Jenkins v. Aetna Cas. & Sur. Co.

• Decision Date: 04 May 1989
• Docket Number: No. 466A88,466A88
• Citation: 324 N.C. 394,378 S.E.2d 773
• Parties: William W. JENKINS v. AETNA CASUALTY AND SURETY COMPANY.
• Court: North Carolina Supreme Court

Page 773

378 S.E.2d 773

324 N.C. 394

William W. JENKINS v. AETNA CASUALTY AND SURETY COMPANY.

No. 466A88.

Supreme Court of North Carolina.

May 4, 1989.

J. Douglas Moretz, Sanford, the plaintiff-appellant.

Pope, Tilghman, Tart & Taylor, by Ann C. Taylor and Johnson Tilghman, Dunn, for defendant-appellee.

MITCHELL, Justice.

The plaintiff filed this civil action seeking to hold the defendant, Aetna Casualty and Surety Company, liable for a judgment entered against the defendant's insured. Both parties made motions for summary judgment. The trial court denied the plaintiff's motion and entered summary judgment for the defendant, and the Court of Appeals, 91 N.C.App. 388, 371 S.E.2d 761, affirmed that judgment. Judge Phillips having dissented in the Court of Appeals, the plaintiff appealed to this Court as a matter of right.

The issues presented by this appeal involve whether either of two exclusions in an automobile liability insurance policy issued by the defendant excluded the vehicle in which the plaintiff was injured from coverage under that policy. The majority in the Court of Appeals held that one of the exclusions applied and affirmed summary judgment for the defendant. We conclude that neither exclusion is applicable in this case. Therefore, we reverse the decision of the Court of Appeals and remand this case in order that the summary judgment entered for the defendant may be stricken and summary judgment entered, instead, for the plaintiff.

Based upon the pleadings, depositions, testimony and other matters of record before the trial court at the time it ruled upon the motions of the parties for summary judgment, the material facts were essentially uncontested. The plaintiff suffered personal injuries as a result of a 1985 automobile accident in which he was a passenger in a 1967 Chevrolet Camaro driven by William Troy Patterson. At the time of the accident, Patterson's wife was the named insured in an automobile liability insurance policy issued by the defendant. As a spouse living in the same household with his wife, Patterson was a covered driver under the terms of the policy. The Camaro had never been listed in the policy and therefore was not a covered automobile under the policy. As Patterson was a covered driver, his accident while using the Camaro would have been covered unless it came under a policy exclusion. The policy exclusions at issue excluded coverage for liability arising from the ownership, maintenance or use of any vehicle, other than those listed as covered vehicles in the policy, which was "owned" by the covered driver or "furnished for [the covered driver's] regular use."

Patterson had purchased the Camaro in September of 1983 from a man known to him only as Junior. The car had no engine and was in need of extensive repairs, but Patterson considered it a "classic" and arranged to buy it for restoration. Patterson paid Junior $400 cash and took possession of the vehicle at Junior's home. Junior told Patterson that he did not actually own the Camaro and was selling it for another man, later identified as Jerome Hall. No certificate of title was passed in the transaction. Junior told Patterson that he had a certificate of title that would be transferred to Patterson, but Patterson "never got around to getting it."

Over the next couple of years, Patterson moved the Camaro, by pulling it with other vehicles, to several different places where he carried on intermittent restoration of the vehicle as the necessary funds were saved. He eventually installed an engine and got the Camaro running, but during this period he never registered the vehicle, never obtained a certificate of title and never listed it on an insurance policy. He said he had planned to comply with all those requirements for the lawful operation of a motor vehicle after he had restored the Camaro to good operating condition.

Patterson eventually left the Camaro with a man who had an automotive repair garage at his home. As of October 1985, the Camaro had been at the garage for a considerable length of time. Patterson decided he should move the car to his own home to finish the restoration.

On 18 October 1985, the plaintiff did not go to work and Patterson picked up the plaintiff's paycheck for him and took it to the plaintiff's home after work. Patterson decided he would move the Camaro that evening, and he and the plaintiff went to the garage. After drinking some beer, Patterson got into the Camaro, for which he had no license plate or registration, to drive it to his house about four miles away. The plaintiff got into the car with Patterson.

The Camaro was wrecked by Patterson when, despite the plaintiff's requests that he slow down, Patterson failed to negotiate a sharp curve at approximately 65 miles per hour. The Camaro ran off the road and overturned, and the plaintiff was thrown from the vehicle and seriously injured.

