Rudolph v. Home Indem. Co.

• Citation: 138 N.J.Super. 125,350 A.2d 285
• Parties: John W. RUDOLPH et al., Plaintiffs, v. The HOME INDEMNITY COMPANY, a New York Corporation, Defendant.
• Decision Date: 04 December 1975
• Court: Superior Court of New Jersey

Page 125

138 N.J.Super. 125

350 A.2d 285

John W. RUDOLPH et al., Plaintiffs, v. The HOME INDEMNITY COMPANY, a New York Corporation, Defendant.

Superior Court of New Jersey,

Law Division.

Dec. 4, 1975.

Frank Cofone, Jr., South River, for plaintiff (Rafano & Wood, South River, attorneys)

Sanford D. Kaplan, Livingston, for defendant (Morgan, Melhuish, Monaghan, [350 A.2d 287] McCoid & Spielvogel, Livingston, attorneys, Richard E. Arvidson, Livingston, of counsel).

DIANA, J.C.C. Temporarily Assigned.

These are cross-motions for summary judgment. The facts are not in dispute.

In March 1973 plaintiff Thomas Rudolph advertised to sell his 1970 Chevrolet Corvette for $3,700. A person representing himself as 'Bill Warren' answered the advertisement in person, offering to purchase the car for the sum of $3,600. Rudolph refused to reduce the price and 'Warren' returned a few days later and presented a purported certified check on the Carteret Bank and Trust, payable to Rudolph in the sum of $3,700. Rudolph accepted and deposited the check in his account in the Somerset Hills and County Bank and signed any transferred the certificate of ownership to 'Warren,' who then left with the car.

A week later Rudolph was advised the check was a forgery and that the certification stamp it bore was false. Rudolph reported the incident to his insurance agent and the Franklin Township police. Investigation revealed that 'Warren' had given a false address and that a person calling himself 'Bill Weinler' and at times 'Ron Warren' had previously acquired another vehicle by the same fraudulent device and had given the same false address as had 'Warren.' It was later discovered that 'Warren' subsequently sold the Rudolph vehicle in Florida and that the person known as 'Bill Warren' was currently in jail in Florida.

Defendant Home Indemnity Insurance Coverage, which had issued a family comprehensive automobile policy to the The policy provides:

father of Thomas Rudolph, denied coverage because the insured 'voluntarily parted with his automobile for a monetary sum' and the police coverage is limited to 'theft or larceny.'

Coverage G. Theft

To pay for loss to the owned automobile or to a non-owner automobile caused by theft or larceny.

LOSS PAYABLE CLAUSE

Loss or damage, if any, under the policy shall be payable as interest may appear to the Lienholder named on the reverse side hereof and this insurance as to the interest of the Bailment Lessor, Conditional Vendor, Mortgagee or other secured party or Assignee of Bailment Lessor, Conditional Vendor, Mortgagee or other secured party therein called the Lienholder shall not be invalidated by any act or neglect of the Lessee, Mortgagor, Owner of the within described automobile or other Debtor nor by any change in the title or ownership of the property; provided, however, that the conversion, embezzlement or secretion by the Lessee, Mortgagor, Purchaser or other Debtor in possession of the property insured under a bailment lease, conditional sale, mortgage or other security agreement is not covered under such policy unless specifically insured against and the premium paid therefor; and provided, also, that in case the Lessee, Mortgagor, Owner or other Debtor shall neglect to pay any premium due under such policy the Lienholder shall, on demand, pay the same.

The company contends that, although Rudolph sustained a loss, the loss does not fall within the policy coverage. The company asserts that since Rudolph voluntarily surrendered both title and possession, neither a theft nor larceny took place in the legal sense.

The distinction defendant draws is that a theft or larceny occurs when legal title to the property remains in the owner after the wrongful taking, but where legal title (whether by fraud or false pretenses) is transferred to the wrongdoer, the wrongful taking is at most obtaining property by false pretense but not a theft or larceny.

The criminal statutes of New Jersey still retain distinctions between larceny, embezzlement and obtaining money by false pretenses.

