Tennessee Farmers Mutual Insurance v. Canal Insurance

McAMIS, P. J. Canal Insurance Company filed its petition in the Circuit Court against Tennessee Farmers Mutual Insurance Company and others to have a declaration of its rights and liabilities under two of its policies issued to Robert Wayne Hodges protecting him among other things from public liability while driving a non-owned vehicle. The petition alleges the two policies were limited to excess insurance over and above any other public liability insurance protecting Hodges, its insured, and that Hodges had such other insurance under a policy in the defendant Tennessee Farmers Mutual Insurance Company. There was a trial before the Court without a jury resulting in an adjudication that Hodges was, in fact, insured under a policy issued by defendant Tennessee Farmers Mutual Insurance Company, hereinafter referred to as defendant, covering the 1964 Ford pick-up truck which Hodges was driving when he had a collision causing certain suits to be brought against him. Defendant has appealed and assigned errors insisting Hodges, at the time of the accident, had purchased the truck and was driving it as his own and not by permission of its insured, Bunis Bailey, and that it is not in any way obligated to defend actions against Hodges or discharge any judgments which might be rendered against him. — 4 — It is to be seen tbe central and controlling issue before tbe Circuit Judge was whether or not Bunis Bailey prior to tbe accident bad sold tbe truck to Hodges or whether, as petitioner Canal Insurance Company insisted, Hodges was driving tbe truck when tbe collision occurred by permission of Bailey so that under tbe terms of defendant’s policy defendant would be obligated to defend tbe suits against Hodges. Prior to April 8, 1965, Arville Bailey, a brother of Bunis Bailey, owned tbe truck in question, but, because of bis minority, tbe title was taken in tbe name of Bunis Bailey. Defendant’s public liability policy was likewise taken in tbe name of Bunis Bailey. On that date there was owing on tbe truck to a finance company approximately $2,000.00'. Faced with a call to military duty, Arville Bailey began talking to bis cousin, Robert Wayne Hodges, several days prior to that date about selling him tbe truck. . These negotiations finally culminated in Hodges agreeing to buy tbe truck and in payment take over tbe payments due the finance company. However, Arville bad made one payment of $80.00 after tbe discussion began and it was agreed Hodges would reimburse Arville for this payment he bad already made. In addition it was agreed Hodges was to receive tbe rebate on a policy of collision insurance in tbe Service Insurance Company which was to be cancelled. On April 8, 1965, Arville and Hodges went to Morris-town where tbe finance company was located to effect a transfer of tbe title and tbe indebtedness owing on tbe truck. It was necessary to take Bunis Bailey along because tbe legal title to tbe truck was in bis name. — 5 — When the finance company refused to allow the indebtedness to be transferred to Hodges, Hodges procured a check for $2,000.00 from his mother and delivered it to the finance company. The finance company, however, refused to release its lien and transfer title until the check cleared the bank. It was then agreed by all parties that when the check cleared, the finance company would mail the title to Hodges who would then present it to Bunis Bailey for his endorsement. According to Hodges’ testimony it was agreed the license plates would remain on the truck until title could be transferred and until that time he was to be permitted to drive the truck for pleasure but not for any business purpose. Bunis Bailey does not seriously question this statement. At the time of the trial Arville Bailey was in Germany and did not testify. It was expected the check would clear and the title would be transferred within a few days after April 8,1965, but apparently due to neglect on the part of the finance company, the title was not mailed to Hodges until late in May. In the meantime, before April 17, 1965, when Ar-ville Bailey left to enter the service, Hodges paid him the $80.00 above mentioned and on May 14, 1965, while driving the truck on a camping trip Hodges was involved in the accident. Defendant was then notified. The policy had not been cancelled prior to the accident. Upon demand the finance company soon thereafter delivered the title to Hodges and it was endorsed to him by Bunis Bailey. There is proof Bunis Bailey on one occasion prior to the accident asked Hodges for the license plates so that he could use them on an old car but was informed by — 6 — Hodges he had to have the plates in order to use the truck and that he could not get plates until he could get the title transferred. Hodges testified he agreed with Arville Bailey that the license plates would remain on the truck and that Arville would keep the insurance until the title could he transferred. He further testified he did not consider the truck his and had possession only because he was given permission to drive it until he got the title — that he only drove the truck about three times before going on the camping trip. Bunis seems to have been uncertain whether the truck belonged to Hodges from and after April 8, 1965, when the finance company accepted Hodges’ cheek and agreed to mail the title to him. On the foregoing evidence the trial court ruled that legal title to the truck had not passed to Hodges and that he was driving the truck with the permission of Bailey, the owner, and was, therefore, entitled to protection under defendant’s policy. In support of its position, defendant relies principally on Home Indemnity Company v. Bowers, 194 Tenn. 560, 253 S.W.2d 750, 36 A.L.R.2d 668. That case involved only the question of insurance coverage under an omnibus clause where the policy holder had sold the car under a conditional sales contract and possession had passed to the conditional vendee prior to the involvement in an accident of the vehicle described in the policy. The Court held that although title had been retained by the policy holder his title thereafter was only as security for the debt, the equitable title being in the conditional vendee. The opinion then reasons that since the policy holder held the legal title only, the real title being in the conditional — 7 — vendee, the conditional vendor was without power to grant permission to the conditional vendee to drive and, therefore, the conditional vendee, in contemplation of the omnibus clause of the policy, was driving in his own right and not by permission of the policy holder. Many courts hold, under the terms of particular statutes, that failure to comply with statutory requirements with respect to sale or transfer of a motor vehicle does not render the transfer or sale void as between the parties. Other statutes are held to make the transfer void with the result that no title passes. Anno. 94 A.L.R. 948; 7 Am.Jur.2d 628, Automobiles and Highway Traffic, Section 43. Missouri appears to be aligned with states holding no title can be acquired except by complying with the statute regulating the transfer of title certificates. In Kelso v. Kelso, 306 S.W.2d 534, 71 A.L.R.2d 258, and cases cited the Supreme Court of Missouri held that one who purchased an automobile without obtaining a legal transfer of title had no insurable interest. The Court of Appeals of that state has held that where the statute has not been followed, the use of the automobile by the purported buyer is considered to be with the permission of the insured and to bring such use within the coverage of the omnibus clause. Haynes v. Linder, 323 S.W.2d 505. Reece v. State, 197 Tenn. 383, 273 S.W.2d 475, holds that under the Tennessee statute, now T.C.A. sec. 59-1201, providing that the ‘1 Owner’ ’ of a motor vehicle is the person who holds the legal title, proof of registration in the name of the certified holder is generally “practically conclusive” of ownership. T.C.A. sec. 59-819 prescribes the requirements for transferring title by bill of sale where, as here, the certificate is being held by a lienor. — 8 — It is not necessary to hold that, as between the parties or even as affecting insurance under an omnibus clause of an insurance policy, the only valid transfer of title is one strictly according to the statute. Here, under the finding of the Circuit Judge in which we concur, the intention of the parties was to hold in abeyance the passing of legal title. We do not have here a case where the intention of the parties was to transfer title without a formal transfer of the certificate of title. The express understanding of the parties that Hodges’ use of the truck was to be limited to pleasure driving and that it was not to be used for business purposes indicates that the parties considered title had not passed. Otherwise, there would have been no reason or authority to limit use of the truck to pleasure. Affirmed. Cooper and Parrott, JJ., concur.