No. 87-020
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
TRUCK INSURANCE EXCHANGE,
Plaint-j.f and. Appellant,
f
VS
KATHY NELSON AND PATRICIA P. KENT,
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Stillwater
The Honorable William J. Speare, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
CROWLEY, HAUGHEY, HANSON, TOOLE & DIETRICH;
Peter F. Habein, Billings, Montana
For Respondent:
ANDERSON, EDWARDS & MOLLOY; Donald W. Molloy,
Billings, Montana
McNAMER & THOMPSON; William R. McNamer, Billings,
Mon ta-na
Submitted: June 5, 1987
Decided: P U G 3 11987
Filed: R U G 3 11987
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Plaintiff Truck Insurance Exchange (TIE) appeals a
November 5, 1986, amended judgment of the Thirteenth Judicial
District, Stillwater County, granting Nelson's motion for
summary judgment. We reverse.
TIE presents a single issue for our review:
Did the District Court err in concluding that a 1979
Ford Bronco was an "owned automobile" within the meaning of
Dennis Jordet's insurance policy?
Dennis Jordet and his wife farm near Reedpoint, Mon-
tana. Jordet is insured under a comprehensive farm policy
issued by TIE. In April of 1981, his wife's sixteen-year-old
sister, Patty Kent, moved in with the Jordets and began
attending high school in Columbus. In May of 1981, Kent
decided to buy a 1979 Ford Bronco from Ryan Oldsmobile in
Billings. Kent traded-in her personal 1975 Firebird as a
down payment. However, Ryan Oldsmobile required Jordet to
sign the installment sales contract because Kent was an
unemployed minor.
Jordet paid the registration fees, and Kent paid him
back. Kent also made the first car payment, which came due
on June 28, 1981. Both Jordet and Kent are named on the
owner's certificate of registration issued on June 15, 1981,
and the Montana certificate of title, issued on July 8, 1981.
Jordet and TIE specifically discussed and mutually agreed to
not insure the Bronco under the ~ o r d e t / T I ~
policy. After TIE
and Jordet mutually agreed to not insure the Bronco under the
~ o r d e t / T Ipolicy, the Bronco was insured through Guaranty
~
National Insurance Company.
On July 10, 1981, Kent's friend, Kathy Nelson, was
injured while a passenger in the Bronco driven by Kent.
Guaranty National paid the limits of its policy to Nelson on
behalf of Kent. A separate policy issued to Kent's father
also paid its limits to Nelson. Nelson later filed an action
against Jordet in Silver Bow County, claiming that Jordet
owned Kent's Bronco for insurance purposes and that Nelson
was entitled to additional recovery under Jordet's policy.
Jordet ' s insurance policy, in Section I1 (111)(3),
provides :
With respect to the insurance afforded
by this policy under COVERAGE Dl [aris-
ing out of the ownership, maintenance,
or use of any automobile], the unquali-
fied word "insured" includes (a) the
named insured and, as respects the
ownership, maintenance or use of any
automobile covered by this policy, his
relatives while residents of his house-
hold; (b) any person while using an
owned automobile or a hired automobile,
~rovided the actual use of the automo-
Lile is by the named insured or --
with his
permission. [Emphasis added.]
The policy's definition section with respect to Cover-
age Dl states: "Owned automobile means an automobile owned
by the named insured." Jordet is the named insured, but the
Bronco is - listed among the described vehicles which are
not
specifically insured under the TIE policy. TIE sought a
declaratory judgment that Kent's Bronco was not covered
within the meaning of its policy. Eventually, both parties
moved for summary judgment, which the District Court granted
in favor of Nelson. On November 5, 1986, the District Court
concluded that the Bronco was an owned automobile under the
Truck Insurance Exchange policy and that the policy provides
coverage to Kent.
The Silver Bow County damage case is still pending.
The Stillwater County District Court's judgment provides
Nelson with supplementary coverage under Jordet's insurance
policy.
On appeal, TIE contends that the Bronco was not owned
by Jordet within the meaning of the insurance policy. TIE
argues that intent is prerequisite to the existence of a
contract, and is the principal guide to interpretation of its
insurance policy. TIE asserts that the question of ownership
under an insurance policy depends upon use, possession and
control, rather than bare legal title.
