text:
    EX PARTE CELTIC LIFE INSURANCE COMPANY. Ex parte Jeffrey Fredrickson. (In re Diane McLendon v. Celtic Life Insurance Company et al.)
    1010738 and 1010759.
    Supreme Court of Alabama.
    May 3, 2002.
    Robert S.W. Given, F.A. Flowers III, and Harlan F. Winn III of Burr & For-man, L.L.P., Birmingham, for petitioner Celtic Life Insurance Company.
    Jerry Dean Hillman, Barry A. Brock, and J. David Moore of Walston, Wells, Anderson & Bains, L.L.P., Birmingham, for petitioner Jeffrey Fredrickson.
    Ted L. Mann and Robert Potter of Mann, Cowan & Potter, P.C., Birmingham, for respondent.
   HOUSTON, Justice.

In Celtic Life Insurance Co. v. McLendon, 814 So.2d 222 (Ala.2001), an appeal from a trial court’s order denying arbitration in a case involving the same parties as are before this Court on these petitions, this Court held:

“[T]he order of the trial court denying Celtic and [Jeffrey] Fredrickson’s motions to compel arbitration is reversed, and the cause is remanded for further proceedings consistent with this opinion.”

After we remanded the case in Celtic Life, this Court decided Cavalier Manufacturing, Inc. v. Jackson, 823 So.2d 1237 (Ala.2001). In Cavalier Manufacturing, a ease of first impression in which the plaintiff had challenged the validity of an arbitration clause because the arbitration clause prohibited ’ punitive damages, we held:

“[A] predispute arbitration clause that forbids an arbitrator from awarding punitive damages is void as contrary to the public policy of this State — to protect its citizens in certain legislatively prescribed actions from wrongful behavior and to punish the wrongdoer. If parties to an arbitration agreement waive an arbitrator’s ability to award punitive damages, the door will open wide to rampant fraudulent conduct with few, if any, legal repercussions. The Legislature intended that punitive damages be available as a remedy in fraud actions, as evidenced by the enactment of § 6-ll-20(a). The Legislature is ' endowed with the exclusive domain to formulate public policy in Alabama, a domain upon which the judiciary shall not trod. American Bankers Ins. Co. of Florida [v. Crawford] 757 So.2d [1125,] 1137 [(Ala.1999)]. Thus, we conclude that it is not within the province of parties to a predispute arbitration agreement to waive a punitive-damages award.”

Cavalier Mfg., 823 So.2d at 1248-49. We reiterated that holding in Ex parte Thicklin, 824 So.2d 723 (Ala.2002).

In Celtic Life, Diane McLendon did not challenge the arbitration clause on the theory that that clause was invalid because it prohibited the award of punitive damages, an issue that had not yet been addressed by the United States Supreme Court or this Court, and on which federal circuit and district courts were divided. However, after this Court reversed the trial court’s judgment denying Celtic Life Insurance Company and Jeffrey Fredrick-son’s motions to compel arbitration and after this Court released opinions in Cavalier Manufacturing and Thicklin, McLen-don filed a motion in the circuit court asking it to void the arbitration agreement based solely upon the provision in that agreement prohibiting the award of punitive damages. In spite of the mandate in Celtic Life, the trial court granted McLen-don’s motion. Celtic and Fredrickson then filed these petitions for a writ of mandamus.

The contract of insurance included the following arbitration agreement:

“Arbitration
“Controversies or disputes arising out of, in connection with, or relating to this certificate [of insurance] which cannot be resolved to the satisfaction of both parties, may be resolved by arbitration, only as herein provided. Except that, judicial injunctive relief may be sought, if, such action is necessary to avoid irreparable harm or to preserve the status quo. Arbitration may not be initiated more than one year after the date written notice of the controversy or dispute was given.
“Arbitration shall be by a panel of three neutral arbitrators. Each arbitrator shall meet the requirements of, and agree to. act in accordance with, the procedures established by, the American Arbitration Association. Within - thirty days after receipt of a demand for arbitration, each party shall designate its arbitrator. The designated arbitrators shall, within thirty days, select the third arbitrator. If the arbitrators cannot agree on a third arbitrator within thirty days, they shall each nominate three individuals. The, American Arbitration Association shall choose the third arbitrator from the list of nominated individuals. Unless agreement is otherwise reached, the proceedings will be conducted in the county seat of the county nearest the insured person’s residence which has a population of at least 100,-000 persons.
“Each party shall bear the cost of its own arbitrator. The costs of the arbitration proceeding, including the fees of the third arbitrator, shall be borne equally by the parties., Attorney fees and expenses for witnesses will not be deemed to be expenses of arbitration, but will be borne by the party incurring them.
“Each party hereby irrevocably waives any right to recover punitive damages. The arbitrators shall have no power to award any punitive damages or to ignore or vary the terms of this certificate. “In any arbitration dispute or controversy that conflicts with this certificate this certificate shall govern. The parties agree that the arbitration award and any decision by the arbitration panel shall be confidential. It is understood and agreed that the arbitration shall be binding upon the parties, that the parties are waiving their right to seek remedies in court (except for judicial injunc-tive relief, as stated above), including the right to a jury trial; and that an arbitration award may not be set aside in later litigation except upon the limited circumstances set forth in the Federal Arbitration Act. Judgment upon the award rendered by the arbitration panel may be entered in any court having jurisdiction thereof.”

On March 4, 2002, this Court ordered McLendon to file an answer and brief. We grant the petitions and issue the writs of mandamus.

