O'Brien v. B.L.C. Ins. Co.

• Decision Date: 14 March 1989
• Docket Number: No. 71086,71086
• Parties: Michael O'BRIEN, Respondent, v. B.L.C. INSURANCE COMPANY, Appellant.
• Court: Missouri Supreme Court

Page 64

768 S.W.2d 64

Michael O'BRIEN, Respondent, v. B.L.C. INSURANCE COMPANY, Appellant.

No. 71086.

Supreme Court of Missouri En Banc.

March 14, 1989.

As Modified on Denial of Rehearing April 18, 1989.

James H. Ensz, Kansas City, for appellant.

James F. Ralls, Jr., William M. Quitmeier, Daryl Bredemeier, Kansas City, for respondent.

BLACKMAR, Judge.

This case is concerned with our important policy statutes ¹ involving transfer of title to motor vehicles (§ 301.210, RSMO 1978 )², odometer fraud (§§ 407.510--407.555, RSMO 1978 )³, and salvage titles (§§ 301.217 and 301.227, RSMO SUPP.1979 )⁴.

On August 13, 1982, a Corvette owned by Beverly Scheerer was inundated by a flash flood, with the water level rising above the dashboard. Following inspection by Ben Hicks Chevrolet the defendant insurer's adjuster, Bob Eisenreich, undertook to settle with Scheerer for a total loss. The insurer, in the usual course of business, would sell a salvage vehicle to a salvage company for 20% of its value, which in this case would be $2200, but this particular vehicle was sold to defendant Ronald Wells, service manager for Hicks, for $5000.

In the consummation of the transaction with Wells several statutes were violated. The title was in the possession of a credit union which held a lien on the vehicle. Scheerer signed the title without having her signature acknowledged and failed to insert the odometer reading of 54,958 miles in the required space on the back (§ 407.536, RSMO 1978 )⁵. The insurer did not send the certificate to the Division of Motor Vehicles with the notation that it was a salvage vehicle, nor did it obtain a certificate in its own name prior to marketing the vehicle (§ 301.227, RSMO SUPP.1979 )⁶. It simply delivered the open title bearing Scheerer's signature to Wells, who paid the consideration agreed to.

Wells undertook the restoration of the vehicle. He changed jobs, becoming service manager of Bill Allen Chevrolet. Allen agreed to sell the Corvette "on consignment", and placed it on the company's used car lot. At some point the odometer had been rolled back so as to show 24,576 miles. The Corvette was then sold to the plaintiff for $11,500. The plaintiff was handed the certificate of title signed by Scheerer, with the odometer reading of 24,576 inserted and the acknowledgment completed by a notary public employed by Allen.

The plaintiff, complaining that the Corvette did not run well from the time he acquired it, filed suit against the insurer, Wells, and Allen. He settled with Allen before trial for $20,000. The jury returned a two-count verdict for the plaintiff against the insurer, assessing the damages for the flooding at $10,500 and for the odometer violation at $2,000. It also awarded punitive damages of $12,500 on the flooding count. The court eliminated all actual damages from the judgment on account of the settlement with Allen and entered judgment for $12,500 punitive damages, for $4,000 statutory treble damages for the odometer violation pursuant to § 407.545, RSMo 1978, ⁷ and for $1,000 attorneys' fees pursuant to the same statute. Plaintiff and the insurer both appealed. The court of appeals affirmed on the plaintiff's appeal and reversed outright on the insurer's appeal, finding that the insurer's conduct, although in violation of several statutes, was not the proximate cause of the damage to plaintiff. We granted transfer because of the important policy considerations underlying the statutes, and now affirm all parts of the judgment except for the award of attorneys' fees, which we vacate and remand for further proceedings.

I. Defendant Insurer's Appeal

The defendant insurer launches a volley of arguments as to why the trial court should have directed a verdict in its favor. We deal with these seriatim.

a. Salvage Law Violations

The insurer concedes that its agents violated the salvage statutes in effect at the time of the sale to Wells, by failing to transmit the title to the Division of Motor Vehicles with an indication that the vehicle was a salvage vehicle (§ 301.227, RSMO SUPP.1979 )⁸ and by failing to obtain an affidavit from Wells stating that the vehicle was being acquired for salvage (§ 307.380.2, RSMO 1978 )⁹. It argues that these omissions were not the proximate cause of any damage to the plaintiff.

