Guaranty Nat. Ins. Co. v. Mihalovich

Decision Date14 December 1967
Docket NumberNo. 38954,38954
Citation435 P.2d 648,72 Wn.2d 704
CourtWashington Supreme Court
PartiesGUARANTY NATIONAL INSURANCE CO., a Colorado corporation, Respondent, v. Vincent MIHALOVICH and Eileen Mihalovich, his wife; and State Farm Mutual Automobile Insurance Co., an Illinois corporation, Appellants, Gary J. Harris and Laura L. Harris, husband and wife, Defendants.

Gordon, Honeywell, Malanca, Peterson & Johnson, Charles R. Johnson, Tacoma, for appellants.

Johnson, Griffin, Boyle & Enslow, Carson F. Eller, Tacoma, for respondent.

HILL, Judge.

Guaranty National Insurance Company, a corporation (hereinafter referred to as Guaranty), which carried the insurance on cars owned by Acoma Car Rental, Incorporated (hereinafter referred to as Acoma), sought by a declaratory judgment action to be relieved of its liability on its policy with Acoma for damages occasioned to Mr. and Mrs. Vincent Mihalovich when the car in which they were driving was involved in a collision (November 16, 1963) with an Acoma car, which had been rented to Gary Harris (October 15, 1963) and was being driven by him.

Guaranty made Mr. and Mrs. Gary Harris and Mr. and Mrs. Vincent Mihalovich parties to the action. The latter joined their insurance carrier, State Farm Mutual Automobile Insurance Company, a corporation (hereinafter referred to as State), as a third-party defendant. It is conceded that if Guaranty is not liable under its policy with Acoma for the damages sustained by the Mihaloviches, State is liable by virtue of the 'uninsured motorist's' provision 1 in its policy issued to them.

Guaranty's disclaimer of liability is predicated on its contention that Gary Harris had converted the car to his own use and was no longer renting the car, 2 but if its coverage was in effect that Mr. Harris had failed to notify and cooperate with Guaranty in the suit brought by the Mihaloviches.

The trial court concluded that after renting the car Gary Harris had converted it to his own use; that he was not a renter at the time of the collision, and, hence, not covered by the Guaranty-Acoma policy.

Judgment was entered to that effect and State and the Mihaloviches each appeal.

On each appeal the issue is the same: Whether the Acoma car driven by Gary Harris, which collided with the Mihalovich car, had been, at the time of that collision, converted by Gary Harris to his own use.

Peculiarly, neither of the parties from whose attitudes and actions that issue must be determined (Acoma and Gary Harris) is a party to this appeal.

The trial court's conclusion that there had been a conversion seemingly rests on the basis that the car, rented for one day on October 15, 1963, was still in the possession of Harris on November 16, 1963. Retention of a chattel by a bailee beyond the period for which it was bailed does not, in itself, constitute a conversion. It is our view that the attitudes and the acts of lessor and lessee in the interim do not support such a conclusion in this case.

The Acoma car was rented to Mr. and Mrs. Harris, who were both present in the Acoma office, on October 15, 1963. A deposit of $25 was made by Mr. Harris, who signed the rental agreement. Mrs. Lois O'Brien, the office manager for Acoma, said that car was to be returned the next day, as written in the appropriate blank in the rental agreement. Mr. Harris testified that it was rented for a week, and that the rental agreement was not filled in when he signed it.

There is a further conflict in the testimony as to the communications between Acoma and Mr. and Mrs. Harris following the rental. Harris testified that he secured the car to take his wife on a trip around the Olympic peninsula, in an effort to patch up their matrimonial difficulties. He testified that three days after renting the car and while on the Olympic loop trip, his wife desired to have the lease extended for a month so that they could visit her parents, and that she called Acoma in his presence to request an extension of the rental period to a month, which extension she told him was granted. He testified further that after they had returned to Tacoma he and his wife both talked with a representative of Acoma by telephone, and the one month rental period was confirmed.

The trial court was of course, free to disregard the testimony of Mr. Harris and to believe the testimony of Mrs. O'Brien. However, her testimony and her actions both negate any intention on the part of Acoma to regard the retention of Acoma's car as a theft, embezzlement, or conversion. While she denies having any telephone conversation with Mr. Harris, she admits having been in communication with Mrs. Harris. We quote her testimony.

Q. Did you talk with Mrs. Harris personally? A. Yes, I did. Q. And how many times, do you remember? A. No, I don't, offhand. Q. Was it more than once? A. No, I don't believe it was more than once.

