Almadova v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 28 July 1982
• Docket Number: No. 15841,15841
• Citation: 133 Ariz. 81,649 P.2d 284
• Parties: Ronald and Georgia M. ALMADOVA, Plaintiffs-Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a foreign corporation, Defendant-Appellant.
• Court: Arizona Supreme Court

Page 284

649 P.2d 284

133 Ariz. 81

Ronald and Georgia M. ALMADOVA, Plaintiffs-Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a foreign corporation, Defendant-Appellant.

No. 15841.

Supreme Court of Arizona, In Banc.

July 28, 1982.

Combs, Stone & Wright by Ronald A. Kershaw, Jr., Phoenix, for plaintiffs-appellees

Hofmann, Salcito & Stevens by James W. Fritz, Phoenix, for defendant-appellant.

FELDMAN, Justice.

Appellant, State Farm Mutual Automobile Insurance Company (State Farm), appeals a decision of the trial court which granted the motion for summary judgment filed by appellees, Ronald and Georgia Almadova (Almadova), on an insurance claim Almadova had brought against State Farm. We have jurisdiction pursuant to Rule 19(e), Rules of Civil Appellate Procedure, 17A A.R.S.

FACTS

State Farm had insured Almadova's 1976 Porsche automobile by a policy which contained theft coverage. On September 11, 1979, Almadova agreed to sell the car to the Fairchild Car Company, which at that time operated a used car lot in Phoenix. On that date, Almadova signed the title to the car and gave possession of the signed title and the car to David Raines, the president of Fairchild. ¹ Contemporaneously, Raines tendered Fairchild's check, payable to Almadova in the amount of $14,000.

Almadova presented the check to the bank on the next day, but it was dishonored because of insufficient funds in the Fairchild account. The following day, Almadova confronted Raines with the dishonored check. According to Almadova, Raines acknowledged that he had been aware that the check would not be honored, and then gave Almadova a second check for the same amount. This check was drawn on the account of the Specialty Car Company. Almadova later presented this second check to the bank on two separate occasions, but it was dishonored both times.

Some time later, Almadova unsuccessfully attempted to regain possession of the car from Raines and Fairchild Car Company. Almadova eventually found that Fairchild had gone out of business and has been unable to locate the vehicle.

Almadova then made a claim under the theft coverage contained in the State Farm policy, and when it was rejected, filed the instant action for recovery under that coverage.

The policy contains two provisions relevant to this case. They are:

Loss to your car. We will pay for the loss to your car ... in excess of the deductible amount, ... caused by ... theft, larceny ...

THERE IS NO COVERAGE FOR:

3. Loss to any vehicle due to ...

d. Conversion, embezzlement or secretion by any person who has the vehicle due to any lien, rental or sales agreement.

In the motion for summary judgment, Almadova requested the trial court to find as a matter of law that the loss of the car fell within the coverage for "theft" but not within the provision excluding coverage for loss resulting from "conversion, embezzlement or secretion by any person" who had possession of the vehicle due to a sales agreement. State Farm argued that there was a question of material fact with respect

to whether the loss had resulted from "theft," and also filed a cross-motion for summary judgment, contending that because Raines had obtained possession as a result of a sales transaction with Almadova, the loss was within the exclusion as a matter of law. The trial court denied State Farm's cross-motion for summary judgment, granted Almadova's motion, and entered judgment for Almadova. State Farm appeals. We must decide, therefore, whether a loss which occurs as the result of the insured's transfer of possession and title to a putative vendee who tenders a "bad check" for the purchase price is a "theft" within the coverage granted by the policy. If the "theft" coverage does apply, we must then decide whether the transaction is a loss resulting from a "conversion, embezzlement or secretion" of the vehicle by a person who had possession "due to" a "sales agreement." We conclude that neither question can be answered as a matter of law on the record before us, and therefore reverse the judgment in favor of Almadova and remand the matter for proceedings consistent with this opinion.

THEFT COVERAGE

We note at the outset that there is much dispute in the cases on whether theft coverage applies when the insured voluntarily relinquishes possession of the automobile but is induced to do so through the fraudulent acts of a purported "purchaser." See Annot. Automobile Theft Policy-Coverage, 48 A.L.R.2d 8 (1956). On the other hand, it is clear that the exclusionary language in the policy before us excludes from coverage the loss of an automobile when possession of the car is delivered to some third person as part of a bona fide sale, but the vendee later fails to pay and does not return the car. Id. at 72-97.

