author: CRAWLEY, Judge.

text:
    GOVERNMENT EMPLOYEES INSURANCE COMPANY v. Jane CAPULLI.
    2000869.
    Court of Civil Appeals of Alabama.
    May 24, 2002.

    Rehearing Denied Sept. 20, 2002.
    Certiorari Denied April 11, 2003 Alabama Supreme Court 1020035.

      Thomas R. Jones, Jr., and Randal Kevin Davis of Davidson, Wiggins, Jones & Coleman, P.C., Tuscaloosa, for appellant.
    Thomas E. Parker, Jr., and Jonathan W. Pippin of Abies, Baxter, Parker & Hall, P.C., Huntsville, for appellee.
   CRAWLEY, Judge.

Government Employees Insurance Company (“GEICO”) appeals from a judgment requiring it to pay a pro rata share of the attorney fee Jane Capulli incurred in settling her personal-injury claim against Carolyn Zavala. We affirm.

On July 1, 2000, Capulli was injured in a motor-vehicle accident with Zavala. Ca-pulli was a passenger in a vehicle owned and driven by James Griffith, GEICO’s insured. Zavala’s vehicle was insured by Alfa. Capulli retained an attorney to represent her in a personal-injury claim against Zavala; she agreed to pay her attorney a one-third contingency fee. Within 30 days of the accident, Alfa admitted liability and paid a property-damage claim made by Griffith. GEICO paid Capulli’s medical expenses of $2,767.18, pursuant to the medical-payments provision of the policy it had issued to Griffith. The record does not contain the insurance policy GEICO issued to Griffith. GEICO states, however, that Capulli is an additional insured under the policy by virtue of her being a passenger in Griffith’s vehicle. Capulli did not deny that GEICO had a subrogation interest in her recovery to the extent of the medical payments it made on her behalf.

On September 21, GEICO contacted Alfa regarding payment of its subrogation claim. On September 27, Alfa advised GEICO that Capulli was represented by an attorney and that, upon settlement of Capulli’s claim, it would contact GEICO regarding its subrogation interest. On October 12, Alfa agreed to settle Capulli’s claim against Zavala for $6,400. That figure included payments for medical expenses, pain, suffering, and mental anguish. Capulli’s attorney informed Alfa that he would be responsible for paying GEICO’s subrogation claim. Alfa agreed to disburse the settlement proceeds to Ca-pulli’s attorney if the attorney would provide Alfa with a hold-harmless letter regarding GEICO’s subrogation interest. Alfa paid the settlement proceeds to Ca-pulli’s attorney, who then paid GEICO $1,844.79 (two-thirds of its subrogation claim of $2,767.18), and retained $922.39 (one-third of GEICO’s subrogation claim) as an attorney fee, pursuant to the “common-fund” doctrine.

Contending that the common-fund doctrine did not apply, GEICO objected to the attorney’s withholding one-third of its sub-rogation interest as his fee. Capulli then filed a declaratory-judgment action seeking a ruling that the sum withheld by the attorney be paid to her under the common-fund doctrine. GEICO answered and counterclaimed, alleging breach of contract/subrogation, money had and received, and intentional interference with business relations. Capulli moved for a summary judgment, and GEICO filed a response in opposition to the motion, along with a cross-motion for a partial summary judgment. The trial court denied GEICO’s motion for a partial summary judgment and granted Capulli’s motion for a summary judgment. GEICO appeals, arguing that the common-fund doctrine is inapplicable.

The pertinent facts in this case are undisputed. Therefore, we review the circuit court’s application of the law to the facts to determine whether Capulli was entitled to a judgment as a matter of law. See Carpenter v. Davis, 688 So.2d 256, 258 (Ala.1997). No presumption of correctness attaches to the decision of a trial court on a summary judgment motion, and our review is de novo. See Gossett v. Twin County Cable T.V., Inc., 594 So.2d 635 (Ala.1992).

The general, or “American,” rule is that attorney fees may be recovered from a source other than the attorney’s client, or the one who contracted to pay the fee, only when “authorized by statute, when provided in a contract, or by special equity, such as in a proceeding where the efforts of an attorney create a fund out of which fees may be paid.” Eagerton v. Williams, 433 So.2d 436, 450 (Ala.1983). There is no statutory authorization for awarding Capulli an attorney fee from GEICO’s subrogation interest, and there is no contract between Capulli or her attorney and GEICO that provides for the payment of attorney fees. Therefore, the only basis for an exception to the general rule is the “special equity” exception. “The ‘common fund’ [doctrine] is merely a particular instance of the ‘special equity’ exception to the rule that attorney fees may not ordinarily be recovered.” Mitchell v. Huntsville Hosp., 598 So.2d 1358, 1361 (Ala.1992).

The common-fund doctrine in insurance-subrogation cases is based on the equitable notion that, because an insurer is entitled to share, to the extent of its subrogation interest, in any recovery its insured achieves against a tortfeasor, the insurer should bear a proportionate share of the burden of achieving that recovery' — including a pro rata share of the insured’s attorney fee. See generally Johnny Parker, The Common Fund Doctrine: Coming of Age in the Law of Insurance Subrogation, 31 Ind. L.Rev. 313, 320-25 (1998); Annot., Right of Attorney for Holder of Property Insurance to Fee out of Insurer’s Share of Recovery from Tortfeasor, 2 A.L.R.3d 1441 (1965).

The United States Supreme Court created the common-fund doctrine over 100 years ago in two decisions that did not involve insurance subrogation, see Trustees v. Greenough, 105 U.S. 527, 26 L.Ed. 1157 (1881), and Central R.R. & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885). The landmark decision extending the doctrine to insurance-subrogation cases is United Services Automobile Association v. Hills, 172 Neb. 128, 109 N.W.2d 174 (1961). See John P. Dawson, Lawyers and Involuntary Clients: Attorney Fees From Funds, 87 Harv. L.Rev. 1597, 1622 23 (1974). In 1983, this court, citing the Nebraska decision in Hills, applied the common-fund doctrine to an insurance-subrogation case for the first time in Alabama. See Blue Cross & Blue Shield of Alabama v. Freeman, 447 So.2d 757 (Ala.Civ.App.1983).

In Freeman, the plaintiffs were injured in an automobile collision with State Farm’s insured. Blue Cross, the plaintiffs’ medical insurer, had paid the plaintiffs’ medical expenses of $1,550.20. The plaintiffs sued State Farm’s insured, the alleged tortfeasor, seeking compensation for, among other things, their medical expenses. Blue Cross notified the plaintiffs’ attorney that it was subrogated to the plaintiffs’ right to recover their medical expenses from the tortfeasor and that it expected to be paid from any recovery from the tortfeasor. Blue Cross also notified State Farm of its subrogation claim and demanded payment. State Farm suggested that Blue Cross intervene in the plaintiffs’ lawsuit. The plaintiffs’ attorney wrote to Blue Cross, stating that he assumed Blue Cross was abandoning the claim to be paid its subrogation interest from the plaintiffs’ recovery and was, instead, pursuing its subrogation interest directly with State Farm. Blue Cross intervened in the lawsuit, and the trial court entered a conditional summary judgment in its favor.

“The conditional judgment was not against the [tortfeasor], nor was it based upon a determination of liability of [the tortfeasor] nor upon the amount of damages plaintiffs were due to recover. The judgment was solely in favor of Blue Cross for the amount of $1,585.40 and against any funds recovered by plaintiffs from [the tortfeasor].”

