author: TORBERT, Chief Justice.

text:
    Charles C. GOWENS v. CHEROKEE COUNTY BOARD OF EDUCATION et al.
    SC 2299.
    Supreme Court of Alabama.
    May 20, 1977.
    Rehearing Denied Aug. 19, 1977.
    W. Troy Massey, Montgomery, for appellant.
    Hugh Reed, Centre, for appellees.
    Truman Hobbs and Joseph E. Carr IV, Montgomery, for Alabama Education Assn., amicus curiae, in support of appellant’s position.
   TORBERT, Chief Justice.

Charles Gowens was employed as a teacher by the Cherokee County Board of Education in August 1973 for the 1973-74 school year. He was subsequently re-employed for the next two school years with each year’s employment being based on a separate written contract. On May 26, 1976, prior to the close of the 1975-76 school year, Gowens received the following letter:

“Dear Mr. Gowens:
This is to inform you that upon the recommendation of the school trustees you were not re-employed by the Cherokee County Board of Education for the 1976-77 school term.
Sincerely,
(signed)
Ed Arnold, Jr.
Superintendent
Cherokee County Schools”

Gowens asked for an opportunity to meet with the Board and on July 6, 1976 was allowed to confer with them. With the assistance of counsel, Gowens requested the Board to give the reason or reasons why he was not rehired for the 1976-77 school term. However, the Board refused to enter into any discussion regarding the reason for their action.

Gowens then filed suit in circuit court seeking declaratory and injunctive relief asking that he be rehired as a teacher. The Board filed a motion to dismiss under Rule 12(b)(6), ARCP. After a hearing, the motion to dismiss was granted.

At the time Mr. Gowens received notification from the County Superintendent that he would not be re-employed for the 1976-77 school year, he was classified as a non-continuing service status teacher under Title 52, § 352, Alabama Code of 1940 (Re-comp.1958). This designation is most frequently referred to as a non-tenured teacher.

Title 52, § 361(2), Alabama Code of 1940 (Recomp.1958), establishes the statutory guidelines for the re-employment of teachers, and provides in pertinent part:

“Any teacher in the public schools, whether in continuing service status or not, shall be deemed offered re-employment for the succeeding school year at the same salary, unless the employing hoard of education shall cause notice in writing to be given said teacher on or before the last day of the term of the school in which the teacher is employed . . ..” [Emphasis added.]

There is no dispute that the letter Mr. Gowens received on May 26, 1976 complied with the requirements set out in Title 52, § 361(2). The primary issue raised by the appellant, Mr. Gowens, concerns what effect should be given to a particular provision contained in a booklet which outlines the personnel policies of the Cherokee County Board of Education. This manual is entitled, “Cherokee County School System Certified Personnel Policies” and on page 17 the following is found:

“Dismissal
According to law, contracts for probationary or non-tenure teachers may be cancelled by the employing board of education causing notice in writing to be given said teacher on or before the last day of school in which the teacher is employed.
Although from a legal standpoint no reason is necessary for the dismissal of non-tenure teachers, the policy of the Cherokee County Board of Education shall be as follows:
a. The principal has made the teacher aware of his weakness.
b. The principal has made recommendations for improvement.
c. The principal shall verify that the teacher has not improved or does not show promise of improving to the point of becoming an effective teacher. Cancellation of contract of tenure
teachers is a detailed legally oriented process. Reference is made to Title 52, Sections 351-361 of the Public School Laws of Alabama for detailed information relative to cancellation of contract of tenure teachers.”

It is Gowens’ argument that the Cherokee County Board of Education is bound by the rules and regulations contained in this booklet and that the failure of the Board to follow these steps constituted a violation of his constitutional right to due process. It is pointed out that county boards of education are empowered to establish local rules and regulations under Title 52, § 73 Alabama Code of 1940 (Recomp.1958).

It is not necessary here for this court to consider what effect this local regulation has on this proceeding. Mr. Gowens was not dismissed from his employment as a teacher but rather he was simply not re-employed for the next year. The terms of the 1975-76 contract were fulfilled by both parties to the contract and there is no indication in this record of a breach of the employment contract by dismissal of Mr. Gowens.

The issues raised by Mr. Gowens regarding his claim to a property interest in his job were addressed by this court recently in Foster v. Blount County Board of Education, Ala., 340 So.2d 751 (1976), wherein it was stated:

“The Alabama Legislature, by enacting the Teacher Tenure Law, has created two classes of teachers in the public schools of this state, those which have a continuing service status (tenured teachers) and those which do not have (probationary or nontenured teachers). The employing boards of education may not summarily terminate a tenured teacher, but may summarily terminate a probationary or nontenured teacher. Title 52, § 351, et seq. See also State v. Board of Education of Fairfield, 252 Ala. 254, 40 So.2d 689 (1949).
“Under Alabama law, it is not disputed that a nontenured teacher has no right, statutory or otherwise, to be re-employed. However, the nonrenewal of a teacher’s contract may entitle him to procedural due process if the reasons for the nonre-newal stigmatizes him, or injures his prospects for future employment. It is also conceded that the Alabama statutes do not require the boards of education to state reasons for the nonrenewal of a nontenured teacher’s contract of employment. Of course, the failure to renew one’s contract cannot be predicated on the exercise by that person of his constitutional rights. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972).
The Supreme Court of the United States held in Board of Regents of State Colleges v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), that the Constitution does not require an opportunity for a hearing before the renewal of a nontenured teacher’s contract, unless the teacher can show that the decision not to renew deprived him of an interest in ‘liberty’ or that he had a ‘property’ interest in continued employment.” 340 So.2d at 752.

Mr. Gowens was not entitled to a due process hearing regarding the Board’s failure to re-employ him because he has not proved that the reasons for the nonrenewal either stigmatized him or injured his prospects for future employment. In fact this record contains no reference to the reasons behind the Board’s action and under the requirements of Title 52, § 361(2), Alabama Code of 1940 (Recomp.1958), the Board was not required to specify its reasons.

Finally, Gowens points out that in the letter of May 26th, the following appears:

“upon the recommendation of the school trustees you were not re-employed. . ."

Gowens argues that because Title 52, § 123, Alabama Code of 1940 (Recomp. 1958), establishes that the responsibility of recommending “dismissal” of teachers is the exclusive prerogative of the County Superintendent the notification he received was faulty and thus void. This issue is not properly raised in this case in that as stated before the action taken by the Cherokee County Board of Education cannot be termed a dismissal, thus it is not proper for this court to address this question here.

Accordingly, the granting of the motion to dismiss was proper and this case is due to be affirmed.

AFFIRMED.

BLOODWORTH, JONES, ALMON and EMBRY, JJ., concur.


source: Caselaw Access Project

author: BEATTY, Justice. MADDOX, Justice

license: Public Domain

text:
    ALABAMA PUBLIC SERVICE COMMISSION et al. v. SOUTH CENTRAL BELL TELEPHONE CO., a corporation.
    SC 1682.
    Supreme Court of Alabama.
    June 3, 1977.
    Rehearing Denied Aug. 12, 1977.

      Maurice F. Bishop, Birmingham, for Hon. George C. Wallace, Governor of Alabama.
    Truman Hobbs and Carl L. Evans, Montgomery, for Ala. Public Service Commission.
    Robert E. Steiner, III, Montgomery, W. M, Booker, Atley A. Kitchings, Peyton D. Bibb, J. Richard Teel, Birmingham, for ap-pellee.
   BEATTY, Justice.

On February 15,1975, South Central Bell Telephone Company (the Company) filed a request with the Alabama Public Service Commission proposing a new intrastate rate and charge schedule. The new schedule, if approved, would allow $59,109,900 in additional revenue annually.

