Fulwiler v. Traders & General Ins. Co.

• Decision Date: 06 May 1955
• Docket Number: No. 5906,5906
• Citation: 59 N.M. 366,285 P.2d 140,1955 NMSC 41
• Parties: C. H. FULWILER, d/b/a Fulwiler Motor Finance Company, Plaintiff-Appellee, v. TRADERS & GENERAL INSURANCE COMPANY, Defendant-Appellant, Allen A. Cooper and Dick Turk, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 140

285 P.2d 140

59 N.M. 366

C. H. FULWILER, d/b/a Fulwiler Motor Finance Company Plaintiff-Appellee, v. TRADERS & GENERAL INSURANCE COMPANY, Defendant-Appellant Allen A. Cooper and Dick Turk, Defendants-Appellees.

No. 5906.

Supreme Court of New Mexico.

May 6, 1955.

Rehearing Denied June 15, 1955.

Quincy D. Adams, James H. Foley, Albuquerque, for appellant.

Philip H. Dunleavy, Albuquerque, for C. H. Fulwiler, appellee.

McGHEE, Justice.

The question presented upon this appeal relates to the right of one as assignee of vendor's interest under a contract for the conditional sale of an automobile to proceed against an insurance company upon its policy of automobile insurance covering loss by collision or upset and naming the conditional vendee as insured with the provision loss was payable to such assignee and the insured vendee as their interests appeared, where the automobile insured was upset and extensively damaged while in the possession of the assignee after repossession for default of the conditional vendee in making stipulated payments.

Judgment below was for the plaintiff, assignee of the conditional vendor, against the defendant insurance company, which brings this appeal.

On May 8, 1952, the defendant issued an automobile insurance policy to one Turk, of Gallup, New Mexico, insuring the automobile in question for its actual cash value, less $50 deductible, coverage to extend for one year from said date. Under the policy Turk was originally named as the insured and the First State Bank of Gallup was designated as loss-payee.

In September of 1952, Turk sold the automobile to Allen Cooper of Grants, New Mexico. This sale was financed by the plaintiff. Turk assigned his contract to the plaintiff and received from him the sum of $700. There was a balance owing to Turk of $133 which the plaintiff agreed to remit when the conditional vendee, Cooper, had made sufficient payments on his indebtedness to the plaintiff to bring the amount remaining due down to the loan value of the automobile. Upon the assignment of the contract, Turk guaranteed the payment of Cooper's indebtedness to the plaintiff.

The conditional sale contract reserved title in the seller until the full amount of indebtedness was discharged, provided that no loss, injury or destruction of the property should release the purchaser from his obligation and made further provision for repossession by the seller upon default of the buyer. It was agreed the seller might take possession upon such event, either directly or through a sheriff or other legal officer, retain all payments theretofore made and re-sell the property at public or private sale, with or without notice to the buyer and with the right in the seller to bid upon the property at public sale. The seller was empowered to deduct all expenses of repossession and sale and then apply the balance of proceeds from such sale to the amount due on the contract. Any surplus remaining was to be paid to the buyer and the buyer was liable for any deficiency.

About a month after the above described negotiation, the following general change endorsement was attached to the policy of insurance on the car by the Clay Fultz Agency of Gallup, New Mexico, agent of the defendant:

'Notice is hereby given that the name of insured should now read:

'Allen Cooper

'c/o Your Food Store, Grants, New Mexico

'Notice is also given that there is now a loss payable in favor of Fulwiler Motor Finance Company, Albuquerque, New Mexico, in the amount of $1065.60, payable in 18 payments of $59.20. The loss payable in favor of the First State Bank is eliminated.

'All other terms and condition remain unchanged.'

While matters thus stood, the conditional buyer, Cooper, defaulted in his payments under the contract, whereupon the plaintiff either called or wrote Turk advising him of the default and asking that he repossess the automobile, which he did. According to Turk's testimony Cooper willingly surrendered the automobile to him and Turk, who was a used car salesman, took it with the intention of doing what he could with it--either to re-sell it, pay it out, or turn it over to the plaintiff. He also testified that at the time repossession was made, it was done upon the assumption that Cooper was to suffer no further liability on the contract and was correspondingly to retain no claim against anyone for any surplus remaining from proceeds on re-sale after satisfaction of the debt due. There was, however, no showing that Turk had any authority whatsoever to release Cooper from his contract with the plaintiff, or that Cooper directly waived or surrendered any right he might have in the proceeds upon re-sale.