Freeman, 447 So.2d at 758.

The plaintiffs and the tortfeasor settled on the day of trial. The plaintiffs moved to assess Blue Cross a pro rata share of their attorney fee, and the trial court granted the motion. Blue Cross appealed, arguing that its intervention and obtaining of a conditional judgment precluded the application of the common-fund doctrine, pursuant to the “active-participation” exception or defense to the doctrine. This court affirmed, stating the following:

“As has been previously shown, Blue Cross appeared after pleadings and principal discovery had been completed. It did not join as a subrogee of a part of plaintiffs’ cause of action to aid plaintiffs in the prosecution of the suit. It appeared only to secure judgment against the insured for return of funds paid to its insured in the event the insureds were successful in their prosecution of the entire cause of action. It then retired from the field of battle, declining to assist or give aid at trial. The effect of the summary judgment against plaintiffs’ recovery was to force the insured to represent the interest of Blue Cross at trial or in settlement after having told Blue Cross they would not do so. Thereafter, recovery of the fund, including the amount due Blue Cross, was obtained solely through the effort of counsel for [plaintiffs] without the active or passive participation of Blue Cross.
“It is the opinion of this court that the mere appearance or intervention in the case by counsel for Blue Cross solely for the purpose of reducing its claim for subrogation to a judgment or lien against the recovery of the plaintiff-insureds, does not satisfy the requirement of active participation or assistance in the prosecution [of] the ease. The facts in the case are clear that Blue Cross did nothing to assist in the recovery of the common fund from which it claimed $1,585.20. Rather than aid and assist plaintiffs, Blue Cross elected to collect its subrogation claim from the avails of the litigation and settlement secured solely by the efforts and expense of counsel for plaintiffs. Equity and justice require it to pay its proportionate share of attorney fees and expenses incurred by plaintiff.”

Freeman, 447 So.2d at 759-60.

Since 1983, this court has applied the common-fund doctrine in two other insurance-subrogation cases. See Alston v. State Farm Mut. Auto. Ins. Co., 660 So.2d 1314 (Ala.Civ.App.1995), and Lyons v. GEICO Ins. Co., 689 So.2d 182 (Ala.Civ.App.1997). In all three cases — Freeman, Alston, and Lyons — we held that the insurer-subrogee was obligated to pay a pro rata share of its insured’s attorney fee because the efforts of the insured’s attorney had created a fund from which the insurer directly benefited.

In three other decisions, which were not insurance-subrogation cases, we held that the common-fund doctrine did not apply and that no attorney fee was due from the entity sought to be charged. See Collins v. Taco Bell Corp., 689 So.2d 863 (Ala.Civ.App.1996); Day v. Ramada Inn South, 527 So.2d 130 (Ala.Civ.App.1987); Henley & Clarke v. Blue Cross-Blue Shield of Alabama, 434 So.2d 274 (Ala.Civ.App.1983).

In each of the foregoing cases — Collins, Day, and Henley & Clarke — an attorney succeeded in having his client’s medical bills paid by a third-party obligor and then sought to charge a fee to an entity that had benefited from the payment or reimbursement of the medical expenses. In Collins, the obligor was the client’s employer because the medical bills were properly covered under the Workers’ Compensation Act; the beneficiary who was sought to be charged with the attorney fee was the health-care provider that had gone unpaid. In Day, the obligor was Aetna, the workers’ compensation carrier; the beneficiaries were Travelers, a private insurer that had mistakenly paid part of the client’s medical bills, and the health-care providers whose claims were unpaid. In Henley & Clarke, the obligor was Medicare and the beneficiary was Blue Cross, a private insurer that had initially paid the client’s medical expenses.

In all three cases, this court affirmed the trial court’s determination that the attorney was not entitled to a fee from the beneficiary under the common-fund doctrine. In all three cases, this court discussed various aspects of the common-fund doctrine and concluded that one or more elements of the test for applying the doctrine did not exist. Specifically, we determined that the beneficiaries were “incidental” rather than “direct,” a determination that was correct but incomplete and perhaps misleading. In Collins, Day, and Henley & Clarke, this court failed to explain that what removed the cases from the operation of the common-fund doctrine was the existence of a debtor-creditor relationship rather than a subrogor-subrogee relationship.

The common-fund doctrine has no application when the relationship between the attorney’s client and the party sought to be charged with the attorney fee is one of debtor and creditor. See, e.g., Maynard v. Parker, 54 Ill.App.3d 141, 145, 369 N.E.2d 352, 355, 11 Ill.Dec. 898, 901 (1977) (refusing to “extend[] the common fund doctrine to require a mortgagee or a furniture store or any other creditor of a plaintiff to contribute to the fees of the plaintiffs attorney if the funds recovered by litigation are used to satisfy the plaintiffs obligations”); City & County of San Francisco v. Sweet, 12 Cal.4th 105, 116, 48 Cal.Rptr.2d 42, 48, 906 P.2d 1196, 1203 (1995). It is almost uniformly acknowledged that the common-fund doctrine, being based upon equitable principles, does not apply in a debtor-creditor situation. See, e.g., Neal v. Stanislaus County, 141 Cal.App.3d 534, 538, 190 Cal.Rptr. 324, 326 (1983); Maynard v. Parker, supra; Bashara v. Baptist Mem’l Hosp. Sys., 685 S.W.2d 307 (Tex.1985); Lynch v. Deaconess Med. Ctr., 113 Wash.2d 162, 168, 776 P.2d 681, 684 (1989). The Alabama Supreme Court implicitly recognized this principle in Mitchell v. Huntsville Hospital, supra, when it observed that if an attorney had deducted his fee from the benefits paid to his client by the third-party obligor (Connecticut General Insurance Company), then the debtor (client) “would have still owed the [creditor] Hospital.” 598 So.2d at 1360 (emphasis added).

In Collins, Day, and Henley & Clarke, each beneficiary was a creditor, not a sub-rogee, of the client, and, unlike a subrogat-ed insurer, the creditor’s right to payment of its claim was not contingent on the client-debtor’s recovery of a “fund” from which the creditor could receive payment. See Sisters of Charity v. Nichols, 157 Mont. 106, 483 P.2d 279 (1971).

“The obligation of the subrogated insurer to share in the costs of recovery from a third party wrongdoer arises because the insurer occupies the position of the insured with coextensive rights and liabilities and no creditor-debtor relationship between them. But here, unlike that situation, the hospital’s claim ... is based upon a debt owed the hospital by its patient in whose shoes it does not stand for any purpose, the debt being owed to it by its patient irrespective of the patient’s rights against a third party wrongdoer.”

157 Mont. at 111-12, 483 P.2d at 283. We conclude that Collins, Day, and Henley & Clarke are not relevant to our inquiry because they do not involve insurance sub-rogation, and they do not state the correct analysis for common-fund cases dealing with subrogation.

Relying, in part, on Collins, Day, and Henley & Clarke — the three cases in which this court decided that the common-fund doctrine did not apply — GEICO argues that the doctrine also does not apply here. GEICO contends that we held, in Collins, Day, and Henley & Clarke, that the common-fund doctrine has five required elements and, it says, Capulli failed to prove at least three of those elements. According to GEICO’s interpretation of Collins, Day, and Henley & Clarke, the common-fund doctrine has the following required elements: (1) there must be a “fund” from which to compensate the attorney; (2) the attorney’s services must directly benefit the fund; (3) the party seeking the fee and the party to be charged with the fee must have a common interest in the fund; (4) the proceedings must be equitable in nature, and (5) the fund must be within the control of the court.

