Wayland v. Peters

IN THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTION FILED
December 17, 1997
ERNEST JAMES WAYLAND, Cecil Crowson, Jr.
) C/A NO. 03A01-9705-CV-00172
Appellate C ourt Clerk
)
Plaintiff-A ppellant, ) ANDE RSON CIRCU IT
)
v. ) HON . JAM ES B . SCO TT, JR .,
) JUDGE
CAR L and LOL A PE TER S, )
individually and d/b/a SCOTT COUNTY)
MO TORS, INC ., a K entu cky )
Corporation, ) REVERSED
) AND
Defendants-Appellees. ) REMANDED
BRU CE D . FOX, R IDEN OUR , RIDEN OUR & FO X, Clinton , for Plaintiff-A ppellant.
DEBRA L. FULTON and ROBERT L. KAHN, FRANTZ, MCCONNELL &
SEYMO UR, LLP, Knox ville, for Defendants-Appellees.
O P I N IO N
Franks, J.
Plaintiff alleg ed in his com plaint that def endants d id not com ply with
Kentucky statutes relative to titling and transferring motor vehicles, and the financial
responsibility requirements in the State of K entucky. Further, that defendan ts are
required to know and follow the applicable laws relative to automobile dealers, and
that the defendants in this matter ignored these laws and should be responsible to the
plaintiff for d amages a s legal ow ner of the 1 973 Bu ick involve d in the collisio n with
the plaintiff.
The Trial Judge u ltimately granted defendant’s mo tion for a summa ry
judgment and plaintiff has appealed. The material facts are not in dispute.
Plaintiff esse ntially argues on appeal that K entucky law is applicable to
the facts of this case, and that under Kentucky law, plaintiff is entitled to recover
damages from these defendants.
This case arose from an automobile accident that occurred in Anderson
County, Tennessee, on November 2, 1989. A 1973 Buick, driven by Milton Downey
collided with Plaintiff’s vehicle. Downey was apparently intoxicated at the time of
the accident and driving on the wrong side of the road. Plaintiff sued Downey and
was aw arded $ 750,00 0.00 in d amag es in the Circuit C ourt fo r And erson C ounty.
Plaintiff then sued these de fendants, and the reco rd shows that Sco tt County Motors
sold the 19 73 Buick to Dow ney on Au gust 22, 19 89, but it did n ot obtain a c ertificate
of title whe n it bough t the car from Terry Darn ell, the previou s owner. T hus, it did
not sign a certificate of title to Downey at the time of his purchase. Defendants made
application f or transfer o f title from D arnell to Sco tt County M otors, and S cott Coun ty
Motors to Downey on July 27, 1990.
Plaintiff insists that defendants’ failure to transfer title properly meant
they owned the vehicle on the date of the accident and were liable for damages for
failure to comply with Kentucky law. This claim is based upon defendant’s alleged
violation of several Kentucky motor vehicle statutes concerning licensing and
registration1 .
1
K.R.S. §186A.220(1) states in part:
[W]hen any motor vehicle dealer licensed in this state buys or accepts
such a vehicle in trade, which has been previously registered or titled for
use in this or another state, and which he holds for resale, he shall not be
required to obtain a certificate of title for it, but shall, within fifteen (15)
days after acquiring such vehicle, notify the county clerk of the
assignment of the motor vehicle to his dealership and pay the required
transfer fee.
Ky. Rev. Stat. Ann. §186A.220(1) (Banks-Baldwin 1996).
K.R.S. § 190.071(2) provides:
Any motor vehicle dealer . . . who is found by the commission to have
acquired a used motor vehicle for cash, trade-in, or in any other manner
and fails to have the registration transferred to him prior to the time the
vehicle is sold or otherwise transferred to another person shall be subject
2
As a preliminary issue to deciding which state law applies, it must be
determined whether an actual conflict of law exists.” Seals v. Delta Air Lines, Inc.,
924 F.Supp. 854, 859 (E.D. Tenn. 1996). In Tennessee, “the intention of the parties,
not the certificate of title, determines the ownership of an automobile.” Smith v. Sm ith,
650 S.W.2d 54, 56 (Tenn.App. 1983). Kentucky “is a certificate of title state for the
purposes of determining ownership of a motor vehicle and requiring liability insurance
covera ge.” Potts v. Draper, 864 S .W.2d 896, 89 8 (Ky. 19 93); K y. Rev. St at. Ann . §
186A (Banks-Baldwin 1996). Generally, the titleholder is considered the owner of the
vehicle in the ab sence o f a valid conditio nal sale. Potts, 864 S.W.2d at 898; Ky. Rev.