Pointing out that Raines gained possession through the tender of a check which he knew would be dishonored, Almadova argues that there is a "theft" where the "buyer" obtains possession by a fraudulent device with intent to permanently deprive the owner of the property. Thus, Almadova claims, the facts fit the definition of "theft" either under the common law or under our statutory definition of theft (A.R.S. § 13-1802), so that the loss falls within the coverage.

State Farm argues, on the other hand, that a "theft" must include a "trespass" both at common law and in the common understanding of that term, so that the concept of theft does not include a voluntary delivery of possession and title, even when such delivery was induced by false pretenses. See General Accident Fire & Life Assurance Corp. v. Denhardt, 253 A.2d 450, 451 (D.C.App.1969).

We note that the policy does not define "theft." The word has many possible meanings; for example, it may mean conduct defined as theft by our criminal statutes. If so, our criminal code contains definitions of theft so broad as to include the common law crimes of theft, larceny, obtaining by false pretenses, embezzlement and receiving stolen property. See A.R.S. § 13-1802(A). On the other hand, at common law the crime of theft was different from embezzlement, obtaining by false pretenses and the other crimes listed in A.R.S. § 13-1802(A). Thus, it is apparent that the word "theft," without further definition in the policy, is susceptible of various interpretations and is, therefore, ambiguous. See Sparks v. Republic National Life Insurance Co., 132 Ariz. ---, 647 P.2d 1127 (1982). As the Florida Supreme Court has noted,

The word "theft" ... has been variously defined by courts of other jurisdictions in construing the "theft" provisions of insurance policies. Some courts have stated that this provision means theft as common thought and common speech would now imagine it; that it should be given the usual meaning and understanding accorded it by persons in the ordinary walks of life....

As stated in Toms v. Hartford Fire Ins. Co., supra, (146 Ohio St. 39, 63 N.E.2d 909, 911) "We think it may be accurately said that to 'the man on the street' the This court is committed to the rule that a contract of insurance prepared and phrased by the insurer is to be construed liberally in favor of the insured and strictly against the insurer, where the meaning of the language used is doubtful, uncertain or ambiguous.... And where, as here, a policy under a theft provision described as "Broad Form" provides coverage for loss or damage due to "theft, larceny, robbery, or pilferage," it requires no great liberality of construction to hold that the insurer intended to provide coverage for losses in addition to those which are, by strict common-law definition, larceny.

word 'theft' is of broader scope than 'larceny' and comprehends essentially the wilful taking or appropriation of one person's property by another wrongfully and without justification and with the design to hold or make use of such property in violation of the rights of the owner. In our opinion, where the word 'theft' is used in an insurance policy, without definition, it should be interpreted as liberally as possible to protect the insured."

Fireman's Fund Insurance Co. of San Francisco v. Boyd, 45 So.2d 499, 500-01 (Fla.1950) (citations omitted).

Our court of appeals has given the following interpretation to the word "theft" in an insurance policy:

The modern trend today, where the word "theft" is not defined in the insurance policy, is to give it a liberal construction, namely a common and ordinary meaning according to the understanding of persons in ordinary walks of life.... The term "theft" has been construed to include any wrongful deprivation of the property of another without claim or color of right, ... the fraudulent and wrongful taking of the property of another....

Pacific Indemnity Co. v. Kohlhase, 9 Ariz.App. 595, 598, 455 P.2d 277, 280 (1969) (citations omitted) ² But see, e.g., Boggs v. Motors Insurance Corp., 139 A.2d 733 (D.C.App.1958); Annot., supra. We believe the rule formulated in Pacific Indemnity Co. v. Kohlhase, supra, is the more modern and better rule. The rule recognizes the inherent ambiguity of the word "theft" in an insurance policy which contains no further definition, and adopts a definition more in tune with the common usage of the word "theft."

We hold, therefore, that where the terms "theft" or "larceny" are used in the grant of coverage in an automobile insurance policy, but are not clearly defined or limited, they are ambiguous and should be interpreted broadly to include a loss caused by any unlawful or wrongful taking of the insured vehicle with criminal intent, whether or not such taking technically qualifies as embezzlement, theft or larceny at common law. See Farm Bureau Mutual Insurance Co. v. Carr, 215 Kan. 591, 594, 528 P.2d 134, 138 (1974); Modern Sounds & Systems v. Federated Mutual Insurance Co., 200 Neb. 46, 50, 262 N.W.2d 183, 187 (1978); Rudolph v. Home Indemnity Co., 138 N.J.Super. 125, 136, 350 A.2d 285, 292 (1975); Munchick v. Fidelity & Casualty...