Farm Bureau Mut. Ins. Co. v. Carr

• Decision Date: 02 November 1974
• Docket Number: No. 47397,47397
• Citation: Farm Bureau Mut. Ins. Co. v. Carr, 215 Kan. 591, 528 P.2d 134 (Kan. 1974)
• Parties: FARM BUREAU MUTUAL INSURANCE CO., Appellant, v. Bobby D. CARR et al., Appellees, v. Harold MORTON and St. Paul Fire and Marine Insurance Co., Third-Party-Defendants.
• Court: Kansas Supreme Court

Page 134

528 P.2d 134

215 Kan. 591

FARM BUREAU MUTUAL INSURANCE CO., Appellant, v. Bobby D. CARR et al., Appellees, v. Harold MORTON and St. Paul Fire and Marine Insurance Co.,

Third-Party-Defendants.

No. 47397.

Supreme Court of Kansas.

Nov. 2, 1974.

Syllabus by the Court

1. A policy insuring against 'direct and accidental loss' of an automobile covers loss by theft.

2. The act of a swindler who deprives the owner of possession of an automobile together with its endorsed certificate of title by means of a preconceived plan involving impersonation, forgery and fraud, is a species of theft covered by a policy insuring against direct and accidental loss.

3. The ancient and well known maxim noscitur a sociis, literally 'it is known from its associates,' is a common sense aid to the construction of doubtful language. Its effect is that the meaning of a word or phrase which may be obscure or doubtful when considered in isolation may be clarified or ascertained by reference to those words or phrases with which it is associated. It simply means that, taken in context, a word may have a broader or narrower meaning than it might have if used alone.

4. In an exclusionary clause of an insurance policy, where the term 'purchase agreement' is used in conjunction with the terms 'bailment lease,' 'conditional sale,' 'mortgage' and 'any other encumbrance,' it is construed to mean an executory contract having characteristics similar to those of the contracts described by its associated terms.

5. A person who has obtained possession of an automobile by false pretenses is not in 'lawful possession' as that term is used in an exclusionary clause of an insurance policy.

6. One who clothes a swindler with both possession of property and full indicia of title is estopped to assert his title against one who purchases from the swindler in good faith, without notice and for value.

7. Where one of two innocent persons must suffer by reason of the fraud of another, he who trusted the wrongdoer and placed the means in his hands to commit the wrong must bear the loss.

8. Whether an insurance company has refused to pay a loss without just cause or excuse so as to render it liable for attorney fees under K.S.A.1973 Supp. 40-256 is a question of fact to be determined in the first instance by the trial court under all the facts and circumstances of each case.

9. In an action to determine an insurance company's liability under the comprehensive loss coverage of its policy for the loss of its policyholders' automobile through false pretenses, and to determine the company's right as subrogee to recover over against a bona fide purchaser, it is held: the trial court did not err in finding (a) the loss was covered by the policy; (b) the insureds, and therefore the insurance company, were estopped from asserting title against the bona fide purchaser; and (c) in refusing to allow attorney fees to the insureds.

Gerald Sawatzky, Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and Robert C. Foulston and Richard D. Ewy, Wichita, were on the brief for appellant.

Terry O'Keefe, Kidwell, O'Keefe & Williamson, Chartered, Wichita, argued the cause and was on the brief for appellees and cross-appellants Carr.

Philip R. Sturgis, Wichita, argued the cause, and Jack N. Turner, Wichita, was on the brief for appellee Duane Bordwell, d/b/a Duane's Motor Co.

FOTH, Commissioner:

The primary issue in this case is whether an insured who loses his automobile through fraud is entitled to recover its value from his insurance company under his policy's 'comprehensive loss' coverage. A secondary issue involves the rights of the insured (or his subrogated insurance carrier) against a third party who innocently purchased the car from the perpetrator of the fraud. Farm Bureau Mutual Insurance Co. brought this declaratory judgment action against its policyholders, Mr. and Mrs. Bobby D. Carr, and anainst the third party purchaser, a used car dealer named Duane Bordwell. The Carrs counterclaimed for the reasonable value of their car. (Other pleadings are irrelevant in view of the outcome.) Trial was to the court, and it held that the loss was covered by the policy, and further, that the company had no right to recover over against Bordwell. Farm Bureau has appealed, contending that either one or the other of these rulings must be erroneous. The Carrs have cross-appealed from a ruling denying them attorney fees.

