Case Title: Commercial Standard Ins. Co. v. West

Citation: 249 P.2d 830, 74 Ariz. 359

Docket Number: 

State: arizona

Court: Arizona Supreme Court

Date: 1952-11-03T00:00:00Z

Document:
74 Ariz. 359 (1952) 249 P.2d 830 COMMERCIAL STANDARD INS. CO. v. WEST. No. 5443. Supreme Court of Arizona. November 3, 1952. Struckmeyer & Struckmeyer and Jack C. Cavness, all of Phoenix, for appellant. Jerman & Jerman and Richard R. Greenfield, all of Phoenix, for appellee. UDALL, Chief Justice. Paul West, dba Cut Rate Car Mart, as plaintiff, brought suit against defendants *360 Douglas Reid and Commercial Standard Insurance Co., a corporation. Both the plaintiff and defendant Reid were licensed "used motor vehicle dealers" and the defendant corporation was the surety on Reid's statutory bond. The case was tried to the court sitting without a jury, at the conclusion of which judgment was entered for the plaintiff, against both defendants. The surety company was only held liable for $1,000, the amount of its bond. It alone appeals as the defendant Reid admitted his personal liability. The parties to this appeal will hereafter be referred to as appellant and appellee. The facts, which are not in dispute, may be summarized as follows: In November, 1949, appellee West had in stock, and held title to, a 1940 Buick automobile and a 1947 Studebaker automobile. During that month he sold these cars to different purchasers. Purchase orders, on his forms, were used in connection with each sale. In each instance conditional sales contracts were also signed by the "purchasers". Appellee did not sign these contracts as "seller" though he was the true owner. In keeping with an established practice based on an oral agreement between them, appellee delivered the contracts to the defendant Reid who signed them as "seller" and, through a "dealer's setup" or arrangement not enjoyed by appellee assigned the contracts to the Valley National Bank. The practice was convenient for appellee and profitable to defendant Reid who received two or three percent of the contract price. The appellant has consistently maintained throughout these proceedings, first, that the complaint does not state a claim upon which relief could be granted, and secondly that the evidence presented does not support the judgment entered. The court, however, denied appellant's various motions to dismiss and its motion for a new trial predicated upon the ground that the judgment was not justified by the evidence and is contrary to law. These rulings have all been assigned as error. The appeal from the final judgment entered challenges the correctness of these orders. If the judgment is to be sustained, it must be that the bond executed by appellant covers the activities of defendant Reid outlined above. Chapter 92, S.L. 1945 (now appearing as Art. 11, Ch. 66, 1952 Cum.Supp. to A.C.A. 1939), governs motor vehicle dealers. It makes them subject to regulation and control by the superintendent and provides for their licensing. Section 7 thereof, 66-1107, supra, provides for a bond, the pertinent provision reading: The bond in question is a little different in form and language to the above-quoted statute. Since, however, the bond is furnished because of the statutory mandate we shall construe the bond by the terms of the statute. This rule is well recognized and gives expression to the legislative intent. The Supreme Court of Iowa, in the case of Charles City v. Rasmussen, 210 Iowa 841, 232 N.W. 137, 139, 72 A.L.R. 638, succinctly stated the rule as follows: This is in accord with our holdings. See: National Surety Company v. Arizona Grocery Co., 32 Ariz. 399, 259 P. 404; Ward v. Johnson, 72 Ariz. 213, 232 P.2d 960. It is urged by the appellant that the actions of defendant Reid in relation to appellee were completely outside the scope of his activities as a licensed dealer and therefore not covered by the bond. In its brief appellant states: Appellant apparently concedes that Reid was acting in his capacity as a licensed dealer when he assigned the conditional sales contracts to the bank and, had loss occurred, he and his surety would be liable to it. The question is therefore presented: in considering the same acts and the whole transaction, was Reid acting in the capacity of a licensed dealer in relation to appellee? and if not so acting in such a capacity, is there no recovery from the surety where loss occurs? Section 1 of the Act, supra, supplies this definition: The statute in question encompasses and the bond is given to cover the business of selling used cars. That this is more than just the actual sale or exchange of a used car is apparent from the statute itself. "Business" was defined in People ex rel. Attorney General v. Jersin, 101 Colo. 406, 74 P.2d 668, 670, in its broad sense as meaning: A person who engages in the used car business, as in any business, must concern himself not alone with selling, but with all the myriad details required to conduct such a business. That each part of the business contributes to the total success or failure is patent. Also the statute itself is broader, we believe, in allowing recovery against a principal and his surety by persons injured by the unlawful acts of the dealer than the narrow construction contended for by appellant. Appellant has referred us to the case of Asa S. Agar, Inc., v. Texas Underwriters, Tex. Civ.App., 129 S.W.2d 374, and the case of Carstensen v. Stratton, 90 Utah 19, 58 P.2d 1035, for the proposition that a surety on a statutory bond In the Agar case the bond was required as a condition precedent to doing business in Texas as a dealer in citrus fruit and conditioned "upon compliance with the * * * terms of all contracts * * * in connection *363 with * * * citrus fruits" [129 S.W.2d 375], allowing actions on the "bond by any person with whom applicant deals in purchasing, handling, selling and accounting for sales of citrus fruit". The statute, however, restricted "persons" to those who handled citrus, to consignors or producers of farm products; and a consignor of boxes, nails and other supplies was held not to be within the class covered. The Carstensen case is similar in that the bond was required of produce dealers and conditioned that they should also fulfill their contracts but limiting it to the business of "commission buying, selling, or handling of produce" [90 Utah 19, 58 P.2d 1937]. A person who made an outright sale of produce, not on "commission" was not covered. Cf. Arizona case, Bianco v. Firemen's Fund Indemnity, 72 Ariz. 181, 232 P.2d 386. The instant statute and bond are not limited but are all-inclusive where there has been an unlawful act by the dealer, for the statute expressly provides that "Such bond shall inure to the benefit of any person who shall suffer any loss by reason of any unlawful act of the licensee." (Emp. sup.) The Supreme Court of Louisiana, in the case of Hartman v. Greene, 193 La. 234, 190 So. 390, 391, stated: Applying this rule to the facts of this case, we hold that the surety (appellant) is liable to appellee for the conversion by defendant Reid of moneys belonging to appellee, as the acts complained of arose out of Reid's actions in the capacity of a used car dealer. Had the latter not been a licensed dealer he would have been unable to follow the procedure outlined to procure for himself the commission out of the reserve fund which was set up at the bank for such dealers. We perceive no legal distinction between the admitted right of the bank to recover on the bond had it suffered a loss and the right of the appellee to do likewise. Judgment affirmed. STANFORD, DE CONCINI, and LA PRADE, JJ., and DON T. UDALL, Superior Court Judge, concur. Note: Justice PHELPS, being unable to take part in the case, the Honorable DON T. UDALL, Judge of the Superior Court of Navajo County, participated in his stead in the determination of this appeal.