Eureka-Security Fire & Marine Ins. Co. v. Maxwell

• Decision Date: 09 March 1960
• Docket Number: No. 7990.,7990.
• Citation: 276 F.2d 132
• Parties: EUREKA-SECURITY FIRE AND MARINE INSURANCE COMPANY, Appellant, v. V. G. MAXWELL, t/a Richmond Trailer Exchange, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

276 F.2d 132 (1960)

EUREKA-SECURITY FIRE AND MARINE INSURANCE COMPANY, Appellant, v. V. G. MAXWELL, t/a Richmond Trailer Exchange, Appellee.

No. 7990.

United States Court of Appeals Fourth Circuit.

Argued January 8, 1960.

Decided March 9, 1960.

Angus H. Macaulay, Jr., and Collins Denny, Jr., Richmond, Va. (Claude D. Minor, and Denny, Valentine & Davenport, Richmond, Va., on brief), for appellant.

G. Clinton Moore, Richmond, Va., for appellee.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and DALTON, District Judge.

BOREMAN, Circuit Judge.

This action originated in the Law and Equity Court of the City of Richmond, Virginia. After certain of the parties plaintiff and defendant were eliminated, V. G. Maxwell, t/a Richmond Trailer Exchange, remained as sole plaintiff, and Eureka-Security Fire and Marine Insurance Company (hereinafter called "Eureka") remained as sole defendant. The case was then removed to the United States District Court for the Eastern District of Virginia and was tried before the court without a jury.

Maxwell was engaged in the business of selling new and used trailers and maintained a lot, suitable for his purposes, on the Petersburg Pike in Richmond. Eureka had issued what is known and described as an "Automobile Dealers' Open Lot Policy", No. A 90 352 143, in which Maxwell was named as the insured. This action involves Maxwell's claim of fire loss under this policy.

On February 14, 1955, Maxwell sold to one Hirsh a Schult house trailer under a conditional sale contract whereby Hirsh, buyer, agreed to pay to Maxwell, seller, or his assigns, the balance of the purchase price plus insurance and finance charges, payable in sixty monthly installments of $83.93 each. The total amount due under the contract was $5,035.80. By the terms of the contract, Maxwell retained title to the trailer as security for the unpaid balance and expressly reserved the right to assign the contract and all his rights thereunder. On the same day, Maxwell assigned the contract to The Chase National Bank of the City of New York (which bank subsequently became The Chase Manhattan Bank), hereinafter called "Bank", in the following language:

"For value received, the undersigned does hereby sell, assign and transfer to The Chase National Bank of the City of New York his, its or their right, title and interest in and to the within contract and the trailer covered thereby and authorizes said Bank to do every act and thing it deems necessary or proper to collect and discharge the same."

Subsequently, through proper application and procedure, the trailer was registered with the Division of Motor Vehicles of Virginia, and certificate of title to the trailer was issued to Hirsh as owner, subject to the lien in favor of Bank in the amount of $5,035.80. As provided by the Code of Virginia, Title 46, § 46-74 (1950), the certificate of title was delivered to Bank to be held with the conditional sale contract.

Prior to these transactions, Maxwell and Bank had entered into a written contract dated January 20, 1955, by the terms of which Maxwell was obligated to Bank to repurchase, upon receipt of a demand from the Bank, any installment contract in respect of which the obligor was in default in the payment of any installment when due. Further, by the terms of the agreement with Maxwell, Bank had the right to withhold and retain certain amounts due under installment contracts as security for the faithful performance of Maxwell's obligations. These funds so withheld were to be retained in a "hold-back account" and the Bank had the right to apply these funds without notice or demand to (1) any obligation upon which Maxwell defaulted, or (2) any obligation of Maxwell whenever the Bank deemed its investment insecure for any reason. Before making demand on Maxwell, the Bank was obligated by the agreement to endeavor to collect the payments due on conditional sales contracts in a manner normally employed in the usual course of business. While the Bank had no obligation to do so, it had the right to commence any proceeding to collect installments due under any installment contract or to exercise any other available remedy. Upon receipt of payment by the Bank of any installment contract repurchased by Maxwell, such contract was to be immediately assigned, transferred and/or endorsed to Maxwell, without recourse, and sent to him by regular mail.

