Robert J. Smith and Kazuko Smith v. Allstate Insurance Company

467 F.2d 104

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 29, 1972
• Docket: 71-3185
• Status: Published

Opinions

DYER, Circuit Judge:

The Smiths, having obtained a judgment against Sandra Wolf for personal injuries suffered by them as a result of an automobile collision, sued Allstate, who insured Sandra’s father, claiming that his policy covered Sandra while she was driving a non-owned automobile which she had purchased but for which no certificate of title had been issued to her. The district court granted summary judgment in favor of Allstate. We affirm.

On April 12, 1969, Sandra Wolf, a 19-year old student at the University of Texas, purchased a used automobile from the Austin Motor Company. She paid cash for the automobile and took possession of it. On the following day she struck and injured two pedestrians, appellants Robert Smith and his wife. While Sandra had signed an application for a certificate of title at the time of the purchase and payment for the automobile, the certificate was not delivered to her until after the accident had occurred. In the interim record title remained in the name of the prior owner of the vehicle, Schnell, for whom Austin resold the automobile in lieu of repossession proceedings.

The evidence submitted by Allstate in support of its motion for summary judgment, uncontroverted by the Smiths, reveals that in May, 1968, Simmons, the owner of Austin, had sold the automobile involved to Schnell under an installment note. In November of that year Schnell defaulted in payment and shortly thereafter brought the automobile back to Simmons and verbally authorized him to sell it for the balance due on the note. The contract of sale between Austin and Schnell contained the usual provision granting the seller (Austin) the right of repossession and resale upon default.

A certificate of title would have been issued to Sandra if Simmons had filed Schnell’s certificate of title showing the lien of Austin on the car, the title application signed by Sandra, and a repossession affidavit executed on behalf of Austin. As a favor to Schnell, however, Simmons chose not to treat the transaction with Schnell as a repossession but, with Schnell’s consent, to simply advise him of the resale and then secure his power of attorney authorizing Austin to sell the automobile, and at that time obtain Schnell’s certificate of title.

Following the accident the Smiths filed suit in state court for their personal injuries and recovered judgment against Sandra for $150,000. After entry of the judgment, the Smiths instituted this diversity action against Allstate to enforce the state court judgment against the company, alleging that Sandra was insured by Allstate at the time of the accident under the family liability policy issued to her father in Bismarck, North Dakota. The Smiths alleged that Sandra, as an undisputed legal resident of her father’s North Dakota household, was covered by the family policy because at the time of the collision, either she was a resident relative driving a “non-owned” automobile, or, in the alternative, if it was determined that she acquired an ownership interest in the vehicle, that she did so as an agent of her father, and was therefore driving an automobile owned by him. In the policy issued to her father, the named insured is covered with respect to automobiles owned by him, any resident of his household is covered with respect to the owned automobiles, and any relative who is a resident of the insured’s household is covered with respect to a non-owned automobile not regularly furnished for use of such relative. The Smiths assert that Sandra did not own the automobile because the failure of Austin to deliver to Sandra a certificate of title violated the Texas Certificate of Title Act, Vernon’s Texas Penal Code Ann. art. 1436-1 et seq., which by its provisions renders such a sale void. Allstate counters that under Texas law, in the context of this case, a technical failure to comply with the Act did not affect the validity of the transfer of ownership of the automobile to Sandra, and therefore she was not driving a “non-owned” automobile. Allstate concedes that the Act has not been complied with by Schnell, Simmons, and Wolf, the parties to the transaction.

In limine, we are convinced that there is no factual dispute with respect to the ownership of the car driven by Sandra Wolf. The pleadings, depositions, and affidavits attached to Allstate’s motion for summary judgment show without contradiction that Sandra paid cash to Austin for the automobile, that the payment was from money she had earned or saved, that Austin delivered the car to her on the day of purchase, that a contract of sale was signed, that she signed an application for certificate of title, and that she had done everything required of her to complete the purchase of the automobile. She was convinced that she had bought the car. Simmons, the owner of Austin, considered the sale consummated. Schnell considered the matter closed. There was simply overwhelming, uncontradicted proof by Allstate that no controversy concerning the ownership of the car existed among any of the real parties in interest at the time the collision occurred.