The Company provides local exchange telephone service and both intrastate and interstate toll service for five southeastern states — Alabama, Kentucky, Louisiana, Mississippi and Tennessee. The Company is a wholly owned subsidiary of American Telephone and Telegraph (AT&T) and began operation on July 1, 1968 when a five-state network split off from Southern Bell Telephone and Telegraph Company. As of December 81, 1974, the Company operated 91 exchanges which serve over 949,000 customers. AT&T, the parent company of the Bell System, has 21 principal telephone subsidiaries across the country as well as a number of other subsidiaries such as Western Electric Company, Inc. and Bell- Telephone Laboratories, Inc. All of the Company’s common stock is owned by AT&T and its debt-equity ratio is about 45% debt and 55% equity.

The Alabama Public Service Commission (the Commission) suspended the proposed schedule of rates on March 3, 1975 for a period of six months, through September 8, 1975, pursuant to Title 48, § 54, Alabama Code (Recomp.1958), as amended. Hearings were held between May 26, 1975 and August 5, 1975 on the proposed new schedule of rates and the Honorable George Wallace, as Governor, the State of Alabama, and the Secretary of Defense and the Executive Offices of the U.S. Government were permitted to intervene as parties.

On September 5, 1975, the Commission issued its order granting an increase in the schedule of rates and charges which would allow $16,694,545 in additional revenue annually. The Company, the State and the Governor appealed from the Commission order to the Circuit Court of Montgomery County under Title 48, § 79, Alabama Code. The Company then filed a request to supersede the order of the Commission under Title 48, § 84, Alabama Code, but the circuit court denied this request in an amended order entered November 7, 1975.

The case was argued on its merits December 18, 1975 and the circuit court entered its final decree on January 6, 1976. This decree fixed an overall rate of return at not less than 9%, which amounted to a 39V2 million dollar annual rate increase, granted the Company’s request for superse-deas of the entire 59 million dollar rate increase originally proposed upon execution and filing of bond, and remanded the case to the Commission to establish a schedule of rates in accord with the 9% return. On February 3, 1976, the Governor, the State and the Commission filed notice of appeal to this Court.

The sole issue presented here is whether the Commission’s order granting a $16,694,-545 annual rate increase and hence a 7.56% overall rate of return amounts to confiscation vel non of the Company’s property.

Where a rate case is appealed from the circuit court this Court’s scope of review is based on firmly established legal principles. When confiscation is alleged the Court must exercise broad review to determine upon its own independent judgment on both the law and the facts whether the rates fixed by the Commission fall within constitutional limits. As stated by the United States Supreme Court in Board of Public Utility Com’rs v. New York Telephone Co., 271 U.S. 23, 46 S.Ct. 363, 70 L.Ed. 808 (1926):

The just compensation safeguarded to the utility by the Fourteenth Amendment [to the United States Constitution] is a reasonable return on the value of the property used at the time that it is being used for the public service, and rates not sufficient to yield that return are confiscatory. .

Several legal principles control the determination of a fair rate of return in order to avoid confiscation. In Alabama Public Serv. Com’n v. Southern Bell T. & T. Co., 253 Ala. 1, 42 So.2d 655 (1949) these were outlined:

I. The reasonable rate of return depends upon many circumstances. It cannot be developed by a rule of thumb calculation. It must be determined in the exercise of a fair, enlightened and independent judgment in light of all relevant facts. .
II. The rate of return must be equal to that generally being earned by others in the same general locality in business undertakings attended by corresponding risks and uncertainties. .
III. The return must be sufficient to assure the investor’s confidence in the financial soundness of the utility enterprise and enough to maintain and support its credit so that it will be able to raise the money necessary to improve and expand its service to the discharge of its public duties. .
IV. In determining the reasonableness of rates it is necessary to consider the effect of the rates imposed in the light of the utility’s present situation and in light of its requirements and opportunities.

When considering confiscation, “. we should remember the principle that the property of a public utility, although devoted to the public service and impressed with a public interest, is still private property. .” Alabama Public Serv. Com’n v. Southern Bell T. & T. Co., supra.

The fixing of a fair rate of return is exclusively within the jurisdiction of the legislature or its agency, the Public Service Commission. State v. Southern Bell Telephone and Telegraph Company, 274 Ala. 288, 148 So.2d 229 (1962). In that connection, we observed in Alabama Public Serv. Com’n v. Southern Bell T. & T. Co., 268 Ala. 312, 106 So.2d 163 (1958) that:

. An appropriate rate of return necessarily will vary, depending upon the particular conditions and factors in each case. . . . However, we would emphasize that the responsibility for fixing rates and charges which are reasonable and just to both the utilities and the public rests with the Commission and not with the courts. So long as the Commission pursues its statutory authority, within constitutional limits, the courts should not interfere with its determinations.

We also recognize that the decree of a circuit court, based upon the record of the Public Service Commission in a rate case, reaches us with no presumption of correctness.

After taking lengthy testimony and then applying the rate base method, the Commission determined that the overall rate of return should be 7.56%. This application conforms to Alabama law:

As we interpret the above statutes, [Title 48, §§ 52, 319, Alabama Code] their effect is to have our Public Service Commission determine utility rates under the theory of a fair rate of return based upon a fair and adequate rate base, as distinguished from the so-called “cost of capital” theory, for determining the rate of return.
Under the rate base theory of determining a fair rate of return, the rate base is the valuation placed on the utility property. State v. Southern Bell Telephone & Telegraph Company, supra.

Title 48, § 52, Alabama Code, as amended, establishes the method for fixing the rate base:

. For the purpose of fixing rates such reasonable value of a public utility’s property shall be deemed to be the original cost thereof, less the accrued depreciation, as of the most recent date available, and the amount of the new investment to be added in the year immediately following the test period used in arriving at the value of such utility’s property.

The Company in the instant case has chosen 1974 as its test year, and the Company and the Commission have agreed upon a rate base of $775,662,119. Neither party disputes the correctness of this amount, and both concede that it complies with Title 48, § 52, Alabama Code, as amended. The deduction for the depreciation reserve reflects generally accepted accounting procedures for determining the present book value of assets. The calculations used to establish the rate base, however, may be helpful in appreciating our other conclusions:

The statutory rate base
(investment as of 12-31-74)
Telephone Plant in Service $774,903,031
Telephone Plant Under Construction 26,705,565
Property Held for Future Telephone Use 677,367
Material and Supplies 4,478,471
Cash Requirements 53L281
Total Investment $806,295,715
Less Depreciation Reserve (140.728.6681
Net Investment $665,567,047
New Investment to be added
12 months ending 12-31-75 (undepreciated) $110,455,972
Less Unrefunded Portion of Customer Funds (360.0001
Total $775,662,119

The Commission then determined that a 7.56% overall rate of return would be fair and reasonable to the Company. When the 7.56% rate of return is applied to the statutory rate base it gives $58,640,056 in net operating .income:.

7.56% X $775,662,119 = $58,640,056

After the Company’s $54,888,566 actual net operating income for 1974 was adjusted by the Commission, to account mainly for the required wage rate increase, a net income deficiency of $8,194,581 (after taxes) is noted. In calculating the adjusted net operating income, the Commission allowed a whole year’s deduction for the Communication Workers of America wage increase which became effective only in August, 1975. This wage increase has the effect of reducing net operating income by $4,119,-250, and the lower the adjusted net income figure, the greater the amount of the rate increase that must be allowed to give a $58,640,056 overall return. Accordingly, by allowing the wage increase for the entire year, the calculation of net operating income clearly is in favor of the Company.

The income tax factor (the Company’s marginal income tax rate) must be multiplied by the gross operating income (before taxes) to achieve net operating income (after taxes). When this tax factor is considered, gross operating income requires $16,694,545 in additional revenue to achieve the desired $58,640,056 overall return. This $16,694,545 is the amount of the rate increase allowed by the Commission order:

Operating Income Calculations
Net Income Determined to
give fair rate of return
(after rate increase) $ 58,640,056
Adjusted Net Income (including allowance for CWA Wage Increase) 50.445.475
Net Income Deficiency (after tax) $ 8,194,681
Applying the Income Tax Factor (0.4908538)
0.4908538 X $16,694,545 = $8,194,581
Gross Income Deficiency
(before tax) $ 16,694,545

The Commission also found the cost of debt to be 7.49% and that the appropriate debt-equity ratio is 45-55%. There is no issue between the parties on these. The cost of debt is the composite cost to the Company for acquiring investment funds generally from lending institutions and through issuance of bonds. This cost of debt percentage can be used to determine interest expense.