GEICO contends that in Lyons this court retreated from the five-factor analysis and required only two elements to be proved, namely: (1) that there must be a “fund” from which to compensate the attorney; and (2) that the attorney’s services must directly benefit the fund. GEICO asks us to clarify Lyons by holding that a five-factor analysis is still appropriate in common-fund cases.

GEICO is correct that in Collins, Day, and Henley & Clarke we stated a five-part test and in Freeman, Alston, and Lyons we used a two-part test for deciding whether the common-fund doctrine applied. GEICO is incorrect, however, in supposing that, in the latter group of cases, we retreated from the analysis used in the former group. In Freeman, Alston, and Lyons, we did not announce a new rule that only two requirements were necessary to assess an attorney fee in a common-fund case. Instead, we discussed what the party seeking an attorney fee must prove in order to establish the right to a fee in an insurance-subrogation case. Collins, Day, and Henley & Clarke were not subrogation cases.

We decline to set forth what, or how many, requirements there may be in other common-fund cases, but, based on the facts before us in this insurance-subrogation case, we conclude that there are only two requirements for applying the common-fund doctrine, namely: (1) there must be a “fund” from which to compensate the attorney; and (2) the attorney’s services must directly benefit the fund. These requirements correspond to the first two parts of the five-part test GEICO argues should apply to all common-fund cases. We note that the third and fourth requirements that GEICO contends must be met in all common-fund cases will invariably be satisfied in an insurance-subrogation case, as they are here. The third requirement — that the party seeking the fee and the party to be charged with the fee must have a common interest in the fund — is necessarily satisfied by the definition of subrogation. See Roger M. Baron, Subro-gation: A Pandora’s Box Awaiting Closure, 41 S.D.L.Rev. 237, 238 (1996) (stating that “[sjubrogation allows an insurer who has indemnified an insured to stand in the shoes of the insured on the insured’s claim for compensation against a third party, usually a tortfeasor”). The fourth requirement — that the proceedings be equitable in nature — is necessarily satisfied in a sub-rogation case because subrogation is a creature of equity. See generally Robert E. Keeton & Alan I. Widiss, Insurance Law § 3.10 (1988).

“The entire law of subrogation, conventional or legal, is based upon equitable principles. International Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163, 165 (Ala.1989). The equitable considerations that are the underpinnings of subrogation are (1) that the insured should not recover twice for a single injury, and (2) that the insurer should be reimbursed for payments it made that, in fairness, should be borne by the wrongdoer.”

Powell v. Blue Cross & Blue Shield of Alabama, 581 So.2d 772, 774 (Ala.1990), overruled on other grounds by Ex parte State Farm Fire & Cas. Co., 764 So.2d 543 (Ala.2000).

As to the fifth requirement GEICO contends is necessary in common-fund cases— that the fund be within the control of the court — GEICO argues that the fund must be recovered as the consequence of a lawsuit by the insured against the tortfeasor. Citing Kimbrough v. Dickinson, 251 Ala. 677, 39 So.2d 241 (1949), International Underwriters/Brokers, Inc. v. Liao, 548 So.2d 163 (Ala.1989), and Mitchell v. Huntsville Hospital, supra, GEICO maintains that the common-fund doctrine presupposes one party’s “filing suit, bearing the burden and expense of litigation, and producing by that litigation a fund that inures to the benefit of himself and others.” Brief of Appellant at 8.

We acknowledge that there is language in Kimbrough, Liao, Mitchell, and other Alabama cases, indicating that a primary reason for applying the common-fund doctrine is that the party seeking the fee has borne the burden of producing a fund that benefits the party from whom the fee is sought — and that the burden, perhaps more often than not, includes litigation. We also acknowledge that, for the three insurance-subrogation cases — Freeman, Alston, and Lyons — in which this court applied the common-fund doctrine to require the insurer to pay a pro rata share of the insured’s attorney fee, the insured had actually filed a lawsuit against the alleged tortfeasor. However, neither this court nor the Alabama Supreme Court has directly addressed the question whether the common-fund doctrine can operate when the fund is produced without litigation.

We have found several cases from other jurisdictions in which the common-fund doctrine was applied to the proceeds of a settlement reached without a lawsuit’s being filed. See Wensman v. Farmers Ins. Co. of Idaho, 134 Idaho 148, 997 P.2d 609 (2000); National Union Fire Ins. Co. v. Grimes, 278 Minn. 45, 153 N.W.2d 152 (1967); Krause v. State Farm Mut. Auto. Ins. Co., 184 Neb. 588, 169 N.W.2d 601 (1969); Bowen v. American Family Ins. Group, 504 N.W.2d 604 (S.D.1993). Cf. Mountain West Farm Bureau Mut. Ins. Co. v. Hall, 308 Mont. 29, 38 P.3d 825, 828 (2001) (reversing a summary judgment and remanding for a determination as to whether the common-fund doctrine applied, but stating that, if the doctrine was applicable, there was no requirement that the fund be the product of active litigation).

In Mountain West, supra, the party sought to be charged with an attorney fee under the common-fund doctrine argued that the doctrine did not apply because the party seeking the fee had not satisfied the following “active litigation” requirement announced in an earlier Montana Supreme Court decision: “The ‘common fund’ concept provides that when a party through active litigation creates, reserves or increases a fund, others sharing in the fund must bear a portion of the litigation costs including reasonable attorney fees.” Means v. Montana Power Co., 191 Mont. 395, 403, 625 P.2d 32, 37 (1981) (emphasis added) (quoted with approval in Murer v. State Comp. Mut. Ins. Fund, 283 Mont. 210, 223, 942 P.2d 69, 76 (1997), and Mountain West, 308 Mont. at 33-34, 38 P.3d at 828). The Montana court explained its earlier use of the phrase “active litigation” as follows:

“[I]n Murer, the language preceding the ‘active litigation’ reference appears to dispel [the] argument [against applying the common-fund doctrine when the fund is produced by an out-of-court settlement]. We stated:
“ ‘The United States Supreme Court created the common fund doctrine in Trustees v. Greenough (1881), 105 U.S. 527, 15 Otto. 527, 26 L.Ed. 1157, and has subsequently applied that doctrine in numerous other cases (citations omitted). These common fund doctrine cases provide that when a party has an interest in a fund in common with others and incurs legal fees in order to establish, preserve, increase, or collect that fund, then that party is entitled to reimbursement of his or her reasonable attorney fees from the proceeds of the fund itself.’
“Murer, 283 Mont. at 222, 942 P.2d at 76. The cases cited in Murer merely illustrate the need to incur legal fees in pursuit of the common fund rather than engage in ‘active litigation.’ In Means and Murer, the active litigation was simply the expense-incurring mechanism employed by the parties to establish the common fund.”

308 Mont. at 34, 38 P.3d at 828-29.

In Krause, the Nebraska court held: “[H]ere no actual suit was filed but it is undisputed that the attorney rendered valuable services in negotiations and in settlement of the case. The recovery of the substantive right to attorney’s fees for services rendered should not depend upon the fortuity of filing a lawsuit.”

