Opinion ID: 2163997
Heading Depth: 1
Heading Rank: 2

Heading: The Exclusions. The second basis for the trial court's decision involved these policy exclusions:

Text: This Insurance Does Not Apply Under .... (c) Coverage D .... (3) While the Owned Motor Vehicle is subject to any bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance, not declared in this policy; . . . . . (e) Coverage D .... to loss due to conversion, embezzlement or secretion by any person in possession of the owned motor vehicle under a bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance. (Emphasis added.) The trial court held that, assuming the transaction between the plaintiff and Mr. Davis amounted to a theft, the transaction was embraced by both exclusions. The insurer contends that the retention of title as a means of security is the gist of a conditional sale and that, where a check is given, title does not pass until it is presented and honored, making the transaction in the interim a conditional sale. The insurer relies upon two Iowa cases, Crescent Chevrolet Co. v. Lewis, 230 Iowa 1074, 300 N.W. 260 (1941) and Watson Bros. Realty v. Associates Corp., 246 Iowa 483, 66 N.W.2d 384 (1955), which considered whether the purchase of an automobile by check was a cash sale, in which title passed upon honoring of the check rather than upon mere delivery of the check and receipt of the automobile. The court in Crescent Chevrolet said when a buyer gives a check or draft for the purchase price and it is accepted by the seller as the means of payment, it constitutes only a conditional payment and as between the parties, payment does not become absolute and title does not pass until the paper is paid. 230 Iowa at 1077-78, 300 N.W. at 262. The holding in Watson Bros. was essentially the same. The insurer asserts that these cases establish the proposition that payment by check results in a conditional sale. However, conditional payment is not the equivalent of conditional sale, as that term is used in the policy. Reference in the exclusion to conditional sale, purchase agreement, mortgage or other encumbrance  supports that view. Under the doctrine of noscitur-a-sociis, the phrase conditional sale must be defined in the context in which it is found. 2A Sutherland, Statutory Construction § 47.16, at 101 (C.Sands ed.1973). Reading conditional sale in connection with the associated words  mortgage or other encumbrance  leads to the conclusion that it means an express, mutual agreement for a security interest in the seller, not a voidance of a supposedly completed sale by failure of the consideration. For the same reason, the rule that a thief does not obtain title to stolen goods does not make this a conditional sale, as argued by the insurer. In short, this is not the sort of security arrangement connoted by the language of the exclusion. The exclusion also excepts coverage of the automobile subject to a purchase agreement. The insurer contends, and the trial court held, that the transaction here fell into that category. We do not agree; the phrase apparently refers to an executory contract while this transaction was completed. In examining the purchase agreement and conditional sale arguments of an insurer in a similar case, the Kansas Supreme Court concluded: The [insurer] singles out the term purchase agreement and asserts that it describes the contract between [the insured-seller] and [the wrongdoer-buyer]. We do not so read the term when it is taken in context. It is, it will be noted, one of four specifically named contractual arrangements followed by the catch-all or other encumbrances. Each of the other three specific arrangements encompasses an executory contract where more than one party has an interest in the car at the same time, viz: lessor-lessee; conditional vendor-conditional vendee; mortgagor-mortgagee. These, and likewise any other encumbrance all contemplate possession of the car in one party while the other has an interest evidence by either title or some sort of lien or encumbrance. We cannot believe the term relied on by the [insurer], inserted in the middle of the other four, was intended to mean anything so radically different from its fellows as the [insurer] would suggest. Farm Bureau Mutual Insurance Co. v. Carr, 215 Kan. 591, 595-96, 528 P.2d 134, 138-39 (1974). There is another, perhaps more compelling, reason why these exclusions are not applicable here: their meaning is not clear, and for the reasons discussed in Division I they must be interpreted in the manner most favorable to the insured. The trial court erred in applying the exclusions. The case is reversed and remanded for entry of judgment for the plaintiff. REVERSED AND REMANDED.