Rogers v. Wheeler

Decision Date30 September 1993
Docket NumberNo. 92-SC-564-DG,92-SC-564-DG
PartiesGerald ROGERS, D/B/A Rogers Motors and Liberty Mutual Insurance Company, Appellants, v. Jim WHEELER and Betty Wheeler, Appellees.
CourtUnited States State Supreme Court — District of Kentucky

Max Hartz, McCarroll, Nunley & Hartz, Owensboro and David H. Vance, Frankfort, for appellants.

Dandridge F. Walton, Frankfort, amicus curiae, Kentucky Auto. Dealers Ass'n.

Henry E. Hayden, Hayden & McKown, Hartford, for appellees.

WINTERSHEIMER, Justice.

This appeal is from a decision of the Court of Appeals sitting en banc which reversed and remanded a summary judgment of the Daviess Circuit Court in favor of Gerald Rogers, d/b/a Rogers Motors. The Court of Appeals held that Rogers was the titleholder of a motor vehicle sold to a purchaser, Thelma Daugherty, which was subsequently involved in a collision with Jim and Betty Wheeler. Liberty Mutual Insurance Company is the insurer of Rogers under a garageman's liability policy. In a plurality opinion, the Court of Appeals determined that the sales scheme used by Rogers was a violation of the public policy of the state requiring insurance on all vehicles.

The issue in this case is whether from the standpoint of extending coverage under the garageman's liability policy, Rogers, a used car dealer, was the owner of the vehicle involved in a collision with an automobile occupied by Jim and Betty Wheeler and thus responsible for insurance coverage. In considering that question, the Court of Appeals found it necessary to interpret K.R.S. 186.010(7) and various sections of K.R.S. Chapter 186A, as well as to overrule part of its decision in Cowles v. Rogers, Ky.App., 762 S.W.2d 414 (1988).

On January 8, 1988, Thelma Daugherty and her husband entered into an alleged conditional sales agreement with Rogers for the purchase of a 1975 Ford for $541.25. The Daughertys made a down-payment of $250 and agreed to pay the balance in weekly installments of $25. The contract provided that "if terms of this contract are broken, all money to be forfeited and car to be repossessed." In an effort to facilitate a potential repossession, Rogers did not transfer title of the vehicle to the Daughertys. When the car's license expired in March 1988, Rogers renewed the registration in his own name. Rogers did not advise the county clerk that he had "sold" the car to the Daughertys and given possession to them. The county clerk, in reliance on the dealer's omnibus policy, K.R.S. 190.033, did not require proof of insurance. Thelma Daugherty did not have a driver's license to operate a motor vehicle on the date of the accident and did not have a license when she took possession of the Ford automobile in January. From the time she took possession of the vehicle until the date of the accident, she did not obtain any liability insurance.

Although the vehicle was to be paid in full in April 1988, the Daughertys fell behind in their payments and still owed a balance of $91.25 on June 5, 1988, when the Daugherty vehicle collided with the automobile occupied by Jim and Betty Wheeler, both of whom were seriously injured. Subsequently the Wheelers filed a lawsuit against Rogers and his insurance carrier. The Daviess Circuit Court entered a judgment for Rogers and Liberty Mutual Insurance Company on the basis of Cowles, supra. On further review, the Court of Appeals determined that Rogers was the owner of the vehicle and the scheme of Rogers was against public policy and remanded the case for further proceedings in the circuit court. This Court granted discretionary review.

The Court of Appeals was correct in deciding that the type of agreement entered into by Rogers and Daugherty was not the type of agreement consistent with K.R.S. 186.010(7). The plurality opinion of the court and the concurring opinion of Judges McDonald and Johnson all agree that Rogers retained legal title and was the owner of the vehicle at the time of the accident. We also agree.

Kentucky is a certificate of title state since the adoption of K.R.S. 186.010(7). The public policy of Kentucky is set out in K.R.S. 304.39-010(1), as follows:

To require owners, registrants and operators of motor vehicles in the Commonwealth of Kentucky to procure insurance covering basic reparation benefits and legal liability arising out of ownership, operation or use of such motor vehicles.

The facts of this case are different from the Cowles situation. Cowles also involved a collision in which a vehicle sold by Rogers the same used car dealer as in this case, was being operated by an uninsured driver. In Cowles, the driver purchased the vehicle from Rogers, and pursuant to the oral agreement of the parties, Rogers retained title to the vehicle pending payment of a balance of $62 on the purchase price. The purchaser was involved in a collision one week later. The Court of Appeals concluded that the driver, not Rogers, was the owner of the automobile because there was not a valid conditional sale and thus the vehicle was not covered by the garageman's liability insurance.

Here Daugherty had been in possession of the 1975 Ford for 60 days when Rogers again renewed his registration of the vehicle without proof of insurance and without informing the county clerk that he had transferred possession of the vehicle to Daugherty.

In Cowles, the Court of Appeals did not consider the compulsory insurance law of Kentucky, what type of contract is necessary pursuant to K.R.S. 186.010(7) or what follows even if there is such a contract.

The distinct differences between this situation and Cowles can be found in 1) the fact that the only statute that Cowles considered was the licensing statute to determine who was the owner of a vehicle; 2) the fact that the court in Cowles never considered the relationship of the licensing statute to the compulsory insurance statute; 3) the fact that Cowles only involved property damage; 4) there was no exercise of control by the dealership in Cowles, such as the re-registration in this case; 5) public policy; 6) the agreement entered into by the dealership was contrary to Kentucky law; and 7) the scheme allowed the dealership to violate the insurance statutes, as well as the registration and licensing statutes.

It would appear that the scheme used by Rogers violated K.R.S. 186.190(2), which requires delivery of the current registration receipt and bill of sale; K.R.S. 186.200(2) which requires a bill of sale in quadruplicate to be delivered to the county clerk and K.R.S. 186.210 which requires that no person shall make a false statement in any application for registration. Rogers did not deliver a current registration receipt or a bill of sale. He made an erroneous statement in his application in order to obtain registration without proof of insurance in violation of K.R.S. 186.021(2).

The type of arrangement between Rogers and Daugherty is not a conditional sales agreement as contemplated by K.R.S. 186.010(7). For purpose of liability insurance coverage, a literal application of this section's exception conflicts with statutory scheme.

The rationale for applying Cowles as an exception does not pertain in this case. Here Rogers had control of the vehicle and exercised that control to the extent of registering it in his name sixty days after he allegedly "sold" the vehicle to Daugherty. He exercised such control as to not only relicense the vehicle in his name, but also to warn Daugherty that he was not going to give her the plate until she brought her payments up-to-date. Rogers said he did not give her permission to drive the car. However, he did have control and exercised that control. Consequently Rogers must be considered the owner.

The failure of Rogers to comply with the licensing, registration and insurance statutes clearly makes him an owner and Mrs. Daugherty a permissive user.

Although we are not bound by the laws of other states, it is notable that other states, when presented...

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