Among the financial data which we may use in ascertaining a fair overall rate of return is an analysis of the debt-equity ratio. The debt-equity ratio is important because it affects both the cost of debt and the cost (rate of return) of equity capital. When the amount of debt is moderate the debt and equity investment are less risky to the investor. However, if the amount of debt is relatively high the debt and equity investment becomes more risky, hence their costs or required rate of return becomes higher. These higher costs in turn necessitate a higher overall rate of return so that the appropriate funds may be generated. By the same token, if the amount of debt is moderate the overall rate of return required will be less. In State v. Southern Bell Telephone and Telegraph Company, 274 Ala. 288, 148 So.2d 229 (1962), this Court said:

The ideal capital structure would allow a debt-equity ratio in amounts that the company would get its full benefit in the amount of debt capital, and yet not have the debt component so high as to discourage prudent investors. This ideal capital structure is not static. However, many commissions and courts for rate making purposes, have concluded that a debt-equity ratio of 45% debt-55% equity most nearly .approximate a proper debt-equity ratio.

Additionally, the record shows that telephone utility investment is less risky than many other types of utilities.

We consider next the rate of return on the Company’s equity investment. The equity funds (net income after the rate increase minus the interest expense on the debt capital) are divided by the equity investment to give the rate of return on equity investment. Equity funds can be used to pay dividends and for retained earnings. This rate of return is an essential consideration under the “cost of capital” theory but it is not to be given strict mathematical significance under the rate base theory.

As we have noted, if the debt portion of capitalization is not too high the Company’s investment will be less risky and a moderate rate of return on equity will be required. Here, we find a 45-55% debt-equity structure which the record shows is considered the reasonable maximum amount of debt for business purposes.

“The ultimate question of a fair rate of return should not be a composite of the results mechanically reached by these for-mulae, with little regard given to the question sought to be determined, that is, the fair rate of return.” State v. Southern Bell Telephone and Telegraph Company, supra.

In its briefs, the Company’s calculations establish an 8.66% rate of return on equity, using what appears to be a composite method, whereas the Commission finds a 12.24% rate, using invested capital, and intervenors calculate a 11.21% rate of return on equity (before the rate increase), also using invested capital. The intervenor’s calculations are essentially the same as the Commission’s if figured after the rate increase allowed by the Commission:

The Company’s calculations:
(after rate increase)
Debt at a cost of 7.49% = 3.37 (45% X 7.49)
(45% of total) ,
Tax deferrals at 0 cost = 0
(6.6% of total)
Equity at a cost of |8.66.%| = 4.19 (48.4% X 8.66)
(48.4% of total)
Overall Rate of Return 7.56%
The Commission’s calculations:
(after rate increase)
Total fair return $ 58,640,056
Amount required to cover debt costs (7.49%) 18.246.548
Amount available for common equity $ 40,393,508
Debt $243,612,127
Equity $330.132,873
Total Cost Capital $573,745,000
$ 40.393,508 = 12.24% $330,132,873
The intervenor’s calculations:
(before rate increase and Commission adjustments)
Net Operating Income (return) $ 54,888,566
Interest Charges (7.34%) 17.881.130
Available for Common Equity $ 37,007,436
Debt $243,612,127
Equity 8330.132.873
Total Cost Capital $573,745,000
$ 37.007,436 - n.2i% $330,132,873

The Company’s figure of 8.86% rate of return on equity is unclear because the Company (prior to the rate increase) acknowledged that its rate of return on average equity was 11.21% for Alabama intrastate.

Moreover, the Company argues that the rate of return on equity should be based upon that percentage of the entire rate base that is applicable to the percentage equity investment. We disagree, because this would allow the Company to receive an equity return on funds that have not yet been invested and funds that are essentially free to the Company from tax deferrals. Further, the Company argues that the rate of return on equity allowed by the Commission in 1971 is more than the 8.66% rate of return on equity allowed presently (as calculated by the Company). However, this position overlooks the fact that the rate of return calculated in 1971 is based upon an entirely different rate base and income adjustments, hence they are not comparable.

After carefully reviewing the record we have found that the total average invested capital for 1974 is $573,745,000. There are differences of opinion in this case regarding the amount of invested capital but this results from an- absence of hard and fast rules for allocating capital among the states composing South Central Bell. We are of the opinion that the rate of return on equity as calculated by the Commission and the inter-veners is an accurate one.

It should be noted that the Commission allowed the new investment of $110,455,072 to be added to the rate base without any decrease for the approximately 43 million dollars accrued depreciation. This made the Commission’s calculation of a total fair return clearly in favor of the Company. Assuming the overall rate of return remains constant, the larger the rate base the larger the amount of income realized. Since the total return is increased by the inclusion of the undepreciated new investment in the rate base, the rate increase granted is in favor of the Company. For example:

7.56% X $775,662,119 =• $58,640,056 (total fair return)
$58,640,056 - $50,445,475 = $8,194,581 (amount of rate increase allowed after taxes)

The inclusion of an undepreciated new investment here is also a departure from many years of rate base calculations by the Company. It appears that the reason the accrued depreciation was not deducted was because of our decision in Alabama Gas Corporation v. Wallace, 293 Ala. 594, 308 So.2d 674 (1975), which held that it was not necessary to deduct this item from the new investment. However, when the new investment is actually made, we expect the Company, using generally accepted accounting procedures, will depreciate that investment. Because the accrued depreciation is allowed to remain in the new investment, a return will be earned on that accrued depreciation. As we have already noted, the Commission also allowed a downward adjustment to net operating income of $4,119,250 for wage increases that became effective in August, 1975.

Under Title 48, § 52, as amended:

The rates and charges for the services rendered and required shall be reasonable and just to both the utility and the public. Every utility shall be entitled to such just and reasonable rates as will enable it at all times to fully perform its duties to the public and will, under honest, efficient and economical management, earn a fair net return on the reasonable value of its property devoted to the public service. . . . In any determination of the commission as to what constitutes such a fair return, the commission shall give due consideration, among other things, to the requirements of the business with respect to the utility under consideration, and the necessity, under honest, efficient and economical management of such utility, of enlarging plants, facilities and equipment of the utility under consideration, in order to provide that portion of the public served thereby with adequate service.

A search of the record for relevant evidence which would establish a fair overall rate of return for the Company intrastate has revealed some interesting facts. In 1974, for example, the Company’s rate of return on equity, 11.21% before the rate increase, was higher than that of AT&T consolidated of 10.4%, and was also higher than 20 (including South Central Bell) of the 21 Bell Companies. Further, a Company witness, Mr. Meyer of Kidder, Peabody & Company, testified that the rate of return on average equity for South Central Bell in 1974 (all 5 states) was 9.96% and that this was the highest in its entire history. Additionally, another comparison may be made with regard to the Company’s financial well-being during 1974. This comparison involves the times-interest-charges ratio, which is the amount of net income divided by the interest costs. It gives the number of times that interest costs are covered by the net income, and the higher the number of times they are covered, the better the well-being of the Company. For Alabama intrastate this number was 3.01 compared to 2.80 for South Central Bell as a whole:

Times Interest Charge Calculation
(before Commission’s adjustment and rate increase)
$54.888.566 $18,246,548 ,U1

This 3.01 times-interest-coverage was higher than all but 4 of the 21 Bell Companies.

Furthermore, Alabama intrastate dividends paid by South Central Bell to AT&T increased from $23,511,835 in 1973 to $26,-714,597 in 1974.