Krause, 184 Neb. at 595, 169 N.W.2d at 605. Krause was criticized by one commentator in 1974, see Dawson, 87 Harv.L.Rev. at 1625 & n. 95, but it was cited with approval in 1983 by this court in Freeman. See also Dunn, Brady, Goebel, Ulbrich, Morel, Kombrink & Hundman v. State Farm Ins. Co., 100 Ill.App.3d 93, 99, 426 N.E.2d 315, 319, 55 Ill.Dec. 340, 345 (1981) (declining to apply the common-fund doctrine on another ground, but citing Krause and noting: “plaintiff is correct in asserting that no case holds that a complaint must be filed before the fund doctrine applies”).

In Freeman, we stated that “an attorney, whose efforts result in recovery of funds in which various persons have an interest, is entitled to payment from such funds of a reasonable fee for his representation of the common interest.” 447 So.2d at 759 (emphasis added). We see no reason why the insured should not be entitled to an attorney fee when his attorney’s efforts consist of investigation, negotiation, and settlement rather than litigation. The following is a pragmatic view of the basis for fee-sharing, pursuant to the common-fund doctrine:

“When an insurance company lays claim to subrogation proceeds, obviously someone has to collect them, and attorneys rarely work for free. It is grossly inequitable to expect an insured, or other claimant, in the process of protecting his own interest, to protect those of the company as well and still pay counsel for his labors out of his own pocket, or out of the proceeds of the remaining funds.”

8A John A. Appleman & Jean Appleman, Insurance Law and Practice § 4903.85 at 335 (1981) (quoted in Guiel v. Allstate Ins. Co., 170 Vt. 464, 468-69, 756 A.2d 777, 780-81 (2000)).

We hold that the right to an attorney fee in a common-fund case does not depend upon the fund’s being produced as a consequence of litigation. A contrary holding might encourage unnecessary litigation.

Having determined that there are two requirements that must be satisfied in order to apply the common-fund doctrine in an insurance-subrogation case, we must now determine whether those requirements were met in this case. The first requirement, that there be a fund from which to compensate the attorney, was clearly satisfied. The fund was the $6,400 settlement Capulli received from Alfa on behalf of Zavala. The fund was “common” because, as subrogor and subrogee, both Capulli and GEICO had an interest in it.

As to the second requirement — that the services of Capulli’s attorney directly benefited the fund — GEICO argues that it received no benefit from the attorney because (1) Alfa’s liability was certain and the only disputed issue was the amount of Capulli’s pain and suffering, (2) Alfa never denied GEICO’s subrogation claim for the medical-expense payments, and (3) the settlement denied GEICO the right to intervene in an action to protect its own subrogation interest. GEICO made two of the same arguments in Sobczak v. Whitten, 75 Ill.App.3d 208, 393 N.E.2d 1080, 30 Ill.Dec. 733 (1979). There, the Illinois appellate court stated, and answered, the arguments as follows:

“GEICO asserts that the fund doctrine does not apply here because it realized no actual benefit from the attorney’s services as liability was clear and payment by defendant was certain. In this case the injury to plaintiffs occurred on August 22, 1976. On September 22, 1976 plaintiffs’ complaint was filed. It appears from the record that while liability was contested in the defendant’s answer to the plaintiffs’ complaint, the defendant intended to settle from the suit’s inception. However, it is apparent that negotiations were required to bring the defendant’s intentions to fruition, as ancillary legal action was evidently anticipated, and the defendant wanted to minimize his exposure to liability in such action. It was only after agreement on those issues was reached, and after plaintiffs documented the extent of their injuries to the defendants that the settlement occurred. The record does not support GEICO’s position that settlement was a foregone conclusion at the time the suit was filed. We believe that the trial court was correct in its determination that plaintiffs’ counsel played a substantial role in securing the settlement.”

75 Ill.App.3d at 213-14, 393 N.E.2d at 1083-84, 30 Ill.Dec. at 737. See also Guiel v. Allstate Ins. Co., 170 Vt. at 471, 756 A.2d at 782 (stating that “notwithstanding its bare statement that liability was conceded, [the subrogee] plainly benefited from the efforts of [the subrogor’s] attorney in securing its subrogation claim”); Bowen v. American Family Ins. Group, 504 N.W.2d at 607 (holding that “[w]hile [the subrogee] argues that its own communication with [the tortfeasor’s insurance company] insured the protection of its sub-rogation interest, it was [the subrogor’s] settlement with [the tortfeasor’s insurer] that made the payment of [the subrogee’s] interest possible”); United Services Auto. Ass’n v. Hills, 172 Neb. at 134, 109 N.W.2d at 178 (stating that even if the subrogee indicates an intention to pursue the enforcement of its subrogation interest in some other manner, once it seeks collection of its claim from the settlement secured by the efforts of the subrogor’s attorney, it must pay a proportionate share of the attorney fee). Cf. Wensman v. Farmers Ins. Co. of Idaho, 134 Idaho at 152, 997 P.2d. at 613 (reversing a summary judgment for the insured because there was a genuine issue of material fact as to whether the attorney’s actions resulted in any benefit to the subrogee when the record contained evidence that the tortfea-sor’s insurer had made the decision to pay the subrogated claim before any effort had been expended by the insured’s attorney).

The record demonstrates that, as was the case in Sobczak v. Whitten, Capul-li’s attorney investigated the facts to establish liability and documented the extent of his client’s injuries, sending Capulli’s medical bills to the tortfeasor’s insurer and thereby convincing it to settle her personal-injury claim. Although the record does not contain a breakdown of the time the attorney spent on the case, we conclude that GEICO failed to rebut Capulli’s prima facie showing that her attorney’s services resulted in a benefit to the common fund. Since GEICO made no argument in the circuit court that the amount of the fee was unreasonable, and it concedes that the one-third contingency fee it was ordered to pay is reasonable, we will not address the amount or reasonableness of the fee. Cf. Guiel v. Allstate Ins. Co., 170 Vt. at 474-75, 756 A.2d at 784-85 (citing Amica Mut. Ins. Co. v. Maloney, 120 N.M. 523, 530, 903 P.2d 834, 841 (1995), for the proposition that because “insurers neither presented evidence that contingency fees were unreasonable in relation to amount of work done to achieve final settlement nor suggested that contingency fee agreement was inconsistent with standard industry practice in such cases,” no remand was necessary). See generally Edelman & Combs v. Law, 663 So.2d 957 (Ala.1995) (discussing the bases for setting fees in class-action common-fund cases); Sobczak v. Whitten, 75 Ill.App.3d at 214, 393 N.E.2d at 1084, 30 Ill.Dec. at 737 (stating some of the factors for determining whether a fee in a common-fund subrogation case is excessive); Krause v. State Farm Mut. Auto. Ins. Co., 184 Neb. at 595-96, 169 N.W.2d at 605-06 (same).

As to GEICO’s argument that the settlement denied it the right to intervene in an action to protect its own subrogation interest, we hold that “the absence of a right of the insurer to participate in or control the insured’s litigation against third parties is not fatal to application of the ‘common fund’ doctrine.” See Mathews v. Bankers Life & Cas. Co., 690 F.Supp. 984, 987 (M.D.Ala.1988). Moreover, intervention alone would not have prevented the imposition of the common-fund doctrine. See Freeman, supra; Alston, supra.

