Matsuo Yoshida v. Liberty Mutual Insurance Co.

• Decision Date: 31 January 1957
• Docket Number: No. 15121.,15121.
• Citation: 240 F.2d 824
• Parties: MATSUO YOSHIDA and Chisato Yoshida, Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

240 F.2d 824 (1957)

MATSUO YOSHIDA and Chisato Yoshida, Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, a corporation, Appellee.

No. 15121.

United States Court of Appeals Ninth Circuit.

January 31, 1957.

COPYRIGHT MATERIAL OMITTED

Arthur N. Greenberg, Los Angeles, Cal., for appellants.

Lyndol L. Young, Los Angeles, Cal., for appellee.

Before POPE, LEMMON and BARNES, Circuit Judges.

BARNES, Circuit Judge.

Appellants Matsuo and Chisato Yoshida, husband and wife, obtained a judgment against one Sylvester Gonzales in the Superior Court of California, County of Los Angeles, in 1955 for personal injuries sustained in an automobile collision occurring on April 15, 1953. The judgment unsatisfied, appellants instituted this action in the District Court to recover the amount of the award from Gonzales' insurer, Liberty Mutual Insurance Company. The action, tried by the court without a jury, was successfully defended by the Company on the ground that Gonzales owned the vehicle involved in the accident and that his policy coverage did not extend to an automobile owned by him.

On appeal appellants make two general arguments: (1) Gonzales was not the owner of the car within the meaning of the policy provisions; (2) appellee has waived its defenses or is estopped as a matter of law to deny liability under the policy, by reason of its conduct in respect to Gonzales' application for insurance and/or another accident which preceded the one in question.

I. Was Gonzales the Owner of the Car?

The initial point is without merit. The automobile liability insurance policy contained, inter alia, the following exclusionary clause:

"(2) The insurance does not apply: (a) to any automobile owned by the named insured or a member of his household * * *"¹

The word "owned" is not defined in the insurance contract. It is a word obviously susceptible of several possible meanings and shadings. And appellants earnestly contend that this Court should construe it in the manner most likely to impose liability on appellee.

This Court has recognized and adhered to the well-settled rule of construction that where ambiguity or uncertainty exists in an insurance contract, such ambiguity or uncertainty will be resolved adversely to the insurer. Allstate Ins. Co. v. Erickson, 9 Cir., 227 F.2d 755; Kershner v. United States, 9 Cir., 215 F. 2d 737; Continental Casualty Co. v. Phoenix Construction Co., 46 Cal.2d 423, 296 P.2d 801; Arenson v. National Automobile & Casualty Insurance Co., 45 Cal. 2d 81, 286 P.2d 816; Fageol Truck & Coach Co. v. Pacific Indemnity Co., 18 Cal.2d 731, 117 P.2d 661. The rule has particular application where exclusions are involved. Pendell v. Westland Life Insurance Co., 95 Cal.App.2d 766, 214 P. 2d 392. However, the rule is not without limitation. Some actual or apparent ambiguity must be present before the rule comes into play. Carabelli v. Mountain States Life Ins. Co., 8 Cal.App.2d 115, 46 P.2d 1004; Wisconsin Hydro Elec. Co. v. Equitable Fire & M. Ins. Co., 8 Cir., 233 F.2d 313. Where there is no ambiguity, there is nothing to be construed. Home Indemnity Co. of New York v. Standard Acc. Ins. Co., 9 Cir., 167 F.2d 919. And a court cannot and should not do violence to the plain terms of a contract by artificially creating ambiguity where none exists. In situations in which reasonable interpretation favors the insurer and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract. As stated by the California Supreme Court in Continental Cas. Co. v. Phoenix Construction Co., supra, 46 Cal.2d 423, 296 P.2d 806 "An insurance company has the right to limit the coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected." Cf. Coit v. Jefferson Standard Life Ins. Co., 28 Cal.2d 1, 168 P.2d 163, 168 A.L.R. 673; Sampson v. Century Indemnity Co., 8 Cal.2d 476, 66 P.2d 434, 109 A.L.R. 1162.