Our duty is to examine the order of the Alabama Public Service Commission on the issue of confiscation in the schedule of intrastate rates and to exercise our independent judgment on both the facts and the law. Alabama Public Serv. Com’n v. Southern Bell T. & T. Co., 253 Ala. 1, 42 So.2d 655 (1949). We have done so, and after considering the evidence we find that the order of the Alabama Public Service Commission authorizing an overall 7.56% rate, of return is a just return and not confiscatory. Accordingly, the decree of the trial court must be reversed and remanded with directions to that court to enter a decree in conformity with this opinion, including the vacation of the writ of supersedeas and a refund with interest for the appropriate sums collected. It is so ordered.

REVERSED AND REMANDED WITH DIRECTIONS.

BLOODWORTH, ALMON, EMBRY, JJ., and SIMMONS, Retired Circuit Judge, sitting by designation of the Chief Justice, concur.

SHORES, J., recused.

MADDOX, J., dissents, with whom FAULKNER and JONES, JJ., concur.

MADDOX, Justice

(dissenting).

The basic difference between me and the majority is whether “new investment to be added in the year immediately following the test period” should be used in determining a rate that is “reasonable and just to both the utility and the public.” Title 48, Section 52, Code, as amended.

The Legislature, in 1971, during a special session, set out what the Alabama Public Service Commission must consider in setting a rate which is “reasonable and just to both the utility and the public” Act No. 97, (Acts, 1971, Vol. 1, pp. 171-172) approved May 11, 1971, amended Title 48, Section 52, to provide, in part:

“ * * * For the purpose of fixing rates such reasonable value of a public utility's property shall be deemed to be the original cost thereof, less the accrued depreciation, as of the most recent date available, and the amount of the new investment to be added in the year immediately following the test period used in arriving at the value of such utility’s property. In any determination of the commission as to what constitutes such a fair return, the commission shall give due consideration, among other things, to the requirements of the business with respect to the utility under consideration, and the necessity, under honest, efficient and economical management of such utility, of enlarging plants, facilities and equipment of the utility under consideration, in order to provide that portion of the public served thereby with adequate service.

The italicized portion of Act No. 97 was added to the Code section in 1971, by the Legislature, in special session.

A fair reading of Act No. 97 convinces me that “new investment to be added” must be considered in fixing a rate that is reasonable and just to the utility. As a matter of fact, the Act specifically requires:

“In any determination of the commission as to what constitutes such a fair return, the commission shall give due consideration, among other things, to the requirements of the business and the necessity, under honest, efficient and economical management of such utility, of enlarging plants, facilities, and equipment of the utility under consideration, in order to provide that portion of the public served thereby with adequate service.” [Emphasis added.]

Under this legislative mandate, the Commission “shall” give consideration to the necessity of “enlarging plants, facilities and equipment.” The majority concedes that the basic difference between me and them is how “new investment” (which I classify as enlargement of plants, facilities and equipment) should be treated. The majority, in effect, contends that “new investment” is to be included only when calculating overall rate of return on rate base, although the statute certainly does not use those words. The effect of the majority’s holding means that if a utility plans to enlarge its plants, facilities or equipment, that this “new investment to be added” has no relevancy to the question of a reasonable rate of return to equity.

In other words, the majority believes that in determining the rate of return to equity, no consideration should be given to the “reasonable value” of the company’s property for any period except the test year. The majority is just wrong in this, and fails to follow the legislative mandate in rate-making.

As this Court said in Alabama Public Service Commission v. Southern Bell T. & T. Co., 253 Ala. 1, 42 So.2d 655 (1949):

“The return must be sufficient to assure the investor’s confidence in the financial soundness of the utility enterprise and enough to maintain and support its credit so that it will be able to raise the money necessary to improve and expand its service in the discharge of its public duties. In the above cited case of Bluefield Waterworks Improvement Company v. Public Service Commission, [262 U.S. 679, 43 S.Ct. 675, 67 L.Ed. 1176] supra, the Supreme Court of the United States said:
1 * * * The return should be reasonably sufficient to assure confidence in the financial soundness of the utility, and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties. * * * >

“The above principle has been amplified in succeeding decisions of the Supreme Court of the United States.

“In United Railways & Electric Company v. West, 1930, 280 U.S. 234, 250, 252, 50 S.Ct. 123, 126, 74 L.Ed. 390, 409, 410, the Supreme Court of the United States quoted as the general rule the above excerpt from the Bluefield Case. The Court defined what is necessary to assure the confidence in the financial soundness of the utility to maintain its credit by stating:

“ * * * It is' manifest that just compensation for a utility, requiring for efficient public service skillful and prudent management as well as use of the plant, and whose rates are subject to public regulation, is more than current interest on mere investment. Sound business management requires that, after paying all expenses of operation, setting aside the necessary sums for depreciation, payment of interest, and reasonable dividends, there should still remain something to be passed to the surplus account, and a rate of return which does not admit of that being done is not sufficient to assure confidence in the financial soundness of the utility to maintain its credit and enable it to raise money necessary for the proper discharge of its public duties.’ ”

It is apparent to me that this Court considers the rate of return to equity is of critical importance. It must be sufficient to attract new capital in order that the utility may continually improve its services. As the Supreme Court of the United States opined in Federal Power Commission v. Hope Nat. Gas Co., 820 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333:

“ * * * Prom the investor or company point of view it is important that there be enough revenue not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock. Cf. Chicago & G. T. R. Co. v. Wellman, 148 U.S. 339, 345, 346, 12 S.Ct. 400, 36 L.Ed. 176, 179, 180. By that standard the return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital. See Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Commission, 262 U.S. 276, 291, 43 S.Ct. 544, 67 L.Ed. 981, 986. 31 A.L.R. 807 (Mr. Justice Brandéis concurring.)

Since both the Commission and the Inter-venors claim that the rate of return on rate base will produce a rate of return to equity of 12.24% or 11.21%, I assume both think that a rate of return to equity in this range is reasonable and fair to the public, and to the company. In General Tel. Co. of Southeast v. Alabama Public Service Commission, Ala., 335 So.2d 151 (1976), both the Commission and the Intervenors seem to agree that a rate of return to equity of 11.05% was reasonable in that case. Unquestionably, the 7.56% rate of return on the rate base in this case will produce a 12.24% or 11.21% rate of return to equity if “invested capital” during the test year only is used as being determinative. But equity and debt capital one year after the test year will be much higher. In fact, in their reply brief, the Commission admits:

“Obviously, the equity and debt capital one year after the end of the test year is substantially greater than the average of equity and debt capital during the test year 1974. The Commission calculated the total equity and debt capital averaged over the test year 1974 as $573,745,-000. If the total equity and debt capital were calculated at year end 1974, the figure would be $608,087,000. . . .” [Emphasis added.]

It is apparent to me that the rate of return is insufficient, when measured against both Alabama’s statutory standard and that of the Supreme Court of the United States. Having said that, I hasten to add that the company’s calculations are based upon the total of new investment, without any allowances. The total equity and debt capital projected by the company at year end 1975, (the year following the test period) is much lower than the total rate base figure and is shown by the following response of the company to an inquiry:

“ALABAMA DOCKET NO. 16966
Alabama Public Service Commission
Bishop Oral Request
Dated July 23, 1975
“Request: Breakdown of invested capital at December 31, 1975, i.e., common equity, Job Development Investment Credit and debt _ applicable to the statutory rate base.
“Response:
SOUTH CENTRAL BELL TELEPHONE COMPANY
INTRASTATE INVESTED CAPITAL BY CLASSES STATE OF ALABAMA
Estimated End of Period 12-31-75
Stockholder’s Equity $346,000,000
Unamortized Job Development Investment Credit 15,000,000 #
Total Equity Capital 361,000,000 *
Total Debt Capital 305,000,000 *
Total Invested
Capital 666,000,000
# Furnished by Mr. J. D. Matheson at the request of Mr. Bishop during cross-examination on July 17,1975.
‘See response to Bishop Request No. 1 (Request No. 2, Item 13).’’