It says that it did not know that Wells had any improper purpose of selling the vehicle to an unknowing purchaser, and that it could rely on his representation that he wanted it for his own use. It also observes that the vehicle could have been restored to over-the-road status if it passed a state inspection. The Corvette had been inspected by Allen before the sale to the plaintiff, in apparent conformity to the governing statutes. So, the insurer argues, the wrongdoing which caused the injury was solely attributable to Wells or Allen or both, and not to it.

We disagree. The situation as the jury might have viewed it was well summarized by the trial judge, in the following language:

There are several things in the Court's mind that indicates [sic] there has been intentional activity, not the least of which is the fact that double the normal salvage value was received from the buyer in return for which it appears he received a title that was open, the mileage was unlisted, and uncertified, and certainly that interpretation of the evidence would be one that would be viable to the jury and the inferences are to be drawn in favor of the Plaintiff....

The insurer's employees were quite familiar with the motor vehicle salvage statutes. Salvage operations were a part of their daily business. They nevertheless armed Wells with a certificate of title which enabled him to do the very thing the statutes prohibited, marketing the vehicle as an over-the-road vehicle without a salvage report to the Division of Motor Vehicles. The jury might believe that Wells wanted the certificate of title in the form submitted in order to carry out his scheme. The purchase price, well in excess of the salvage value, gives further indication that illicit marketing might be contemplated. It is not unreasonable, in the light of these circumstances, to charge the insurer with the consequences of the subsequent acts of Wells and Allen.

The fact that the vehicle subsequently passed inspection by Allen is not controlling. Because of Wells' position with Allen the jury might be suspicious of the inspection. It might also conclude that, had the insurer made it possible for Wells to obtain only a salvage title, revealing that the vehicle had been flooded, Allen would have declined to market the vehicle, or would have taken additional precautions during the inspection, or would have advised the purchaser that the vehicle had been flooded.

Williams v. Nuckolls, 644 S.W.2d 670 (Mo.App.1982), does not help the insurer very much. There an automobile dealer had sold a veteran used car without performing the statutory inspection. The purchaser drove the vehicle approximately five miles, at which point the brakes failed. The court held that the purchaser's evidence failed to show that there was a defect in the brakes at the time of sale, or that any defect could have been discovered in the course of an inspection. Here the jury could have concluded that the insurer's omissions were an essential part of the chain of events leading to the plaintiff's unwitting purchase.

b. Intervening Cause

The insurer next advances the hoary doctrine of intervening cause, both as to the salvage violation and the odometer violation, pointing out that the insurer had no part in the marketing of the Corvette or in the rollback of the odometer and suggesting that no damage would have occurred but for the willfully improper conduct of Wells and Allen. We disagree. If the insured's agents had not violated statutory requirements that were well known to them, Wells' scheme would have been much more difficult, and perhaps impossible, of accomplishment.

The discussion under Part I-a shows that compliance with the salvage title statutes very well might have prevented Wells and Allen from foisting a flood-damaged vehicle off on an unwitting purchaser. Had the insurer insisted that the correct mileage be shown on the certificate before making any delivery of it, the odometer fraud could not have been carried out. It avails the insurer nothing to argue that the salvage title statutes then in effect did not require odometer disclosure on a salvage vehicle. The insurer did not deal with Scheerer's certificate as a salvage title. It rather transferred a certificate in a manner appropriate only for sale of an over-the-road vehicle.

The failure to require Scheerer to acknowledge her certificate, though not sued on, provides further evidentiary support for the plaintiff. Wells and Eisenreich might have been afraid that Scheerer would not be willing to acknowledge a certificate containing omissions, and so might have determined that it was not wise to resubmit it to her. A person willing to insert a figure in a blank certificate might be unwilling to make an alteration in a notarized certificate. The availability of notaries who do not insist on strict formalities is well known. The jury might consider these omissions in viewing the total picture.

The doctrine of intervening cause is not so strong as it seems to have been at one time. The essential question is foreseeability. Even criminal conduct will not always insulate a tortfeasor, if the criminal conduct is reasonably foreseeable. Virginia D. v. Madesco Inv. Corp., 648 S.W.2d 881 (Mo. banc 1983); Madden v. C & K Barbecue Carryout, Inc., and Decker v. Gramex Corp., 758 S.W.2d 59 (Mo. banc 1988); Aaron v. Havens, 758 S.W.2d 446 (Mo. banc 1988). In civil cases, we have regularly held that foreseeability is for the jury in all except the most obvious cases. Jackson v. Ray Kruse Const. Co., 708 S.W.2d 664 (Mo. banc 1986).

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