Nelson contends that ownership encompasses the right of
control, and therefore Jordet's failure to exercise control
does not diminish legal ownership for the purposes of insur-
ance coverage. Nelson argues that the motor vehicle stat-
utes, Title 61, Chapter 3, MCA, create a presumption of
ownership in Jordet. Nelson asserts that Jordet financed the
Bronco, arranged Kent's insurance with Guaranty National, and
test drove the Bronco.
Both TIE and Nelson admit that Kent and Jordet were
joint owners of the Bronco, and thereby frame the central
question: Does the term "owned automobile" in Jordet's
insurance policy include the jointly-owned Bronco?
The interpretation of a contract is a question of law.
When presented with an issue of law on appeal, we are not
bound by the conclusions of the District Court but are free
to draw our conclusions from the evidence presented. Sharp
v. Hoerner Waldorf Corp. (1978), 178 Mont. 419, 423, 584 P.2d
1298, 1300.
Our review of this issue is guided by Safeco Ins. Co.
v. Lapp (Mont. 1985), 695 P.2d 1310, 42 St.Rep. 289. In
Lapp, a car dealership failed to process the title documents
on a car it sold. The sole issue in Lapp was whether the
dealership remained the owner within the meaning of its
insurance policy. The Lapp Court noted that the motor vehi-
cle statutes of Title 61, Chapter 3, MCA, are aimed primarily
at public regulation of automobiles. The Court held that the
statutes are relevant but not determinative of ownership for
insurance purposes. The Court emphasized contractual intent
and ruled that the dealership was not the owner for insurance
purposes. "Ownership for insurance purposes can be deter-
mined by the intent of the parties and the language of the
insurance contract." Lapp, 695 P.2d at 1312.
In the instant case, we will not inject vehicle certi-
fication statutes into the insurance contract and thereby
distort the coverage terms. Section 28-3-301, MCA, mandates
that the intent of the parties shall govern the contract's
interpretation: "A contract must be so interpreted as to
give effect to the mutual intention of the parties as it
existed at the time of contracting, so far as the same is
ascertainable and lawful." We are faced with ill-defined
contract terms. Where the terms are ambiguous, we may clari-
fy them with extrinsic evidence of the parties' intentions.
Section 28-2-905 (2), MCA.
Those intentions are revealed in the record. Contrary
to Nelson's assertions, Jordet and TIE did not contract to
insure the Bronco, but affirmatively sought to avoid insuring
it. They specifically discussed insuring the Bronco, but
rejected the idea. In his affidavit, Jordet stated: "On the
advice of our insurance agent, Patty obtained her own insur-
ance on the car in her own name through a different company.
The car was not on my policy and I did not expect or intend
the policy to cover it." The record also reveals that Kent
decided to purchase separate insurance. We find that the
Bronco was not insured within the contemplation of the con-
tracting parties.
In her brief, Nelson repeatedly stresses that Jordet's
signature on the installment sales contract conclusively
places the Bronco on the TIE policy. However, at issue in
this case is the insurance contract, not the purchase
contract. The purchase of property and the insurance of
property are distinct transactions.
Jordet was a solvent debtor, whose signature merely
secured Kent's purchase. In her deposition, Kent testified:
Q. Did the salesman suggest that Dennis
[Jordet] sign?
A. Well, either that, or I didn't get
the Bronco.
The purchase contract is essentially irrelevant to the
acquisition of insurance. We will not allow the purchase
agreement to dictate the interpretation of the insurance
agreement. We find that Jordet's signature on the install-
ment sales contract does not establish ownership for insur-
ance purposes.
Jordet's joint ownership was an accommodation to allow
Patty Kent to finance her purchase of the Bronco. Kent paid
the down payment, repaid the registration and license fee,
made the first and only installment payment, purchased sepa-
rate insurance with Guaranty National, held the title certif-
icate, possessed the only keys, and drove it exclusively.
Jordet and Kent agreed that the Bronco was under the sole use
and control of Kent. She repeatedly testified that she
considered herself the sole owner of the Bronco.
Q. Now, when you were buying the Bron-
co, was it your intention to buy the car
for yourself?
A. Yes.
Q. Were you buying it for anybody else
but yourself?
A. No.
Q. Did you ever intend it to be pur-
chased for Dennis' benefit?