The Commission argues that the $15,000,-000 item “Unamortized Job Development Investment Credit” is “neither a contribution of stockholders or debt.” In any event, the total of equity and debt capital as projected by the company would be $666,-000,000, not the $724,468,420 figure used by the company to arrive at its 8.66% rate of return to equity. I had some difficulty understanding how the company arrived at the 8.66% figure it used in the brief, but I finally determined it used the total rate base figure.

The company’s calculations (after the rate increase) if arranged as are the Commission’s and the Intervenor’s, in the majority opinion, would be as follows:

Total return $ 58,640,056
Amount required to cover debt costs [$775,662,119 (rate base)
X 45% (debt) = $349,047,953 X 7.49% (debt cost) = $26,143,692] 26.143.692
Available for Common Equity $32,496,364
Debt $349,047,953
Equity ($775,662,119 X 48.4%) 375.420.467
Total Cost Capital $724.468.420
$ 32,496,3?4 = 8.66% rate of return to equity. $375,420,467

If the company’s projected figures are used, the calculations would be as follows:

Return $ 58,640,056
Debt Cost ($805,000,000 X 7.49%) 22.844.500
Available for Common Equity 8 35.795.556
Debt $305,000,000
Equity 361.000.000
Total Cost Capital 8666.000.000
8 35.795.556 _ $361,000,000 9.92% rate of return to equity.

The circuit court found that a floor of confiscation would be a 9% rate of return on rate base. Assuming that the debt-equity ratio would remain approximately the same, the calculations would be:

Total return ($775,662,119 X 9%) $ 69,809,691
Invested Capital $666,000,000
Interest Charges $ 22,844,600
Available for Common Equity $ 46,962,091
Amount of Common Equity $361,000,000
Rate of Return 18.01%

Three witnesses for the company testified that the return on equity, in order to allow the company a fair rate of return comparable to that being earned by others, would be in the range of 13% to 15%. The Interve-nor’s witness, Whatley, suggested that return to equity of 10.8%, which he adjusted downward to 9.51%, was appropriate. The Commission implicitly found that a 12.24% rate of return to equity was reasonable in view of the fact that it argues in brief that its order would provide for a return to equity of 12.24%.

Using the 12.24% rate of return to equity and the company’s projections of “Stockholder’s Equity” at December 31, 1975, of $346,000,000 (this sum does not include $15,-000,000 Unamortized Job Development Investment Credit, which the Commission contends is not equity), then the rate of return on rate base would have to be at least 8.61658% to produce a rate of return on equity of 12.24%.

The computation would be as follows:

Total return ($775,662,119 X 8.61658) $ 65,194,900
Debt Cost ($305,000,000 X 7.49%) 8 22.844.500
Available for Common Equity 8 42.350.400
Equity $346,000,000
Debt 8305.000.000
Total Cost Capital 8651.000.000
8 42.350,400 _ $346,000,000 12.24% rate of return to equity.

I believe the trial court’s finding that a 9% rate of return was necessary to prevent confiscation is erroneous. On the other hand, I believe that the majority’s determination that the Commission order is just and reasonable is also erroneous and is not supported by the record, because the rate of return on rate base, which includes new investment, will not produce a 12.24% rate of return to equity unless the company’s invested capital remained static, which it will not. The Commission, in fact, admits this by allowing the company to include “new investment to be added” of $110,455,-972 in the rate base. I believe that the record shows that the Commission, in ordering the 7.56% rate of return on rate base did not follow the mandate of the Legislature to' provide for “new investment” — enlargement of facilities, etc. Therefore, I would remand the case to the Commission with directions to determine a rate of return which would take into consideration the enlargement of plants, facilities and equipment in the year after the test year.

FAULKNER and JONES, JJ., concur.


author: EMBRY, Justice.

text:
    James L. COX et al. v. Clement S. WALTER, Jr., et al.
    SC 1866.
    Supreme Court of Alabama.
    June 10, 1977.
    Rehearing Denied Aug. 19, 1977.
    Romaine S. Scott, Jr., Warren B. Light-foot and Robert W. Bradford, Jr., Birmingham, for appellants.
    Douglas P. Corretti and Samuel Maples, Birmingham, for appellees.
   EMBRY, Justice.

James L. Cox and others appeal from a judgment granting a permanent injunction prohibiting them from resubdividing their residential lots without the written consent of the owners of all lots in Thorley Estates Subdivision.

Plaintiffs, Clement S. Walter, Jr. and Elizabeth D. Walter, William V. Weldon, and Albert S. Naughton and Dorothy P. Naughton, own lots in the subdivision as do defendants, James L. and Betty G. Cox, and John L. and Jane H. Glasser.

There are nine lots in the subdivision, ranging in size from 3.1 acres to 9.4 acres, all of which were purchased subject to protective covenants. The Walters, Weldon, and the Naughtons claim the Coxes and Glassers, without consent of plaintiffs and the other owners of lots in Thorley Estates, caused to be subdivided lots 5 and 6 to create lot 5A for the purpose of selling it for the building on it of a single residence dwelling house, thus violating the protective covenants. Cox and Glasser deny violating the restrictions.

The pertinent provisions of the text of the “protective covenants” are as follows:

“1. LAND USE AND BUILDING TYPE. No lot shall be used except for residential purposes. No building shall be erected, altered, placed, or permitted to remain on any lot other than one detached single-family dwelling not to exceed three stories in height. * * * (emphasis added)
* * * * * *
“5. LOT AREA AND WIDTH. No dwelling shall be erected or placed on any lot having an area of less than 2 acres.” (emphasis added)

The lot in question, 5B, created by resub-dividing the original two lots owned by Cox and Glasser, is in excess of two acres as required by provision No. 5 of the protective covenants.

There are many issues raised on this appeal, but they all center around the question of whether the two lots in dispute can be resubdivided without violating restrictions placed on the original subdivision.

The question can be resolved by construing the protective covenants.

The trial court held the protective covenants must be construed in the light of the obvious intent of the plan of development of the subdivision. It was the trial court’s opinion that the developers intended the real property being subdivided into Thorley Estates Subdivision to consist of nine (9) lots and the developers intended that only one single-family residence, not to exceed three (3) stories in height be permitted on each of the nine (9) lots.

Cox and Glasser contend that there is no language in the covenants which restricts the number of lots in Thorley Estates and that covenant No. 5 prohibiting the placing of a dwelling on “any lot having an area of less than 2 acres,” can only be logically interpreted as contemplating future division.

This court’s decision in Hoffman v. Tacon, 293 Ala. 684, 309 So.2d 817 (1975), is dispositive of the question raised on this appeal. In Hoffman, we held the restrictions placed on the original subdivision when it was created did not prevent the subdivision of a plot into two lots which would each exceed the minimum size prescribed by the restrictions. The restrictions in Hoffman are similar to those imposed by the protective covenants in this case. In Hoffman, as here, the covenants allowed only one single-family dwelling on any residential plot; and the restrictions contained a minimum lot size clause that was met by the proposed lot.

The decisive point in Hoffman was the absence of any restriction which specifically prohibited the subdivision of a lot; also absent in this case. Where the language of the restriction is clear and unambiguous, it will, of course, be given its manifest meaning, but its construction will not be extended by implication or include anything not plainly prohibited and all doubts and ambiguities must be resolved against the party seeking enforcement. Bear v. Bernstein, 251 Ala. 230, 36 So.2d 483 (1948); Springdale Gayfer’s Store Co., Inc. v. D. H. Holmes Co., Ltd., 281 Ala. 267, 201 So.2d 855 (1967). Restrictions against the free use and enjoyment of property are not favored in law and such restrictions are to be strictly construed. Kennedy v. Henley, 293 Ala. 657, 309 So.2d 435 (1975).

Cox and Glasser’s resubdivision of their lots does not violate the terms of the protective covenants that proscribe more than one single-family dwelling on any lot. Their actions also meet the requirement which prescribes a minimum lot size. In short, their plans conform with all requirements set out in the protective covenants.

The judgment of the lower court is reversed, and the permanent injunction therein provided is dissolved.

REVERSED AND RENDERED.

