Sandhorst v. Mauk's Transfer, Inc.

• Decision Date: 20 April 1977
• Docket Number: No. 2-57871,2-57871
• Citation: 252 N.W.2d 393
• Parties: Harvey P. SANDHORST, Appellee, v. MAUK'S TRANSFER, INC., Appellant.
• Court: Iowa Supreme Court

Page 393

252 N.W.2d 393

Harvey P. SANDHORST, Appellee, v. MAUK'S TRANSFER, INC., Appellant.

No. 2-57871.

Supreme Court of Iowa.

April 20, 1977.

Dick L. Jensen, of Dreher, Wilson & Adams, Des Moines, for appellant.

Roland K. Landsness, of Jones, Cambridge, Carl, Feilmeyer & Landsness, Atlantic, for appellee.

Heard by MOORE, C. J., and MASON, RAWLINGS, LeGRAND and UHLENHOPP, JJ.

MOORE, Chief Justice.

Defendant appeals from judgment entered on adverse jury verdict in plaintiff's action for conversion of a truck in violation of an oral and written agreement of the parties. We affirm.

The facts involved are not seriously disputed. The record reveals plaintiff Sandhorst had been employed by defendant Mauk's Transfer, Inc. as a truck driver beginning in 1967. In April 1969 Sandhorst and Mauk's entered into an agreement whereby Sandhorst purchased a 1966 Kenworth truck from Mauk's. He made a $500 down payment and executed a $15,000 note for the balance. As part of the agreement Sandhorst leased the truck back to Mauk's. The parties agreed the title certificate would show Mauk's as the owner but that Sandhorst would make all payments on the truck and would be responsible for its upkeep and expenses. Sandhorst was to receive the certificate of title to the truck when his note was paid.

This arrangement continued until May 1969 when the truck was wrecked when struck by an automobile. Sandhorst's note was cancelled after his indebtedness was paid from insurance proceeds.

Thereafter a second Kenworth truck, the subject of this lawsuit, was purchased by Mauk's from an Omaha dealer for $23,750. Mauk's agreed to sell the truck to Sandhorst and he subsequently wrote a check for $1000 as a down payment. There is conflicting evidence whether a note was executed for the balance of the payments. However, it is undisputed the parties did operate under the old lease until a new one was executed in March 1971. This lease showed Sandhorst as owner and lessor of the truck. Both parties testified that if payments were satisfactorily made by Sandhorst the certificate of title was to be transferred to him. Robert Fleming, Mauk's bookkeeper, testified he credited Sandhorst's account for principal and interest as each payment was received. At no time pertinent in this case was Sandhorst delinquent in payments due. Sandhorst interpreted the relationship as a binding agreement. Alva Mauk testified for the company that it was nothing but an "incentive agreement."

The agreement came to an end in September 1971 when Sandhorst failed to make a hauling trip and was found inside an Omaha tavern with his truck idling outside. Mauk's then terminated him as a driver but gave him a week to work and pay the balance of $10,476 then owing on the truck. When Sandhorst was unable to do so, Mauk's took the truck and paid him $524. This was based on the Omaha dealer's lowest estimated wholesale value of the truck.

Sandhorst testified he believed the truck was worth between $15,000-16,000 at the time it was taken by Mauk's. His expert valued it at $15,500. Mauk's expert valued it at $12,500 to $13,000. When Mauk's refused to credit Sandhorst more for his investment in the truck he sued the company for conversion.

Prior to trial Sandhorst submitted several requests for admissions which Mauk's objected to and denied. On trial plaintiff's proof and Mauk's evidence established, without dispute, Mauk's wrongfully failed to make the pretrial requested admissions. After trial Sandhorst made application for attorney fees pursuant to the provisions of rule 134(c), Rules of Civil Procedure. The court allowed $300.

Mauk's has appealed from judgment on the jury verdict for plaintiff in the amount of $3000 actual and $750 exemplary damages as well as the $300 attorney fee allowance.

I. Our review in this law action is on errors assigned. We review the record in a light most favorable to the judgment and if supported by substantial evidence the fact findings are binding on us and will not be disturbed. However, we are not precluded from inquiry as to whether trial court applied erroneous rules of law which materially affected the decision. We are not bound by the trial court determinations of law. Rule 344(f) 1, R.C.P.; Sand Seed Service, Inc. v. Bainbridge, Iowa, 246 N.W.2d 911, 912 and citations.

