# FILED December 17, 1997 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE

EASTERN S ECTION

ERNEST JAMES WAYLAND, ) C/A NO. 03A01-9705-CV-00172 ) Plaintiff-A ppellant, ) ANDE RSON CIRCU IT ) v. ) HON . JAM ES B . SCO TT, JR ., ) JUDGE CAR L and LOL A PE TER S, ) indi vidu all y and d/b /a SC OTT COUNTY) MO TO RS, 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 I

O N Franks, J. Plaintiff alleg ed in his com plaint that def endants d id not com ply with Kentucky stat

utes relat ive to tit ling and trans ferring motor vehi cles, and the f

inancial responsibility requirements in the State of K entucky. Further, that defendan ts are required to know and foll ow the applicable laws relative t o automobile dealer

s, and that the defendant

s in this matt

er ignored these

laws and should be responsi ble 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 plainti

ff. The Trial Judge u ltimately granted defendant’s mo tion for a summa ry judgment and plaint

iff has appealed. The material fact s are not in di spute.1 K.R.S. §186A .220(1) states

in part: [W]hen any m

otor vehicle dealer licensed in this state b

uys or accept

s such a vehicle in trade, which has been previously registered or titled for use in this or another state, and which he h olds for resale, he shall not be required to obtain a certificate of title for it, but shall, w ithin fifteen (15) days after acquiring such vehicle, notify the county clerk of the assignment of the motor v ehicle to his dealership and pay the required transfer fee. Ky. Rev. S

tat. Ann. §186A.220(1) (B anks-Bald win 1996). K.R.S. § 190.071(2) provides: Any motor vehicle d ealer . . . who is found by the commiss ion to have acquired a used motor vehicle for ca sh, 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 Plaintiff esse ntially argues on appeal that K entucky law is applicable to the facts of thi s case, and that under Kentucky law, plaintiff is entitled t

o recover damages from these defendants.

This case arose fr

om an automobile accident that occurred i

n Anderson County, Tennessee,

on November 2, 1989. A 1973 Buick, driven by Milton Downey collided with Plaintiff’s vehicle. Downey was appare ntly i ntoxicated at

the time of the accident and dr

iving on the wrong side of the road. Plai

ntiff 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 cert

ificate of t

itle to Downey at

the time of his pur

chase. 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 i

nsists tha t defendants’ fai

lure to tr ansfer tit le properly

meant they owned the vehicle on the date of t he accident and were liable for damages for failure to compl

y with Kentucky

law. This clai

m is based upon defendant’s alleged violation of s everal Kentucky mot or vehicle st

atutes concerni

ng licensing and registrat ion 1

.to suspension, fine, or revocation of his motor vehicle dealer’s license.

Ky. Rev. S

tat. Ann. §19

0.071(2) (Ban

ks-Baldw in 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 wh ich the sale or trade is made the cur

rent registrat

ion receipt issu

ed on the mo

tor vehicle an

d bill of sale. Ky. Rev. S

tat. Ann. §186.190(2) (Ban ks-Baldw in 1994). 3 As a preliminary

issue to deciding which state law applies, it must be determined whether an act ual 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 certi

ficate of ti

tle, dete rmines the ownership of a n automobile.” Smith v. Sm ith , 650 S.W.2d 54, 56 (Tenn.App. 1983). Kentucky “is a cer tificate of title state for the purposes of determini

ng ownership of a motor vehicl e and requiring l

iabilit y 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). Generall y, the t itleholder

is considered t

he 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). Kent ucky has changed from “an equitable t

itle st ate to a cert

ificate of t

itle st ate for the purpos es of determining ownership of a motor vehicl e for liabil

ity i nsurance 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 theref ore 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 g

eneral provision

dealing with tort

cases and provid

es: (1) The rights a

nd liabilities of the

parties with resp

ect to an issue in4 tort are determi

ned by the lo

cal law of the sta

te which, with res

pect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6. § 146, which speci

fically ad dresses persona

l injury cas

es, states: In an action for a personal injury, the loca l law of the state where the injury occu

rred determine

s the rights and li

abilities of the pa

rties, 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 sta

te where the injur

y occurre d will have the most significant relationship to the litigation. Hataway , 830 S.W.2d 53 at 59. In this case, although the injur

y occurre d in Tennessee, K

entucky ha

s a more signific

ant 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. Rathe r, these contact

s should be used to g

uide the analy

sis of the interest and policies to be considered under §6. While Tennessee is the place of injury, the plac e of injury is less important when it is “fortuitous.” The Restatement does not define “fortuitous.” The Comments, however, refer t o situations when the place of inj ury is for tuitous “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 t he conduct occurred i

n Kentucky because tha t is where the Appellees transf

erred possession of the car to Downey. Appel lees maintai

n the conduct causing appel

lant’s damages was t

he 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 Tenness ee 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”.2 K.R.S. § 190 .015 states th at the purpose of K.R.S. Ch apter 190 (reg

ulating mo

tor vehicle sa

les) is to promote the public interest and public welfare and to prevent frauds, impo sitions and other abuses upon th

e citizens of Kentucky. Ky . Rev. Stat.

