Phoenix Insurance Company v. Newell

• Decision Date: 25 June 1971
• Docket Number: Civ. No. 868.
• Citation: 329 F. Supp. 172
• Parties: The PHOENIX INSURANCE COMPANY, a corporation, Plaintiff, v. Susan NEWELL, Administratrix of the Estate of Edward J. Byer, Deceased, et al., Defendants.
• Court: U.S. District Court — District of Montana

329 F. Supp. 172

The PHOENIX INSURANCE COMPANY, a corporation, Plaintiff, v. Susan NEWELL, Administratrix of the Estate of Edward J. Byer, Deceased, et al., Defendants.

Civ. No. 868.

United States District Court, D. Montana, Billings Division.

June 25, 1971.

Bruce R. Toole and Stephen H. Foster, Crowley, Kilbourne, Haughey, Hanson & Gallagher, Billings, Mont., for plaintiff.

Gene Huntley, Baker, Mont., for defendants Susan Newell, Admx., Edgar Boucher and John W. Trudo.

Horton B. Koessler, Hibbs, Sweeney & Colberg, Billings, Mont., for defendant Joe Steffes, Jr.

MEMORANDUM OPINION AND ORDER

BATTIN, District Judge.

Plaintiff, Phoenix Insurance Company, seeks a declaratory judgment against Erwin Heberle Ford, Susan Newell, Administratrix of the Estate of Edward J. Byer, deceased, and Edgar Boucher, John W. Trudo, and Joe Steffes, Jr.

The parties agreed upon a statement of facts for submission to the court on plaintiff's motion for summary judgment, as follows: Phoenix was the insurer of Erwin Heberle Ford, a partnership engaged in the business of selling new and used automobiles in Baker, Montana. On Saturday, May 4, 1968, Edward J. Byer purchased a 1956 Chevrolet automobile from Erwin Heberle Ford. He paid cash for the vehicle. On the date of the purchase Byer executed the application for a new certificate of title on the old certificate of title, then in the possession of Erwin Heberle Ford. At the same time, Erwin Heberle Ford executed the assignment on the certificate of title, naming Byer as the assignee. The signature of Erwin Heberle Ford, by Erwin Heberle, a partner, was notarized later that same day. Byer took possession of the vehicle on May 4, 1968, after paying the purchase price in full, executing the required documents and purchasing three dollars worth of gasoline.

Byer did not take the certificate of title, which was properly executed, but instead left it with Erwin Heberle. Byer asked Heberle to get license plates for the vehicle on Monday, May 6, 1968, the next day during which the County Treasurer's office, Fallon County, would be open for business. Heberle agreed to do this and accepted twenty dollars from Byer to pay for the gasoline and the license plates. Arrangements were made for a third party to deliver these license plates to Byer on Monday. Erwin Heberle then placed dealer plates on the vehicle so that Byer might drive it over the weekend.

Byer took possession of the vehicle in question and left Erwin Heberle Ford with a copy of the sales slip for the vehicle and a copy of the sales slip for the gasoline. At approximately 6:55 o'clock p. m. on May 4, 1968, Byer was killed in a collision with a vehicle, driven by defendant Joe Steffes, Jr., in which defendants Edgar Boucher and John W. Trudo were passengers. The wrecked Byer vehicle was towed back to Erwin Heberle Ford.

On May 6, 1968, Heberle went to the County Treasurer at the Fallon County Courthouse and delivered to him the certificate of title on the vehicle purchased by Byer, together with the attached assignment and application, all duly executed. At that time Heberle obtained license plates on behalf of the deceased Byer. The County Treasurer sent the certificate of title with the assignment and application for a new certificate of title to the Registrar of Motor Vehicles of the State of Montana. The documents were received in Deer Lodge on May 10, 1968, and a new certificate of title was issued in the name of Edward J. Byer on June 27, 1968.

After receiving the license plates, Heberle replaced the dealer plates on the Byer vehicle with the plates which he had received from the County Treasurer.

Subsequently, defendants Trudo and Boucher each commenced an action against defendants Susan Newell and Joe Steffes, Jr., for injuries suffered in the collision of the Byer vehicle and the Steffes vehicle. Through her attorney, Newell demanded of Erwin Heberle that he arrange with his insurance company to defend her. Plaintiff Phoenix retained counsel to defend Newell in both actions, but served on Newell a letter reserving to itself the right to deny coverage of Byer and his personal representative, and stating that such coverage was denied.