For the reason discussed in the following paragraphs, we need not discuss (1) whether the trial court had authority to enter an order contrary to the mandate of this Court (see Ex parte King, 821 So.2d 205 (Ala.2001); Terminix Int’l Co. v. Jackson, 723 So.2d 555, 558 (Ala.1998); Alfa Mut. Ins. Co. v. Nationwide Mut. Ins. Co., 684 So.2d 1295, 1302 (Ala.1996); and Ex parte Mobil Oil Corp., 613 So.2d 350, 352 (Ala.1993)); (2) whether the law of the case required the trial court to deny McLendon’s motion (see Southern United Fire Ins. Co. v. Purma, 792 So.2d 1092, 1094 (Ala.2001); Titan Indem. Co. v. Riley, 679 So.2d 701, 705 (Ala.1996); and Glasscock v. Wallace, 488 So.2d 1346, 1348 (Ala.1986)); (3) whether McLendon waived any claim that the contract language relating to punitive damages rendered the arbitration provision void (see Bogle v. Scheer, 512 So.2d 1336, 1337 (Ala.1987); and Boshell v. Keith, 418 So.2d 89, 92 (Ala.1982)); or (4) whether Cavalier Manufacturing and Thicklin should be given prospective application only.

Celtic and Fredrickson are requesting that this Court direct the trial court to vacate its order entered on remand and to enter another order granting the defendants’ motions for a stay of the proceedings, including any discovery undertaken to compel arbitration, with instructions to the parties to proceed to arbitration in accordance with the parties’ agreement to arbitrate, excluding the punitive-damages provision. The arbitration agreements in Cavalier Manufacturing and Thicklin contained severability clauses, and in those cases this Court severed the void provisions relating to punitive damages from the remainder of the arbitration clause.

The policy at issue contains the following provision:

“Any provision of this certificate which, on its effective date, conflicts with the law of the state in which the primary insured resides, is amended to conform to the minimum requirements of such laws.”

We need not decide whether this clause renders ineffective a clause held to be void after the effective date of the policy, because Celtic, the only defendant who was a party to the contract, waived the right to enforce the provision excluding an award of punitive damages. This Court has long recognized that a party to a contract can waive a contractual provision beneficial to that party. See Industrial Mach., Inc. v. Creative Displays, Inc., 344 So.2d 743, 746 (Ala.1977); LaGrave v. Jones, 336 So.2d 1330, 1332 (Ala.1976). See also Commercial Contractors, Inc. v. United States Fid. & Guar. Co., 524 F.2d 944, 954 (5th Cir.1975) (applying Alabama law).

Both Celtic and Fredrickson argue that this Court has frequently excised void or illegal provisions in a contract, even in the absence of a severability clause, and enforced the remainder of the contract. See Wright v. Robinson, 468 So.2d 94, 98 (Ala.1985); Sales-Davis Co. v. Henderson-Boyd Lumber Co., 193 Ala. 166, 172, 69 So. 527, 529 (1915). See generally 17A C.J.S., Contracts § 297 (1999) (discussing the general “duty of the court to preserve so much of a contract as may properly survive its invalid and ineffective provisions”).

The trial court is directed to vacate its order and enter an order granting Celtic and Fredrickson’s motions to stay the proceedings, including discovery, and to compel arbitration in accordance with the arbitration agreement set out hereinabove, except for the following provision:

“Each party ... irrevocably waives any right to recover punitive damages. The arbitrators shall have no power to award any punitive damages .... ”

PETITIONS GRANTED; WRITS ISSUED.

LYONS, BROWN, JOHNSTONE, HARWOOD, WOODALL, and STUART, JJ., concur.

MOORE, C.J., and SEE, J., recuse themselves.


source: Caselaw Access Project

author: MOORE, Chief Justice. HOUSTON, Justice

license: Public Domain

text:
    Lola M. WALKER v. GuideONE SPECIALTY MUTUAL INSURANCE COMPANY.
    1000964.
    Supreme Court of Alabama.
    May 10, 2002.

      J. Farrest Taylor of Cochran, Cherry, Givens & Smith, P.C., Dothan, for appellant.
    Jeffrey W. Smith, Montgomery, for ap-pellee.
   MOORE, Chief Justice.

Lola M. Walker appeals from the trial court’s summary judgment for GuideOne Specialty Mutual Insurance Company. The trial court held that GuideOne was not obligated to pay Walker uninsured-motorist benefits under Walker’s automobile insurance policy because the policy required a claimant to present competent evidence other than the testimony of the insured to prove the facts of an accident for which a claim was made in which there was “no physical contact with the hit-and-run vehicle.” The only evidence Walker offered was her testimony as to the events causing the accident. We reverse and remand.

The facts of this case are largely undisputed. GuideOne issued an automobile insurance policy to Walker. The policy provided uninsured-motorist benefits. The policy also included the following provision:

“If there is no physical contact with the hit-and-run vehicle the facts of the accident must be proved. We [GuideOne] will only accept competent evidence other than the testimony of a person making [a] claim under this or similar coverage.”

On or about November 1, 1999, Walker was involved in an automobile accident; she was severely injured and the only passenger in the automobile — her husband— was killed. Walker alleges that an approaching vehicle left its lane and crossed into her lane, causing Walker to swerve to miss the oncoming vehicle; her vehicle left the roadway and collided with a tree. Walker’s vehicle was completely destroyed by the resulting fire. The unidentified “phantom” vehicle did not stop; it remains unidentified. Walker is the only surviving witness to the accident.

As a result of the accident, Walker filed a claim with GuideOne for uninsured-motorist benefits. Walker contends that GuideOne denied her claim. GuideOne, however, insists that it did not affirmatively deny Walker’s claim but that it merely filed a complaint for a declaratory judgment concerning the matter. GuideOne filed its complaint for a declaratory judgment in Henry County on May 9, 2000, to determine the respective parties’ rights under the insurance policy. On December 6, 2000, GuideOne filed a motion for a summary judgment. On January 10, 2001, the trial court found that “controlling authority in this matter is provided by Hannon v. Scottsdale Ins. Co., [736 So.2d 616] (Ala.Civ.App.1999),” and granted Gui-deOne’s summary-judgment motion. Walker appealed. This is the first time this Court has addressed the issue presented by this appeal: Whether, under Alabama’s uninsured-motorist statute, § 32-7-23, Ala.Code 1975, an insurance policy provision is invalid and unenforceable because, in a “miss-and-run” accident allegedly caused by an unidentified “phantom” vehicle the policy will not cover a claimant who fails to produce evidence to corroborate his or her claim. The United States Court of Appeals for the Eleventh Circuit and the Court of Civil Appeals, of Alabama have each upheld such policy provisions under Alabama’s uninsured-motorist statute.