Stat. Ann. § 186.010(7) (Banks-Baldwin 1996). Kentucky has changed from “an
equitable title state to a certificate of title state for the purposes of determining
ownership of a motor vehicle for liability insurance purposes.” Potts, 864 S.W.2d at
898. Ke ntucky courts have also h eld that an au tomobile d ealer’s failure to comply
with licensing, registration and insuran ce statutes makes him a n owner and the buyer a
permissive user. Roge rs.v Wheeler, 864 S.W.2d 892 (Ky. 1993). Under Kentucky law,
Downey was not the titleholder on the date of the accident and therefore was not the owner.
Accordingly, the laws of Kentucky and Tennessee are in conflict.
Tennessee has adopted the “most significant relationship” approach of § 6,
145, 146 and 175 of the Restatement (Second) of Conflict of Laws (1971), for resolving tort
cases. Hataway v. McKinley, 830 S.W.2d 53 (Tenn. 1992).
Section 145, is the general provision dealing with tort cases and provides:
(1) The rights and liabilities of the parties with respect to an issue in
to suspension, fine, or revocation of his motor vehicle dealer’s license.
Ky. Rev. Stat. Ann. §190.071(2) (Banks-Baldwin 1992).
K.R.S. § 186.190(2) states:
A person shall not purchase, sell, or trade any motor vehicle without
delivering to the county clerk of the county in which the sale or trade is
made the current registration receipt issued on the motor vehicle and bill
of sale.
Ky. Rev. Stat. Ann. §186.190(2) (Banks-Baldwin 1994).
3
tort are determined by the local law of the state which, with respect to
that issue, has the most significant relationship to the occurrence and
the parties under the principles stated in § 6.
§ 146, which specifically addresses personal injury cases, states:
In an action for a personal injury, the local law of the state where the
injury occurred determines the rights and liabilities of the parties,
unless, with respect to the particular issue, some other state has a more
significant relationship under the principles stated in § 6 to the
occurrence and the parties, in which event the local law of the other
state will be applied.
Generally, the law of the state where the injury occurred will have the most
significant relationship to the litigation. Hataway, 830 S.W.2d 53 at 59. In this case,
although the injury occurred in Tennessee, Kentucky has a more significant relationship to
the parties and events at issue.
In analyzing §145(2), it is improper merely to count contacts . See Hataway,
830 S.W.2d at 57. Rather, these contacts should be used to guide the analysis of the interest
and policies to be considered under §6. While Tennessee is the place of injury, the place of
injury is less important when it is “fortuitous.” The Restatement does not define “fortuitous.”
The Comments, however, refer to situations when the place of injury is fortuitous “or
when f or other reas ons it bears little re lation to the oc currence a nd the partie s with
respec t to the pa rticular is sue.” § 1 45(2) c mt. e. Hataway suppo rts this pro position .
Although Hataway did not define “fortuitous,” it determ ined that the injury
occurr ence in Arkan sas wa s “mere ly a fortuito us circu mstanc e.” 830 S.W.2 d at 60.
Next, th e parties dispute the loca tion of th e cond uct cau sing the injury.
The Appellant contends the conduct occurred in Kentucky because that is where the
Appellees transferred possession of the car to Downey. Appellees maintain the
conduct causing appellant’s damages was the accident. In this case, the primary choice
of law issue involves ownership of the automobile, and this conduct took place in Kentucky.
The Appellant is a Tennessee resident, and the appellees are Kentucky
residen ts. The p arties’ do micile o r residen ce will “ usually ca rry little we ight of it self”.
4
Restatement (Second) of Conflict of Laws §145(2) cmt. e, unless all of the parties
reside in a single state. Id. Although Tennessee is the place of the accident, Kentucky
has the mo st significant re lationship to th e events at issu e. Appelle es acted in
Kentuck y and violated Kentuck y statutes. Thus, it is n ot unfair to th e appellees to
apply Kentucky law to their actions. T he Tennessee ru le of ownership is ba sed on our
Court’s interpretations of Tennessee statutes. Its application to events outside
Tennessee is therefore less important. Kentucky has an interest in applying its laws
regulati ng auto mobile sales w hich are made in Ken tucky.