Since the Smiths offered nothing to controvert the factual showing made by Allstate in support of its motion for summary judgment, Allstate must prevail if the judgment was appropriate as a matter of law. Fed.R.Civ.P. 56(e). See First National Bank of Arizona v. Cities Service Co., 1968, 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569; Kaiser Aluminum & Chemical Corp. v. Marshland Dredging Co., 5 Cir. 1972, 455 F.2d 957. Undoubtedly in some cases the question of automobile ownership may be both factual and legal requiring submission to the jury of the factual issue. American Employers’ Insurance Co. v. Zablosky, 5 Cir. 1961, 292 F.2d 412, cert. denied 368 U.S. 946, 82 S.Ct. 387, 7 L.Ed.2d 343. But here, the only contested issue is the legal effect of the Texas Certificate of Title Act upon the transfer in question which is, of course, inappropriate for jury consideration.

The Smiths argue that under no circumstances does the purchaser get ownership, title, or right to title of an automobile vis-a-vis the record title owner unless and until there is compliance with the provisions of the Certificate of Title Act. We disagree. It is clear under Texas law that non-compliance with the Act does not override the clear showing of a valid and complete transfer of ownership of the automobile to Sandra Wolf. In Texas, automobile ownership, in the factual context of this case, is not dependent upon who holds the certificate of title. While the Act defines an owner of a motor vehicle for certain purposes, “the statutory definition is not a comprehensive pronouncement applicable under all circumstances.” Strickland Transportation Co. v. Ingram, Tex.Civ.App. 1966, 403 S.W.2d 192, 194 (writ dism’d). “The legislative intent as disclosed in section 1 of the Certificate of Title Act, was to lessen and prevent theft and traffic in stolen motor vehicles . . . , and not to prevent sales and transfers of interest in motor vehicles.” Hicksbaugh Lumber Co. v. Fidelity and Casualty Company of New York, Tex.Civ.App. 1944, 177 S.W.2d 802. Accord, Johnson v. Safeco Insurance Co., Tex.Civ.App. 1971, 464 S.W.2d 164, 169.

A certificate of title in the name of one other than the person in possession of an automobile raises a presumption of ownership in favor of the title holder. “Such presumption is not evidence under Texas law but is an ‘administrative presumption’ which merely requires the person against whom the presumption is asserted to produce evidence to the contrary. If clear, positive and undisputed evidence to the contrary is introduced then the presumption, as the Texas courts state, ‘vanishes’ or ‘is put to flight.’ ” American Employers’ Insurance Co. v. Zablosky, supra, 292 F.2d at 414 (Citations omitted). Furthermore, a sale of an automobile without the transfer of a title certificate is valid as between the parties, when the purposes of the Certificate of Title Act are not defeated, although the Act declares that the non-transfer of such certificates renders the sale void. Rush v. Smitherman, Tex.Civ.App.1956, 294 S.W.2d 873, 877 (writ ref’d); see Phil Phillips Ford, Inc. v. St. Paul Fire and Marine Ins. Co., Tex.1971, 465 S.W.2d 933, 937; Hicksbaugh Lumber Co. v. Fidelity & Casualty Company of New York, supra. See also Viator v. American General Insurance Co., Tex.Civ.App.1967, 411 S.W.2d 762 (writ ref’d n.r.e.), where, in a strikingly parallel situation, the sale of an automobile was held valid and ownership was held to have passed for insurance purposes even though there had been no transfer of the title certificate at the time of the accident.