A. No.
Implicit in ownership is the ability to control how,
when, where and by whom the vehicle will be used. Section
70-1-101, MCA, states: "The ownership of a thing is the
right of one or more persons to possess and use it to the
exclusion of others." Jordet never exercised any of the
indicia of ownership which would be compatible with his
insuring the Bronco. " [A]n insurance policy, like any other
contract, must be given an interpretation which is reasonable
and which is consonant with the manifest object and intent of
the parties." National Farmers Union Property & Gas Co. v.
Colbrezze (9th Cir. 1966), 368 F.2d 405, 411, cert. denied,
(1967), 386 U.S. 991, 87 S.Ct. 1306, 18 L.Ed.2d 336.
We hold that the Bronco was not an "owned automobile"
within the meaning of Jordet's policy with TIE. The amended
judgment entered by the District Court on November 5, 1986,
is reversed.
We concur:
Justices
Mr. Justice John C. Sheehy, dissenting:
The decision of the District Court that the Truck
Insurance Exchange policy provides coverage to Patricia Kent
as an insured for the accident which occurred on July 10,
1981 should be affirmed because (I), under the policy, the
1979 Ford Bronco was an "owned automobile"; and (21, the
intent of Dennis Jordet was to own the automobile for
otherwise Patricia Kent could not acquire it.
Dennis Jordet alone purchased a used 1979 Ford Bronco
from Ryan Oldsmobile in Billings, Montana, by entering into
an installment sales contract with that dealer on May 29,
1981.
Dennis Jordet purchased the 1979 Ford Bronco because on
May 29, 1981, and on July 10, 1981, Patricia Kent was a
minor. She was not capable of entering into a contract for
the purchase of an automobile. Her name does not appear on
the installment sales contract. ("All persons are capable of
contracting except minors . . .." Section 28-2-201, MCA.)
As the purchaser under the installment sales contract Jordet
was legally liable to General Motors Acceptance Corporation,
which took over the sales contract from Ryan Oldsmobile, for
all of the obligations of the buyer under the installment
sales contract, including a deficiency judgment, if
foreclosure became necessary.
There is no doubt that the purchase of the automobile by
Dennis Jordet was intended by him for the use and benefit by
his minor sister-in-law, Patricia Kent. It was undoubtedly
his intent that the payments would be made on the installment
sales contract by Patricia, that she would have the free and
unimpeded use of the automobile, and would maintain the
automobile and pay for its upkeep and licensing. All of that
is irrelevant in this case, because irrespective of her use
of the automobile, or her eventual payments, she was not in
any legal sense the purchaser of the automobile. As a minor
she could not even disaffirm the contract for purchase, under
S 41-1-304, MCA, because her name appears nowhere on the
installment sales contract.
It is further clear in the record that Dennis Jordet
intended to have the automobile which he had purchased for
Patricia included as his scheduled automobile on his Truck
Insurance Exchange policy. When he applied, he was
discouraged in this by Truck's agent, because of costs and
other considerations, and it was only then that he applied,
and paid for, separate insurance for Patricia through
Guaranty National Insurance Company.
It is idle therefore for the majority to contend that
Dennis Jordet was not the owner of this automobile. Unless
Ryan Oldsmobile consented, it was impossible under the law
for Patricia to purchase the automobile because she was a
minor. Their ineluctable intent was that Dennis Jordet
would purchase and own the automobile so that Patricia Kent
could enjoy its sole use.
Therefore this is not a case to which Safeco Insurance
Company v. Lapp (Mont. 19851, 695 P.2d 1310, 42 St.Rep. 289
applies. In Lapp, there is no doubt the parties intended
that Lapp should own the automobile. In this case the
parties intended that Jordet should own the automobile. In
Lapp, the intent of the parties on ownership excluded Lapp
from coverage. In this case the intent of the parties on
ownership brings coverage under the Truck Insurance Exchange
policy.
Ownership of the vehicle is the only issue in this case.