In Moreno v. Nationwide Insurance Co., 105 F.3d 1358 (11th Cir.1997), the Eleventh Circuit certified a similar question to this Court, but this Court declined to answer. This placed the Eleventh Circuit “in the unusual position of having to decide a first impression question of Alabama state law.” Moreno v. Nationwide Ins. Co., 114 F.3d 168, 169 (11th Cir. 1997). The insurance policy at issue in Moreno stated: “ ‘[i]f there’s no physical contact with the hit-and-run vehicle, the facts of the accident must be proved. We [Nationwide] will accept only competent evidence other than the testimony of any insured whether or not that insured is making a claim under this or any similar coverage.’ ” 114 F.3d at 170. The Eleventh Circuit held that the insured was not impermissi-bly limited in his uninsured-motorist coverage because the corroboration requirement “only provide[d] the standard of proof necessary to recover under the uninsured-motorist provision of the policy.” 114 F.3d at 171. The Eleventh Circuit concluded that “a corroboration requirement in phantom driver cases is not contrary to [Alabama] public policy” and Alabama’s uninsured-motorist statute. 114 F.3d at 169.

Two years later, in a decision relied upon by the trial court in this case, the Court of Civil Appeals, finding Moreno to be “persuasive,” concluded that a similar corroborative-evidence requirement in an automobile insurance policy was “not in derogation of the Alabama Uninsured Motorist Statute or the public policy of this state.” Hannon v. Scottsdale Ins. Co., 736 So.2d 616, 618 (Ala.Civ.App.1999). The policy at issue in Hannon provided coverage for injuries suffered in a phantom-vehicle accident, “ ‘provided the facts of the “accident” can be corroborated by competent evidence other than the testimony of any person making a claim under this or any other similar insurance as a result of such “accident.” ’ ” 736 So.2d at 617, quoting the policy provision. This Court denied certiorari review of the decision in Hannon. We now consider, however, the issue that was before the Eleventh Circuit in Moreno and before the Court of Civil Appeals in Hannon.

In this case, Walker argues that the corroborative-evidence requirement in her policy is unenforceable because, she says, it excludes her from coverage to which she is “legally entitled” under the Alabama uninsured-motorist statute, § 32-7-23, Ala.Code 1975. GuideOne argues that the corroborative-evidence requirement is not an “exclusion” of coverage but merely provides a “standard of proof’ designed to prevent fraudulent claims in phantom-vehicle accidents.

Alabama’s uninsured-motorist statute provides protection for “persons ... who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom.” § 32-7-23, Ala.Code 1975. “[A] policy exclusion that ‘is more restrictive than the uninsured motorist statute ... is void and unenforceable.’ ” Peachtree Cas. Ins. Co. v. Sharpton, 768 So.2d 368, 370 (Ala.2000) (quoting Watts v. Preferred Risk Mut. Ins. Co., 423 So.2d 171, 175 (Ala.1982)). Unknown phantom drivers, like the one Walker claims caused her accident, are included within the definition of an uninsured motorist. Criterion Ins. Co. v. Anderson, 347 So.2d 384 (Ala.1977).

A motorist “legally entitled to recover damages” under § 32-7-23 is one who presents facts sufficient to prove that the motorist was involved in an accident under circumstances that would entitle the motorist to uninsured-motorist coverage. Such a motorist is “legally entitled” to damages if the motorist meets his or her burden of presenting substantial evidence to survive a motion for a summary judgment or a judgment as a matter of law and the fact-finder is reasonably satisfied from the evidence that the motorist should recover damages. See § 12-21-12, Ala.Code 1975. In Walker’s case, the only evidence of a culpable phantom vehicle is Walker’s own testimony, which could constitute substantial evidence.

GuideOne’s policy excludes coverage for claimants involved in phantom-vehicle accidents who cannot present “competent evidence other than the testimony of a person making [a] claim.” Walker’s situation provides one example. But GuideOne’s exclusion of a claimant’s testimony, unless corroborated, could generate other, rather ludicrous, results. For example, even the testimony of three witnesses who were passengers in a vehicle involved in a phantom-vehicle accident would not constitute “competent evidence” if, in addition to the driver, those three witnesses were “making [a] claim” under GuideOne’s policy. Thus, there may be four witnesses to a phantom-vehicle accident, but the corroborative-evidence provision allows GuideOne to ignore all such evidence because it comes from “person[s] making [a] claim.” If one witness’s testimony can meet the applicable evidentiary burden so that the claimant is “legally entitled to damages,” the testimony of four witnesses is probably more likely to do the same. Thus, GuideOne’s policy could be used to hide a veritable mountain of testimonial evidence that would otherwise indicate that the claimant or claimants are “legally entitled to recover damages.”

The undeniable effect of Guide-One’s corroborative-evidence requirement, therefore, is to exclude from coverage those who were involved in an accident as the result of a phantom vehicle, but who cannot present “competent evidence other than the testimony of a person making [a] claim.” Such persons may be “legally entitled” to recover under § 32-7-23, but they are denied uninsured-motorist coverage because they do not to meet GuideOne’s contractual burden of proof. GuideOne’s corroborative-evidence requirement contractually raises the burden of proof for Walker and others similarly situated to a burden higher than the evidentiary burden required by law in Alabama. GuideOne’s policy, therefore, excludes from coverage those who otherwise would be able to prove that they are “legally entitled to recover damages” under § 32-7-23. Because GuideOne’s corroborative-evidence requirement is more restrictive than the uninsured-motorist statute, it is void and unenforceable. Peachtree, supra. To hold otherwise would permit GuideOne to alter Alabama law by contract.