GEICO argues that, if it received a benefit at all from the services of Capulli’s attorney, the benefit was merely incidental rather than direct. That argument states a defense to the application of the common-fund doctrine. See Parker, 31 Ind.L.Rev. at 333. There are two defenses to the application of the doctrine. Id. The first is the “active-participation” defense, i.e., that the party sought to be charged with the attorney fee actively participated in producing the fund.

“This defense requires that the insurer prove that it actively participated in or its efforts substantially contributed to the creation or preservation of the sub-rogated fund. The extent to which an insurer must actively participate or contribute to the recovery to avoid application of the fund doctrine varies from jurisdiction to jurisdiction. Some jurisdictions require very little participation ....
“Other jurisdictions require substantially more participation or contribution and define the defense accordingly:
“ ‘[I]n order for the insurer to claim active participation in a settlement, it must demonstrate that it participated in the settlement negotiations with the insured for the entire settlement and substantially contributed to that total settlement award. Similarly, to show active participation in a judgment against the tortfeasor, the insurer must show that it intervened in the suit and participated in the case ... or at the very least demonstrate that it significantly contributed to discovery.’
“Whether the insurer has substantially participated or contributed under this definition turns upon whether it performed services in aid of the recovery of the fund.”

Id. at 335 (footnotes omitted; citing this court’s decisions in Alston and Freeman). GEICO does not argue that it was an active participant; under the analysis of Alston and Freeman, such an argument would be unsuccessful.

The second defense is the “incidental-benefit” defense, i.e., that the party sought to be charged with the attorney fee was merely an incidental, and not a direct, beneficiary of the attorney’s services in producing the fund. See CNA Ins. Cos. v. Johnson Galleries of Opelika, Inc., 639 So.2d 1355 (Ala.1995); Lyons v. GEICO, 689 So.2d at 184. GEICO points out that Capulli admitted, in answers to its interrogatories, that she was unaware of GEICO’s subrogation interest until after the settlement. GEICO contends that Capulli’s being unaware of its subrogation interest precludes her from maintaining that, in seeking a recovery for her injuries, she intended to benefit GEICO.

We reject that argument. GEICO had a subrogation interest as a matter of law. The record affirmatively shows that Capul-li’s attorney acknowledged that interest. Capulli’s subjective intent to benefit that interest is immaterial.

We hold that Capulli established all the elements of the common-fund doctrine required in an insurance-subrogation case and that she was entitled to a judgment as a matter of law. The judgment of the circuit court is affirmed.

AFFIRMED.

YATES, P.J., and PITTMAN, J., concur.

THOMPSON and MURDOCK, JJ„ concur in the result.

      . In CNA Insurance Cos. v. Johnson Galleries of Opelika, Inc., the court stated that if the parties have an adversarial relationship the actions of one cannot confer a direct benefit on the other.
      “The requirement that the relationship between the client and the passive beneficiaries of the fund not be adversarial is based on the general proposition that the same attorney may not represent adverse parties in the same action. Consequently, the relationship is not adversarial unless the subrogor is denying that subrogee has a subrogated interest in the proceeds. Conflicts, such as disputes over the right to intervene, distribution of the funds or as between the subrogee and the attorney as to the attorney's right to, or amount of a fee, do not involve the type of adverse relationship which would preclude application of the common fund doctrine. See Lyons v. GEICO Ins. Co., 689 So.2d 182, 184 (Ala.Civ.App.1997).”
      Parker, 31 Ind. L.Rev. at 332 n. 101.


source: Caselaw Access Project

author: YATES, Presiding Judge.

license: Public Domain

text:
    GRIFFIN WOOD COMPANY, INC. v. Charles E. HORTON.
    2010591.
    Court of Civil Appeals of Alabama.
    Sept. 27, 2002.
    Rehearing Denied Dec. 6, 2002.
    Certiorari Denied April 11, 2003 Alabama Supreme Court 1020497.

      Clark Summerford and Beverly Smith Williamson of Zeanah, Hust, Summerford, Davis & Williamson, Tuscaloosa, for appellant.
    Taylor T. Perry, Jr., of Manley, Traeger, Perry & Stapp, Demopolis, for appellee.
    J. Doyle Fuller and Susan G. Copeland of Law Office of J. Doyle Fuller, L.L.C., Montgomery, for amicus curiae Alabama Forestry Association and Alabama Forest Products Industry Workmen’s Compensation Self Insurers’ Fund.
   YATES, Presiding Judge.

Charles E. Horton sued Griffin Wood Company, Inc. (“Griffin Wood”), on December 8, 2000, seeking workers’ compensation benefits and alleging that he had suffered an injury to his.back during the course of his employment with Griffin Wood that rendered him permanently and totally disabled. Griffin Wood answered the complaint on February 14, 2001, denying the existence of an employment relationship and raising as a defense the farm-labor exception to workers’ compensation liability provided in § 25-5-50(a), Ala.Code 1975. Following an ore tenus proceeding, the trial court, on January 28, 2002, entered an order finding that Horton had been employed by Griffin Wood; that he had injured his back during the course of his employment; and that he is permanently and totally disabled as a result of the back injury. Griffin Wood appeals.

This case is governed by the 1992 Workers’ Compensation Act. This Act provides that an appellate court’s review of the standard of proof and its consideration of other legal issues shall be without a presumption of correctness. § 25 — 5—81(e)(1), Ala.Code 1975. It farther provides that when an appellate court reviews a trial court’s findings of fact, those findings will not be reversed if they are supported by substantial evidence. § 25-5-81(e)(2). Our supreme court “has defined the term ‘substantial evidence,’ as it is used in § 12-21-12(d), to mean ‘evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.’ ” Ex parte Trinity Indus., Inc., 680 So.2d 262, 268 (Ala.1996), quoting West v. Founders Life Assurance Co. of Florida, 547 So.2d 870, 871 (Ala.1989). This court has also concluded: “The new Act did not alter the rule that this court does not weigh the evidence before the trial court.” Edwards v. Jesse Stutts, Inc., 655 So.2d 1012, 1014 (Ala.Civ.App.1995).

Griffin Wood argues on appeal that Horton was performing farm labor for an entity known as G & H Farms and that, therefore, he is not covered by the Workers’ Compensation Act, pursuant to § 25-5 — 50(a), Ala.Code 1975. Horton argues that Griffin Wood is estopped to deny workers’ compensation coverage for him, or, in the alternative, that Griffin Wood effectively elected workers’ compensation coverage for him.

Corin Harrison owns Griffin Wood and G & H Farms. Griffin Wood is in the business of harvesting, buying, and selling timber. G & H Farms is a farming operation in the business of raising cattle and catfish. G & H Farms has two employees who work on the farm tending the cattle and the catfish. Harrison testified that the two businesses are separate entities and that each business has separate bank accounts, charge accounts, and financial statements. Harrison also stated that he files separate tax returns for the two businesses.

Horton testified that he was 41 years old, has an llth-grade education, and that he has obtained his GED certificate. He stated that after his brother had informed him that Harrison was looking for someone to work on his cattle and catfish farm, he met with Harrison to discuss the job and was told that he would be working for Griffin Wood “[taking] care of the catfish and cattle side of the operation.” Horton began working on the cattle and catfish farm on February 3, 1999. His job duties included feeding the cattle and the catfish; cheeking the oxygen levels in the catfish ponds; treating the catfish ponds with chemicals and minerals; repairing fences; roping calves; tagging, treating, and castrating the cattle; clearing pastures; and cutting and bailing hay.

