St. Paul Fire and Marine Insurance Co. v. Toman

Toman (defendant) planned to sell a removable house at a public auction. Before the auction sale began, the auctioneer informed the potential buyers that the house would need to be removed from Toman’s farmstead under terms to be subsequently negotiated between the buyer and Toman. Van Collins bid the highest for the house and issued a check to the auctioneer. Collins did not receive any written document evidencing the sale. A few days after the sale and before Collins had an opportunity to negotiate the removal-terms with Toman, a fire on Toman’s property destroyed the house. Toman had an insurance policy with St. Paul Fire and Marine Insurance Company (the insurer) (plaintiff) and sought payment pursuant to the policy. The insurer refused to pay Toman on the grounds that he no longer had an insurable interest in the house at the time of the loss and the risk of the loss had passed to Collins. Toman contended that he did have an insurable interest and was, therefore, entitled to payment. During proceedings, Collins testified that he fully understood he would need Toman’s approval before removing the house from Toman’s farmstead. Collins further testified that he had no immediate plans to remove the house because he thought he should first obtain a bill of sale from Toman, and that he knew Toman still occupied the house at least part-time and would require time to move out of the house. The insurer argued that real-property law governed the sale of the house, which negated any insurable interest held by Toman. However, the lower court found that the house constituted a sale of goods governed by the Uniform Commercial Code (UCC) and concluded that the risk of loss had not yet passed to Collins because there was no tender of delivery. Consequently, the lower court awarded Toman the policy amount plus prejudgment interest from the date of the fire.