Suburban Motors Inc. v. State Farm Mutual Automobile Insurance Co.

Richard Kirschner owned a 1981 Mercedes Benz vehicle (the Mercedes) that he had insured by State Farm Mutual Automobile Insurance Company (State Farm) (defendant) against theft. Sometime before November 27, 1985, the Mercedes was stolen. In accordance with Kirschner’s insurance policy, State Farm paid him $41,000 in exchange for the title to the vehicle. Sometime before November 27, 1985, the California Department of Licensing issued new title documents for the Mercedes based on an illegally altered vehicle-identification number (VIN). On November 27, 1985, automobile dealer Steven Taglianetti offered the Mercedes for auction with the California Auto Dealers Exchange (CADE). After the Mercedes was sold at auction, it changed hands to a series of supposed owners who had no knowledge that the vehicle was stolen. Suburban Motors, Inc. (plaintiff) purchased the Mercedes sometime after November 27, 1985. After Suburban Motors leased the vehicle to a customer on April 4, 1986, the customer was stopped by the police, who discovered the vehicle was stolen, took possession of the vehicle, and turned it over to State Farm. Suburban Motors sued for possession of the vehicle, claiming it had a right to the title as a good-faith purchaser. The trial court held that Suburban Motors had the superior right to title as good-faith purchaser. State Farm appealed.