VOTAW v. FARMERS AUTOMOBILE INTERINSURANCE EXCHANGE et al.†
The defendants have appealed from a judgment which was rendered against them in a suit on an insurance policy to reimburse the plaintiff for the payment of a judgment which was recovered against him in a previous suit for damages resulting from an automobile casualty. It is asserted the findings and judgment are not supported by the evidence, since it appears that the plaintiff had sold his car under an oral conditional sales contract, and was therefore not the “sole and unconditional owner” thereof, which fact exempts the insurers from liability by the express terms of their policy.
The plaintiff is the owner of the automobile which was insured by the defendants against accidents occurring in the use thereof. By the terms of the policy the insurers are exempt from liability “(G) If the interest of the insured in the automobile described herein is at any time other than the sole and unconditional ownership.” At the time of the accident the car was being operated by one Kin, who had agreed in an oral conditional contract to purchase it. The possession of the automobile was actually delivered to the vendee. The title to the machine was reserved in the vendor until it was fully paid for. The purchase price was never fully paid. The certificate of ownership was neither signed nor delivered to the vendee, nor had the certificate of ownership or the notice of sale been given to the division of motor vehicles as required by section 45 3/4 of the California Vehicle Act (St.1923, p. 517, as added by St.1931, p. 2105). The certificate of ownership was not transferred to the vendee until the fall of 1933, after the accident had occurred. In a previous suit judgment for damages for personal injuries received by strangers to this action as a result of a collision with plaintiff's automobile was rendered against this plaintiff in the sum of $4,341.27, which he was compelled to, and did, pay in full. The insurers participated in the defense to the former action with an express written agreement that all rights to defend against future litigation on the policy on the ground of exemption from liability under the “sole and unconditional ownership” clause referred to would be reserved to the insurers.
Upon demand the insurance companies refused to reimburse this plaintiff on the ground that they were exempt from liability under the provisions of that clause in the policy. This suit upon the policy was then instituted. The cause was tried before the court sitting without a jury. Findings were adopted favorable to the plaintiff. A judgment was accordingly rendered against the defendants for the sum of $4,341.27 and costs of suit. From that judgment, this appeal was perfected.
It has been squarely determined that the owner of an automobile is entitled to recover compensation upon a policy insuring the machine against loss by accident or fire, even though the policy contains an exemption clause relieving the insurer of liability except in the event of “sole and unconditional ownership” thereof, and when the car is subject to a conditional executory agreement of sale, and the vendee is in actual possession thereof, provided the title is retained in the vendor until the purchase price is fully paid. Wyman v. Security Insurance Company of California, 202 Cal. 743, 262 P. 329, 330. The facts of the case cited are exactly like those which are involved in this case except that the loss which was sustained in that case resulted from the burning of the machine, and in the present case damages accrued against the owner by virtue of an automobile collision. It is said in the Wyman Case:
“The policy provided that: It shall be void, ‘If the interest of the assured in the subject of this insurance be other than unconditional and sole ownership.’ Respondent relies upon this provision of the policy when applied to the finding of the court that at the time the policy was issued Wyman had agreed verbally to sell the machine to Davee, reserving title to the truck in himself, but delivering possession of the truck to Davee. It has been held in this state that, under such a contract and in case of the loss or destruction of the property involved, the loss falls upon the vendor. Potts Drug Co. v. Benedict, 156 Cal. 322, 334, 104 P. 432, 25 L.R.A.(N.S.) 609; Waltz v. Silveria, 25 Cal.App. 717, 719, 145 P. 169. ‘The interest of the insured is sufficient when the whole loss will fall upon him in case of the destruction of the insured property.’ 14 Cal.Jur. 499; Phenix Ins. Co. v. Hilliard, 59 Fla. 590, 52 So. 799, 138 Am.St. Rep. 171; Burson v. Fire Ass'n, 136 Pa. 267, 20 A. 401, 20 Am.St.Rep. 919.
“Under these authorities we are of the opinion that plaintiffs were not precluded from recovery upon the insurance policy merely by reason of the verbal agreement entered into by Wyman prior to the issuance of the policy to sell the truck to Davee upon the terms and conditions of such agreement.”
In the present case, for the reason that the plaintiff retained the title to the automobile until it was fully paid for, that the purchase price was not fully paid, and that no certificate transferring title or notice of sale had been made or filed with the division of motor vehicles as required by section 45 3/4 of the California Vehicle Act, the plaintiff was rendered liable under the provisions of section 1714 1/4 of the Civil Code, as the owner of the car, for damages resulting from the negligence of the conditional vendee who was driving the machine at the time of the accident with the owner's express or implied consent.
Upon the authority of the Wyman Case, under the circumstances of this cause, the defendants are liable under their policy to reimburse the plaintiff for damages which he was compelled to pay on account of the accident.