Pursuant to New Jersey statute, N.J.S.A. 2A:102--5, the intentional fraudulent appropriation of property or money of another into whose hands it has lawfully come or to whom it has been entrusted is an embezzlement. One of the essential elements of the crime is that the property must have been entrusted to the wrongdoer by virtue of a special relationship he holds to the property owner (I.e., as employee, agent consignee, factor, bailee, lodger or tenant).

N.J.S.A. 2A:111--1 renders criminal the obtaining of money or property of another by means of a false promise or writing with an intention not to perform when the promise or writing was given.

Larceny, by virtue of N.J.S.A. 2A:119--2, is the intentional unlawful taking of the property of another without such fear as is sufficient to constitute robbery. An unlawful taking is deemed to be a complete and independent possession and control of the property adverse to the rights of the owner.

Other than 'theft of a trade secret,' there is no specific statutory crime in New Jersey known as 'theft,' but the term is often considered a popular term for larceny and is used to describe any intentional unlawful taking of another's property.

It should be noted that the proposed New Jersey Code of Criminal Justice to a limited degree eliminates the distinction between embezzlement, larceny and false pretenses and designates these offenses as 'Theft by unlawful taking or disposition' (2C:20--3) and 'Theft by deception' (2C:50--4).

It is universally held that a policy insuring an automobile owner against loss from theft covers loss resulting from a taking which is shown to have all of the elements of common law larceny--that is, a felonious taking by trespass and carrying away of personal property without the owner's consent and with the felonious intent permanently to deprive the owner of the property and convert it to the use of the taker. There is, however, considerable lack of agreement on the question of whether theft coverage extends to a loss suffered where the taking amounts to obtaining property by false pretenses, embezzlement or some other statutory crime. 48 A.L.R.2d 20 (1956).

I find no New Jersey case directly in point. In Champion v. Chicago Fire & Marine Ins. Co., 104 N.J.L. 554, 141 A. 794 (E. & A.1928), the taker, representing that he sought to test drive a vehicle, presented a fraudulent check to the agent of the owner of the vehicle as security, obtained permission to test drive the car and absconded. The court determined that coverage existed under the facts of the case, designating conduct of the wrongdoer as 'larceny' by virtue of the fact that the owner was induced to part with possession by trick or artifice but still retained title to the vehicle.

In Edgewater Nat'l Bank v. Safeguard Ins. Co., 81 N.J.Super. 383, 195 A.2d 653 (App.Div.1963), the president and stockholder of a corporation which held title to a vehicle, absconded with the vehicle. The lienholder sought recovery under the corporation's insurance policy which afforded coverage for theft or larceny but excluded coverage for 'conversion, embezzlement and secretion by one in possession under a bailment lease, conditional sales, purchase agreement or other encumbrance.' The court determined that the insurer was obligated to afford coverage, resting its decision in part upon the fact that the absconding corporate officer was not 'in possession under a bailment lease, conditional sale, purchase agreement or other encumbrance.' The court acknowledged that while as a general rule, theft or larceny involves the wrongful taking of property from one who has both possession and legal title, it refused to hold that, for the purposes of insurance coverage, the term 'theft' is limited to situations where the property was in possession of the owner then wrongfully taken.

In both Champion and Edgewater the wrongdoer secured possession of the vehicle while the owner retained legal title. In Champion the wrongdoer secured possession by a fraudulent scheme, trick or artifice which the court characterized as larceny. In Edgewater the wrongdoer's conduct was characterized as a theft although technically an embezzlement.

The facts of the instant case differ from both Champion and Edgewater to the extent that the wrongdoer by a preconceived fraudulent device secured both possession and a certificate of ownership from the lawful owner.

In neither the Champion case, the Edgewater case nor the instant case did the policy language limiting the coverage to theft or larceny expressly exclude from coverage the specific conduct of the wrongdoer in those cases.

The decisions in other jurisdictions provide some guidance. Courts in California, New York, the District of Columbia and Missouri have held that where, as a consequence of fraud, the Title to an automobile insured against theft, is delivered by the insured to another, the loss suffered by the insured is not within the coverage afforded by the insurance. Fiske v. Niagara Fire Ins. Co., 207 Cal. 355, 278 P. 861 (Sup.Ct.1929); Van Vechten v. American Eagle...