Home Ins. Co. v. Lomax

• Decision Date: 29 June 1972
• Docket Number: CA-CIV,No. 1,1
• Citation: 17 Ariz.App. 520,498 P.2d 594
• Parties: The HOME INSURANCE COMPANY, a corporation, Appellant, v. Terry Lynn LOMAX, a single male, et al., Appellees. 1567.
• Court: Arizona Court of Appeals

Page 594

498 P.2d 594

17 Ariz.App. 520

The HOME INSURANCE COMPANY, a corporation, Appellant, v. Terry Lynn LOMAX, a single male, et al., Appellees.

No. 1 CA-CIV 1567.

Court of Appeals of Arizona, Division 1.

June 29, 1972.

Rehearing Denied Aug. 7, 1972.

Jennings, Strouss & Salmon, by Rex E. Lee and Wm. R. Jones, Jr., Phoenix, for appellant.

Brewer & Mallamo, by Charles M. Brewer, and Herbert Mallamo, Phoenix, for appellees Runge.

Hill & Savoy, by John E. Savoy, Phoenix, for appellee Lomax.

HATHAWAY, Judge.

Appellant, The Home Insurance Company, issued a 'business owner's policy' to the insured, Mecham Pontiac Corporation. Appellee, Terry Lynn Lomax, picked up a 1968 'Firebird' Pontiac automobile from the insured on or about March 4, 1969, and two days later while operating the vehicle, he severely injured appellee, Edward L. Runge.

This appeal is from a declaratory judgment in favor of appellees entered upon findings of fact and conclusions of law.

Two questions are presented for review. First, was Terry Lynn Lomax a 'permissive user' of a Mecham Pontiac automobile, or was he one to whom possession of an automobile had been 'transferred . . . by the named insured pursuant to an agreement of sale?' If Lomax falls into the latter category, then coverage is excluded by the specific policy terms. If coverage is not excluded we must answer the second question, to wit: Was there a valid policy endorsement limiting coverage for permissive users to the amounts specified by the Arizona Uniform Motor Vehicle Safety Responsibility Act, A.R.S. § 28--1101, as amended, et seq? We will consider the questions in the order they have been set forth.

The parties agree that if Lomax is covered as a 'person insured', it must be under subparagraph IV(3)(a) of the policy, which provides:

'(3) with respect to the automobile hazard:

'(a) any person while using, With the permission of the named insured, any automobile to which the insurance applies under the automobile hazard, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission. . . . (Emphasis added)

Appellant's position is that the following language in paragraph IV specifically excludes Lomax:

'None of the following is an insured:

(iii) any person or organization, other than the named insured, with respect to any automobile

(b) possession of which has been transferred to another by the named insured pursuant to an agreement of sale;'

Crucial to the coverage question is the nature of Lomax's possession of the Firebird. The principal point of disagreement centers on whether Lomax entered into an agreement of sale with appellant; we will therefore first address that point.

Terry Lynn Lomax, 22 years old, was employed by A. J. Bayless as a truckloader at a gross salary of $499 per month when he appeared on March 4, 1969, at Mecham Pontiac. He owned a 1963 Chevrolet Impala which was encumbered by a lien to the First National Bank of Arizona in the amount of $888.43. Mecham Pontiac appraised the Impala at $555. The total cash price for the Firebird amounted to $3,377.71 which included sales taxes, title and license fees.

The evidence is indisputed that Mecham Pontiac knew that Lomax had no equity in the 1963 Impala to be traded in and that he would have to secure an additional $300 as a downpayment. It is likewise undisputed that Mecham Pontiac knew the balance of the purchase price--$3,077.71--was to be financed. Mecham's credit manager secured a credit application from Lomax and undertook to place the financing with the Pioneer Bank. A 'Retail Buyer's Order' was obtained from Lomax with his signature affixed thereto, and an 'application for Arizona certificate of title and registration' executed in blank, was retained by Mecham.

The 'Retail Buyer's Order', upon which the appellant relies as an agreement for sale and thus a basis for the transfer of possession, provides in bold print:

'THIS ORDER IS NOT BINDING UNTIL ACCEPTED BY DEALER AND PURCHASER'S CREDIT HAS BEEN APPROVED BY THE FINANCE COMPANY.'

The trial court found that the 'Retail Buyer's Order' was not a binding agreement of sale and entered the following pertinent findings:

'6. That on or about the 4th day of March, 1969, Mecham Pontiac permitted Lomax possession of their used 1968 Pontiac Firebird bearing Mecham's dealer plates #3179, and at that time Lomax signed a Retail Buyer's Order which was not binding on either the purchaser or seller; that said permission extended until March 7, 1969, at which time the proposed co-signer, Gary Rolf, was to grant approval or rinder his disapproval as to the purchase of said car and also on March 7, 1969 to render his decision to allow or not allow his credit to be used for the purchase of said car through his bank, to wit, the First National Bank of Arizona.

7. That at no time did the co-signer, Gary Rolf, sign any agreements to purchase or finance or make any application for credit to co-sign for said Mecham Firebird automobile, nor did he approve Lomax's purchase of the Firebird automobile, nor did he request financing from his bank, the First National Bank of Arizona.

8. That Mecham Pontiac owned the said Pontiac Firebird on March 6, 1969, when it was involved in an accident with Defendant Runge, which accident resulted in severe injuries to Runge, including but not limited to the amputation of his left leg, and at the time of said accident Defendant Lomax was still a permissive user and was covered under the policy of insurance for the accident in question and resulting injuries to Defendant Runge as a permissive user, with limits of $100,000/$300,000 as and for bodily injury liability.'

The record supports the trial court's findings. The 'Retail Buyer's Order' amounted to nothing more than a conditional offer which might have ripened into a firm offer upon Lomax's securing adequate financing. See Cavazos v. Holmes Tuttle Broadway Ford, Inc., 104 Ariz. 540, 456 P.2d 910 (1969); Miller v. Haley, 38 Ariz. 469, 300 P. 1020 (1931). Lomax made no agreement or promise in the offer to pay the sales price to Mecham Pontiac. Before there can be a conditional sales contract there must be a binding, absolute obligation on the part of the buyer to pay the full amount of the purchase price. Automatic Voting Machine Corp. v. Maricopa County, 50 Ariz. 211, 70 P.2d 447 (1937); Oberan v. Western Machinery Co., 65 Ariz. 103, 174 P.2d 745 (1946). Even if a promise to pay could be implied from the language of the purchase order, it would fail as a conditional sales agreement since no specific terms for the sale were agreed upon. See Byrd v. Kidd, 92 Ariz. 337, 376 P.2d 863 (1962).

Appellant, citing Beatty v. Western Pacific Ins. Co., 74 Wash.2d 530, 445 P.2d 325 (1968), contends that Lomax and Mecham Pontiac intended to effect a conditional sale. We find that the following facts clearly show that Lomax and Mecham had no such intention: The 'Firebird' carried Mecham's dealer's license plates, no temporary plates or registration having been issued to Lomax; Lomax did not deliver title to his Impala and the 'Firebird' was still registered in the previous owner's name since Mecham had made no attempt to transfer title; further, appellant paid Mecham Pontiac for repairs to the auto stemming from the accident, albeit without expressly admitting that the loss was covered by its policy issued to Mecham. ¹ In addition, no money was exchanged pursuant to the alleged contract. Lomax gave Mecham Pontiac his check in the sum of $25 in conjunction with the execution of the Retail Buyer's Order. No credit was given on the order for the check, rather it is reflected thereon as payment for a 'warranty charge.' The trial court's undisputed finding was that the check was:

'for...