Opinion ID: 1454481
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Heading: Hawaii Motor Vehicle Registration Law

Text: The Lehmans urge a literal reading of the motor vehicle registration statute, HRS § 286-52(e) (1976), which provides: Until the director of finance has issued the new certificate of registration and certificate of ownership as in subsection (d) provided, delivery of such vehicle shall be deemed not to have been made and title thereto shall be deemed not to have passed, and the intended transfer shall be deemed to be incomplete and not to be valid or effective for any purpose, notwithstanding any provision of the Uniform Commercial Code; provided that a security interest in a motor vehicle shall be perfected as provided in the Uniform Commercial Code, sections 490:9-302(3)(b) and 490:9-302(4), and that the validity, attachment, priority, and enforcement of such security interest shall be governed by Article 9 of the Code. (Emphasis added.) The Lehmans argue that since the new certificates of ownership and registration had not been issued by the director of finance, Gilwick remained the owner of the Nissan on the date of the accident; and thus, Gilwick's HIG policy and not FSIC's should provide coverage to the Sheldons. This court has previously faced this issue and held that as between two insurance companies, the company insuring the purchaser of an automobile is obligated to provide coverage for an accident involving the subject vehicle after it is sold and possession transferred to the purchaser, despite non-compliance with the motor vehicle registration statute. Pacific Insurance Company, Limited v. Oregon Automobile Insurance Company, 53 Haw. 208, 490 P.2d 899 (1971). In Pacific, this court was called upon to interpret Revised Laws of Hawaii (RLH) § 160-10(e) (1955), predecessor of HRS § 286-52(e), [5] to determine whether the statute controlled in an insurance coverage dispute between two companies, one insuring the seller and the other the buyer of an automobile. Pursuant to an agreement of sale, the buyer paid the purchase price and took possession of the vehicle. Subsequently, the subject vehicle was involved in an accident prior to the issuance of the certificates required under RLH § 160-10(e). This court found that the statute was plain and unambiguous in providing that non-compliance with the statute invalidates any intended transfer of ownership for any purpose. However, we reasoned that the phrase for any purpose in the statute was not all encompassing, and that departure from literal construction is justified when such construction would produce an absurd and unjust result and the literal construction in the particular action is clearly inconsistent with the purposes and policies of the act. 53 Haw. at 211, 490 P.2d at 901 (citations omitted). In Pacific this court specifically found that strict application of RLH § 160-10(e) would produce an unreasonable and absurd result as nothing in the language of the statute nor its legislative history indicated that the legislature intended that the seller of an automobile should assume civil liability for negligent operation of the automobile by the buyer merely because the Treasurer had not issued new certificates of ownership and registration. 53 Haw. at 212, 490 P.2d at 901 (emphasis added). We deemed such an interpretation to be outside the realm of the objectives of the statute, which were to provide a means of registering the title of an automobile for the protection of the public; to assist governmental officials to readily determine the ownership of an automobile; and to prevent unlawful and dishonest dealing in automobiles. 53 Haw. at 212, 490 P.2d at 901-02 (footnote omitted). See also Moore v. Allstate Insurance Company, 6 Haw.App. 646, 736 P.2d 73 (1987). It is important to note that although this court in Pacific referred to the issue in terms of tort liability, the facts, as in the instant case, indicate that the ultimate issue decided was actually one of insurance coverage as between two insurance companies. Since the decision in Pacific, the motor vehicle registration statute has been amended and recodified; [6] however, there has been no change that would alter or detract from the holding in Pacific. The Lehmans argue that the facts in the instant case are distinguishable from those in Pacific because Pacific involved an individual and not a commercial seller; and that in Pacific, documents necessary to transfer ownership were submitted to the treasurer for registration, while in the instant case, Gilwick intentionally withheld processing the transfer documents until the $120.00 balance on the promissory note was paid. [7] We find, however, that the Lehmans' contentions are without merit as they fail to convince us of any relevant distinctions between their case and Pacific with respect to determining ownership in an insurance coverage dispute. On the contrary, we find Pacific dispositive of the Lehmans' position regarding HRS § 286-52(e) as there is substantial evidence to support the trial court's finding that ownership, in an insurance context, was transferred to the Sheldons, consistent with the intent and expectations of the parties. At the time of purchase on December 28, 1983 and prior to taking delivery of the Nissan, Gilwick required and the Sheldons obtained their own no-fault insurance which was consistent with the notice set forth in the retail installment contract that Gilwick was not providing insurance coverage to the Sheldons for the Nissan. The sales contract specifically provided that it: DOES NOT INCLUDE INSURANCE ON YOUR LIABILITY FOR BODILY INJURY OR PROPERTY DAMAGE AND DOES NOT MEET THE REQUIREMENTS FOR PROOF OF FINANCIAL RESPONSIBILITY UNDER CHAPTER 287, HAWAII REVISED STATUTES. (Emphasis in original.) This notice clearly indicates that Gilwick did not intend and the Sheldons could not have expected that Gilwick would provide insurance coverage to the Sheldons. In the context of insurance coverage disputes, we must look to the language of the insurance policies themselves to ascertain whether coverage exists, consistent with the insurer and insured's intent and expectations. Globe Indemnity Company v. Texeira, 230 F.Supp. 451 (D.Hawaii 1964). In so doing, we shall construe insurance policies according to their plain, ordinary, and accepted sense in common speech unless it appears that a different meaning was intended. First Insurance Co. of Hawaii, Inc. v. State of Hawaii, 66 Haw. 413, 665 P.2d 648 (1983). Moreover, this court has stated that it is committed to enforce the objectively reasonable expectations of parties claiming coverage under insurance contracts, which are construed in accord with the reasonable expectations of a layperson. Fortune v. Wong, 68 Haw. 1, 702 P.2d 299 (1985); Sturla, Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203, 684 P.2d 960 (1984). Looking first at the HIG policy issued to Gilwick, the Comprehensive Automobile Liability Insurance specifically provided, in relevant part, that the owner . . . of a non-owned automobile is not an insured and thus excluded from coverage. A non-owned automobile is defined as an automobile which is neither an owned automobile nor a hired automobile. An owned automobile is defined as an automobile owned by the named insured. Based upon the aforementioned language, neither Gilwick nor HIG intended that coverage be extended to the Sheldons, since the word owner when considered in its plain, ordinary and accepted sense in common speech would include a buyer who enters into a valid sales agreement and takes possession and control of the subject vehicle. Pacific, 53 Haw. 208, 490 P.2d 899 (1971). Review of the FSIC policy confirms the fact that the Sheldons understood that they were the owners of the Nissan since the policy specifically names Gene K. Sheldon as the named insured and lists the Nissan in the Declarations as the covered vehicle for the period December 28, 1983 (date the Sheldons took possession and control of the Nissan) to June 28, 1984. The definition of your covered auto includes any vehicle owned by you [named insured and spouse] and shown in the Declarations. (Emphasis added.) Considering the language of the FSIC policy, the notice provision set forth in the sales contract, and the fact that the Sheldons paid no portion of the HIG premium, a literal interpretation of HRS § 286-52(e) would create a legal fiction, making the Sheldons an insured of HIG after they took possession and exercised exclusive control over the use of the Nissan. Such an absurd result is clearly outside the realm of the Sheldons' objectively reasonable expectations, and more so of the Lehmans', who could only be said to have reasonably expected recovery from the negligent operator's (Gene K. Sheldon's) insurer, FSIC. Therefore, under the circumstances of this case, we find that HRS § 286-52(e) is not determinative of ownership for purposes of resolving coverage disputes under automobile insurance policies.