Generally, “the state who se interests are m ost deeply aff ected shou ld
have its local law applied .” Resta temen t (Seco nd) of Conf lict of L aws § 6(2) cm t. f.
Kentuck y is a certificate of title s tate for purp oses of de termining m otor vehicle
ownership and insurance obligations. Potts v. Draper, 864 S.W .2d 8 96, 8 98 (K y.
1993); Ky. Rev. Stat. Ann. § 186A (Banks-Baldwin 1996). Kentucky law requires
“the seller of a motor vehicle to take statutory steps to properly complete the sale and
until this is don e the seller w ill be conside red the ow ner for pu rposes of lia bility
insurance.” Potts, 864 S.W.2d at 900. The effect of the rule is to insure “that all the
public will be protected from uninsured motorists.” Id.
In this case, the only person se eking pro tection from an uninsu red motor ist is
the Appellant, a Tennessee resident. The Potts court noted the goal of the law is
protecting “all the public”. Kentucky also seeks to regulate the conduct of Kentucky
automobile sellers.2 Kentucky has an interest in assu ring that local automobile dea lers
comply with the statute, thereby reducing the number of uninsured motorists on the
road.
2
K.R.S. § 190.015 states that the purpose of K.R.S. Chapter 190 (regulating motor vehicle sales)
is to promote the public interest and public welfare and to prevent frauds, impositions and other
abuses upon the citizens of Kentucky. Ky. Rev. Stat. Ann. § 190.015 (Banks-Baldwin 1982).
5
Kentuck y courts have h eld that a mo tor vehicle d ealer’s failure to
comply with a registration statute mak es him the own er, and the purchaser a
permis sive use r. Rogers v. Wheeler, 864 S.W .2d 892 (K y. 1993). The purpose o f this
rule is to protect the public from uninsured motorists. Potts, 864 S.W.2d at 900.
Appellees argue that they were not the owners of the vehicle since they
had not received title f rom Terr y Dar nell a t the t ime o f the acci dent. In K entu cky,
however, a dealer can become the owner of an automobile without actually acquiring
the title. Hartford Accident & Indemnity Co. v Maddix, 842 S.W.2d 871 (Ky.App.
1992); See K.R.S. § 186A.220. In Mad dix, the court noted that, at the time of the
accident, the dealer had done everything necessary to acquire ownership. 842 S.W.2d
at 872. Specifically, he was within the fifteen day “window” of K.R.S. § 186A.2203 .
In this ca se, Ap pellees d id not co me w ithin the fifteen day “win dow” .
The primary purpose of the rule in Rogers and Potts is to protect the
public by ensuring that the dealer’s omnibus insurance policy will continue to cover
vehicles when there has been an improper transfer of title. As a Kentucky Court has
observed :
“the signific ant chang es brough t about by the M VRA were aim ed at a
specific ob jective: to ensu re continuo us liability coverag e in order to
protect the victims of motor vehicle accidents, and to ensure that one
who suffers a loss as the result of an automobile accident would have a
source and m eans of recove ry. National Insurance Assoc. v Peach, 926
S.W.2 d 859 ( Ky. Ap p. 1996 ).
Kentucky courts have determined that “the MVRA is a social legislation
3
K.R.S. §186A.220(1) states in part:
[W]hen any motor vehicle dealer licensed in this state buys or accepts
such a vehicle in trade, which has been previously registered or titled for
use in this or another state, and which he holds for resale, he shall not be
required to obtain a certificate of title for it, but shall, within fifteen (15)
days after acquiring such vehicle, notify the county clerk of the
assignment of the motor vehicle to his dealership and pay the required
transfer fee.
Ky. Rev. Stat. Ann. §186A.220(1) (Banks-Baldwin 1996).
6
that mu st be libe rally cons trued to accom plish the se obje ctives. Id. (Citing Beacon
Ins. Co. Of America v. State Farm Mutual Ins. Co., 795 S.W .2d 6 2 (19 90). Arg uably,
the most effective way to ensure that victims have a means of recovery is to hold that
the owner is responsible for complying with the financial responsibility law for any
accidents caused by the owned vehicle.
The M otor Veh icle Repara tions Act (“ MVR A”), wa s enacted to
compensate accident victims promptly and without regard to fault. KRS 304.39-
010(2). The first $10,000.00 worth of injuries, known as “basic reparation benefits”
are paid without regard to fault. KRS 30 4.39-040(1). Gen erally, these benefits are
paid by the victim’s insurer. KRS 304.39-050(1). The victim’s insurer, however, may
seek subrogation from the insurer of the alleged tortfeasor. KRS 304.39-070(3). Thus,
the MVRA abolishes tort liability only in the amount of basic reparations benefits and
only betw een ins ureds. Safeco Ins. Co. Of America v. Brown, 887 F.Supp. 974 (W.D.
