Judah AMC & Jeep, Inc. v. Old Republic Ins. Co., 63282
| Decision Date | 18 June 1980 |
| Docket Number | No. 63282,63282 |
| Citation | 293 N.W.2d 212 |
| Parties | 29 UCC Rep.Serv. 687 JUDAH AMC & JEEP, INC., Appellant, v. OLD REPUBLIC INSURANCE COMPANY, Appellee. |
| Court | Iowa Supreme Court |
Keith E. Uhl, of Scalise, Scism, Gentry, Brick & Brick, Des Moines, for appellant.
Jack W. Rogers and Clyde C. Putnam, Jr., Des Moines, for appellee.
Considered by REYNOLDSON, C. J., and LeGRAND, REES, HARRIS, and ALLBEE, JJ.
In a transaction for purchase of a fleet of automobiles by a car-rental business provision was made for obtaining insurance. Collision insurance was provided but a loss-payable clause was not. The seller then assigned its interest to a bank. After loss of one of the vehicles payment was made, not to the holder of a recorded security interest, but to the borrower named in the policy. The borrower became defunct without paying the insurance proceeds over to the lender. The lender then brought this suit against the insurer on the theory that the insurer had actual or construction notice of the security interest and that the lender, rather than the borrower, was entitled to the insurance proceeds. We affirm the trial court's judgment for the insurer.
Plaintiff sold a fleet of 32 automobiles for $147,585.92 to Zebra Rent-A-Car which did business as Dollar Rent-A-Car (hereinafter Dollar). Thereafter plaintiff assigned the contract to Central National Bank. The assignment was with recourse to the plaintiff. The bank perfected its security interest on the vehicles by recording the contract in Polk County. The reverse side of the contract contained a statement that
After the security agreement was recorded defendant insured the fleet for a total potential liability of $155,000. No loss-payable provision on the policy was completed, either in favor of the seller or lender. One of the cars under the contract, covered by the policy, was thereafter destroyed in a collision. Its value was $3860.24 (with $250 deductible). A sworn proof of loss, made for Dollar by its president, stated in part: "The said automobile at the time of the loss . . . belonged solely to insured and no other person had any interest therein, by chattel mortgage, sale contract, or otherwise, except as follows: No exceptions."
In processing the claim the insurer spoke with the seller to establish the purchase price of the destroyed vehicle. The parties sharply dispute the significance of this conversation. Plaintiff believes it establishes actual knowledge by the insurer of the falsity of the statement in the proof of loss. The insurer argues the conversation betrays no such knowledge. To the contrary, the insurer thinks it is significant that during the conversation the plaintiff did not claim any interest in the vehicle.
The $3610.24 was paid by the insurer to Dollar. It was not applied to the outstanding debt owed to Central National Bank. Subsequently plaintiff was required to pay the bank the balance of the contract, including the value of the destroyed automobile. Plaintiff then took an assignment from the bank for this claim and, being unable to collect from Dollar or its officers, brought this suit.
Trial was to the court upon stipulated facts. The trial court found that neither the plaintiff nor the bank intended to make the proceeds of the insurance collateral or a direct security interest. It also found the insurer did not receive actual notice to make payment under the loss to anyone other than to Dollar, the named insured.
I. This is a law action, reviewable on...
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