TORBERT, C. J., and BLOODWORTH, JONES and ALMON, JJ., concur.


text:
    Landon BROWNING v. BIRMINGHAM NEWS et al.
    SC 2061.
    Supreme Court of Alabama.
    June 10, 1977.
    Rehearing Denied Aug. 19, 1977.

      Richard C. Duell, III, Birmingham, for appellant.
    James C. Barton, Birmingham, for the Birmingham News Co.
    Clarence Hanson and Tom Bailey, Robert R. Sexton, Birmingham, for City of Tarrant City and its Mayor, Evan Veal.
   TORBERT, Chief Justice.

Plaintiff-appellant, Landon Browning filed a libel suit against the Birmingham News Company, its publisher, Clarence Hanson, and a staff writer, Tom Bailey. These defendants will be referred to at times in this opinion as the News defendants. Also joined as defendants in the suit were the City of Tarrant and its mayor, Evan Veal, who will be referred to as the Tarrant defendants. Both the News defendants and the Tarrant defendants filed motions to dismiss.

The News defendants filed an affidavit by Tom Bailey, the author of the article in question, which in essence stated that no statement in the article was made with the knowledge that it was false or with reckless disregard of whether it was true or false. No other affidavits were filed by any of the parties but the trial court allowed all parties to file briefs prior to his consideration of the motions to dismiss. The trial court then treated the motions to dismiss as motions for summary judgment and granted summary judgment as to all the defendants. The trial court did not specify his underlying considerations in finding that there were no genuine , issues of material fact; however, this was not required under Rule 56, ARCP.

In his complaint Mr. Browning alleged that he was libeled by the publication of an article in the July 7, 1975, edition of the Birmingham News entitled “Tarrant Officials Say Taxi Service Bad, Want Upgrade.” The entire article was not made a part of the record and is therefore not before this court. However, Browning did include in his complaint the following five paragraphs from the article which he alleged constituted the libel:

Section 2 — “He said he intended to operate a small fleet of shiny new taxis, open an office on Main Street and offer service like Tarrant had never before experienced.
Section 3 — “Well, the council was skeptical because the last city taxi company had been an exclusive sort of thing that operated on a wing and a prayer. But the councilmen agreed anyway to help the new cab company by at least discouraging other companies.
Section 4 — “Today, the smooth-talking businessman has long since gone, the fleet of cars has dwindled to a single cab, and — as Mayor Evan Veal tells it, ‘We’re being deluged with complaints no one likes waiting two hours for a cab.’
Section 6 — “ ‘We’re going to do all we can to help (the Tarrant Taxicab Co.),’ said Veal. ‘We’re going to bring in competition for him so he can either upgrade his service or get out.’
Section 7 — “The mayor obviously was peeved over the situation, believing that he and other council members had gone out on a limb to favor a local businessman only to see that businessman’s business decline and the number of complaints increase.”

Browning attached to his complaint copies of written demands for retraction of the alleged libelous article which had been served on all the named defendants. It appears that in response to this demand, The Birmingham News published an article on July 11, 1975 entitled “Competition Not Bothering Tarrant Taxi Businessman.” None of the contents of this article have been made a part of the record.

The principal issue before this court is whether the granting of summary judgment for both the News defendants and the Tarrant defendants was proper under the circumstances of this case.

It is, however, appellant Browning’s initial contention that the trial court erred in converting the defendants’ motions to dismiss into motions for summary judgment. Browning argues that this conversion was in violation of the requirements of Rule 12(c), ARCP, that all the pleadings must be closed before a trial court can treat a motion for judgment on the pleadings as a motion for summary judgment.

This argument overlooks the fact that the conversion here took place under the following provision of Rule 12(b), ARCP:

“If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.”

There is no showing of an abuse of discretion on the part of the trial judge in not excluding the affidavit of Tom Bailey nor is there a showing that all parties were not allowed an opportunity to present all pertinent materials in regard to the motion. Thus there was no error in converting the “motions to dismiss” into summary judgment motions. There was also no error in the trial court’s granting the Tarrant defendants’ motion for summary judgment.

Rule 56, ARCP, provides that a motion for summary judgment shall be granted when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. This court has also stated that the burden is upon the moving party to clearly show that the other party could not recover under any discernible circumstances. Folmar v. Montgomery Fair Company, 293 Ala. 686, 309 So.2d 818 (1975). The movant’s burden is substantially increased by the scintilla of evidence rule which requires that if there is a scintilla of evidence supporting the position of the party against whom the motion for summary judgment is made, then summary judgment may not be granted. Loveless v. Graddick, 295 Ala. 142, 325 So.2d 137 (1975).

The Tarrant defendants and the News defendants both present the argument that Mayor Veal was cloaked with a privilege in making the comments attributed to him in the July 7th News article. They argue first that this privilege is “absolute” and therefore he is immune from a defamation suit as is any newspaper which reports such statements. Defendants cite the case of Barr v. Matteo, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434 (1959), as authority for this contention.

We are not persuaded by this argument and reiterate that in this jurisdiction, the only absolutely privileged communications recognized under the law of defamation are those made during legislative or judicial proceedings, or contained in legislative acts of this state which are made under authority of law. O’Barr v. Feist, 292 Ala. 440, 296 So.2d 152 (1974); Tonsmeire v. Tonsmeire, 281 Ala. 102, 199 So.2d 645 (1967).

Alternatively, the defendants contend that Mayor Veal had a “qualified” privilege to make these remarks. The test for determining if a communicating party has a conditional or qualified privilege was most recently set forth by this court in Willis v. Demopolis Nursing Home, Inc., Ala., 336 So.2d 1117 (1976).

“ ‘Where a party makes a communication, and such communication is prompted by duty owed either to the public or to a third party, or the communication is one in which the party has an interest, and it is made to another having a corresponding interest, the communication is privileged, if made in good faith and without actual malice. * * * The duty under which the party is privileged to make the communication need not be one having the force of legal obligation, but it is sufficient if it is social or moral in its nature and defendant in good faith believes he is acting in pursuance thereof, although in fact he is mistaken.’ ” [Emphasis added.]
336 So.2d at 1120, quoting Berry v. City of New York Ins. Co., 210 Ala. 369, 98 So. 290 (1923).

This court in Willis v. Demopolis Nursing Home, Inc., supra, also held that the question of whether a communication is privileged by reason of its character or by reason of the occasion on which it was made is a question of law.

The communication directly attributed to Mayor Veal in the News article is found in sections 4 and 6 of the article and is as follows:

“We’re being deluged with complaints . no one likes waiting two hours for a cab . . . we’re going to do all we can to help. We’re going to bring in competition for him so he can either upgrade his service or get out.”

Under the circumstances of this case, Mayor Veal’s communication, quoted above, was conditionally privileged. As a result, the law in this state required that in order for Browning to have stated a cause of action against the Tarrant defendants it was necessary for him to have alleged and proved actual malice. Willis v. Demopolis Nursing Home, Inc., Ala., 336 So.2d 1117 (1976); O’Barr v. Feist, 292 Ala. 440, 296 So.2d 152 (1974).

Browning neither alleged nor did he offer any proof of actual malice on the part of the Tarrant defendants. Accordingly, the granting of summary judgment for Mayor Veal and the City of Tarrant was appropriate.

The balance of the article, which was not directly attributed to Mayor Veal, cannot be considered as being conditionally privileged in that it appears to be a transíation and interpretation on the part of the News staff writer and amounts to a subjective analysis of a party who is not subject to the privilege. As a result, the granting of summary judgment for the News defendants could not have been properly grounded on privilege.

The News defendants strongly contend that if the words in this article are accorded their natural meaning that the article is not capable of a defamatory meaning as a matter of law. They also argue that the communication is actually no more than rhetorical hyperbole or a vigorous epithet analogous to the communication in Greenbelt Cooperative Publishing Ass’n v. Bresler, 398 U.S. 6, 90 S.Ct. 1578, 26 L.Ed.2d 6 (1970), wherein the U. S. Supreme Court found no defamation. They contend that summary judgment was proper under these circumstances.