The plaintiff brought an action against Patterson alleging that Patterson's negligent operation of the Camaro was the proximate cause of the plaintiff's injuries. On 5 December 1986, a judgment was entered against Patterson in the amount of $17,197.99 for the plaintiff's damages resulting from the accident. Thereafter, the plaintiff brought this action against the defendant insurance company alleging that the defendant was liable under its automobile liability policy for satisfaction of the judgment against Patterson.

On appeal of the trial court's summary judgment for the defendant in this action, the Court of Appeals held that the issue of ownership was controlled by an exception to the general rule that, for purposes of tort law and liability insurance coverage, no ownership passes to the purchaser of a motor vehicle until "legal" title is transferred in compliance with N.C.G.S. § 20-72(b). The Court of Appeals held that Patterson, by virtue of paying the full cash price and taking possession of the Camaro, had acquired an equitable ownership interest in the car and "owned" it within the meaning of that term as used in the defendant's insurance policy, notwithstanding the lack of compliance with the title transfer statute. We disagree.

The Motor Vehicle Safety and Financial Responsibility Act, N.C.G.S. §§ 20-279.1 to 20-279.39 (1983), regulates the issuance of motor vehicle liability insurance policies in this State, and the provisions of the Act are included in automobile liability insurance policies by operation of law. Insurance Co. v. Chantos, 293 N.C. 431, 238 S.E.2d 597 (1977). The definition of "owner" as used in the mandatory provisions of the Act is provided by N.C.G.S. § 20-4.01 ¹ and applies throughout Chapter 20 "[u]nless the context otherwise requires...." N.C.G.S. § 20-4.01 (1983). Except under special circumstances not present in this case, the statute limits the definition of the word "owner" to the person holding legal title. N.C.G.S. § 20-4.01 (1983).

Our motor vehicle statutes also regulate the manner in which legal title and ownership of motor vehicles must be transferred. N.C.G.S. § 20-72 requires proper execution of an assignment and delivery of the certificate of title before "legal" title and ownership pass. ² Applying the statutory definition of "owner," the statutory requirements for passing title and the statutory requirements for liability insurance, we have held that for purposes of tort law and liability insurance coverage, no ownership passes to the purchaser of a motor vehicle which requires registration until: (1) the owner executes, in the presence of a person authorized to administer oaths, an assignment and warranty of title on the reverse of the certificate of title, including the name and address of the transferee; (2) there is an actual or constructive delivery of the motor vehicle; and (3) the duly assigned certificate of title is delivered to the transferee (or lienholder in secured transactions). Insurance Co. v. Hayes, 276 N.C. 620, 640, 174 S.E.2d 511, 524 (1970). Hayes was decided under former N.C.G.S. § 20-279.1(9) (repealed 1973), which essentially provided the same definition of "owner" as N.C.G.S. § 20-4.01(26). The rationale of Hayes applies as well under the § 20-4.01(26) definition of "owner" and was not changed by the legislature's repeal of the repetitive definition in N.C.G.S. § 20-279.1(9). See Ohio Casualty Ins. Co. v. Anderson, 59 N.C.App. 621, 298 S.E.2d 56 (1982), cert. denied, 307 N.C. 698, 301 S.E.2d 101 (1983).

The defendant insurance company had the burden of showing that an exclusion to coverage under its policy was applicable. Insurance Co. v. McAbee, 268 N.C. 326, 150 S.E.2d 496 (1966). The evidence before the trial court in this case established that Patterson paid $400 cash as the total price for the Camaro and took immediate possession of the vehicle, but he never received the certificate of title. There was no indication from the forecast of evidence presented to the trial court that the owner, Jerome Hall, ever properly executed an assignment of the certificate of title. Clearly, the parties to this transaction did not comply with the requirements of N.C.G.S. § 20-72(b) for the transfer of legal title and ownership. As this Court has construed the relevant statutory provisions, there had been no transfer of title and ownership of the Camaro to Patterson. Therefore, Patterson did not "own" the vehicle within the terms of the liability insurance policy.

In concluding that Patterson "owned" the Camaro, the Court of Appeals relied upon an exception to the rules discussed in Hayes for determining the ownership of a motor vehicle. Such an exception for one who has an equitable interest in a vehicle was applied by the Court of Appeals in Ohio Casualty Ins. Co. v. Anderson, 59 N.C.App. 621, 298 S.E.2d 56. In Anderson, a father purchased a car, paid the entire purchase price, took possession of the car, obtained insurance coverage for the car under an "owner's policy" and paid premiums on the policy....