Olin Mathieson Chem. Corp. v. Southwest Casualty Co.

• Decision Date: 07 March 1957
• Docket Number: Civ. A. 1322.
• Citation: Olin Mathieson Chem. Corp. v. Southwest Casualty Co., 149 F.Supp. 600 (W.D. Ark. 1957)
• Parties: OLIN MATHIESON CHEMICAL CORPORATION, Plaintiff, v. SOUTHWEST CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Western District of Arkansas

149 F. Supp. 600

OLIN MATHIESON CHEMICAL CORPORATION, Plaintiff, v.SOUTHWEST CASUALTY COMPANY, Defendant.

Civ. A. 1322.

United States District Court W. D. Arkansas, Fort Smith Division.

March 7, 1957.

Mehaffy, Smith & Williams, Little Rock, Ark., for plaintiff.

Rex W. Perkins, Fayetteville, Ark., for defendant.

JOHN E. MILLER, District Judge.

This action is before the Court upon plaintiff's motion for summary judgment in its favor and upon defendant's motion for summary judgment in its favor.The parties have filed briefs in support of their respective contentions, and the motions are now ready for final disposition.

The pleadings, stipulations, and depositions on file disclose the following undisputed facts:

The plaintiff is a Virginia corporation; the defendant is an Arkansas corporation, having its principal place of business in the Fayetteville Division of the Western District of Arkansas; and the amount involved, exclusive of interest and costs, exceeds the sum of $3,000.

Prior to August, 1954, B. A. Meshell owned several trucks, including a 1953 Ford 2-ton truck, which he apparently had purchased under a conditional sales contract that had been assigned to Universal C.I.T.In any event, Meshell was making monthly payments to Universal C.I.T. on the truck.Meshell had possession of the pink slip (registration slip) on the truck, but Universal C.I.T. retained possession of the certificate of title issued by the State of Arkansas.

On January 8, 1954, the defendant, Southwest Casualty Company, issued its standard liability insurance policy with a combination fleet schedule to Meshell, describing the above mentioned Ford truck as one of the vehicles covered thereby.The effective period of the policy was one year from date of issue.Among other things the policy provided:

"Item 6.(a) Except with respect to bailment lease, conditional sale, mortgage or other encumbrance the named insured is the sole owner of the automobile.

"* * * * * *

"The company agrees with the insured, named in the declarations made a part hereof, in consideration of the payment of the premium and in reliance upon the statements in the declarations and subject to the limits of liability, exclusions, conditions and other terms of this policy:

"Insuring Agreements

"I.Coverage A — Bodily Injury Liability: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of the automobile.

"* * * * * *

"II.Defense, Settlement, Supplementary Payments: As respects the insurance afforded by the other terms of this policy under coverages A and B the company shall:

"(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent;

"* * * * * *

"III.Definition of Insured: With respect to the insurance for bodily injury liability and for property damage liability the unqualified word `insured' includes the named insured and also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission.

"* * * * * *

"VIII.Policy Period, Territory, Purposes of Use: This policy applies only to accidents which occur and to direct and accidental losses to the automobile which are sustained during the policy period, while the automobile is within the United States of America, its territories or possessions, Canada or Newfoundland, or is being transported between ports thereof, and is owned, maintained and used for the purposes stated as applicable thereto in the declarations."

The maximum liability of the defendant under the policy was $5,000 for bodily injury to each person and $10,000 for each accident.

During the early part of August, 1954, Meshell sold the Ford truck to Leo Harper.Harper paid either $400 or $450 to Meshell and assumed the payments to Universal C.I.T.The payments were approximately $114 a month, and seven or eight payments were still due at the time.The total purchase price of the truck was about $1,250.

Apparently the parties did not have a specific agreement that Meshell would retain title to the truck until the purchase price was paid.However, in his deposition Meshell testified as follows in answer to a question concerning what he would have done if Harper had failed to finish making the payments on the truck:

"A.I couldn't have done anything else but taken the truck just as you or anybody else would have done.

"Q.Youwould have taken it back?

"A.Yes, sir."(Page 8)

In his deposition, Harper testified as follows:

"Q.Mr. Harper, at what point between the time you had your first agreement with Mr. Meshell and on up until the time you anticipated that you would make your last payment to C.I.T., at what point did you feel you would become the absolute owner of that truck?