The plaintiff argues that, because this article imputed a lack of integrity, competency or fitness in the conduct of his business, it constituted libel per se.

This court, in McGraw v. Thomason, 265 Ala. 635, 93 So.2d 741 (1957), provided the following guidelines for use in determining the actionable character of alleged libelous statements:

“[T]he printed words are to be taken in their natural meaning, and according to the sense in which they appear to have been used and the idea they are adapted to convey to those who read them. A forced construction is not to be put upon them in order to relieve the defendant from liability, nor are they to be subjected to the critical analysis of a trained legal mind, but must be construed and determined by the natural and probable effect on the mind of the average lay reader.”

265 Ala. at 639, 93 So.2d at 744.

Taking these factors into consideration, this court is of the opinion that a genuine issue exists as to whether the contents of this article together with the accompanying headline imputed a lack of integrity, competency, or fitness in the conduct of the plaintiff’s business. Thus summary judgment could not have been properly based on this contention of the News defendants.

Before concluding this inquiry into the propriety of the granting of summary judgment for the News defendants, it may be instructive to attempt to capsulize the present state of the law of libel as handed down by the U. S. Supreme Court. In New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), the Court amended the common law of defamation by establishing a constitutional privilege in order to allow a freer flow of criticism and debate regarding public officials in the discharge of their public duties. This privilege was announced in the following manner:

“The constitutional guarantees require, we think, a federal rule that prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves that the statement was made with ‘actual malice’ —that is, with knowledge that it was false or with reckless disregard of whether it was false or not.”

376 U.S. at 279-80, 84 S.Ct. at 726.

In Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967), this same privilege was extended to defamatory criticism of “public figures.” The definition of public figures which was established by a majority of the Court included persons who do not hold public office but who are “nevertheless intimately involved in the resolution of important public questions or, by reason of their fame, shape events in areas of concern to society at large.” 388 U.S. at 164, 87 S.Ct. at 1996.

In the plurality opinion in Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971), the Court extended the privilege to defamatory falsehoods relating to “private persons” in those situations where the statements concerned matters of general or public interest. In Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), however, the Court retreated from this extension of the privilege to private persons, using the rationale that “the States should retain substantial latitude in their efforts to enforce a legal remedy for defamatory falsehood injurious to the reputation of a private individual.” 418 U.S. at 345-46, 94 S.Ct. at 3010.

This latitude was restricted in two ways. First, there can be no liability for the libel of a private person unless there is some finding of fault on the part of the publisher or broadcaster. The Court left the development of an appropriate standard for the finding of fault to the individual states. Second, unless liability is based on actual malice, there can be no recovery of punitive or presumed damages and compensatory awards of damages must be supported by competent evidence of injury. The Court’s objective here was to limit compensation to actual injury, which in an appropriate case may include mental anguish, embarrassment and other elements of non-monetary damages.

The Court, in Gertz, also expounded upon its prior definition of “public figures” by stating:

“For the most part those who attain this status [public figure] have assumed roles of especial prominence in the affairs of society. Some occupy positions of such persuasive power and influence that they are deemed public figures for all purposes. More commonly, those classed as public figures have thrust themselves to the forefront of particular public controversies in order to influence the resolution of the issues involved. In either event, they invite attention and comment.”

418 U.S. at 345, 94 S.Ct. at 3009.

This definition was recently quoted with approval by the Court in Time, Inc. v. Firestone, 424 U.S. 448, 96 S.Ct. 958, 47 L.Ed.2d 154 (1976).

Based on the foregoing U. S. Supreme Court authority it is clear that, unless the defendant is cloaked with privilege, the threshold inquiry in any lawsuit which alleges libel should be: Is the plaintiff who brings the suit a public official, public figure, or private individual? It is only after a determination of this question that the parties may proceed with any degree of certainty as to the standard that will be used in resolving the issue of liability and damages. It has been held that this determination is a question of law. Rosenblatt v. Baer, 383 U.S. 75, 88, 86 S.Ct. 669, 15 L.Ed.2d 597 (1966).

The complaint in this case did not offer to categorize the plaintiff as either a private individual, public official or public figure. It is apparent that the trial court considered the plaintiff either a public official or public figure in rendering summary judgment for the News defendants. However, the record before this Court indicates that the trial court did not have sufficient evidence before it to make an informed determination of the plaintiff’s status. This Court has often stated that in considering the propriety of the granting of a motion for summary judgment the pleadings will be viewed in the light most favorable to the party opposing the motion. Isbell v. Huntsville, 295 Ala. 380, 330 So.2d 607 (1976); Donald v. City National Bank of Dothan, 295 Ala. 320, 329 So.2d 92 (1976); Loveless v. Graddick, 295 Ala. 142, 325 So.2d 137 (1975). Thus for the purpose of ruling on the motion for summary judgment the trial court should have presumed that because the complaint did not allege actual malice that the plaintiff was a private individual. Of course the defendants in this case were free to offer affidavits in support of their motion to dismiss on the question of the plaintiff’s status, but this was not done. Accordingly, summary judgment could not have been properly based on the plaintiff’s failure to allege or offer proof of actual malice. Thus we are unable to find any grounds upon which summary judgment for the News defendants could have been based and as to these defendants this case is reversed and remanded.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

BLOODWORTH, JONES, ALMON and EMBRY, JJ., concur.


author: FAULKNER, Justice. JONES, Justice

text:
    Frank WATSON v. Calvin McGEE, etc.
    SC 1698.
    Supreme Court of Alabama.
    July 8, 1977.

      Charles D. Rosser and Henry H. Self, Jr. of Rosser & Munsey, Tuscumbia, for appellant.
    Vincent McAlister and Braxton W. Ashe of Almon, McAlister & Ashe, Sheffield, for appellees.
   FAULKNER, Justice.

This is an appeal from a judgment in a negligence action for the defendant. We affirm.

On December 27, 1972, during the course of his duties, Frank Watson, an employee of Union Carbide Corporation, was injured in a 35 foot fall when a steel bin above him came loose. At the time of the accident Calvin McGee, a contractor, was performing demolition work at the plant pursuant to a contract. Part of McGee’s job was to dismantle one of the furnaces. As a final step in the dismantlement, a steel bin had to be removed. The accident occurred when the bin was cut loose by a member of McGee’s crew. After the accident Union Carbide conducted an investigation and obtained statements of several witnesses, including James Tolbert, a member of McGee’s crew, who died prior to the trial.

Watson, the injured employee, filed suit in the Circuit Court of Colbert County against the contractor, McGee, seeking damages of $500,000 for negligent and/or wanton injury. Watson relied on the safety provisions in the contract while McGee claimed Watson was contributorily negligent. The jury found for McGee and Watson appeals.

I.

It was not reversible error for the Circuit Court to admit into evidence the written statements of Tolbert who died before the trial and who never testified. The statements were in the form of two exhibits, numbered 4 and 2A.

Exhibit 4 was entered into evidence by stipulation of the parties. This exhibit was attached to a pre-trial order which, under Rule 16 of the Alabama Rules of Civil Procedure, controls the subsequent course of the action. Moreover, the objecting attorney admitted several times at trial that the parties had agreed that Tolbert’s statement would be put into evidence. Agreements and stipulations made in a pretrial order and admitted in court are binding on the parties and admissible into evidence. See Prestwood v. Watson, 111 Ala. 604, 20 So. 600 (1895); Brunswick v. Regent, 463 F.2d 1205 (5th Cir. 1972).

Exhibit 2A was an excerpt from an accident investigation report. It was a summary of a statement by Tolbert taken by the Superintendent of Industrial Relations at Union Carbide. As admitted by the objecting attorney at trial, there is no significant difference between the two statements, as contained in Exhibits 4 and 2A, except the inclusion of the name “Hovater” in Exhibit 4. The appellant must not only establish error but also must show that he was probably prejudiced by the error. Shelby County v. Baker, 269 Ala. 111, 110 So.2d 896 (1959). Since the statements are substantively the same and since Exhibit 4 was properly admitted into evidence, there was no prejudicial error as to Watson.