GuideOne relies heavily upon this Court’s statement that “in the absence of statutory provisions to the contrary, insurance companies have the same right as individuals to limit their liability or impose conditions upon coverage so long as such conditions are not inconsistent with public policy.” Alabama Farm Bureau Mut. Cas. Ins. Co. v. Cain, 421 So.2d 1281, 1283 (Ala.Civ.App.1982) (emphasis added). GuideOne argues that it has the right to require corroborative evidence in phantom-vehicle cases as a condition to recovery in such cases because, without such a condition, a driver who runs off the road may fraudulently claim that the accident was caused by a phantom vehicle. Unfortunately for GuideOne, however, there is no “absence of statutory provisions to the contrary” regarding this issue. Section 32-7-23 requires coverage for those “legally entitled”; we construe that phrase to mean that GuideOne cannot establish an evidentiary hurdle of corroborative evidence to bar.legally entitled drivers from a recovery under an uninsured-motorist provision in its policy.

Alabama’s statutory provisions relating to uninsured-motorist coverage are silent on the matter of corroborative-evidence requirements or any contractual burden of proof whatsoever, see § 32-7-23, Ala.Code 1975, while the uninsured-motorist statutes in some other states expressly provide that proof of “no-contact” or “phantom” unidentified-vehicle accidents must be established by corroborative evidence. Kansas’s uninsured-motorist statute, which is remarkably similar' to Alabama’s, expressly allows an insurer to include in its policy a provision requiring corroborative evidence in phantom-vehicle accidents. See Kan. Stat. Ann. § 40-284(e)(3) (2000). While we understand GuideOne’s desire to protect itself against fraudulent claims, we cannot insert into Alabama’s uninsured-motorist statute an exception the Legislature has chosen not to include.

The appellate division of the New Jersey Superior Court reached a similar conclusion in Pasterchick v. Insurance Co. of North America, 150 N.J.Super. 90, 374 A.2d 1243 (1977), in reviewing a corroborative-evidence provision in light of New Jersey statutes that mandated coverage in phantom-vehicle accidents (N.J. Stat. Ann. § 17:28-1.1 and § 39:6-78). The Paster-chick court held that “[f]or the insurance companies to impose a condition requiring corroboration is for them to condition the coverage and thus to provide coverage in fewer cases and upon different terms from those prescribed by statute.” 150 N.J.Super. at 93, 374 A.2d at 1245. The court held such a condition to be “an impermissible qualification of the statutory mandate.” 150 N.J.Super. at 94, 374 A.2d at 1245. The New Jersey court also explained its limited role in the determination of the issue, the same role in which this Court finds itself:

“[W]e are not privileged to question the wisdom of the legislative action nor to substitute our judgment for that of the legislative authority. We understand well the reasonableness and desirability for a requirement of corroboration in this area so ripe for fraudulent claims. But correction by judicial legislation demeans the separation of powers. If the Legislature deems the situation to warrant the requirement, it can easily do so.”

150 N.J.Super. at 94, 374 A.2d at 1245 (citation omitted).

We conclude that GuideOne’s corroborative-evidence requirement violates the statutory mandate of § 32-7-23, Ala.Code 1975. Therefore, we decline to follow the decision of the United States Court of Appeals for the Eleventh Circuit in Moreno, supra, and we expressly overrule the decision of the Court of Civil Appeals of Alabama to the contrary in Hannon, supra.

Accordingly, the trial court’s summary judgment in this case is hereby reversed, and the case is remanded for proceedings consistent with this opinion.

REVERSED AND REMANDED.

SEE, LYONS, JOHNSTONE, HARWOOD, and WOODALL, JJ., concur.

HOUSTON, BROWN, and STUART, JJ., concur in the result.

HOUSTON, Justice

(concurring in the result).

In State Farm Fire & Casualty Co. v. Lambert, 291 Ala. 645, 285 So.2d 917 (1973), this Court determined that the physical-contact requirement in the hit- and-run provision of an automobile liability insurance policy was in derogation of the Alabama Uninsured Motorist Statute (Ala. Code 1975, § 32-7-23) and was void as against public policy. In so holding the Court adopted the rationale of the Supreme Court of Florida in Brown v. Progressive Mutual Insurance Co., 249 So.2d 429, 430 (Fla.1971):

“ ‘The argument that the policy requirement of physical contact is reasonable is fallacious. The only reason for such a requirement is to prove that the accident actually did occur as a claimant may say it did. This is a question of fact to be determined by the jury, or the judge if demand for jury trial is not made. If the injured party can sustain the burden of proof that an accident did occur, he should be entitled to recover, regardless of the actuality of physical contact.’ ”

291 Ala. at 649-50, 285 So.2d 917, quoting Brown, 249 So.2d at 430.

When there is no physical contact with the hit-and-run or phantom vehicle, Guide-One purports to accept as competent evidence only the testimony of a person not making a claim under this policy or a similar policy.

Nothing in Alabama law makes Walker’s testimony incompetent; for an insurer to attempt to do so and to thereby deprive her of a claim under her uninsured-motorist coverage is in derogation of § 32-7-23 and is void as against public policy. Lambert, supra.

      . Section 32-7-23, Ala.Code 1975, provides as follows:
      "(a) No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in subsection (c) of Section 32-7-6, under provisions approved by the Commissioner of Insurance for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, that the named insured shall have the right to reject such coverage; and provided further, that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured had rejected the coverage in connection with the policy previously issued to him by the same insurer.
      “(b) The term uninsured motor vehicle' shall include, but is not limited to, motor vehicles with respect to which:
      “(1) Neither the owner nor the operator carries bodily injury liability insurance;
      “(2) Any applicable policy liability limits for bodily injury are below the minimum required under Section 32-7-6;
      “(3) The insurer becomes insolvent after the policy is issued so there is no insurance applicable to, or at the time of, the accident; and
      "(4) The sum of the limits of liability under all bodily injury liability bonds and insurance policies available to an injured person after an accident is less than the damages which the injured person is legally entitled to recover.
      "(c) The recovery by'an injured person under the uninsured provisions of any one contract of automobile insurance shall be limited to the primary coverage plus such additional coverage as may be provided for additional vehicles, but not to exceed two additional coverages within such contract.”
      (Emphasis added.)