In June, 1971, the Carrs owned a 1968 Oldsmobile Cutlass which was insured by Farm Bureau. The car was used by their son, but was titled in the names of 'Bobby D. and/or Phyllis J. Carr.' They decided to sell it, and advertised it for sale in the newspaper. On the afternoon of June 3 the ad drew a response from a smooth talker who identified himself to Mrs. Carr as Mr. Sutton. 'Sutton' expressed interest in the car on behalf of a client. After some thirty minutes of negotiation 'Sutton' agreed to buy the car for the Carrs' asking price of $2,000. He would return later to close the deal.

Mrs. Carr called her husband, who advised her to check with the bank if the purchaser offered a personal check. When 'Sutton' returned, however, he offered the printed check of a local Buick dealer, drawn by typewriter and imprinted with a check protector. Mrs. Carr accepted it without hesitation, gave him the keys, the car, and the certificate of title.

The title was signed by her, but not notarized nor otherwise filled in. Mr. Carr's signature was not on the certificate at the time Mrs. Carr delivered it to 'Sutton.' There is no question, as the trial court found, but that Mrs. Carr intended to sell the car, and when she 'received the check, signed and delivered the Certificate of Title to 'Sutton' and gave 'Sutton' the automobile, she considered the automobile as having been sold.'

Later that day Mrs. Carr remembered the license tags on the car and called the Buick dealer who had ostensibly purchased it. It was then she learned that the check had been stolen and that 'Sutton' was an impostor. She immediately called her husband, who in turn called the police and Farm Bureau.

In the meantime 'Sutton,' too, had been busy. He first took the certificate of title to a used car lot and a notary public who knew him by sight as a prospective purchaser. The notary affixed his signature and seal. He then went on to a second used car lot, Bordwell's, and offered the car for sale. Bordwell called the notary and asked if Sutton was all right. The notary confirmed his signature and assured Bordwell that so far as he knew everything was fine. Bordwell bought the car for $900, filling in his company's name as transferee on the certificate of title. It is not definitely known when or by whom the purported signature of Mr. Carr was placed on the certificate, but the trial court found it was there when Bordwell bought the car. The trial court also made an unchallenged finding that 'Bordwell was an innocent bona fide purchaser in good faith and for value.'

'Sutton' has never been seen again.

In its petition Farm Bureau alleged that it didn't know whether the loss of the automobile by the Carrs was by theft or whether the circumstances came under one of the exclusions of the policy. It asked simply for a determination of the coverage question. It did claim that if the loss was by theft, and was covered, then Bordwell got no title to the car. In that case, it alleged, the company and the Carrs were entitled to recover the car or its value from Bordwell. The trial court, as noted, found against the company on both issues.

On appeal the company's position has hardened on the coverage question. It contends first of all that its comprehensive loss clause, 'Coverage D.' insures only against 'any direct and accidental loss of . . . the automobile.' Mrs. Carr's voluntary surrender of the car and the certificate of title, it says, are not the kind of direct and accidental loss intended to be covered.

Our previous cases have uniformly held that fraudulent schemes like that employed here constitute a 'theft' under policy provisions insuring against 'theft, robbery or pilferage.' Motor Co. v. Insurance Co., 111 Kan. 225, 207 P. 205; Overland-Reno Co. v. Indemnity Co., 111 Kan. 668, 208 P. 548; Overland-Reno Co. v. Indemnity Co., 115 Kan. 137, 222 P. 122. In the Motor Co. case the syllabus held:

'Under a contract of insurance issued to protect a dealer in automobiles against 'theft, robbery or pilferage,' the act of a swindler who deprived the insured of an automobile by means of a preconceived plan which involved impersonation, misrepresentation, and fraud was a species of 'theft' for which the insurance company was liable.'

The second Overland-Reno case disposes of the company's reliance on Mrs. Carr's intent to deliver title in a completed sale as a distinguishing feature:

'. . . The insurance company cannot evade liability because the party delivering the car to the thief could not, or did not, think of every possible element of precaution in making, in good faith, what he supposed was a bona fide sale.' (115 Kan. at 139, 222 P. at 123. Emphasis added.)

Cf. also, Tripp v. United States Fire Ins. Co., 141 Kan. 897, 44 P.2d 236, reaffirming these principles as 'settled' law.

In each of the first three cases cited the car was obtained through an impersonation, the giving of a worthless check, and a purported sale. In each the court held there was a 'theft' despite the common law distinctions recognized in the thenexisting criminal code between larceny and obtaining property by false pretenses. Out new criminal code, in effect when this loss occurred, has obliterated that distinction. It describes but one such crime, denominated 'theft.' It includes the former larceny and false pretenses crimes, and many other dishonest means of acquiring property as well. See K.S.A.1973 Supp. 21-3701, and the accompanying notes of the Judicial Council. We hold that the loss of the...