Early in 1956, Hirsch became delinquent in his monthly payments to the Bank and Bank informed Maxwell of such delinquency. On March 20, 1956, Maxwell, with the consent of Hirsh, repossessed the trailer, placed it on his lot and undertook to ready it for resale as a used trailer. On March 22, 1956, the trailer was extensively damaged by fire.

Pursuant to stipulation of the parties, the District Court found that on the date of the fire the conditional sale contract had not been reassigned to Maxwell and it, together with the certificate of title in Hirsh, was still in the Bank's possession. The record does not disclose any demand of the Bank upon Maxwell to repurchase the Hirsh contract, and there is no evidence that the amount due under the Hirsh contract was charged by the Bank against Maxwell's "hold-back account".

At the conclusion of all the evidence, Eureka made a motion to dismiss. The motion was denied and the court stated as its reason for so doing that

"Competent evidence may establish true ownership of a motor vehicle, the Virginia registration statutes to the contrary notwithstanding. Plaintiff Maxwell agreed with Hirsh, the registered owner of the trailer, to a voluntary repossession because of Hirsh\'s inability to meet the installment payments. That agreement was fully executed when plaintiff Maxwell regained possession of the trailer and with possession title to the trailer vested in plaintiff."

The District Court further found that the insurance policy here involved covered all vehicles consigned to or owned by Maxwell, and since Maxwell owned the trailer at the time of loss, he was entitled to recover from Eureka the amount of $2,672.00 by virtue of the terms of his insurance policy.

Two provisions in Maxwell's Dealers' Open Lot Policy relate to coverage with respect to a vehicle which is subject to a conditional sale contract or other encumbrance. Under "Exclusions" it is provided:

"This policy does not apply:

"(a) * * *

"(b) under any of the coverages, if the automobile is or at any time becomes subject to any bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance not specifically declared and described in this policy; * * *".

The other exclusion is found in the "Automobile Dealers' Open Policy — Monthly Reporting Form A" attached to and made a part of the policy. This provision reads:

"The Policy covers automobiles consigned to or owned by the Insured and held for sale or used in the Insured\'s business as an automobile dealer including repair service or as demonstrators but excludes automobiles sold by the Insured under bailment lease, conditional sale, mortgage or other type of encumbrance. * * *"

By an endorsement attached to the policy, an "Auto Home" or trailer was included in the definition of "automobile".

The insurance policy clearly covered the trailer here involved when it was owned by Maxwell and held for sale and until the exclusion provisions of the policy became operative by the conditional sale to Hirsh. There is ample authority to support the proposition that "courts have no power to make contracts of insurance, and when it appears upon the face of the contract by clear and unambiguous language that exclusions of risks are incorporated therein, then it is the duty of the court to enforce the contract as written." Welborn v. Wyatt, 1940, 175 Va. 163, 7 S.E.2d 99. See also Hardware Mut. Cas. Co. v. Wendlinger, 4 Cir., 1944, 146 F.2d 984; Darden v. North American Ben. Ass'n, 1938, 170 Va. 479, 197 S.E. 413; Collins v. Metropolitan Life Ins. Co., 1935, 163 Va. 833, 178 S.E. 40.

Maxwell contends that he was the owner of the trailer at the time of the fire loss and within the coverage of the insurance policy; that he became such owner upon repossession of the trailer by operation of law and pursuant to certain provisions of the Virginia statutes which will be hereafter noted.

It appears to be well settled in Virginia that, as a general rule, the sole evidence of ownership of a motor vehicle is the registered title. Nationwide Ins. Co. v. Storm, 1959, 200 Va. 526, 106 S.E. 2d 588; Staunton Industrial Loan Corp. v. Wilson, 4 Cir., 1951, 190 F.2d 706; Byrd v. American Guarantee & Liability Ins. Co., 4 Cir., 1950, 180 F.2d 246. It may be noted that in Nationwide Ins. Co. v. Storm, supra, the court approved the holding in the case of Garlick v. McFarland, 159 Ohio St. 539, 113 N.E.2d 92, to the effect that ownership of a motor vehicle could not be transferred without transfer and endorsement of the certificate of title even though the purchase...