Ky. 1995). Additionally, there is no limit on recovery for property damage.
Because the accident took place in Tennessee, the MVRA’s limitations
would n ot apply. K.R .S. § 304.39 -060(2)(a) p rovides : “T ort liability with respe ct to
accidents occurring in this Com monw ealth and arising from the ownership,
maintena nce, or use o f a motor v ehicle is ‘abo lished’ for d amages b ecause of bodily
injury, sickness o r disease to the extent the b asic reparatio n benefits p rovided in th is
subtitle are payable therefor . . .“ (emphasis added). Additionally, K.R.S. § 304.39-
060(2)(c) states that “[t]ort liability is not so limited for injury to a person who is not
an own er, operator, m aintainer or u ser of a m otor vehicle within sub section (1) o f this
section . . .” Subsection (1) provides : “[a]ny person who registers, operates,
maintains o r uses a mo tor vehicle o n the public roadwa ys of this Com monw ealth shall,
as a condition of such registration, operation, maintenance or use of such motor
7
vehicle and use of the public roadways, be deemed to have accepted the provisions of
this subtitle . . .” There is also no evidence that the Appellant ever maintained or
registered his car within K entucky. Thu s, the abolition o f tort liability is inapplica ble
to the Appellant. The Sixth Circuit determined that it did not violate the Kentucky
Constitution to apply the MVRA to bar a nonresident from recovering medical and
hospita l expen ses arisin g from an auto mobile accide nt in Ke ntucky. Russell v. P roffitt,
765 F2d 72 (6th C ir. 1985). In the instant case, h oweve r, the acciden t occurred in
Tennessee.
The only po rtion of the M VRA that significan tly addresses ou t-of-state
accidents is K.R.S. §304.39-030(2) which states:
If the accident causing injury occurs outside this Commonwealth but
within the United States, its territories and possessions, or Canada, the
following persons and their survivors suffering loss from injury arising
out of ma intenance o r use of a m otor vehicle have a righ t to basic
reparation benefits:
(a) basic reparation insureds; and
(b) the driver and other occupants of a secured vehicle who have not
rejected the limita tion up on their tort rights . . . .
This section is apparently de signed to p rotect Ken tucky residents w hen travelin g out-
of-state. Since the appellant is not insured under a policy covering a Kentucky
vehicle, he is not a “basic reparation insured.” K.R.S. §304.39-080(5) requires that
owners maintain security for the payment of basic reparations benefits for vehicles
operated in Kentucky or registered there. (Emphais supplied).
Finally, K.R.S . §446.070 , states that:
[a] person injured by the violation of any statute may recover from the
offender such damages as he sustained by reason of the violation,
although a penalty or forfeiture is imposed for such violation.
This statute affords the appellant an avenue of recovery for appellee’s violation of the
registration statutes. In order to prevail under this statute, however, a plaintiff must
8
demonstrate that the defendant’s violation of the statute was the proximate cause of
the dam ages su stained . See generally, Real Estate Marketing, Inc. v. Franz, Ky., 885
S.W.2d 921(Ky. 1994). In this case, appellees argued the proximate cause of
appellant’s d amages w as Dow ney’s consum ption of alc ohol and c olliding with
appellant, but appellees’ failure to comply with the titling and registration statutes of
Kentuck y made it poss ible for Do wney to hav e possessio n and op erate the veh icle
without having to comply with the financial responsibility law.
Although appellees did not have possession of the title at the time of the
accide nt, they are owne rs unde r Kentu cky law a nd Do wney w as a per missive user.
The purp ose of the K entucky law is to protect the public by ensu ring that a ve hicle
licensed by the state is insured.
We vac ate the Trial C ourt’s judgm ent and rem and the T rial Court to
determine to what ex tent the app ellant was d amaged by the failure of the appellee s to
comp ly with the statutes o f Ken tucky as d etailed in this opin ion.
The costs of the appeal are assessed to appellees.
__________________________
Herschel P. Franks, J.
CONCUR:
___________________________
Houston M. Godd ard, P.J.
___________________________
Clifford E. Sanders, J.
9