      . See, e.g., Ariz.Rev.Stat. § 20-259.01.M (2001) (if there is no physical contact with the unidentified vehicle, "the insured shall provide corroboration that the unidentified motor vehicle caused the accident”); Neb.Rev. Stat. § 44-6405(4) (1998) ("without actual physical contact" between the unidentified vehicle and the insured, the evidence of the accident must be corroborated "by competent evidence provided by an independent and disinterested person”); Ohio Rev.Code Ann. § 3937.18(D)(2) (2001) (if the identity of the motorist cannot be determined, independent corroborative evidence must exist); Or.Rev. Stat. § 742.504(2)(g)(B) (2001) (if the phantom vehicle has “no physical contact with the insured,” the evidence of the accident must be corroborated); Tenn.Code Ann. § 56-7-1201(e) (1999) (if there is no physical contact with the unknown motorist’s vehicle, “the existence of such unknown motorist [must be] established by clear and convincing evidence, other than any evidence provided by occupants in the insured vehicle”).

      . Kansas's uninsured-motorist statute allows an insurer to include in a policy the corroborative-evidence contract provision: "Any insurer may provide for the exclusion or limitation of coverage ... when there is no evidence of physical contact with the uninsured motor vehicle and when there is no reliable competent evidence to prove the facts of the accident from a disinterested witness not making [a] claim under the policy.” Kan. Stat. Ann. § 40-284(e)(3) (2000).


author: THOMPSON, Judge.

text:
    Thomas R. SHELTON and Southeastern Employee Benefit Marketers, P.C., d/b/a Shelton Builders v. Lewis Frederick CLEMENTS, Jr.
    2000851.
    Court of Civil Appeals of Alabama.
    Feb. 1, 2002.
    Rehearing Denied March 15, 2002.
    Certiorari Denied May 17, 2002 Alabama Supreme Court 1011435.

      Joshua J. Lane and Wilford J. Lane, Anniston, for appellants.
    John R. Phillips of Phillips & Phillips, Anniston, for appellee.
   THOMPSON, Judge.

Thomas R. Shelton (“Shelton”) and Southeastern Employee Benefit Marketers, P.C., d/b/a Shelton Builders (hereinafter “Shelton Builders”) sued Lewis Frederick Clements, Jr., and Michael Keith Hanson, alleging, among other things, breach of contract and defamation. Shelton and Shelton Builders (hereinafter sometimes collectively referred to as “the plaintiffs”) amended their complaint to name AmSouth Bank, N.A., as a defendant in the action. Clements answered, denying liability, and filed a counterclaim, alleging that the plaintiffs had breached a contract between him and Shelton Builders. Hanson moved to dismiss the plaintiffs’ claims against him. The trial court granted that motion and dismissed the plaintiffs’ claims against Hanson.

After receiving ore tenus evidence, the trial court, on January 3, 2001, entered an order in which it determined that the plaintiffs had breached a contract with Clements; the trial court awarded Clements $27,000 in damages on that claim. In its January 8, 2001, order, the trial court also found in favor of Clements on the plaintiffs’ claims. On January 4, 2001, the trial court entered an order dismissing the plaintiffs’ claims against AmSouth Bank. The January 4, 2001, order disposed of the last claims remaining in this action; therefore, that order constituted a final judgment. The plaintiffs filed a postjudgment motion, which the trial court denied. The plaintiffs appealed to the Supreme Court; that court transferred the matter to this court, pursuant to § 12-2-7(6), Ala. Code 1975.

• Initially, we note that where the trial court has received ore tenus evidence, the trial court’s judgment based on that evidence is entitled to a presumption of correctness and will not be reversed on appeal absent a showing that it is plainly and palpably wrong. Alverson v. Trans-Cycle Indus., Inc., 726 So.2d 670 (Ala.Civ. App.1998).

The record indicates that Shelton constructs houses for a living. Shelton is the president of Shelton Builders. The record contains no information regarding the identities of the other officers of Shelton Builders, the number of corporate stockholders or their ownership interests, or the corporation’s financial information. Hanson was an employee of Shelton Builders. Hanson coordinated the construction of Clements’s house for Shelton Builders; he was the primary contact between Clements and Shelton Builders.

On September 20, 1994, Clements and Shelton Builders entered into a contract pursuant to which Shelton Builders agreed to construct a house for Clements for a total contract price of $111,320. The design plans for Clements’s house provided that a portion of the house was to be constructed as a log cabin, and that the remainder of the house was to be of a more traditional style. The contract between Shelton Builders and Clements specified that a “log-cabin kit” was to be used to construct the log-cabin section of Clements’s house. The preconstruction estimated appraisal for Clements’s house was $100,000. AmSouth Bank agreed to loan Clements $90,000 for the construction of the house. Clements testified that when he entered into the construction contract in 1994, he expected to receive an inheritance of $16,000 in January 1995. In order to obtain the initial capital needed to begin the construction of Clements’s house before January 1995, Shelton agreed to inject $16,000 into the construction account for Clements’s house. Shelton actually deposited approximately $25,000 into that account. Shelton testified that the extra money was needed because the home-design plans required the purchase of the log-cabin kit, which cost approximately $20,000. In January 1995 Clements received his inheritance of $16,000, and he repaid Shelton’s loan to him in that amount. The parties left the remaining $9,000 in the construction-loan account for a time.

It appears that the construction of Clements’s house actually began in January 1995. During the construction of the house, one of the log-cabin walls cracked; the record indicates that the parties later learned that the wall had fractured because the specifications for the foundation of the house were not adequate to support the wall. Construction halted until representatives of the manufacturers of the log-cabin kits could recommend a method of repairing the wall and bolstering the foundation to properly support the walls of the log-cabin portion of the house. After the dispute that gave rise to this action, the log-cabin company settled a $2,500 “claim” made by either Shelton or Clements.