The case of Schmidt v. C. I. T. Corporation, 14 Cal.App.(2d) 92, 57 P.(2d) 1016, 1017, upon which the appellant relies, is not in conflict with the Wyman Case, supra. In the Schmidt Case judgments on appeal were affirmed in favor of the plaintiffs in two consolidated cases which resulted in the awarding of damages for personal injuries sustained by them on account of an automobile collision. The question of the liability of an insurer of the automobile was not involved in that case. It was held that the owner of the automobile was liable notwithstanding the fact that he had made a conditional agreement to sell the machine to a third party, and had actually delivered the machine to the conditional purchaser, but had not transferred the certificate of ownership, nor notified the department of motor vehicles of the sale pursuant to the provisions of section 45 3/4 of the California Vehicle Act. It appears in the Schmidt Case that the appellant previously bought the machine in question from one Paul Kunde, who signed, transferred, and delivered the certificate of ownership to the appellant, who failed to register it with the department of motor vehicles. The owner contended on appeal that he was therefore exempt from liability for damages under the provisions of section 1714 1/4 of the Civil Code, on the theory that Kunde, under such circumstances, would be deemed to be the present owner of the machine. The court properly decided in that regard that the appellant would not be permitted to “take advantage of its own wrong” and escape liability by pleading that he had failed to comply with the statute by filing with the department of motor vehicles the transferred certificate of title which he held, or by failing to notify the department of the purchase of the machine.
There appears to be some conflict of authorities in other jurisdictions regarding the liability of an insurance company to indemnify the insurer of personal property for loss by fire or accident who has made a conditional contract to sell the property on installments, some of which have not been paid, where the vendor specifically reserves the title until the purchase price has been fully paid and the policy provides that it shall be in force only while the insured is the sole and unconditional owner thereof. The authorities define the term “sole and unconditional owner” of property to mean the person on whom the loss insured against would be certain to fall, not as a mere matter of contract obligation, but as the result of bona fide rights in the insured property. Phenix Ins. Co. v. Hilliard, 59 Fla. 590, 52 So. 799, 138 Am.St.Rep. 171; Houseman v. Home Ins. Co., 78 W.Va. 203, 88 S.E. 1048. 1052, L.R.A.1917A, 299; 26 C.J. 176, § 213; 14 R.C.L. 1059, § 234. In the authority last cited it is said:
“In the case of a conditional sale in which title is reserved in the vendor until the purchase price has been fully paid, the vendee is usually considered not to be the sole and unconditional owner, though he would be liable for the (purchase) price in the event of the loss of the property, and the vendor is considered to be such owner. * * *”
The syllabus in the Houseman Case, supra, correctly states the purport of that decision in regard to the insurer's liability to the vendor of personal property under such circumstances pursuant to a conditional contract of sale which specifically reserved the title in him until the property is fully paid for, as follows:
“Neither an option nor an invalid or conditional contract of sale of personal property by an insured, with reservation of title until payment of the purchase money, although possession is transferred to the vendee, will constitute a breach of the condition of the policy requiring ‘sole and unconditional ownership.”’
In 26 Corpus Juris 176, § 213, it is said in that regard:
“In respect to personal property, a contract of sale whereby the title is to remain in the seller until the purchase price is paid does not affect the seller's title as ‘sole and unconditional owner’, when possession of the property has not passed, not even, according to some authorities, when possession has been transferred.”
In upholding the doctrine last mentioned, it is said in the Hilliard Case, in 59 Fla. 590, 52 So. 799, 801, 138 Am.St.Rep. at page 175:
“By fair construction and intendment the ‘unconditional and sole ownership’ of property for the purposes of insurance is in those upon whom the loss insured against would certainly fall, not as a matter of mere contract obligation, but as the result of real bona fide rights in the property insured.”
There appears to be no doubt regarding the soundness and justice of the declaration of the Hilliard Case quoted. The circumstances of the present case illustrate that principle perfectly. In contemplation of law and in fact the insured person was the sole owner of the car. It is not disputed that he specifically reserved the title in himself until the entire purchase price was fully paid. On the theory and in the belief that he remained the sole owner, he did not sign or transfer the certificate of ownership to the vendee, nor did he notify the division of motor vehicles, in accordance with the provisions of section 45 3/4 of the California Vehicle Act, now section 177 of the Vehicle Code (St.1935, p. 93). Under this section of the Vehicle Code the vendor is deemed to be the owner of the machine, and is unquestionably personally liable for damages resulting from the negligence of the vendee or of any other person who may be driving the car with his express or implied consent. That appears to be the very liability which this insurance company under the terms of its policy agreed to compensate him for. In truth a final judgment of a court has actually determined that the insured was liable for the damages which accrued in this case, and the owner of the machine was forced to pay that judgment.
It is suggested the liability of the insurance company is increased by transferring the possession of the machine to the vendee on a conditional agreement to buy the automobile. But it is not controverted that the insurance company is liable on its policy for damages resulting from the negligence of any competent person to whom the machine has been intrusted by the owner with his express or implied consent. This liability for the negligence of a permissive driver is the same whether he is allowed to drive the automobile on one occasion, daily, frequently, or until he acquires title by paying an agreed purchase price therefor. Undoubtedly the clause in the policy which provides that it shall remain in force only while the insured is the “sole and unconditional owner” is to guard against fraud with respect to the title to property which is to be insured, and to prevent persons from fraudulently insuring and collecting compensation on property which they do not own. While there may always be an increased liability of the insurance company when the insured owner of an automobile permits another person to drive the car, dependent upon the prudence and character of that individual, that permissive use of the machine is contemplated by the terms of the policy, the liability of the company is not increased merely because the machine was loaned to a prospective purchaser under a conditional contract to buy it, rather than to some other permissive driver of the vehicle.
On sound principle under the circumstances of this case we are of the opinion the insurance company may not be permitted to avoid its liability under the policy on the ground that the insured did not remain the sole and unconditional owner of the automobile.
On the authority of Wyman v. Security Insurance Company of California, supra, the judgment is affirmed.
Mr. Justice THOMPSON delivered the opinion of the court.
We concur: PULLEN, P. J.; PLUMMER, J.