## Facts

- A customer traded a 2000 Mercedes-Benz S430 (the Mercedes) to Euro Motorcars, Inc. (Euro), a Maryland dealership.
- Euro contacted Patrick Figueroa (Figueroa), whom Euro knew from many prior successful transactions as an agent for two dealers, Maygoun Auto Sales (Maygoun) and Car Mart, about purchasing the Mercedes.
- Figueroa represented that he wanted to buy the Mercedes on Maygoun’s behalf, and Euro agreed to sell it to Figueroa for $56,500.
- Consistent with the wholesale-car trade practice between the parties, Euro allowed Figueroa to take possession of the Mercedes without paying immediately, with the understanding that Euro would deliver the certificate of title after Euro received payment.
- Instead of selling the Mercedes to Maygoun, Figueroa sold it to Banc Auto, Inc. (Banc), a Pennsylvania used-car dealer that had also used Figueroa as a middleman in prior transactions without problems.
- Banc agreed to pay $56,500 and also to share a percentage of its resale profit with Figueroa.
- At Figueroa’s instruction, Banc issued a check for the purchase price made payable to “Car Mart,” which Figueroa cashed; Figueroa did not forward the funds to Euro.
- Because Euro never received payment, Euro refused to transfer the certificate of title to Banc, leaving Banc unable to resell the Mercedes.
- Banc kept and used the Mercedes for roughly two years; a court later ordered the car sold, producing $40,000 in sale proceeds.
- Banc initiated criminal charges against Figueroa, and Figueroa was convicted of stealing the check (the payment), not of stealing the Mercedes itself.
- Banc’s insurer, Empire Fire and Marine Insurance Company (Empire), filed a declaratory-judgment action involving Banc, Euro, and Figueroa; Banc and Euro asserted competing claims concerning ownership and entitlement to the sale proceeds.
- The trial court ruled for Banc and awarded Banc the $40,000 proceeds; Euro appealed.

## Issues

1. Whether Euro’s voluntary delivery of the Mercedes to Figueroa gave Figueroa voidable title (rather than void title), allowing him to transfer good title under UCC § 2-403 (13 Pa.C.S. § 2403).
2. Whether Banc qualified as a good-faith purchaser for value such that it took title free of Euro’s claim despite Figueroa’s failure to pay Euro.
3. Whether the trial court correctly awarded the court-ordered sale proceeds to Banc rather than Euro.

## Decision

- The Superior Court of Pennsylvania affirmed the judgment in Banc’s favor.
- Because Euro voluntarily entrusted possession of the Mercedes to Figueroa as part of a sale transaction, Figueroa held voidable title, not void title.
- Under UCC § 2-403, a person with voidable title has power to transfer good title to a good-faith purchaser for value.
- Banc paid value for the Mercedes and, based on its prior course of dealing with Figueroa and the nature of the transaction, qualified as a good-faith purchaser for value.
- Euro’s reliance on cases involving true theft (void title), including In re Hennessy, was rejected because Euro had consented to Figueroa’s possession of the Mercedes.
- Figueroa’s criminal conviction for stealing the check did not convert the transaction into a theft of the vehicle; the wrongdoing was the diversion of payment, not an initial nonconsensual taking of the car.
- As the party with superior ownership rights against Euro, Banc was entitled to the $40,000 sale proceeds.

## Legal Principles

- When a seller voluntarily delivers goods to a buyer (or intermediary) in a transaction of purchase, the recipient generally obtains voidable title even if the recipient later fails to pay or acts fraudulently.
- Under UCC § 2-403 (13 Pa.C.S. § 2403), a holder of voidable title can transfer good title to a good-faith purchaser for value.
- A good-faith purchaser for value can take title free of the original seller’s claim even though the intermediary wrongfully retains or steals the payment proceeds.
- A case involving a thief who never had consensual possession presents void title and is treated differently from a voluntary delivery that later results in nonpayment.
- In disputes over sale proceeds after a court-ordered sale of goods, entitlement follows the party who holds the superior ownership rights under the UCC title rules.

## Conclusion

The Superior Court held that because Euro voluntarily gave Figueroa possession of the Mercedes in a sale transaction, Figueroa had voidable title and could pass good title to Banc as a good-faith purchaser for value under UCC § 2-403; therefore, Banc, not Euro, was entitled to the proceeds of the court-ordered sale.


Empire Fire and Marine Insurance Co. v. Banc Auto, Inc., 897 A.2d 1247 (2006)