Lowry v. Tucson Diesel, Inc.

• Decision Date: 13 June 1972
• Docket Number: No. 1,CA-CIV,1
• Citation: 17 Ariz.App. 348,498 P.2d 160
• Parties: Ruby M. LOWRY et al., Appellants, v. TUCSON DIESEL, INC., an Arizona corporation, Appellee. 1751.
• Court: Arizona Court of Appeals

Page 160

498 P.2d 160

17 Ariz.App. 348

Ruby M. LOWRY et al., Appellants, v. TUCSON DIESEL, INC., an Arizona corporation, Appellee.

No. 1 CA-CIV 1751.

Court of Appeals of Arizona, Division 1.

June 13, 1972.

Rehearing Denied July 24, 1972.

Review Denied Sept. 26, 1972.

Gary K. Nelson, Atty. Gen., by John H. Riley and John L. Jones, Asst. Attys. Gen., Phoenix, for appellants.

Herbert E. Williams, Tucson, for appellee.

HOWARD, Judge.

Appellee, Tucson Diesel, Inc., filed a 'Petition for Special Action, Proceeding in Quo Warranto and Petition for Declaratory Judgment' in superior court requesting that the appellants, Ruby M. Lowry, the Arizona Highway Department and the State of Arizona be enjoined from revoking the registration of any vehicle owned by Tucson Diesel and that a declaratory judgment be entered to the effect that Tucson Diesel has fully complied with A.R.S. § 28--324. The parties subsequently submitted an Agreed Statement of Facts and further stipulated, at the hearing on the Order to Show Cause, that two questions would be decided by the court:

'1. Is the purchase of insurance by a lessee in a lease contract a sufficient procurement of the coverage required by A.R.S. § 28--324?

'2. Does A.R.S. § 28--324 violate Article II, Section 25 of the Arizona Constitution regarding the impairment of the obligation of a contract?'

Following judgment that Tucson Diesel, by requiring its lessees to purchase liability insurance coverage, had satisfied the requirement of A.R.S. § 28--324 and that A.R.S. § 28--324 does not violate Article II, Section 25 of the Arizona Constitution, A.R.S., defendants below brought this appeal questioning only that portion of the judgment which held that Tucson Diesel had 'procured public liability insurance within the meaning of A.R.S. § 28--324.'

The Agreed Statement of Facts reveals that Tucson Diesel entered into agreements with M. M. Sundt Construction Company and Tucson Warehouse & Storage whereby these companies leased from Tucson Diesel a total of seven Diamond Reo trucks. Each of these lease agreements entered into by the parties provided that:

'10. Liability and Physical Damage Insurance, for bodily injury and property damage to others and damage to or loss of vehicle, by collision, fire, theft or otherwise, from the time title to each vehicle is taken in the name of Lessor until the vehicle is returned to the Lessor at the termination of this lease, shall be purchased and maintained by Lessee.'

The agreements further set forth the minimum coverages required by lessor and provided that 'all insurance policies shall name Lessor, its Successors and/or Assigns as additional insured.'

Having complied with the above terms lessees transmitted to lessor certificates of insurance which lessor in turn transmitted to the Arizona Highway Department, Motor Vehicle Division, purporting to show that Tucson Diesel was an insured under the liability insurance coverage thereby satisfying the requirements of A.R.S. § 28--324. That section provides, in pertinent part:

'A. No owner engaged in the business of renting, or who intends to rent, a motor vehicle without a driver, shall be permitted to register the motor vehicle until he has procured public liability insurance with an insurance company approved by the insurance department of this state insuring the renter thereof against liability arising from his negligence in the operation of the rented vehicle . . ..'

Mrs. Ruby M. Lowry, Supervisor, Motor Vehicle Dealer Service, informed Tucson Diesel by letter that 'Arizona does not accept any lessee's insurance coverage for leased or rented vehicles. Proof of liability insurance coverage is required from the registered owner, showing the coverage of Tucson Diesel, Inc., applying to any and all vehicles which are leased or rented to any lessee for registration in Arizona.' Various communications between Tucson Diesel and Mrs. Lowry culminated in a telephone call from Mrs. Lowry to Gene I. Wendt, president of Tucson Diesel, whereby she informed him that the registration for the leased vehicles would be cancelled in ten days. At that time Tucson Diesel brought this action.

At the hearing on the Order to Show Cause it was stipulated that 'blanket liability insurance coverage on all vehicles of petitioner (as required by the letter from Mrs. Lowry to Tucson Diesel) is not required by A.R.S. § 28--324 as respects petitioner only.' ¹

We are thus faced with the narrow question of whether a...