## Facts

- James T. Toman owned a farmstead house insured under a valued fire policy for $28,000 issued by St. Paul Fire and Marine Insurance Company.
- At a public auction on September 23, 1981, Toman sold the house to be removed from the land; Van Collins was the high bidder for $3,250 and paid by check to the auctioneer.
- No written bill of sale was issued at the auction, and the timing and terms of removal were not specified beyond being left for later agreement between buyer and seller.
- Before the sale, Collins indicated Toman could rent the house to hunters for the upcoming season; Collins understood removal would require Toman’s approval and that Toman still occupied the house at least part-time.
- On September 25, 1981, Toman left on a business trip; before he returned, the house was destroyed by fire.
- Toman made a claim under the policy; the insurer denied coverage, asserting Toman lacked an insurable interest because the house had been sold and the risk of loss had shifted to Collins.
- In a declaratory judgment action, the trial court ruled for Toman, awarding $28,000 plus prejudgment interest from the date of the fire; the insurer appealed.

## Issues

1. Whether the auction sale of a house to be removed from land is governed by real property law or the U.C.C. as a sale of “goods.”
2. Whether Toman retained an insurable interest at the time of the fire, or whether risk of loss had passed to Collins.
3. Whether prejudgment interest should run from the date of the fire or from the date the insurer refused to pay.

## Decision

- The Supreme Court of South Dakota held the transaction was governed by the U.C.C. as a sale of goods because the house was sold for removal from the land.
- The court affirmed that Toman retained an insurable interest at the time of loss because there had been no tender of delivery and the risk of loss had not passed to Collins.
- The court modified the prejudgment interest award, holding interest should accrue from the insurer’s refusal to pay rather than from the date of the fire.
- Disposition: affirmed as modified.

## Legal Principles

- A structure sold with the expectation it will be severed and removed from realty may be treated as “goods” governed by the U.C.C., rather than as a real property conveyance.
- Under U.C.C. risk-of-loss rules, passage of title does not alone determine risk of loss; absent agreement, risk generally remains with the seller until tender of delivery (and, depending on the seller’s status, until delivery).
- A seller may retain an insurable interest in identified goods until tender/delivery; continued possession and control are evidence that tender has not occurred.
- Prejudgment interest on an insurance recovery generally accrues from the time payment is wrongfully withheld (the insurer’s refusal to pay), not from the date of the casualty, absent a contrary statutory or contractual rule.

## Conclusion

Because the house was sold for removal and no tender of delivery occurred before the fire, the U.C.C. governed, Toman kept the risk of loss and an insurable interest, and the insurer was liable for the policy’s valued amount; prejudgment interest, however, ran only from the insurer’s refusal to pay.


St. Paul Fire & Marine Ins. Co. v. Toman, 351 N.W.2d 146 (S.D. 1984)