to another party. The buyer paid value and recorded first but had information that should have prompted further investigation into the prior claim. Because the buyer failed to qualify as an innocent purchaser for value, the prior unrecorded interest retained priority.
Mountain Byte obtained a laptop from Regina by misrepresenting the purpose of the transfer. Mountain Byte then sold the laptop to Bay Logic, which paid full market value after inspecting the device and finding no ownership markings. Bay Logic's status as an innocent purchaser for value prevented Regina from recovering the laptop in conversion.
A forger executed a deed purporting to convey land owned by the true owner. A subsequent buyer paid value, took without notice of the forgery, and recorded the deed. In the jurisdiction applying its recording statute, the buyer's status as an innocent purchaser for value protected the buyer against the true owner's claim.
Liberty Growers entered an installment land contract, paid forty percent of the price, and took possession. A prior unrecorded contract claimant asserted superior title. The court awarded the land to the prior claimant but granted Liberty Growers an equitable lien for the amount already paid because it qualified as an innocent purchaser for value only to the extent of its payments.
A corporation purchased substantially all assets of another business in an arm's-length transaction. The buyer paid value and had no notice of the seller's unresolved labor obligations. The buyer's status as an innocent purchaser for value insulated it from successor liability for the seller's prior violations.
Kenneth L. Baker was discharged by Golden State Bottling Co. on August 16, 1963. On June 10, 1964, the National Labor Relations Board found that the discharge constituted an unfair labor practice and ordered Golden State, its officers, agents, successors, and assigns to reinstate Baker with backpay. The Court of Appeals for the Ninth Circuit enforced the Board's order with respect to Baker on December 2, 1965, and a final decree was entered on November 27, 1968. On January 31, 1968, All American Beverages, Inc. purchased Golden State's soft drink bottling and distribution business. All American continued to carry on the business without interruption or substantial changes in method of operation, employee complement, or supervisory personnel. The sales contract conditioned the purchase on Eugene Schilling, Golden State's secretary and manager who had discharged Baker, agreeing to remain employed by All American for one year as general manager. In a subsequent backpay specification proceeding to which both Golden State and All American were parties, the Board found that All American had purchased the business with knowledge of the outstanding Board order and was a successor liable for reinstatement with backpay. The Board ordered All American to reinstate Baker and directed that Golden State and All American jointly or severally pay Baker a specified sum of net backpay. The Court of Appeals for the Ninth Circuit enforced the order, one judge dissenting, and the Supreme Court granted certiorari. When Baker was discharged he was Golden State's leading driver-salesman. On October 1, 1964, Golden State began converting its top driver-salesmen to distributors who realized net profits after deduction of operating expenses from the purchase and resale of products. The Board found that Baker would have become a distributor on October 1, 1964, but for his discharge and therefore computed his gross backpay subsequent to that date on the basis of what he would have earned as a distributor.
View caseThe purchaser must pay valuable consideration, act in good faith, and take without actual or constructive notice of prior adverse claims. Failure on any element defeats the status under recording acts and conversion rules.
Under notice statutes an innocent purchaser for value prevails over prior unrecorded interests. Under race-notice statutes the purchaser must also record first. Race statutes focus solely on recording order and do not require the innocent-purchaser elements.
No. Protection extends only to the extent of payments made. The court may award the land to the prior claimant while granting the installment buyer an equitable lien for amounts already paid.
In some jurisdictions a subsequent purchaser who takes without notice and records may be protected against the true owner despite the forged deed. Protection depends on the type of recording statute and chain-of-title rules.
Consent obtained by fraud does not bar recovery from anyone except an innocent purchaser for value. A buyer who pays value without notice of the fraud is shielded from the conversion action.