"A.Well, that one is just like any of the rest of them, it's not mine until it's paid for."(Page 15).

Harper also testified as follows:

"A.Well, I had bought the truck from Mr. Meshell, conditionally bought it, I had paid him a down payment on it and was making his payments on the truck at the time.C.I.T. had papers on the truck.In other words, they financed the truck and, I don't know, I guess all three of us had an interest in it."

After the sale was made Harper then made the monthly payments directly to Universal C.I.T. Payments were made by Harper's own personal checks.At the time of the sale Meshell gave Harper the pink slip to the truck, but did not give him the certificate of title since the latter document was in the possession of Universal C.I.T.

After purchasing the truck Harper used it in his business of hauling pulpwood.Meshell exercised no control over the truck, and both parties considered the truck as belonging to Harper as long as he continued to make the payments.Apparently the only statement made after the sale by Meshell to Harper concerning the truck was in the nature of advice to Harper concerning the proper maintenance of the truck.No doubt Meshell wanted the truck properly cared for until Harper had completed the payments to Universal C.I.T.

The defendant insurance company was not notified of the sale by Meshell to Harper, and, in fact, the company had no knowledge of the sale until after the truck had been involved in an accident.

On October 14, 1954, the truck, while being driven by L. C. Lester, an employee of Harper, was involved in a collision which resulted in the death of Willie Earl Shirey.On October 26, 1954, Shirey's widow, Ethel Shirey, individually and as next friend of her minor children, filed a complaint in the Union County Circuit Court, alleging that her husband's death was proximately caused by the negligence of Leo J. Harper, Joe Canady, L. C. Lester, and International Paper Company.She sought damages in the total sum of $185,000.

On December 7, 1954, Mrs. Shirey amended her complaint by adding as partiesdefendantB. A. Meshell, Olin Mathieson Chemical Corporation, and Mrs. C. W. King.The defendant herein, Southwest Casualty Company, employed counsel to defend B. A. Meshell, and said counsel appeared in the Union County Circuit Court on June 27, 1955, to conduct said defense.On that date the plaintiff, Ethel Shirey, was granted a nonsuit without prejudice as to B. A. Meshell, Joe Canady, Leo J. Harper, and International Paper Company.After the nonsuit was granted as to Meshell the attorneys for the defendant, Southwest Casualty Company, withdrew from the case.The plaintiff herein, Olin Mathieson Chemical Corporation, demanded that Southwest Casualty Company defend the action against it, but the said Insurance Company refused to do so.

The case in the Circuit Court proceeded to trial, and the jury returned a verdict in favor of the plaintiff and against the defendants, L. C. Lester and Olin Mathieson Chemical Corporation, in the amount of $50,000.The case was appealed to the Arkansas Supreme Court and that court affirmed the judgment in full.The court held that there was sufficient evidence to make a jury question as to whether Olin Mathieson Chemical Corporation"had the right to direct and control the operations of Lester and his truck".Olin Mathieson Chemical Corp. v. Shirey, Ark., 291 S.W.2d 250, 253.

The parties have stipulated that the plaintiff herein, Olin Mathieson Chemical Corporation, expended the sum of $7,274.83 for attorneys' fee, costs and expenses in the defense of the action in the state court, and that said expenditures were reasonably necessary in the defense of the litigation.

Subsequent to the collision Meshell purchased the Ford truck from Universal C.I.T. for approximately $125.

Neither Meshell nor Harper received any money from the insurance company which had issued the collision coverage on the truck.

It is upon these undisputed facts that each party seeks summary judgment in its favor.Plaintiff contends that the transaction between Meshell and Harper was either an incomplete conditional sale or a bailment; that Meshell remained the owner of the truck within the meaning of the policy; that Harper's employee, Lester, was driving the truck with the consent of Meshell; that the plaintiff was legally responsible for the use of the truck; and therefore that plaintiff was an insured within the meaning of the policy.

To the contrary, defendant contends that the transaction between Meshell and Harper was an absolute sale; that at the time of the accident Meshell no longer owned the truck and the policy was no longer in effect; that Harper's employee, Lester, was not driving the truck with the consent of Meshell; and that plaintiff was not an insured under the...