Empire Fire and Marine Insurance Co. v. Banc Auto, Inc.

Someone traded in a Mercedes-Benz (the Mercedes) to a car dealer, Euro Motorcars (Euro). Euro contacted Figueroa, whom Euro knew based on many prior successful dealings as an agent for two other car dealers, Maygoun Auto Sales (Maygoun) and Car Mart, regarding the Mercedes. Figueroa responded with interest in buying the Mercedes on Maygoun’s behalf. Accordingly, Euro agreed to sell the Mercedes to Figueroa for $56,500. Per industry custom, Euro permitted Figueroa to take the Mercedes without making any payment, trusted that Euro would be paid once Figueroa received payment from the other car dealer, and planned to transfer the Mercedes’s certificate of title to the other car dealer once Euro received payment from Figueroa. Instead of selling the car to Maygoun, Figueroa sold the Mercedes to Banc Auto, Inc. (Banc), which had similarly used Figueroa as a middleman many times before without any problems, for $56,500 plus a percentage of Banc’s profit once Banc resold the Mercedes. At Figueroa’s instruction, Banc issued to Figueroa a check made out to Car Mart for the purchase-price. Figueroa cashed the check but did not pay Euro. Consequently, Euro refused to transfer the Mercedes’s certificate of title to Banc. Thus, Banc could not resell the Mercedes and instead used the Mercedes for a couple of years until the Mercedes was sold by court order for $40,000. Banc filed criminal charges against Figueroa, which resulted in Figueroa’s conviction of stealing the check. Banc’s insurer, Empire Fire and Marine Insurance Company (Empire) (plaintiff) filed a declaratory-judgment action as to Banc, Euro, and Figueroa (defendants). The trial court ruled in Banc’s favor and awarded Banc the proceeds of the Mercedes’s sale. On appeal, Euro argued that the trial court erred in finding that Banc owned the Mercedes because Figueroa unlawfully converted or stole the Mercedes and Banc was not a bone-fide purchaser.