Mid-Century Ins. Co. v. Gardner, MID-CENTURY

• Decision Date: 31 August 1992
• Docket Number: MID-CENTURY,No. C011331,C011331
• Citation: 11 Cal.Rptr.2d 918,9 Cal.App.4th 1205
• Court: California Court of Appeals Court of Appeals
• Parties: INSURANCE COMPANY, Plaintiff and Respondent, v. Ron GARDNER, Defendant and Appellant.

Page 918

11 Cal.Rptr.2d 918

9 Cal.App.4th 1205

MID-CENTURY INSURANCE COMPANY, Plaintiff and Respondent, v. Ron GARDNER, Defendant and Appellant.

No. C011331.

Court of Appeal, Third District, California.

Aug. 31, 1992.

Jay-Allen Eisen Law Corp., Jay-Allen Eisen, Marian M. Johnston, Ann Perrin Farina and Clayeo C. Arnold, Sacramento, for defendant and appellant.

Kroloff, Belcher, Smart, Perry & Christopherson, Orlie L. Curtis and Clinton P. Walker, Stockton, for plaintiff and respondent.

SPARKS, Associate Justice.

Plaintiff Mid-Century Insurance Company brought this action for a declaration that it had no duty to pay benefits to its insured, defendant Ron Gardner, for personal

                injuries he sustained in an accident with an uninsured driver. 1  It claimed the policy Mr. Gardner had purchased offered no coverage.  The parties stipulated to a trial before a temporary judge, who ruled in the plaintiff insurer's favor and entered judgmentaccordingly.  With [9 Cal.App.4th 1209] respect to the explicit basis for the ruling, Mr. Gardner asserts the temporary judge improperly disregarded the corporate form of his business in applying one of the policy's exclusions.  Mr. Gardner also argues that neither of the other policy exclusions urged below by the plaintiff insurer has any application to the facts of this case.  We agree and shall reverse
                

BACKGROUND

The matter was submitted to the temporary judge on deposition excerpts and exhibits, which make for disjointed reading on appeal. We shall do our best to assemble the pertinent facts from this record, with any conflicts resolved or inferences drawn in favor of the judgment.

Saving the facts of disputed significance for the discussion, we begin with those which serve as a framework. Mr. Gardner started working as a landscape contractor in Chico in 1959, incorporating in 1986 as Gardner's Landscaping, Inc. The corporation maintained a "commercial vehicle" insurance policy with Financial Indemnity Company, which on amended declarations (bearing an effective date of March 13, 1987) listed 17 vehicles registered to the corporation (beginning with a 1975 "Ford F700 Dump" and ending with a 1987 Ford half-ton pickup truck). Among these was a 1987 Nissan pickup truck, listed as unit "023." The policy included coverage of $30,000 per person for bodily injury resulting from an accident involving an uninsured motorist.

In April 1987, Mr. Gardner was driving the 1987 Nissan pickup truck on corporation business when he was involved in an accident with an uninsured motorist. The parties do not dispute that he sustained serious bodily injuries in an amount in excess of $30,000.

At the time of the accident, the plaintiff insurer had issued several identical automobile insurance policies to Mr. Gardner as the "named insured." The vehicles covered under these policies were a 1986 Cadillac Fleetwood, a 1978 Ford van, a 1980 VW Rabbit, and a 1979 Datsun 280Z. The policy that was admitted as a trial exhibit covered the Cadillac. The policies provided $100,000 in benefits for bodily injuries caused by an uninsured motorist. All these vehicles, however, were actually owned by the corporation.

The procedural background of this matter is uncomplicated. Mr. Gardner demanded uninsured motorist benefits from both the plaintiff insurer and Financial Indemnity Company. Apparently, Financial Indemnity Company paid him the bulk of the $30,000 limits under its policy with him and tendered the remainder. The plaintiff insurer, on the other hand, refused his tender and filed this declaratory relief action in 1989. The temporary judge issued a statement of decision in which he determined Mr. Gardner "exercised and possessed the same incidents of ownership and control over th[e] vehicles" insured through either insurance company, and was an "owner-in-fact" of the 1987 Nissan pickup truck in which he was injured, so the plaintiff insurer was not obligated to pay benefits by virtue of an exclusion in the policy precluding benefits for injuries occurring while occupying a vehicle owned by the insured but not afforded coverage under the policy. Not receiving any objection to the statement of decision, the temporary judge entered judgment in favor of the plaintiff insurer in April 1991. This appeal followed.