Horton testified that he had received his paychecks and his W-2 forms from Griffin Wood. Additionally, Griffin Wood had provided Horton with a farm truck, fuel, a radio, and a cellular telephone. Horton testified that he had been also subject to Griffin Wood’s drug-testing policy. He stated that he had charged goods for the farm to the Griffin Wood accounts. Horton’s testimony also indicated that Harrison had met with the Griffin Wood supervisors every morning to discuss the daily operations of that business and that, after the Griffin Wood supervisors had been dismissed, Harrison would then meet with Horton to discuss the daily operations of the cattle and catfish farm. Horton testified that he had worked full-time on the farm and that he had never worked in the woods harvesting timber.

Harrison testified that Horton had been employed by G & H Farms “to look after my cows and my catfish.” He stated that 100 percent of Horton’s job duties entailed working with the cattle and the catfish. Harrison acknowledged that Horton had received his paychecks and W-2 forms from Griffin Wood and that the two G & H Farms employees were on the Griffin Wood payroll as a matter of convenience. Harrison testified that Griffin Wood had provided Horton with a farm truck, fuel, a radio, and a cellular telephone. He also stated that G & H Farms had reimbursed Griffin Wood for Horton’s salary and other expenses incurred by Griffin Wood on behalf of G & H Farms.

Horton testified that on Wednesday, April 19, 2000, he and Boise Rutledge, the other farm employee, were preparing to “work” the cattle by setting up a portable head chute. Horton stated that as he and Rutledge were moving the head chute into place he felt something “burn in [his] back” and that “something kind of caught in his back.” Horton stated that his back “bothered” him while he was “working the cows.” Horton, Harrison, and Rutledge had been “working the cows” by applying a “wormer” medication to the cattle. Horton stated that when they had completed applying the medication to the cattle he knelt down to pour the medication from the applicator back into the bottle. He stated that when he stood “it felt like someone stuck a knife in my tail” and he collapsed to the ground. Horton stated that Harrison witnessed the incident and asked him what was wrong and that he replied “my back is killing me.” Harrison stated that Horton kneeled down and then grunted. He stated that he asked Horton what was wrong and that Horton replied that he had a “catch” in his back.

Horton continued to work the remainder of the week, primarily cutting hay, and he did not inform Harrison that his back was injured. Horton testified that on the following Saturday night, while he was walking out on his porch to light his barbecue grill, something caught in his back and he went down to his knees in excruciating pain. He was transported to the hospital by ambulance. Horton was subsequently diagnosed and treated for ruptured discs at the L4-L5 and L5-S1 levels and underwent two surgeries on his back. He testified that he is in constant pain and that he has not worked since April 22, 2000. The first report of the injury was completed on a form used for Griffin Wood employees.

The provisions of the Workers’ Compensation Act do not apply to the “employer of a farm laborer.” § 25-5-50(a), Ala.Code 1975. This court has stated:

“ ‘[I]t is generally recognized that the exemption of farm labor from workmen’s compensation coverage is construed according to the character of the work regularly performed by the employee, not according to the nature of the employer’s business. See 1C A. Larson, The Law of Workmen’s Compensation § 53.00 (1982). In other words, it is the nature of the work the employee does that determines whether he is a “farm laborer” for purposes of Ala.Code § 25-5-50 (1975).’ ”

JWM, Inc. v. Raines, 779 So.2d 247, 248 (Ala.Civ.App.2000), quoting Patrick v. Miller, 440 So.2d 1096, 1097 (Ala.Civ.App.1983). It is undisputed that Horton regularly performed farm-related labor during the course of his employment; therefore, the provisions of the Workers’ Compensation Act are not applicable to Horton, and he is not entitled to coverage under the Act, pursuant to § 25-5-50(a), Ala.Code 1975.

Horton relies upon a general rule of estoppel applicable to the area of insurance law and argues that, because he was listed on the Griffin Wood payroll and because the Griffin Wood employees were covered by workers’ compensation insurance, Griffin Wood is estopped to deny him-workers’ compensation coverage. The rule that Horton relies upon is stated as follows:

“ ‘There is a general rule of estoppel extant in the field of insurance law. This rule prohibits an insurer in employer’s liability, who collects premiums based upon a payroll listing, from denying liability as to an employee who was included therein. See Couch on Insurance 2d § 44:126 (1963 Ed.).’ ”

Ala-Miss Enters., Inc. v. Beasley, 446 So.2d 644, 646 (Ala.Civ.App.1984), quoting Employer’s Ins. Co. of Alabama v. Lewallen, 293 Ala. 574, 577, 307 So.2d 689, 691 (1975).

In Beasley, Beasley worked as a woodcutter for Hamilton and was injured when a tree fell on him, breaking his leg. Hamilton had been hauling wood exclusively to Ala-Miss Enterprises for approximately nine months, except for several loads that he had hauled to another purchaser. It was undisputed that Hamilton had hired Beasley and had supervised his work. There was no contract between Hamilton and Ala-Miss Enterprises, and Ala-Miss Enterprises could accept or reject any timber tendered by Hamilton. However, Ala-Miss Enterprises had deducted from the price it paid for every cord of wood it accepted from Hamilton a certain amount to pay workers’ compensation insurance premiums for Hamilton and Beasley. The trial court concluded that Beasley was an employee of Ala-Miss under the Workers’ Compensation Act and awarded him benefits. Id.

On appeal, this court, by way of analogy to the general rule of estoppel stated above, held that “Ala-Miss, by deducting for workmen’s compensation from the monies owed Hamilton, elected to treat Beasley, Hamilton’s ‘employee,’ as its employee for workmen’s compensation coverage.” Beasley, 446 So.2d at 646. In reaching its conclusion, this court specifically noted that Ala-Miss Enterprises had deducted the workers’ compensation insurance premiums from the price it paid per cord of wood to Hamilton; that it could reasonably be inferred that the premiums had been deducted to cover the people in the woods cutting and hauling the timber; that Beasley had been cutting timber to be hauled to Ala-Miss Enterprises; and that, therefore, Beasley would have been covered under Ala-Miss Enterprises’s workers’ compensation insurance coverage by virtue of Ala-Miss Enterprises’s having deducted the premiums for that purpose. This court specifically limited its holding to the peculiar facts of that case. Beasley, at 646-47.

The facts of this case are distinguishable from those in Beasley. Here, Horton was listed on the Griffin Wood payroll, and the Griffin Wood employees were provided with workers’ compensation insurance coverage. However, Griffin Wood’s workers’ compensation insurance premiums were not calculated based on the number of people on the payroll, rather, the premiums were calculated on a per-cord-of-wood-harvested basis. Harrison testified as follows:

“Q. You testified earlier that you had workers’ compensation for Griffin Wood Company, and Mr. Horton was on the payroll for Griffin Wood Company; is that correct?
“A. That’s right.
“Q. Are you testifying that there is coverage under the Griffin Wood Company policy for an employee that works on the farm?
“A. No. It’s my understanding that the worker’s comp has taken the position that it was farm laborer and that my premium — L pay my worker’s comp premium on a per cord basis. And so therefore [Horton] wasn’t producing any wood, so therefore there was no premi--um paid on him.”