If Dennis Jordet is the owner of the vehicle, under the
retail installment sales contract, and also because of the
certificate of title and certificate of registration, then
the terms of Truck's policy apply. The policy was written by
Truck Insurance Exchange and needs no interpretation. The
pertinent provisions of the policy which apply coverage in
this case to Dennis Jordet as the owner of the 1979 Ford
Bronco are these:
Section I1 - Liability and Medical Coverage
Insuring Agreements
(1 Coverages
The company agrees
Coverages D (1) and D (2) - Automobile Liability and
Farm Liability Insurance
- pay on behalf - - insured -- which the
to of the all sums
insuredshall become legally obligated to pay
because of bodily injury to any person anddamage
to property:
D(1) Arising out of the ownership, maintenance, or
- of any automobile.
use
(3) With respect to the insurance afforded by this
policy under COVERAGE D(1), the unqualified word
"insured" includes (a) the named insured and, as
respects the ownership, maintenance or use of any
automobile covered by this policy, his relatives
while residents - - household;
of his
(1) Owned automobile means an automobile owned &
the named insured; (Emphasis added.)
At the time of the purchase and of the accident in this
case, Patricia Kent was a relative, a sister-in-law, and a
resident in the same household as the insured Dennis Jordet.
Therefore she qualifies as an "insured" under the policy.
It makes no difference that the Ford Bronco is not
listed on the schedule of vehicles attached to the policy.
The language of the policy controls. In U.S.F. & G. v.
Newrnan (9th Cir. 1981), 656 F.2d 457, 459, it was held:
The policy extends liability coverage to "any
... person while using an owned automobile."
"Owned automobile" is defined in the policy as an
"automobile owned by the Named Insured" and
contains no limitation to vehicles listed on the
policy. The "named insured" in Casualty 75 is the
partnership. The effect of these provisions is to
extend liability coverage to the operation of
vehicles owned by the partnership, whether listed
on the schedule or not.
In addition, the 1979 Ford Bronco was an "automobile
owned by the named insured" under the statutes of this State.
Section 61-3-105, MCA, provides that a person appearing under
the public records as the registrant of any motor vehicle is
prima facie deemed the owner thereof. Dennis Jordet applied
to the State's Registrar of Motor Vehicles for a certificate
of his ownership, and a certificate of ownership (title) was
issued by that official showing Dennis Jordet and Patricia
Kent to be the owners of the automobile in question. Section
61-3-202, MCA. When the names and addresses of more than one
owner who are members of the same family are listed on the
certificate of ownership, joint ownership with right of
survivorship is presumed. Section 61-3-202 (3), MCA. As an
owner of the automobile, he also applied for a registration
and license. Section 61-3-303, MCA.
This case involves the sale of a used motor vehicle by
an auto dealer. When an auto dealer in Montana acquires a
used car, he picks up from the former owner the certificate
of title, assigned in blank. When the used car dealer sells
the used car, it is his duty to forward to the county
treasurer within four working days the assigned certificate
of ownership and certificate of registration, together with
the application for title by the new owner. Section
61-4-111, MCA, provides that "upon compliance by the dealer
with the requirements set forth in this section, title of
said motor vehicle shall be deemed to have passed to the
purchaser as of - - - of delivery of the vehicle to him by
the date
the dealer, and the dealer shall have no further liability or
responsibility with respect to the processing of
registration."
In this case, Ryan Oldsmobile had performed the
necessary functions and accordingly, under § 61-4-111 (2),
MCA, title to the 1979 Ford Bronco passed to Dennis Jordet
and Patricia Kent as of the date of delivery by Ryan
Oldsmobile.
Under the facts of this case therefore, not only did
Patricia Kent and Dennis Jordet intend that Dennis Jordet be
an owner of the automobile, but under the statutes of
Montana, he - an owner of the automobile.
was
Truck maintains that Jordet was only an "accommodation
owner." There is no such ownership estate for vehicles in
Montana law; it would be irrelevant under the policy, because
he was still an owner.
Kathy Nelson is a third party claimant against Patricia
Kent because of an accident which occurred to the 1979 Ford
Bronco insured by Truck at the time. Kathy's right to
insured coverage of her claim against Patricia Kent vested at
the time of the accident. McLane v. Farmers Insurance
Exchange (1967), 150 Mont. 116, 432 P.2d 98. The
self-serving statements elicited after the accident from
Dennis Jordet, Chris Jordet and Patricia Kent that Patricia
had the sole use of the automobile following its purchase
fail to overcome this fact: Dennis Jordet was an owner of
the automobile when Kathy Nelson was injured. The policy
coverage applies.
I join in the dissent of Mr.