Plaintiff asks the court in its motion for summary judgment to determine whether it was, through its policy issued to Erwin Heberle Ford, an insurer of Edward J. Byer; whether it had a duty to defend the action brought by defendants Trudo and Boucher and any action which might be brought by defendant Joe Steffes, Jr., and whether it had a duty to indemnify defendant Newell as personal representative of deceased Byer, in the event that a judgment should be rendered against her in any of the above-described actions. Finally, plaintiff asks the court to determine the extent of its liability, in the event that it is found liable to indemnify Newell.

I.

The answers to the issues raised by plaintiff depend upon whether legal title to the Byer vehicle had passed to Byer or remained in Erwin Heberle Ford.

This policy issued by Phoenix required it to pay all sums which the insured became legally obligated to pay as damages because of bodily injury or property damage, to which the insurance contract applied and which arose out of the garage operations, including only the automobile hazards, for which insurance was offered under the policy declarations. The policy limited the items insured under the automobile hazard to damages arising out of:

"(1) the ownership, maintenance, or use * * * of any automobile for the purpose of garage operations, and

"(2) the occasional use for other business purposes and the use for nonbusiness purposes of any automobile owned by or in charge of the named insured and used principally in garage operations, and

"(3) the ownership, maintenance or use of any automobile owned by the named insured while furnished for the use of any person."

Under definitions of persons insured, the policy specifically excludes "any person or organization, other than the named insured, with respect to any automobile (a) owned by such person or organization or by a member (other than the named insured) of the same household, or (b) possession of which has been transferred to another by the named insured pursuant to an agreement of sale."

It is clear from the contract which Phoenix made with Erwin Heberle Ford, that it did not insure any automobile which had been sold and possession of which had been taken by the transferee. Therefore, if there was in fact a sale of the vehicle in legal contemplation and possession had passed, the Phoenix policy is not applicable to the Byer vehicle.

The Montana Supreme Court has ruled that in order for an attempted sale of a vehicle to pass title within legal contemplation, the statutory requirements of Section 53-109, Revised Codes of Montana, 1947, must be met. Irion v. Glens Falls Insurance Co., 154 Mont. 156, 461 P.2d 199 (1969); Ostermiller v. Parker, 152 Mont. 337, 451 P.2d 515 (1968); Safeco Insurance Co. v. Northwestern Mutual Insurance Co., 142 Mont. 155, 382 P.2d 174 (1963). The United States District Court in Montana has also held this to be the rule. Glens Falls Insurance Co. v. Irion, 323 F.Supp. 1164 (D.Mont.1970); Colbrese v. National Farmers Union Property and Casualty Co., 227 F.Supp. 978 (D.Mont.1964), overruled, 368 F.2d 405 (1966)¹.

Section 53-109(c) requires a dealer who transfers a vehicle to

"deliver such certificate of ownership and certificate of registration with an application for registration executed by the new owner in accordance with the provisions of section 53-107, and the registrar upon receipt of said certificate of ownership, certificate of registration and application for registration, * * * shall issue a new certificate of ownership and certificate of registration * * * as provided in said section 53-107."

Section 53-109(d) then provides that until the Registrar has issued these documents,

"delivery of any motor vehicle shall be deemed not to have been made and title thereto shall not have passed and said intended transfer shall be incomplete and not be valid or effective for any purpose."

The Montana Court construing section 53-109(c) in Irion held that the dealer, not the transferee, was responsible to see to timely and proper registration, and that if he failed to do so, section 53-109(d) made him remain the owner of the vehicle. The Court went on to point out that paragraph (d) applied to paragraphs (a), (b) and (c) insofar as a party to the transfer did not follow the law. Irion, supra, 154 Mont. at 166-168, 461 P.2d 199.

In Safeco, the Montana Court ruled that failure of the dealer-transferor to execute the assignment on the certificate of title, failure of the transferee to apply for registration, and failure of the transferor to deliver the proper documents to either the transferee or the Registrar, was a failure to comply with section 53-109. As a result of these failures there was found to have been no completed sale and the dealer remained the owner of the vehicle.

Judge Jameson, relying on Safeco, held in Colbrese that failure to complete a transfer in accordance with section 53-109 meant that no title passed from the transferor to the transferee. In that case, the transferee obtained the registration and paid for and obtained license plates for the vehicle for two years. However, the transferor, who was not a dealer, failed to deliver to him the certificate of title and a new certificate was never obtained in the transferee's name. Because the transferor had not, as required by section 53-109(a) and (b), signed the certificate of title, had not had such signature notarized, and had not delivered it to the transferee, there was no sale in legal contemplation and title remained in the transferor.

In Ostermiller, the Montana Court, reaffirming the Safeco decision, ruled that because the dealer retained the certificate of title, registration, lien, and release of lien until the vehicle was...