## Facts

- A trucking company agreed to buy a new tractor from a truck dealer and to trade in a 1966 Mack tractor as part of the deal.
- The Mack’s certificate of title was held by a lienholder; the dealer agreed to pay off the lien to obtain title.
- The parties orally agreed on the deal terms on March 24, 1969, and the trucking company’s president signed a conditional sales contract for the new tractor; an invoice was delivered, and the trucking company had possession of the new tractor.
- The trucking company was permitted to remove new tires from the trade-in Mack and replace them with used tires; the tire swap was not finished when the dealer’s driver arrived to pick up the Mack.
- A mechanic employed by the trucking company volunteered, with the dealer’s assent, to drive the Mack to the dealer’s lot.
- While the mechanic was driving the Mack toward the dealer, the Mack was involved in a collision injuring two individuals.
- After the accident, the Mack was towed to the dealer’s lot; the dealer paid off the lien, repaired the Mack at its own expense, and later resold it without adjusting the trade-in price.
- The trucking company’s insurer filed a diversity declaratory judgment action seeking a determination of which insurer provided liability coverage for the mechanic at the time of the accident.

## Issues

1. Whether the truck dealer or the trucking company owned the trade-in Mack tractor at the time of the accident for purposes of determining which liability insurer covered the driver.
2. Whether the parties’ transaction and conduct, applying U.C.C. principles, showed an agreement or performance that postponed passage of title until after physical delivery or receipt of the paper title.

## Decision

- The Seventh Circuit affirmed the district court’s judgment for the trucking company’s insurer.
- The court held that the dealer owned the Mack at the time of the collision.
- Because the dealer was the owner at the relevant time, the dealer’s liability insurer was responsible for coverage for the accident.

## Legal Principles

- Under U.C.C. sales concepts, absent a contrary agreement, title passes when the seller completes its performance with respect to physical delivery of the goods.
- Determining ownership for insurance-coverage purposes turns on the parties’ agreement and the overall transaction, not solely on momentary physical possession or the location of the paper certificate of title.
- Post-transaction conduct—such as paying liens, repairing damage at one’s own expense, and reselling without price adjustment—may be treated as strong evidence of the parties’ understanding as to when title and ownership transferred.
- A permissive change in who physically transports the goods (including a buyer’s employee delivering a trade-in) does not, without a new agreement, alter the ownership allocation established by the sale transaction.

## Conclusion

The court concluded that the trade-in transaction placed ownership of the Mack with the dealer before the accident, and it therefore assigned liability coverage responsibility to the dealer’s insurer rather than the trucking company’s insurer.


Home Indem. Co. v. Twin City Fire Ins. Co., 474 F.2d 1081 (7th Cir. 1973)