AMERICAN EMPLOYERS INSURANCE COMPANY v. Zablosky

• Decision Date: 14 September 1961
• Docket Number: No. 18550.,18550.
• Parties: AMERICAN EMPLOYERS INSURANCE COMPANY, Appellant, v. John ZABLOSKY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

292 F.2d 412 (1961)

AMERICAN EMPLOYERS INSURANCE COMPANY, Appellant, v. John ZABLOSKY, Appellee.

No. 18550.

United States Court of Appeals Fifth Circuit.

June 30, 1961.

Rehearing Denied September 14, 1961.

James A. Williams, Dallas, Tex., for appellant.

William P. Fonville, J. Alex Blakeley, Alan D. Feld, Dallas, Tex., for appellee.

Before JONES and BROWN, Circuit Judges, and CARSWELL, District Judge.

JONES, Circuit Judge.

The appellee, John Zablosky, was struck by a truck which was driven by Roy Alvin Tucker, an employee of H. L. Flynt. Zablosky sued Flynt and Tucker in a Texas State court seeking damages for his injuries sustained and recovered judgment for $100,000, with interest and costs. Execution was issued and returned nulla bona. Basing federal jurisdiction on diversity of citizenship, Zablosky sued American Employers Insurance Company, herein referred to as the Insurance Company, the motor vehicle liability insurance carrier of B. F. Schoeneman, a contractor, claiming the truck was owned by Schoeneman, and that it, at the time of the injury, was being driven by Tucker as the employee of Flynt with the permission and consent of Schoeneman, thus invoking the coverage of the so-called omnibus clause.¹ Zablosky asserted other theories for recovery. These we need not consider since the case was submitted to the jury and recovery was allowed under the omnibus clause.

The policy was issued to B. F. Schoeneman, doing business as Midwest Contracting Co. and other trade names. When the truck which was involved in Zablosky's injury was added to the coverage of the policy the endorsement contained the statement, "owned by H. L. Flynt and leased to insured." This endorsement recited an additional premium of $177.40. A further endorsement provided:

"Title to the 1952 Ford Truck * * * is vested in the name of B. F. Schoeneman d/b/a Midwest Contracting Company, however, said automobile has been sold under a conditional agreement to H. L. Flynt. It is agreed that for interpretation of coverage under the policy H. L. Flynt shall be considered to be the owner of said automobile."

The truck had been purchased from a dealer by Schoeneman who executed a conditional sale contract to evidence and secure an unpaid portion of the purchase price. The installment payments were made by Schoeneman. The title to the truck was registered in the name of Schoeneman. He procured fire and theft insurance on the truck. Flynt had no insurance on the truck.

Schoeneman, called as a witness by Zablosky, testified that Flynt, who was in the hauling business, had done considerable hauling for him, that on prior occasions he had assisted Flynt in obtaining credit, that Flynt had telephoned him that he, Flynt, was negotiating with a dealer for the truck but he had neither a down payment nor a trade-in and so could not finance the purchase and requested Schoeneman's help. Schoeneman, so he testified, agreed that the truck should be put in his name and he would execute a 24 monthly installment conditional sale contract with Flynt undertaking to pay Schoeneman one and a half installments each month. Schoeneman understood that Flynt was to give him preferential treatment in his hauling requests. Schoeneman expected that the amounts he would owe Flynt for hauling would be credited on the purchase of the truck. The transaction was in the form it took in order to provide financing for Flynt and security for Schoeneman, and the title to the truck, according to Schoeneman, was to be transferred to Flynt when Flynt had paid Schoeneman for it. The agreement between Schoeneman and Flynt was oral. The registered title to the truck was transferred to Flynt some time after the injury to Zablosky but not until Flynt had paid the full amount of the purchase price to Schoeneman. It was shown that Tucker was driving the truck for Flynt when the injury occurred.

Both Zablosky and the Insurance Company moved for a directed verdict. Zablosky's motion asserted that the evidence conclusively established the ownership of the truck by Schoeneman, that it was being driven by Tucker as the employee of Flynt at the time of the accident, and hence Zablosky should recover under the omnibus clause. The Insurance Company's...