Ann. § 190.015 (Banks-

Baldwin 1982

). 5 Restatement (Second)of Conflict of Laws §145(2) cmt.e, unless al l of the parti

es reside in a single state. Id. Although Tennessee is t he 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 inter

pretations

of Tennessee statut

es. Its appl

ication to e

vents outside Tenne ssee

is t here fore les s imp ortant.Kent

ucky has a n int erest in appl ying it s la ws 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 obl igations . Potts v. Draper , 864 S.W .2d 8 96, 8 98 (K y. 1993); Ky. Rev. St

at. Ann. § 186A (Banks-Baldwin 1996). Kentucky law requir es “the seller

of a motor vehicle t

o take statut

ory steps t

o properly compl

ete the sale a

nd 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 i s to insure “t hat all the public will be pr

otected from uninsur

ed 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 “al

l the public” . Kentucky als o seeks to regulat e the conduct of Kentucky automobile sellers. 2 Kentucky has an interest in assu ring that local automobile dea lers comply with the statute, t hereby reduci

ng the number of uninsured motor ists on the road.3 K.R.S. §186A .220(1) states

in part: [W]hen any m

otor vehicle dealer licensed in this state b

uys or accept

s such a vehicle in trade, which has been previously registered or titled for use in this or another state, and which he h olds for resale, he shall not be required to obtain a certificate of title for it, but shall, w ithin fifteen (15) days after acquiring such vehicle, notify the county clerk of the assignment of the motor v ehicle to his dealership and pay the required transfer fee. Ky. Rev. S

tat. Ann. §186A.220(1) (B anks-Bald win 1996). 6 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 fr om uninsured motorists. Potts, 864 S.W.2d at 900. Appellees argue that

they were not t

he owners of the vehicle since they had not r ecei ved title f rom Terr y Dar nell a t the t ime o f the acci den t. In K entu cky, however, a dealer can bec ome the owner of an automobile wit hout actuall

y acquiri ng the title. Hartford Accident & I ndemnity Co. v Maddix, 842 S.W.2d 871 (Ky.App. 1992); See K.R.S. § 186A.220. In Mad dix, the court noted t hat, at the

time of the accident, t

he dealer had done every thing necessary

to acquire ownershi

p. 842 S.W.2d at 872. Specifically,he was within the fift een day “window” of K.R.S. § 186A.220 3

. 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 ensur

ing that the de aler’s omnibus i nsurance policy

will continue t

o cover vehicles when there has been an improper tr ansfer of tit

le. 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 vi

ctims of motor vehicle accidents, and to ensure that

one who suffers a loss as t

he result of an aut

omobile accident would ha ve 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 ha

ve determined that

“the MVRA is a social legislation7

that mu st be libe rally cons trued to accom plish the se obje ctives. Id. (Citing Beacon Ins. Co. Of America v. St ate Farm Mutual Ins. Co. , 795 S.W .2d 6 2 (19 90). Arg uab ly, the most effecti

ve way to ensure t

hat victims have

a means of recovery i s to hold that the owner is responsi

ble for complyi

ng with the financi al responsibi lity 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 vi ctims promptly

and without regard t

o 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 vi

ctim’s insur

er. KRS 304.39-050(1). The vi ctim’s insur

er, however, may seek subrogation from the insurer of the alleged tortfeasor. KRS 304.39-070(3). Thus, the MVRA abolishes tort liability only in t he amount of basic repar ations benefit

s and only betw een ins ureds. Safeco Ins. Co. Of A meric a v. Br own , 887F.Su

pp. 9 74 (W. D. Ky. 1995). Additi

onally,there is no l

imit on recovery

for property

damage. Because the accident

took place in Tennesse e, 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 occurr

ing in this Com monw ealth and arising from t he 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 t

herefor . . . “ (emphasis added). Additionally , K.R.S. § 304.39- 060(2)(c) sta

tes that “[t

]ort lia bility is not so li

mited for injur

y 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 registrat ion, operati

on, maintenance or us e of such motor8

vehicle and use of t

he public roadways , be deemed to have accept ed the provisions of this subti tle . . . ” There is also no evi dence that the Appellant ever maintai ned or registered his car within K entucky. Thu s, the abolition o f tort liability is inapplica ble to the Appellant . The Sixth Circui t determined t

hat it did not

violate the

Kentucky Constitution to apply t

he MVRA to bar a nonresident from recoveri ng 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 injur

y occurs outside this Commonwealth but within the United St

ates, it s territ ories and possessions, or Canada, t he following persons and t heir survivors suffering los s 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 repa

ration insur

eds; 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 outof-state. Since the appellant is not i nsured under a polic

y covering a Kentucky vehicle, he i s not a “basic re paration insured.” K.R.S. §304. 39-080(5) requir es that owners maintain secur

ity for t he payment of basic

reparations be

nefits for vehicles operated in Kentucky

or registered there . (Emphais supplied). Finally, K.R.S . §446.070 , states that: [a] person injur

ed by the violation of any statute may recover from the offender such damages as he sustained by r eason of the violat

ion, although a penalt

y or forfei

ture is imposed f

or such violat

ion. This statut

e affords the appel

lant an avenue of recove ry for appel

lee’s viol ation of the registration stat

utes. In order to prevail under this statute, however, a plaintiff must9

demonstrate that

the defendant’s vi

olation of the statute was the pr oximate cause of the dam ages su stained

. See ge neral ly, Real Estate

Market ing, Inc. v. Fr

anz, Ky
. , 885 S.W.2d 921(Ky. 1994). In this case, appellees argued t

he 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 compl y with the t

itling and r

egistrat ion statut es of Kentuck y made it poss ible for Do wney to hav e possessio n and op erate the veh icle without having to c omply with t he fi nanc ial res pons ibilit

y l aw. Although appellees di

d not have possession of the titl e at the ti me 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 i s 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.