A letter (exhibit No. 3) from Mrs. Harris to Acoma, produced by Mrs. O'Brien, certainly indicates much more extensive communication than Mrs. O'Brien concedes. She admitted, too, that she knew that Mrs. Harris had been involved in an accident with the car, which antedated the October 16 collision with the Mihalovich car, and that Acoma had received at least two letters from Mrs. Harris. Mrs. O'Brien testified as follows Mr. Eller: These three pages (referring to exhibit No. 3) make up one letter. The witness: I would have to read it. I would say yes, this is--no, this is the second letter when she sent the insurance form back. Q. The last page is part of the second letter? A. Yes. Wait a minute, I would have to, really have to have my original. Mr. Cavanagh: Just so I understand it, it is one letter? The witness: That is all one, that's right.

She explained a failure to turn the matter over to the police, 'because Mr. Harris' father stepped in and asked us not to.' She also referred to there having been a 'lot of promises.' Promises are, of course, made to somebody by somebody and involve communication.

None of this sounds like Acoma was contending that Gary Harris had stolen its car or had converted it to his own use. And, certainly, its computation of the charges against him amounting to $1,059.44, 3 as shown on exhibit No. 1, are much more consistent with a claim of lease (bailment) than of conversion.

We note, too, the quickness and the ease with which Acoma acquired possession of its car after the collision with the Mihalovich car. Mrs. O'Brien saw the car very shortly after the collision. It was in drivable condition, and she testified, 'Someone from our company drove it to the garage.' 4 Any question of notice to Acoma that its car had been involved in a collision would seem superfluous in the light of this testimony.

As indicated, the trial court, seemingly on no other basis than the length of time that Mr. Harris had retained possession of the rented car, concluded that there had been a conversion.

Such a conclusion is a non sequitur. Possession for a month under a claim of lease certainly does not support the conclusion. Assuming the truth of Mrs. O'Brien's statement that the lease was for one day and that there was no extension, it still does not follow that the retention by a bailee of a car beyond the period for which it was bailed constitutes a conversion. He may be liable for a breach of his contract and not guilty of conversion or of any other tort. Salmond on the Law of Torts (9th ed. 1936), § 78, p. 310. The following is an amplification of the foregoing statement:

(D)etention of a chattel amounts to a conversion only when it is adverse to the owner or other person entitled to possession--that is to say, the defendant must have shown an intention to keep the thing in defiance of the plaintiff. * * * Thus, if a bailee merely holds over after the end of the period for which the chattel was bailed to him, he may be liable for a breach of contract, but he is not guilty of conversion or of any other tort. He has not deprived the owner of the possession, for there is nothing to show that the plaintiff may not have the chattel again whenever he desires it. (p. 315)

There is no evidence that the Harrises ever claimed possession of the car in question as anything but a lessee from Acoma, and no evidence that Acoma was anything but a reluctant lessor.

It is important to keep in mind who is claiming that there has been a conversion in this case and who assumes the burden of proving it. It is not Acoma which was much better off keeping this transaction on a bailment basis and recovering its car rental and repair bills from the Harrises, rather than suing for the value of the vehicle under trover for conversion, which normally effects a transfer of the chattel to the converter. As we point out in Martin v. Sikes, 38 Wash.2d 274, 287, 229...

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9 cases
  • Burr v. Lane
    • United States
    • Washington Court of Appeals
    • January 14, 1974
    ...(rental vehicle), thereby converting it to his own use. Conclusion of law No. 3. Plaintiff relies on Guaranty Nat'l Ins. Co. v. Mihalovich, 72 Wash.2d 704, 435 P.2d 648 (1967). Mihalovich held the mere retention of a rented car for about a month after the period of bailment was insufficient......
  • United Fed'n of Churches, LLC v. Johnson
    • United States
    • U.S. District Court — Western District of Washington
    • April 15, 2022
    ...not required—to prove the "taking or unlawful retention" element of a conversion claim. See Guar. Nat'l Ins. Co. v. Mihalovich , 72 Wash.2d 704, 435 P.2d 648, 652 (1967) (noting that "the refusal of a demand to surrender possession is a customary way of proving conversion" but conceding tha......
  • Griffith v. Glen Wood Co., Inc.
    • United States
    • North Carolina Court of Appeals
    • June 19, 2007
    ...at 98-100 (5th ed.1984) [hereinafter Prosser]; Restatement of Torts (Second) § 237 cmt. g (1965); accord Guaranty Nat. Ins. Co. v. Mihalovich, 72 Wash.2d 704, 435 P.2d 648, 652 (1967) (holding that absent demand and refusal, or some other decisive repudiation of the owner's rights, merely r......
  • United Fed'n of Churches, LLC v. Johnson
    • United States
    • U.S. District Court — Western District of Washington
    • April 15, 2022
    ... ... See Guar. Nat'l Ins. Co. v. Mihalovich , 435 P.2d ... 648, 652 (Wash. 1967) ... ...
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