II. Mauk's first vigorously asserts the trial court erred in overruling its pretrial motion, motion for directed verdict and posttrial motions raising its contention Sandhorst had no interest in the truck because of the provisions of Code section 321.45(2). It provides:

"2. No person shall acquire any right, title, claim or interest in or to any vehicle subject to registration under this chapter from the owner thereof except by virtue of a certificate of title issued or assigned to him for such vehicle or by virtue of a manufacturer's or importer's certificate delivered to him for such vehicle; nor shall any waiver or estoppel operate in favor of any person claiming title to or interest in any vehicle against a person having possession of the certificate of title or manufacturer's or importer's certificate for such vehicle for a valuable consideration except in case of

"a. the perfection of a lien or security interest by notation on the certificate of title as provided in section 321.50 or "b. the perfection of a security interest in new or used vehicles held as inventory for sale as provided in Uniform Commercial Code, Chapter 554, Article 9, or

"c. a dispute between a buyer and the selling dealer who has failed to deliver or procure the certificate of title as promised, or,

"d. except for the purposes of section 321.493. Except in the above enumerated cases, no court in any case at law or equity shall recognize the right, title, claim or interest of any person in or to any vehicle subject to registration sold or disposed of, or mortgaged or encumbered, unless evidenced by a certificate of title or manufacturer's or importer's certificate duly issued or assigned in accordance with the provisions of this chapter."

The crux of defendant's argument is that since it was the undisputed "owner" on the certificate of title and plaintiff had no interest reflected on that certificate, plaintiff's claim of ownership based on an oral agreement and written lease are untenable.

We have been called upon to construe section 321.45(2) on several prior occasions. The earlier cases adopted a strict interpretation which appears to have been diluted somewhat by more recent decisions.

In Varvaris v. Varvaris, 255 Iowa 800, 124 N.W.2d 163, we were confronted with a replevin action brought by an executor against the surviving spouse for possession of two automobiles and the accompanying title certificates. The certificate showed title of both vehicles in decedent at time of his death. Defendant spouse claimed a right to them by virtue of a gift inter vivos. However, we held that the gift was incomplete because no assignment of the title certificate was made in compliance with section 321.45(2).

Calhoun v. Farm Bureau Mutual Ins. Co., 255 Iowa 1375, 125 N.W.2d 121 also illustrates our early approach to the statute. There, plaintiff's insurance carrier sought to avoid liability under a collision policy covering plaintiff's automobile on the basis it had been sold. Plaintiff had agreed to trade his car to a friend but had delayed transferring the certificate of title until a loan was approved. When his friend wrecked the car prior to loan approval, the insurance carrier denied coverage alleging a completed sale had already transferred ownership. We rejected this argument and held the carrier liable stating at 255 Iowa 1382, 125 N.W.2d 126:

" * * *. Our present statute specifically provides the one and only method for transfer of title between buyer and seller. That is by assignment of the motor vehicle title certificate.

" * * *, we conclude plaintiff as title holder remained the owner of the 1958 Pontiac and entitled to recover under the 'collision clause' of his policy with defendant. To hold otherwise would nullify the statute. * * *."

In State v. Sabins, 256 Iowa 295, 127 N.W.2d 107 (1964) we reversed a criminal conviction for the crime of obtaining property by false pretenses where defendant obtained possession of a motor vehicle but was not assigned the certificate of title. We held the element of obtaining title was not proven since title was not transferred as defined in section 321.45(2).

In Marx Truck Line, Inc. v. Fredricksen, 260 Iowa 540, 150 N.W.2d 102, we were presented with a fact pattern similar to the one here. The parties had entered into an oral agreement whereby part of the defendant driver's earnings were applied as payments on the purchase price of the truck-tractor. When a dispute arose on the terms of the sale agreement and defendant ceased hauling freight but retained possession of the company truck, the corporation brought an action in replevin. We held plaintiff corporation was not entitled to possession because it was not shown to be the titled owner on the certificate when the replevin action was commenced.

More recently, however, in Farmers Butter & Dairy Coop. v. Farm Bur. Mut. Ins. Co., Iowa, 196 N.W.2d 533, we held that section 321.45(2) did not operate as to bar a bailee's right of collision coverage recovery under the policy issued it by defendant-insurer. The rationale for this interpretation was that "bailments" were not contemplated by the legislature when it provided for the certificate of title as the exclusive method of proving motor vehicle ownership and effecting transfer of title.

Here, for the first time, we must determine the proper application of section 321.45(2) involving an undisputed two-party transaction relating to motor vehicle ownership or interest.

Several general principles from leading legal authorities and other jurisdictions give some guidance.

Professor Gilmore aptly made this observation in his text, Security...