DISCUSSION

I

We initially consider the stated basis for the temporary judge's ruling. There can

                be no dispute that Mr. Gardner is the explicit "named insured" under the plaintiff's policies. 2  The question then is whether he is nevertheless excluded under the terms of the policy.  To quote the exact language of the exclusionary clause in question, "This coverage does not apply to bodily injury sustained by a person:  [p] 1. While occupying a motor vehicle owned by you or a family member for which insurance is not afforded under this policy...."  (Emphasis altered.)   Consequently, in order for this exclusion to apply, it must be shown Mr. Gardner "owned" the 1987 Nissan pickup truck insured by Financial Indemnity Company in which he was riding at the time of the accident.  The plaintiff insurer attempts to demonstrate this in two ways.  First (in an argument made clear only in oral argument), it asserts that "[b]y any ordinary reasonable definition [of "owned,"] he owned it."   Second, it argues Mr. Gardner "has such unity of interest and identity with the [9 Cal.App.4th 1211] corporation that the corporate veil should be pierced."   We approach these in turn
                

A.

As was pointed out below by Financial Indemnity Company, the plaintiff insurer's policy simply uses the term "owned" without giving it a more specialized definition. We therefore begin by applying the meaning a reasonable person would ordinarily give the term. (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764.) According to Webster's Third New International Dictionary (1971), to "own" is "to have or hold as property or appurtenance : have a rightful title to, whether legal or natural : POSSESS...." (P. 1612.)

Under the ordinary sense of this definition, Mr. Gardner did not own the vehicle in which he was injured. Title to the 1987 pickup truck was in the corporation's name, which held the vehicle as its property. Regardless of the extent to which Mr. Gardner owned or controlled the corporation as a stockholder and executive officer (including the use of the pickup truck), this does not confer upon him the corporation's title to the truck. "[I]t cannot be said that the facts disclose a sale [of the real property] by trustees to themselves.... [T]he trustees, though directors and stockholders of the defendant bank, were not the bank." (Copsey v. Sacramento Bank (1901) 133 Cal. 659, 662, 66 P. 7 [emphasis in original]; accord, Miller v. McColgan (1941) 17 Cal.2d 432, 436, 110 P.2d 419 [stockholders do not own corporate property]; Bainbridge v. Stoner (1940) 16 Cal.2d 423, 428, 106 P.2d 423 [directors do not hold title to corporate property in their charge]; Gorham v. Gilson (1865) 28 Cal. 479, 484 [stockholders "never had any title, legal or equitable, to the property" of which the corporation was defrauded].) Nor did Mr. Gardner "possess" the pickup truck other than to operate it.

The plaintiff's efforts to demonstrate that Mr. Gardner owned the truck in the "ordinary" sense of the word are self-defeating, because if there are multiple meanings we must choose the one which will achieve the policy's object of providing coverage for loss. (Reserve Insurance Co., supra, 30 Cal.3d at pp. 807-808, 180 Cal.Rptr. 628, 640 P.2d 764.) Therefore, we need not recount the cases it cites for the principle that ownership of a vehicle for insurance purposes is not limited to the entity holding title. If there are multiple

                possible "owners" of a vehicle, it was incumbent upon the plaintiff to make clear which types of ownership would work a forfeiture of coverage under the policy.  (Id. at p. 808, 180 Cal.Rptr. 628, 640 P.2d 764.)   Having failed to specify in its exclusion that ownership could be anything other than holding the title of record (which is certainly ownership [9 Cal.App.4th 1212] in its most ordinary sense), the plaintiff cannot apply this exclusion merely based on Mr. Gardner's dominion over the pickup truck.  Although we are by no means certain this is what the temporary judge meant in labelling Mr. Gardner the "owner-in-fact" of the 1987 Nissan pickup truck, this conclusion would be legally erroneous and the judgment cannot be premised upon it
                

B.

Since, for purposes of the plaintiff's exclusionary clause, it is the corporation which owned the 1987 pickup truck, the plaintiff can come within the ambit of the clause only by disregarding the corporate form of Gardner's Landscaping in order to show that Mr. Gardner actually "owned" the pickup truck. This would require us to apply the suggestively-named doctrine of "piercing the corporate veil." (See 9 Witkin, Summary of Cal.Law (9th ed. 1989) Corporations, § 12, p. 524.) We shall recount the principles relevant to this doctrine, and then determine if the plaintiff's evidentiary showing was sufficient to warrant its application.

1.

"The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff's interests." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300, 216 Cal.Rptr. 443, 702 P.2d 601.) The elements of the doctrine are at least easily stated. "There is no litmus test to determine when the corporate veil will be pierced; rather[,] the result will depend on the circumstances of each particular case. [ (H.A.S. Loan Service, Inc. v. McColgan (1943) 21 Cal.2d 518, 523, 133 P.2d 391.) ] There are, nevertheless, two general requirements: '(1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those...