Turk held the car for a month or six weeks when he was advised by the plaintiff that a man was being sent to Gallup to take possession of the car and drive it to the plaintiff's office in Albuquerque. Accordingly, on April 15, 1953, an employee of the plaintiff named Apodaca arrived in Gallup to take the car. One of the office employees of plaintiff testified it was intended the car would be placed on plaintiff's lot and advertised for re-sale. Before turning the automobile over to Apodaca, Turk asked for a complete release from the plaintiff. Turk's attorney prepared such a release which was executed for the plaintiff by Apodaca. The evidence was conflicting as to whether or not Apodaca had any authority to execute such release. Apodaca then took the car and while being driven from Gallup to Albuquerque it overturned and was so badly damaged it had only a salvage value of $200.

The plaintiff then brought this action asking judgment against the insurance company as loss payee on the described policy of insurance. Turk and Cooper were named as defendants. The insurance company defended upon the ground the plaintiff was not insured against loss under the policy in question and that neither Turk nor Cooper had an insurable interest in the automobile at the time of loss.

The case was tried to the court which found that Apodaca had no authority to release the rights of the plaintiff in either the automobile or the conditional sale contract; that the value of the automobile just preceding the accident was $1,095; that the net loss, after deducting the salvage value of $200 and $50 for the deduction provisions of the policy, was $845. It concluded the plaintiff was a named insured under the insurance policy and that he had an insurable interest in the automobile on the date of the accident to the extent of the balance due on the contract and his expenses on repossession; that Turk was entitled to payment of $133 and that Cooper had an equity in the car of $45.38. Judgment was then entered for such parties in the respective sums mentioned against the defendant insurance company.

Numerous assigned errors are directed to the court's refusal to grant requested findings of fact and conclusions of law tendered by the defendant, the findings of the court respecting the value of the automobile before the accident, the lack of authority in Apodaca to execute the release given to Turk, the conclusion the plaintiff was a named insured under the policy and the granting of judgment in favor of Turk and Cooper against the defendant.

Neither Turk nor Cooper makes appearance in this court.

We will first consider defendant's principal argument which may be paraphrased as follows: The plaintiff was not a named insured under the insurance policy, but merely an appointee to receive the proceeds of the policy as his interest might appear. As such appointee his right of recovery is dependent upon the named insured having an insurable interest in the property at the time of loss. Plaintiff is not entitled to recover on the policy because neither the named insured, Cooper, nor the original insured, Turk, had an insurable interest in the car at the time of loss.

Our attention is directed by defendant to the difference between a loss-payable or open mortgage clause in an insurance policy, and a union or standard mortgage clause. In substance, the distinction is that under a loss-payable clause no contract of insurance is made between the insurer and the loss-payee and the right of recovery of the loss-payee cannot rise above that of the named insured, so that a breach of the conditions of the policy by the insured which precludes his recovery likewise defeats the recovery of his appointee, the loss-payee. 29 Am.Jur. (Insurance) Sec. 552. Whereas, under a union or standard mortgage clause it is usually provided the interest of the mortgagee in the proceeds of the policy shall not be defeated by the act or neglect of the mortgagor or owner of the insured property. 29 Am.Jur. (Insurance) Sec. 553.

A loss-payable clause was before the court in Tri-State Ins. Co. v. Ford, D.C.N.M.1954, 120 F.Supp. 118, 123, where it was said:

'The phrase 'payable as interest may appear' identifies this provision as a standard 'loss-payable clause'; as such it is well settled that the rights of a mortgagee under such a loss-payable clause rise no higher than the rights of the insured.'

At footnote 11, p. 123 of the report of this case, the following matter is quoted from Hamburg-Bremen Fire Ins. Co. v. Ruddell, 1904, 37 Tex.Div.App. 30, 82 S.W. 826:

"* * * The contract proper is between the insurance company and the owner of the property, and the effect of the clause directing that the loss, if any, shall be payable to the mortgagee, is but to name or appoint that person as the party entitled to receive payment of the fund in the event a loss becomes payable under the terms of the policy. But whether or not any loss is payable at all is dependent entirely upon the performance of the terms of the contract between the insurer and the insured. The policy in this instance expressly stipulated that the same should be void in case of any fraud upon the part of the insured; and, if it did not, a sound public policy would not permit him to recover by...