The unusual twist in this ease is that there is no dispute between the persons who have claimed or ever had an interest in the automobile. All o,f them recognize the transaction as a valid sale to Sandra. Only the injured parties urge the absence of compliance with the Act as a basis for recovery from the carrier of Sandra’s father’s liability insurance. They are in no position to do so. Both Truck Insurance Exchange v. Schuenermann, Tex.Civ.App.1965, 391 S.W.2d 130 (writ ref’d n.r.e.), and Johnson v. Safeco Insurance Co., supra, involved the question of insurance coverage in instances where there was a transfer of an automobile but the title certificate was not changed until after an accident. In Schuenermann the automobile being driven by Rauel Diaz at the time of the accident was purchased by his father Marcos in 1957 and the title certificate was in his name. In 1959, Marcos gave the automobile to Rauel as a graduation present indicating that the son would have title to it. Rauel had possession of the automobile at all times until the date of the collision in 1962, but the title certificate had never been transferred to him nor any application made by him for a new. title. It was contended that Rauel was a non-owner and thus covered under his father’s policy. The court held that the insurance company was not obligated to defend and was not liable under the policy, saying:

This case does not involve a dispute between rival claimants of an interest in the automobile in question. Under such circumstances, the administrative presumption of ownership arising from the recitals in the certificate of title may be overcome by evidence showing that ownership of the vehicle was, in fact, in Rauel Diaz .... The evidence and stipulations establish that, in fact Rauel Diaz was the owner of the 1953 Ford. Since all parties concede that in such event the appellant insurer is under no obligation to defend or indemnify the estate of the insured, it follows that the trial court erred in holding that there was coverage under the “non-owner” policy.

Id. at 133-34.

In Johnson Mr. Smith of Colorado, in February of 1967, gave to his daughter Mrs. Brown, a 1960 Chevrolet. On November 30, 1967, Smith executed and mailed to Mrs. Brown, who was a resident o.f Texas, an assignment of the Colorado title. On December 14, 1967, Mrs. Brown was involved in an accident with Mrs. Johnson whose minor son was injured. Prior to the accident a certificate of title had not been issued in Mrs. Brown’s name. The Johnsons obtained a judgment against Mrs. Brown and then sued Safeco Insurance Company who carried automobile liability on the car while it was owned by Mr. Smith, claiming that the automobile was still owned by him because of the admitted noncompliance with the Texas Certificate of Title Act. The court denied recovery, saying:

This case does not involve a dispute between persons claiming title to the car. Under such circumstances, the administrative presumption of ownership existing from the recitals on the certificate may be overcome by the evidence showing ownership. The Colorado certificate of title had been executed, assigned and delivered to Mrs. Brown, together with the possession and use of the automobile. Mrs. Brown had received and accepted them, and subsequently made application for a Texas title. The intent of the parties was apparent.

Id. 464 S.W.2d at 170.

We think it is clear that in this case the Smiths may not utilize the Texas Certificate of Title Act to fasten liability on the insurance company as a defendant.

Finally, the Smiths argue that in contrast to a two party transaction, “in a three party transaction, the prospective purchaser does not take title until all of the formalities of the Certificate of Title Act have been complied with.” They support this abstract statement with reliance upon Freeberg v. Securities Investment Co., Tex.Civ.App.1960, 331 S.W.2d 825 (writ ref’d); Guinn v. Lokey, 1952, 151 Tex. 260, 249 S.W.2d 185, and Phil Phillips Ford, Inc. v. St. Paul Fire and Marine Ins. Co., supra. In the context of the case sub judice, their reliance upon these authorities is misplaced.

In Freeberg and Guinn non-compliance with the Act was relied upon by the record title holder as a basis for recovery after he had been defrauded by another person who had come into possession of the automobile. In Phil Phillips Ford, again the Act was invoked to protect a bona fide lienholder from one who attempted to sell the automobile for full value and thus defeat the lien. These cases are clearly inapposite to this case where there are no conflicting claims as to ownership or rights of a claimed bona fide purchaser for value and a defrauded seller.

In summary, we agree with the district court that ownership of the automobile driven by Sandra at the time of the Smith’s injury was vested in her. She was therefore not driving a “non-owned” automobile within the provisions of her father’s policy with Allstate. The Smiths’ injury was vested in her. She purchased the car as an agent for her father, and was therefore driving a car “owned” by him and covered under the policy is wholly without merit. The judgment of the district court is

Affirmed.