Harrison testified as follows in response to questioning by the trial court:

“Q. Do you know how [the] premium is calculated by the insurance company? You had some testimony in response to Mr. Summerford’s question with regard to [the] premium paid on a cord basis. But do you personally know that, or is that something that somebody at the insurance company told you when you called them?
“A. It’s on a per cord basis.
“Q. My question to you is how do you know that?
“A. Well, what we do is get a quote every year and not just from this particular company. And at one time they went on payroll, strictly payroll. And then I would say five or six years ago they started back computing it on a per cord basis. And our monthly premium — if I haul 2,000 cords in the month of November; that’s what my premium is based on for folks in the woods. If I haul 2,000, -2,000 times $1.10, $.95, whatever it might be.
“Q. So then what you’re telling me is that it doesn’t matter whether you have five employees or five hundred employees at Griffin Wood Company. Your premium for workman’s comp coverage is determined by the cords of wood that you have produced on a monthly basis?
“A. Right.”

It can reasonably be inferred that the workers’ compensation insurance premiums were paid on behalf of those employees that worked in the woods cutting and hauling the timber. It is undisputed that Horton worked full-time in the cattle and catfish operation and that he did not work in the woods. Thus, no premiums were paid on behalf of Horton; therefore, he' is not covered by the Griffin Wood workers’ compensation insurance.

Horton also cites Lewallen supra, 293 Ala. 574, 307 So.2d 689, in support of his estoppel argument. In that case, Lewallen owned two construction companies — Omar Construction Company and Dome Construction Company. Those two businesses were later incorporated into one company, and the workers’ compensation insurance carrier collected premiums based on the monthly size of the total payroll of the two businesses that had been incorporated into one company. The workers’ compensation insurance policy, however, listed only one of the preincorporation businesses, and the policy was never changed to reflect the incorporation of the two businesses into a singlé entity. The employee, who had been employed by the preincorporation business that was not listed on the policy, was injured during the course of his employment. The insurance carrier denied any liability, arguing that the employee was not employed by the company named as the insured. The trial court entered a judgment declaring that the employee was covered under the policy. - Relying upon the general rule of estoppel in the area of insurance law, the supreme court affirmed the trial court, based, in part, on the fact that the employee’s salary was used to calculate the workers’ compensation insurance premium." Lewallen, supra. Again, the facts of Lewallen are distinguishable from the facts of this case. In Lewallen the employee’s salary was used to calculate the workers’ compensation insurance premiums. In the present ease, although Horton was named on the Griffin Wood payroll, the workers’ compensation insurance premiums were calculated on a per-cord basis, not on the number of employees on the payroll.

Accordingly, we conclude that the general rule of estoppel relative to the field of insurance law is not applicable to estop Griffin Wood from denying workers’ compensation insurance coverage for Horton.

Relying upon Smith v. Thrower Nursery, Inc., 360 So.2d 741 (Ala.1978), Horton also argues that Griffin Wood effectively elected workers’ compensation coverage for him. We disagree. An employer of a farm laborer may elect to become subject to the provisions of the Workers’ Compensation Act by “filing written notice thereof with the Department of Industrial Relations, a copy thereof to be posted at the place of business of the employer.” § 25-5-50(a), Ala.Code 1975. Our supreme court stated in Smith:

‘Where an employer has clearly manifested his intent to elect coverage and the concerned parties have at all times acted as though coverage was in effect, these actions should control. As Prof. Larson points out in his treatise on workmen’s compensation, ‘[WJhen the question is what will amount to affirmative election of coverage, most courts are less exacting as to formalities and will accept any realistic evidence of intent to accept coverage, such as actual payment of compensation or the taking out of workmen’s compensation insurance.’ 2A A. Larson, The Law of Workmen’s Compensation, § 67.10 (1976). While a single act of taking out insurance or paying a claim may not be sufficient evidence of intent, a consistent pattern of behavior on the part of the employer, his employees, and the Department of Industrial Relations will suffice.”

360 So.2d at 743. In Smith our supreme court affirmed the trial court’s judgment holding that an employer had elected workers’ compensation coverage for a farm laborer where the employer had filed notice of its intent to come under the provisions of the Act with the Department of Industrial Relations; the employees had been notified that they were covered by the Act, and notice of such coverage had been posted on an employee bulletin board; the employer had paid premiums for coverage and also had paid eight separate workers’ compensation claims; and the employer, the insurer, and the Department of Industrial Relations had all acted as if an effective election of coverage had occurred. Smith, supra.

In the present ease, there was no evidence presented indicating that G & H Farms or Griffin Wood had elected coverage for the farm employees. There was no notice of election filed with the Department of Industrial Relations electing coverage. There was no evidence indicating a consistent pattern of behavior on the part of the parties or others indicating an election of coverage, i.e., there was no evidence indicating that G & H Farms or Griffin Wood had previously paid premiums for workers’ compensation coverage or had paid any workers’ compensation claims on behalf of the farm employees. There was evidence presented indicating that a first report of injury had been prepared on a Griffin Wood form and had been submitted to the insurer; however, this alone will not suffice to effectively elect coverage under the Workers’ Compensation Act.

Accordingly, after reviewing the record, we conclude that the trial court erred in determining that Horton was covered under the provisions of the Workers’ Compensation Act. Therefore, we reverse the trial court’s judgment and remand this case for further proceedings consistent with this opinion.

REVERSED AND REMANDED.

CRAWLEY, THOMPSON, and PITTMAN, JJ., concur.

      . As discussed above, Griffin Wood had paid insurance premiums for its employees; however, those premiums were calculated on a per-cord-of-wood basis and did not include a premium for Horton, whose sole duties were farm-related and who did not work in the woods harvesting the timber.


author: CEAWLEY, Judge. MURDOCK, Judge,

text:
    Shirley A. JONES and Larry D. Cross v. Clyde W. CLAUSELL et al.
    2010614.
    Court of Civil Appeals of Alabama.
    Nov. 15, 2002.
    Rehearing Denied Jan. 17, 2003.
    Certiorari Denied April 11, 2003 Alabama Supreme Court 1020733.

      Larry C. Moorer, Mobile, for appellants.
   CEAWLEY, Judge.

Shirley A. Jones and Larry D. Cross (hereinafter referred to as “the redemp-tioners”) defaulted on payments for their home. Pursuant to the terms of a mortgage between the redemptioners and Clyde W. Clausell, John Clausell, Theodore Clausell, and Samuel Rowe (hereinafter collectively referred to as “the sellers”), a foreclosure sale was conducted on August 16, 1999, as a result of the redemp-tioners’ default. The home was repurchased by the sellers, except that John Clausell had died and his two daughters, Annie Bettis and Elnora Shackelford, repurchased his interest in the property (the sellers, excluding John Clausell and including Bettis and Shackelford, are hereinafter collectively referred to as “the purchasers”). On August 18, 1999, the redemp-tioners received a letter giving them notice that their home had been sold at the foreclosure sale. The notice informed them that they had 10 days to surrender possession of their home pursuant to § 6-5-251, Ala.Code 1975, and that their failure to do so would cause them to forfeit their right to redemption.

On August 7, 2000, the redemptioners inquired of the purchasers concerning the total amount due to be paid so that they could exercise their right of redemption. On August 15, 2000, the redemptioners were informed that because they had not delivered possession of their home until August 30, 1999, 12 days after receiving notice of the foreclosure sale, they had therefore forfeited their right to redemption.

