Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 4

United States v. 2007 Custom Motorcycle
United States District Court, District of Arizona, __ F.Supp.2d __ (2011).
FACTS Timothy Allen commissioned a custom motorcycle from Indy Route 66 Cycles, Inc., a company based in Indianapolis, Indiana. Indy built the motorcycle and issued a "Certificate of Origin" in April 2007. Two years later, federal law enforcement officers arrested Allen on drug charges and seized his home and other property in Phoenix, Arizona. The officers also seized the Indy-made motorcycle from the garage of the home of Allen's sister, Tena. The government alleged that the motorcycle was subject to forfeiture as the proceeds of drug trafficking. Indy filed a claim in a federal district court against the government. Indy argued that it owned the motorcycle, as evidenced by the "Certificate of Origin," which the company still possessed. Indy claimed that it had been keeping the motorcycle in storage. The government asserted that the motorcycle had been delivered to Allen in April 2007 and that Indy thus did not have standing to make its claim. The government filed a motion to strike the claim.
ISSUE Did ownership to the motorcycle pass at the time that Indy gave Allen possession and control over it?
DECISION Yes. The district court issued a ruling in the government's favor and granted the motion to strike Indy's claim.
REASON Under UCC 2-401(2), "unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods." In the sales transaction in this case, the parties did not "otherwise explicitly agree" to different terms. Thus, the critical factor was whether Indy had delivered the motorcycle to Allen. Testimony by Indy's former vice president, Vince Ballard, was "inconclusive." Although Ballard implied that Indy had delivered the motorcycle to Allen, he also asserted that Indy had kept it in storage. Yet the motorcycle was found in Tena's garage. This "strongly indicates that claimant delivered it to [Timothy] Allen." Thus, Indy had given up possession of the motorcycle to Allen. This was sufficient to pass title even though Indy had kept a "Certificate of Origin." As a consequence, the motorcycle was subject to forfeiture as the proceeds of drug trafficking.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that Indy had given the "Certificate of Origin" to Allen and had kept the motorcycle. Would the result have been different? Explain.