Between February 14, 1995, and April 17, 1995, Shelton made six “draws” from the construction loan Clements had obtained from AmSouth Bank; those draws totaled $50,122.80. The record indicates that the terms of the construction loan Clements obtained from AmSouth required that the contractor could make a draw only after completing each stage of the construction of the house. The draw was designed to pay a stage of construction as it was completed.

On April 21, 1995, Shelton went to Am-South to make a seventh draw from the construction loan. However, on that daté, AmSouth refused to provide Shelton any funds from the construction loan. Am-South stated the reason for that refusal was that it had inspected the construction on Clements’s house and discovered that the stage for which Shelton was seeking payment had not yet been completed. After AmSouth refused to provide further funds from the construction loan, Shelton returned to the construction site. Shelton spoke with Clements and Hanson about AmSouth’s refusal to provide further funding for the construction of Clements’s house. Clements did not understand the reason for that refusal, and he asked Shelton why the bank had refused to provide further funding. According to Clements, Shelton stated to him that he did not know why AmSouth refused to allow him to make the draw on April 21,1995.

Clements testified that after he, Shelton, and Hanson met to discuss AmSouth’s refusal to provide further draws from the construction account, Shelton told the workers then present at the construction site that there “isn’t any more money.” Clements testified that Shelton gave each worker $100 in cash and that Shelton told the workers that they, could place a lien against Clements’s house to guarantee that they would be paid for their work. Clements testified that Shelton told the construction workers that AmSouth would not release additional loan proceeds because “not enough work had been done.” Shelton admits that he had told the workers that they could place a lien on Clements’s house for the value of the work for which they had not been paid.

Clements testified that after April 21, 1995, he repeatedly asked Shelton for an accounting that could set forth the amounts that had been spent on the construction of his house and the amounts Shelton had withdrawn from the construction loan. Clements testified that approximately one month after April 21, 1995, Shelton gave him a box containing unsorted receipts. Clements testified that he and Hanson spent approximately two weeks sorting through the receipts and construction bills and matching those receipts and bills to the cancelled checks from the construction-loan account. Clements testified that he and Hanson constructed an accurate ledger for the construction account. Clements testified that after he had created the ledger, he and Hanson estimated the cost of completing the construction of his house. Clements stated that he then obtained a $9,000 personal loan in order to fund the completion of the construction stages necessary to once again become eligible to obtain funds from the AmSouth construction loan.

At the trial in this matter, Clements presented evidence indicating that Shelton had used a total of $9,652.58 from the construction account for his personal expenses. Clements’s evidence indicated that Shelton had used some funds of that amount for his personal use, and that Shelton had billed certain expenses related to the maintenance of his own house or to other projects to Clements’s construction project. Shelton disputed some, of that evidence, but he admitted that he had used some funds from the construction-loan account to pay for repairs to his own house and for construction on another project. It is undisputed that the parties considered the approximately $9,000 Shelton had initially invested in the project (the amount ■ in excess of the $16,000 he “loaned” to Clements to begin construction) to be Shelton’s money. Therefore, Clements did not object to Shelton’s using that amount for his personal or business use.

Shelton also testified that when he received the $2,500 “settlement” from the log-cabin company, he took $454 from that amount to repay some expenses he had incurred in constructing Clements’s house. It is not clear from the record whether Clements received the remainder of the “settlement” proceeds.

After April 21, 1995, Shelton performed no further work on Clements’s house. The parties dispute whether Shelton was unwilling to complete the project and simply did not return to the worksite, or whether Clements refused to allow Shelton to continue working on the project. Shelton testified that Clements refused to discuss the construction project with him after April 21, 1995, and that he later learned that Clements had undertaken the completion of the construction project himself. Shelton stated that after April 21, 1995, an AmSouth employee indicated to him that he and Clements would have to work together to work out the construction scheduling problems. Shelton maintained that Clements had refused to travel with him to the bank to meet with an AmSouth representative to work out the problems with the financing of the construction project.

Clements testified that after April 21, 1995, he was unwilling to invest any more money in the construction project until he could ascertain where and on what the funds already withdrawn had been spent. Clements testified that he invested the additional $9,000 to continue the construction project only after creating the ledger and estimating the cost of finishing the construction of his house. Clements testified that it took him weeks to construct the ledger, and that Shelton did not return to work on the construction site after he had completed the ledger.

Clements, with Hanson’s assistance, completed the construction project using the same subcontractors initially hired by Shelton. In order to save money and complete the construction of his house for an amount close to the original contract price, Clements substituted some costly materials with less expensive materials. Those substitutions resulted in a savings of approximately $12,000. However, even with that amount of cost savings, the total cost of the construction of Clements’s house totaled $117,629.73, which was approximately $6,000 in excess of the original contract price of $111,320.

Shelton testified that he had used his personal charge accounts to purchase some materials for the construction of Clements’s house. Shelton admitted that he instructed the merchants from whom he had purchased those materials to place liens on Clements’s house in order to obtain payment for those materials. Those liens delayed Clements’s ability to obtain additional draws from AmSouth; therefore, they delayed the completion of the construction of Clements’s house. Those liens were later resolved, and several of the merchants obtained judgments against Shelton.

Shelton testified that he personally has constructed between 70 to 80 houses, but that Clements’s house was the first house built by Shelton Homes. Clements presented evidence indicating that Shelton had stated that if he did not make a profit on the construction of Clements’s house, he would simply bankrupt that “little corporation,” i.e., Shelton Homes. Shelton testified that he did not recall making that statement. Hanson testified that Shelton had at one point told him that he was worried that there was not enough money remaining in the construction-loan account to finish the construction of the house, and that “he was going to try and get out of the contract.” Shelton denied that allegation; at trial, he insisted that he had intended to complete the construction of Clements’s house.