On August 16, 2000, the redemptioners filed a complaint for redemption against the purchasers, alleging that they had surrendered possession of their home in a timely manner pursuant to § 6-5-251, that they had provided the purchasers with a written demand for a statement of debt and charges and that the purchasers had failed to provide a statement to them within 10 days pursuant to § 6-5-252. On November 13, 2000, the purchasers filed an answer to the redemptioners’ complaint. On May 25, 2001, the redemption-ers filed suggestions of death for Shackel-ford and Theodore Clausell and a motion to amend their complaint to name Namon Shackelford, Jr., Angela Tartt, Lakeisha Grimes, Elnora Reid, and Namon Shackel-ford, the heirs of Elnora Shackelford, and Ima Paxton, Erme Jean Clausell, Johnnie Clausell, Theodore Clausell, Jr., and Dais-ey Clausell, the heirs of Theodore Clausell, as defendants (these heirs are hereinafter included in the term “the purchasers”). On June 4, 2001, the trial court granted the redemptioners’ motion to amend their complaint; an amended complaint was filed on June 9, 2001.

On January 22, 2002, the trial court conducted a bench trial on the redemption-ers’ complaint. On February 1, 2002, the trial court entered an order stating that the redemptioners were not entitled to the relief they sought. The redemptioners filed a notice of appeal on March 24, 2002. On August 23, 2002, this case was transferred to this court by the supreme court, pursuant to § 12-2-7(6), Ala.Code 1975. On appeal, the redemptioners argue that the trial court erred in determining that they had not properly exercised their right to redeem their home.

The trial court was presented with conflicting testimony in regard to when the redemptioners surrendered possession of their home to the purchasers. The redemptioners testified that the last night they stayed at the home was Thursday, August 26, 1999; that they had completely moved out of the home and contacted Namon and Elnora Shackelford on Friday, August 27; and that they surrendered possession of their home by providing the keys to the house to Namon and Elnora on Saturday, August 28, 1999. Namon testified that the redemptioners telephoned on Saturday, August 28, and stated that they were still moving things out of the home and wanted to clean it, and scheduled to meet him and Elnora to deliver the keys on Monday, August 30, 1999. The trial court questioned Namon as to the reliability of his memory of that date; Namon responded that he was sure of the date because he had picked Elnora up from work prior to meeting the redemptioners at the home.

Our review of the trial court’s judgment is governed by the ore tenus standard of review.

“ ‘We note that under the ore tenus standard of review, the trial court’s findings of fact based on oral testimony, and a judgment based on those findings, are given a presumption of correctness. A judgment based on such findings will not be reversed unless it is shown to be plainly and palpably wrong. The appellate courts are not allowed to substitute their own judgment for that of the trial court if the trial court’s decision is supported by reasonable inferences to be drawn from the evidence. The reason for giving such deference to the trial judge’s findings based on disputed evidence in ore tenus proceedings is that the trial judge has the benefit of observing the witnesses’ manner and demeanor and has the better opportunity to pass upon the credibility of their testimony.’
“Ex parte Pielach, 681 So.2d 154, 154-55 (Ala.1996) (citations omitted). ‘Under the ore tenus rule, the trial court’s judgment and all implicit findings necessary to support it carry a presumption, of correctness and will not be reversed unless found to be plainly and palpably wrong.’ Transamerica Commercial Fin. Corp. v. AmSouth Bank, N.A., 608 So.2d 375, 378 (Ala.1992) (citations and internal quotation marks omitted).”

Creel v. Crim, 812 So.2d 1259, 1260-61 (Ala.Civ.App.2001). Based upon this standard of review, we cannot say that the trial court erred in basing its decision on the testimony of Namon Shackelford rather than on the testimony provided by the redemptioners. The trial judge was in the best position to determine the credibility of the testimony presented.

The redemptioners also attempt to rely on Watts v. Rudulph Real Estate, Inc., 675 So.2d 411 (Ala.1996), to argue that Namon and Elnora had not acted with due diligence in failing to demand the keys to the home when the redemptioners telephoned them on August 28 and that the redemptioners had otherwise acted in good faith. In Watts, our supreme court held that redemptioners’ acting in good faith and a purchaser’s not acting with due diligence excused the redemptioners’ precise compliance with § 6-5-251. In that case, the redemptioners, on the ninth day, sought a statement of charges by the purchaser to exercise their right of redemption. On the tenth day, having received no response from the purchaser, the redemp-tioners sent a second letter stating an intent to redeem along with a check, estimated to be the amount of charges due. On the seventeenth day, the purchaser returned the check with a letter stating that the charges were $136.48 more than the amount sent by the redemptioners and stating that because the redemptioners had failed to surrender possession, their right to redemption had been forfeited. In making its holding, the supreme court observed:

“This court stated in Garvich v. Associates Financial Services Co., 435 So.2d 30, 33 (Ala.1983):
“ ‘ “Courts of equity, in keeping with the general policy of redemption statutes, namely, the prevention of the sacrifice of real estate by forced sales, have excused the literal compliance with these statutes, and entertained bills for statutory redemption in a variety of cases, wherein, because of some fault of the party from whom redemption is sought, compliance would be useless, or, for any reason, not the fault of the redemptioner, it becomes impractical to comply.” ’
“Quoting Rodgers v. Stahmer, 235 Ala. 332, 333, 179 So. 229, 230 (1938).”

675 So.2d at 413.

The implicit findings that support the trial court’s judgment (i.e., that the re-demptioners presented no evidence to suggest why they could not have surrendered possession of the home, if the trial court believed the testimony of Namon that the redemptioners telephoned on Saturday, August 28, stating they had not completed moving or cleaning the house) carry a presumption of correctness and we cannot conclude those findings to be plainly or palpably wrong. Creel, supra. The testimony presented by Namon does not present a case in which the redemptioners made a good-faith effort, nor can we say that the failure to demand the keys on the tenth day was a lack of due diligence as was presented in Watts, supra, because Namon and Elnora had no duty to demand that the redemptioners surrender possession of the home on the tenth day. Rather, the redemptioners had a duty to surrender possession by the tenth day to avoid forfeiting their right to redemption. Accordingly, the trial court’s judgment is due to be affirmed.

AFFIRMED.

YATES, P.J., and THOMPSON and PITTMAN, JJ., concur.

MURDOCK, J., concurs specially.

MURDOCK, Judge,

concurring specially.

I believe this is a close case. The key passage of testimony may be that given by Namon Shackelford when, in describing his conversation with Shirley Jones on Saturday, August 28,1999, he testified:

“Well, she called and said she had moved, but there was some things she had left in the house, and she would go ahead and turn her key over Monday [August 30, 1999] at five o’clock.”

I do not find in the record any express testimony that the parties mutually agreed that the surrender of possession of the premises could be postponed until August 30, 1999. While the record hints at such a conversation and at other facts that might satisfy the requirements of Watts v. Rudulph Real Estate, Inc., 675 So.2d 411 (Ala.1996), it appears to fall short of proving such facts. In any event, I cannot conclude that the trial court’s implied factual findings, and its judgment based thereon, were in error as a matter of law.

      . The mortgage was titled as a vendor's lien deed and promissory note, but was in substance a simple mortgage.

      . We note that the 10-day period within which the purchasers were allowed to provide a statement to the redemptioners had not expired as of the date the complaint was filed.