Did Gonzales own the car in question, a 1937 Chevrolet, at the time of the accident? It appears that he purchased the car under a conditional sale agreement whereby legal title was retained by the vendor until payment of the final installment, which had not been paid when the accident occurred. Whether or not a conditional vendee owns his car must be determined by reference to the law of California, wherein the policy was issued and Gonzales resided. Standard Acc. Ins. Co. of Detroit, Mich. v. Winget, 9 Cir., 197 F.2d 97. The California Vehicle Code supplies a ready answer. Section 66 defines an "owner" as including "the person entitled to the possession of a vehicle as the purchaser under a conditional sale contract." Of course, the statutory definition is not necessarily controlling for the words of a contract are to be taken in their ordinary and popular sense. California Civil Code, § 1644; Massachusetts Mut. Life Ins. Co. v. Pistolesi, 9 Cir., 160 F.2d 668, certiorari denied, 332 U.S. 759, 68 S.Ct. 59, 92 L.Ed. 345. We believe, however, that common understanding of the words "owner" and "own" with respect to automotive vehicles accords with our view. Under law the conditional vendee has the beneficial interest in the automobile, including the right of possession. It is his to drive and use. He lacks only the bare legal title. It seems unlikely, in light of modern purchasing practices, under which a vast majority of automobiles are bought under conditional sale contracts, that the non-owner exception is intended to except only the legal owner. This ordinarily is a bank or a finance company. Such a construction would render the clause a practical nullity. If the clause has any common or popular meaning, it means that a person in Gonzales' position is the owner of the car. Indeed, Gonzales so understood, for in the accident report filed after the first accident he inserted his own name in the blank marked "owner".

Nevertheless, appellants assert that a recent California decision, Oil Base, Inc. v. Transport Indemnity Co., 143 Cal.App. 2d 453, 299 P.2d 952, requires us to construe the word owner to mean either the legal or registered owner. That case dealt with the question of whether a lessee was an owner. The court held that it was not. The decision is not governing authority in the instant matter. Moreover, no contention was made in the trial of that case that the word "owner" had any meaning other than either legal owner or registered owner. There the lower court had nevertheless included as owner one who had the right to possess and use, to the exclusion of others, such as a lessee. The Oil Base case would aid appellants only if we viewed the non-owner clause as exempting the legal owner alone.

Appellants urge as one acceptable alternative that owner means registered owner, contending that the Continental Cas. Co. case, supra, requires us to follow the Certificate of Financial Responsibility filed by appellee with the California Department of Motor Vehicles, in interpreting the contract provisions. That certificate indicated insurance coverage for any car "not registered to insured." Assuming arguendo that the teaching of the Continental Cas. Co. case is as appellants contend, they still cannot prevail. Gonzales was the registered owner of the 1937 Chevrolet. Admittedly, the 1953 registration had not yet been secured at the time of the accident, while the 1952 registration had expired. But in July of 1953 the car was registered for that year. The subsequent registration related back to the beginning of the year. Rainey v. Ross, 106 Cal.App.2d 286, 235 P.2d 45, 50. As stated therein, "the hiatus * * * is more seeming than real." The fact that registration was made in that case within the allowable statutory period whereas in the instant case it was late must be regarded as inconsequential. Otherwise, the insurer would have to pay the penalty for the insured's careless or negligent inaction.

Appellants further contend the trial court erroneously found that the effective date of the non-owner endorsement commenced simultaneously with the effective date of the policy. The life of the policy began on May 3, 1952 and ended on May 3, 1953. No date was designated on the endorsement, although space was provided therefor. The policy was correctly read as a whole. The only reasonable inference flowing from such a reading is that the endorsement coexisted with all other provisions. Appellants' contention of a different effective date for the endorsement is untenable.

II. Did Appellee Waive its Defenses under the Contract or is it Estopped to Assert Them?

Gonzales filed his application for insurance under the California Assigned Risk Plan in early April, 1952. The Assigned Risk Plan is designed to provide automobile liability insurance for those persons who are unable to procure insurance through ordinary channels. All automobile liability insurance carriers engaged in business in California are required to participate in the Plan and each carrier is assigned its pro rata share of assigned risks. Cal.Ins.Code, § 11160 et seq. Gonzales' difficulty in procuring regular insurance coverage arose apparently from his poor driving record, which included numerous traffic violations and at least two prior accidents.

He made the application at the offices of Biebrach, Bruch, and Moore, Inc., insurance brokers in San Jose, California. This firm represented Gonzales and was not the agent of appellee. Accordingly, any statements that may have been made by employees of the firm cannot effect appellee's substantive legal rights, for they had no authority, actual or apparent, to bind it.

The application form was not prepared by the appellee insurance company. When filled in by appellant, it did not expressly state what type of coverage was desired. However, Gonzales did indicate that an "owner and operator" certificate of financial responsibility was required by the Department of Motor Vehicles. The application also stated that Gonzales neither...