Shelton testified that AmSouth had provided funds as the various construction stages were completed. He stated that the project had progressed well, but he explained that the construction project appeared to be behind schedule, applying AmSouth’s financing schedule, because the project had required a huge initial outlay of capital in order to purchase the log kit for the log-cabin portion of Clements’s house. Shelton maintained that Aim-South’s standard construction-account form did not work well for providing funding to finance a log-cabin home.

Shelton also testified that he was not aware that if he finished the work required by AmSouth, he could have obtained the next draw. Shelton initially testified that he could have funded that additional construction in order to again become eligible for a draw. However, he later testified that Shelton Builders had no assets and that he or it would have had to borrow the money necessary to complete the construction stage as required by AmSouth.

On appeal, the plaintiffs first argue that the trial court erred in finding that both Shelton and Shelton Builders had breached the parties’ 1994 construction contract. The plaintiffs argue that the evidence does not support the trial court’s decision to pierce Shelton Builders’ corporate veil so as to impose personal liability upon Shelton.

“A corporation is a legal entity that exists separate from its shareholders, and its actions and obligations are to be considered separately from those of its shareholders. Wright v. Alan Mills, Inc., 567 So.2d 1318 (Ala.1990). The corporate structure is intended to protect shareholders and officers from liability arising from the operation of the corporation. Messick, v. Moring, 514 So.2d 892, 894 (Ala.1987). The ability to pierce a corporate veil and impose personal liability on the corporation’s shareholders arises from an equitable doctrine and ‘ “furnishes a means for a complainant to reach ... [an] individual upon a cause of action that otherwise would have existed only against the ... corporation.” 1 William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 41.10 (perm. ed. rev.vol.1999).’ Ex parte Thorn, 788 So.2d 140, 145 (Ala.2000). Piercing the corporate veil to impose personal liability on a corporation’s shareholder is not a power that is exercised lightly. First Health, Inc. v. Blanton, 585 So.2d 1331, 1334 (Ala.1991).”

Gilbert v. James Russell Motors, Inc., 812 So.2d 1269, 1273 (Ala.Civ.App.2001). The fact that a party owns all or a majority of the stock in a corporation does not alone destroy the corporate entity, nor does the fact that the corporation is not sufficiently capitalized alone work to defeat the corporate existence. Ramko, Inc. v. Lander, 707 So.2d 645 (Ala.Civ.App.1997). “ ‘To pierce the corporate veil, a [party seeking to pierce the corporate veil] must show fraud in asserting the corporate existence or must show that recognition of the corporate existence will result in injustice or inequitable consequences.’ ” Econ Mktg., Inc. v. Leisure Am. Resorts, Inc., 664 So.2d 869, 870 (Ala.1994) (quoting Backus v. Watson, 619 So.2d 1342, 1345 (Ala.1993), citing Washburn v. Rabun, 487 So.2d 1361 (Ala.1986), and Cohen v. Williams, 294 Ala. 417, 318 So.2d 279 (1975)). Also, where a corporation is “controlled by persons who use the corporation as a mere instrumentality, a court is not required to recognize the corporation as a separate entity.” Thorne v. C & S Sales Group, 577 So.2d 1264, 1266 (Ala.1991).

In this case, it is undisputed Shelton Builders had no assets. The record indicates that Shelton used the Am-South construction-loan account to pay some of his own minor personal expenses. In addition, Clements presented evidence that Shelton had billed Clements for certain equipment and labor related to other projects. It is undisputed that Shelton purchased certain materials for the construction of Clements’s house on his personal credit cards, and that, when he did not pay those debts, he later instructed those personal creditors to place liens on Clements’s house. Further, Shelton withdrew some of the proceeds of the $2,500 “settlement” from the log-cabin company to pay expenses related to the construction of Clements’s house for which Shelton was personally liable; after first paying his own expenses, Shelton then forwarded the remainder of those funds to Clements. Thus, the record contains evidence to support a conclusion that Shelton Builders was undercapitalized and that, by involving his own personal finances in the construction project for which Shelton Builders had contracted, Shelton had commingled his funds with those of the corporation. We conclude that that evidence, together with the evidence indicating that Shelton intended to file a petition in bankruptcy for Shelton Builders if it did not earn a profit on the construction of Clements’s house and that Shelton had informed Hanson that he would like to “get out of’ the contract between Shelton Builders and Clements, would support a conclusion that Shelton had operated Shelton Builders merely as an instrumentality or alter ego of himself. See Thorne v. C & S Sales Group, supra. Whether a party is an alter ego of his corporation is a question of fact to be resolved by the fact-finder. Woods v. Commercial Contractors, Inc., 384 So.2d 1076, 1079 (Ala.1980). The trial court did not make any specific findings of fact with regard its decision to pierce the corporate veil to impose personal liability on Shelton. In the absence of specific findings of fact, this court must presume that the trial court made those factual findings that would support its judgment. Transamerica Commercial Fin. Corp. v. AmSouth Bank, N.A., 608 So.2d 375 (Ala.1992). Also, we conclude that the evidence tends to support a conclusion that under the facts of this case, allowing Shelton to avoid personal liability would “result in injustice or inequitable consequences” for Clements. See Econ Mktg., Inc. v. Leisure Am. Resorts, Inc., 664 So.2d at 870. Given the evidence in the record on appeal, we conclude that the evidence supports a finding that Shelton should be personally liable for the damages the trial court awarded Clements on his breaeh-of-con-tract claim.

The plaintiffs next argue that the trial court erred in determining that they, rather than Clements, breached the contract between Shelton Builders and Clements. In order to prevail on his breaeh-of-contract claim, Clements was required to present evidence in support of the following elements of his claim: (1) the existence of a valid contract between Shelton Builders and him; (2) his own performance under that contract; (3) Shelton Builders’ breach, or failure to perform under the contract; and (4) damage sustained as a result of Shelton Builders’ nonperformance. Southern Med. Health Sys., Inc. v. Vaughn, 669 So.2d 98, 99 (Ala.1995). The plaintiffs do not dispute the existence of a valid contract between Shelton Builders and Clements. Rather, the plaintiffs’ argument in their brief on appeal is dedicated to their contention that the evidence demonstrates that Clements failed to perform under the contract.

The plaintiffs argue that the evidence demonstrates that Clements “repudiated” the contract. See Congress Life Ins. Co. v. Barstow, 799 So.2d 931, 938 (Ala.2001) (“ ‘A repudiation is a manifestation by one party to the other that the first cannot or will not perform at least some of his obligations under the contract.’ ” Quoting E. Allan Farnsworth, Contracts, § 8.21, at 633-34 (1982)). The plaintiffs maintain that Clements’s alleged repudiation of the contract between Shelton Builders and him constituted a breach of that contract, and that that alleged repudiation prevented them performance under the contract. The plaintiffs point to Shelton’s testimony that he wanted to meet with Clements and an AmSouth representative to reinitiate the bank’s funding of the construction project, but that Clements would never do so. However, Clements testified that he was unwilling to provide Shelton further funds to complete the project until Shelton had explained how the money already spent had been used; Clements stated that it was almost a month before Shelton and the bank provided him with the information he needed to create a ledger and to make that determination. Clements testified that Shelton did not return to manage the construction project; Shelton testified that Clements would not discuss the project with him after April 21, 1995. Thus, the evidence in the record as to why Shelton and Shelton Builders stopped working on the construction of Clements’s house conflicted. The evidence also conflicted in regard to whether either party had attempted to work out the problems with the financing of the construction of Clements’s house.

The evidence regarding the parties’ performance under the contract regarding almost every pertinent fact was in conflict. It is the duty of the trial court to resolve conflicts in the evidence. Jones v. LeFlore, 421 So.2d 1287, 1288 (Ala.Civ.App.1982). After receiving the ore tenus evidence, the trial court determined that the plaintiffs had breached the contract. There is sufficient evidence in the record on appeal to support that determination. Therefore, we are unable to say that the trial court’s judgment in favor of Clements on the plaintiffs’ breach-of-contract claim was plainly and palpably wrong. See Alverson v. Trans-Cycle Indus., Inc., supra.

The plaintiffs’ last argument is that the trial court abused its discretion in its award of damages because, they allege, Clements did not mitigate his damages. Whether a party has mitigated his damages is a factual question. Carnival Cruise Lines v. Goodin, 535 So.2d 98 (Ala.1988). “Generally, an injured party is required to mitigate his damages in a reasonable manner consistent with what an ordinarily prudent person would do in similar circumstances.” Id. at 103. A party may not recover for any part of his loss that was caused or increased by his failure to act reasonably. Kuruvilla v. Red Bay Hosp., 497 So.2d 829 (Ala.Civ.App.1986).

In its January 3, 2001, order finding in favor of Clements on his counterclaim, the trial court stated, in part:

“The assessing of damages is somewhat difficult in this case. This is due to the fact that the nature and extent of some items of damages were or could have been substantially altered by the conduct of one party or the other. However, from a fair and equitable analysis based on the totality of the circumstances, the Court is of the opinion that [Clements] is due to recover of the Plaintiffs the sum of $27,500.”

We note that our supreme court recently characterized the defense of failure to mitigate damages as an affirmative defense. Prudential Ballard Realty Co. v. Weatherly, 792 So.2d 1045, 1048 (Ala.2000). In this case, the plaintiffs did not raise in their answer to Clements’s counterclaim the defense of the failure to mitigate damages. Therefore, under the authority of Prudential Ballard Realty Co. v. Weatherly, we conclude that that defense was waived. See also Rule 8(c), Ala. R. Civ. P.; Sperau v. Ford Motor Co., 674 So.2d 24 (Ala.1995).

Assuming, however, that the issue whether Clements appropriately mitigated his damages was properly before the trial court, we note that the trial court’s judgment does not set forth the calculations it used in reaching its damages award. However, a trial court is not required to assess damages with mathematical precision. Chestnut v. Laramore, 560 So.2d 1070 (Ala.Civ.App.1990). “All that is required is that the evidence, with as much certainty as the situation permits, lay a foundation with which the trier of fact may make a fair and reasonable estimate of the amount of damages.” Farmer v. Strother, 423 So.2d 252, 253 (Ala.Civ.App.1982) (citing 22 Am.Jur.2d 44, Damages § 25 (1965), and United Bonding Ins. Co. v. W.S. Newell, Inc., 285 Ala. 371, 232 So.2d 616 (1970)). We cannot determine from the trial court’s judgment whether it considered the issue whether Clements had appropriately mitigated his damages. Where a trial court fails to make specific factual findings regarding a particular issue, this court must assume that it made those findings necessary to support its judgment. Transamerica Commercial Fin. Corp. v. AmSouth Bank, N.A., supra. We must assume that the trial court, in determining the damages it would ¡award, concluded that Clements had mitigated his damages. Therefore, we next address whether the record on appeal supports that determination.

Shelton testified that after April 21, 1995, he discovered a roofing contraetor that would perform the roofing work for several hundred dollars less than the original roofing contractor. Shelton also testified that he discovered another contractor who could complete the remaining carpentry work more quickly, and therefore less expensively, than the carpenter who ultimately completed the work on Clements’s house. Clements testified that in completing the construction of his house, he substituted the more expensive materials or features for which he had originally contracted for less expensive alternatives. Clements also used the subcontractors that Shelton had originally hired. We cannot say that Shelton has established that Clements’s actions aggravated his damages or increased his loss. See Kuruvilla v. Red Bay Hosp., supra. We must conclude that the evidence in the record supports the trial court’s conclusion that Clements, in using the subcontractors originally hired by Shelton, acted in a “reasonable manner consistent with what an ordinarily prudent person would do in similar circumstances.” Carnival Cruise Lines v. Goodin, 535 So.2d at 103. Therefore, we cannot say that the plaintiffs have established that the trial court erred in refusing to reduce its damages award based on Clements’s alleged failure to mitigate his damages.

AFFIRMED.

YATES, P.J., and CRAWLEY, PITTMAN, and MURDOCK, JJ., concur.