II.

It was not reversible error for the lower court to admit into evidence the parol testimony of Robert Downie, Assistant Superintendent of Engineering and Maintenance at Union Carbide, concerning the contract between Union Carbide and McGee.

Watson first objects to the trial court’s allowing Downie to testify that it was his understanding with McGee that if McGee had any problems or questions about the job, he was to consult Downie. There is no prejudicial error here. None of the parties to the contract is attempting to vary the terms of the contract by this testimony. In fact, the parties to the contract agree as to their understanding of the contract. It is a non-party who is complaining.

Next Watson complains that the trial court erred in allowing Downie to explain § 25 of the contract. A contract may be explained consistently with its terms. Chastain & Blass Real Estate & Ins., Inc. v. Davis, 280 Ala. 489, 195 So.2d 782 (1967). In order for the court, to properly interpret the contract, the court may use parol evidence to put itself in the position of the parties. American Mut. Liab. Ins. Co. v. Tuscaloosa Veneer Co., 237 Ala. 187, 186 So. 133 (1939). There was no attempt to challenge the contract or the meaning of its terms. Downie was merely asked to illuminate its meaning. Parol evidence is admissible to explain the writing or to show the purpose and character of the transaction. 30 Am.Jur.2d Evidence § 1065 (1967) (citing Baker v. Gregory, 28 Ala. 544 (1856)). Since this evidence aided in the interpretation of the writing by placing the court in the position of the parties, it is admissible.

Watson also questions the lower court’s allowing Downie to testify that he instructed McGee to remove the catwalk on the ground that such an instruction would be an oral modification or contradiction of a written contract. Parties to a written contract may by mutual consent without other consideration orally alter, modify or rescind the contract. Allied Mills, Inc. v. St. John, 275 Ala. 69, 152 So.2d 133 (1963). Downie’s testimony was thus admissible.

III.

The trial court did not commit reversible error by sustaining an objection to a question asked by Watson on cross-examination of McGee’s witness. The question was as follows:

“Let me ask you on page 9 of Plaintiff’s Exhibit No. 6, it says ‘when working overhead, station a man below or use danger signs and rope off to warn others of the danger.’ Would you say that rule should have applied to Calvin McGee and the work he was doing?”

The refusal to allow a witness to answer a question calling for a conclusion of the witness and invading the province of the jury was not error. Jackson Lumber Co. v. Butler, 244 Ala. 348, 13 So.2d 294 (1943); O’Rear v. Richardson, 17 Ala.App. 87, 81 So. 865 (1919). See 98 C.J.S. Witnesses § 328 (1957).

Asking a witness whether something should have applied is asking the witness to give his opinion about something not within his knowledge. Even if he could have drawn a conclusion or offered a guess, such a response would be of little value in a proceeding supposedly based on fact and law, not mere opinion.

On direct examination, the witness was asked what safety rules were in effect at the site at the time of the accident, whereas on cross-examination he was asked whether a specific rule should have applied. The answer to Watson’s question could neither explain nor rebut any prior issue. Sustaining this objection did not deny Watson’s right to respond in kind or his right to a searching and sifting cross-examination.

“Opinions should never be substituted for obtainable facts.” Dersis v. Dersis, 210 Ala. 308, 98 So. 27 (1923). Since the contract in question was in evidence, the question of what safety rules were applicable was a question for the jury. Therefore, the objection to Watson’s question was correctly sustained.

IV.

It was not reversible error for the court to allow McGee to answer questions concerning instructions given him by Downie.

Watson at lower court specifically objected to a question asking if Downie told McGee that he would keep the Union Carbide people out of the demolition work area. However, the court sustained the objection and no answer was given; thus, there was no prejudicial error. Madison Highlands Dev. Co. v. Hall, 283 Ala. 333, 216 So.2d 724 (1968).

Watson also objected to the question, “And did you [McGee] put it [the rope] up at the request of Mr. Downie?” Although the objection was overruled, there was no prejudicial error because the matter of Downie’s request was thoroughly covered in both prior and subsequent questions which were not objected to. See Central of Ga. Ry. Co. v. Lee, 227 Ala. 661, 151 So. 840 (1934); Prosch v. Prosch, 47 Ala.App. 33, 249 So.2d 855 (1971).

We will not consider whether certain questions now complained of were inadmissible because they elicited hearsay responses, because these questions were not objected to below by Watson. An objection must be made to a question and a ground stated therefor, or the objection and any error is waived. Madison Highlands Dev. Co., supra; 88 C.J.S. Trial § 115 (1955). Therefore, if no objection is made, there is no error in allowing into evidence the answer.

In view of the above, and in light of the fact that Downie’s testimony verified McGee’s answers, and that both Downie and McGee were available for cross-examination, we find no prejudicial error in the court’s allowing McGee’s answers into evidence.

AFFIRMED.

TORBERT, C. J., and BLOODWORTH, EMBRY, and BEATTY, JJ., concur.

MADDOX, J., concurs in result.

JONES and SHORES, JJ., dissent.

ALMON, J., not sitting.

JONES, Justice

(dissenting):

I respectfully dissent on two points:

1) the admissibility of Exhibit 2A which is treated in Section I of the opinion, and 2) the admissibility of the question asked of the witness, Downie, on cross-examination, which is treated in Section III of the opinion.

1) Exhibit 2A, in my opinion and by all the rules of evidence with which I am familiar, was clearly inadmissible. It was in the form of an accident investigation report prepared and maintained by a third party, Union Carbide, and consisted of a summary of a statement given shortly after the accident by a witness who died between the time of the accident and the time of the trial. It was offered and admitted, over objection, as an exception to the hearsay rule permitted by ARCP, 44(h) (Business Entries). This exact point was addressed and laid to rest by the United States Supreme Court, interpreting the Federal “Shop Book” Act, in Palmer v. Hoffman, 318 U.S. 109, 113, 63 S.Ct. 477, 480, 87 L.Ed. 645 (1943):

“An accident report may affect that business in the sense that it affords information on which the management may act. It is not, however, typical of entries made systematically or as a matter of routine to record events or occurrences, to reflect transactions with others, or to provide internal controls. The conduct of a business commonly entails the payment of tort claims incurred by the negligence of its employees. But the fact that a company makes a business out of recording its employees’ versions of their accidents does not put those statements in the class of records made ‘in the regular course’ of the business within the meaning of the Act.”

To be sure, Mr. Justice Faulkner, speaking for the majority in this case, affirms not on the basis of Rule 44(h), but on the basis of ARAP 45 (Harmless Error). In other words, reasons the opinion, because Watson’s counsel had agreed (at the time of the pre-trial order) to admit Tolbert’s written statement in the evidence, it was not prejudicial error to admit the company-maintained accident report; and this for the reason that “there is no significant difference between the two statements . except the inclusion of the name ‘Hovater’ in Exhibit 4.”

This is a curious application of Rule 45, for its effect is to force upon the party stipulating to the admission of one statement, the admission of another statement different in kind and source from the first, so long as the two are similar in substance. A party may have ho objection, on the one hand, to stipulating to the use of a written statement by a witness otherwise inadmissible; while, on the other hand, he may validly object to admitting another’s “summary” of the same witness’ account of the accident. The nature and source of the latter statement, as well as its cumulative effect, could hardly be said to be nonprejudicial.

Furthermore, the rule of this case, in my opinion, will effectively eliminate pre-trial stipulations regarding use of statements as evidence for fear that such stipulations will be given a scope of operation beyond the original intent of the parties. Indeed, as here applied, the Harmless Error Rule means that Watson’s counsel stipulated not only that Tolbert’s written statement could be put into evidence, but also that the company prepared and maintained accident investigation report could be put into evidence — a result clearly not contemplated by the pre-trial stipulation.

2) The second point of my dissent is directed to the second sentence of the fourth paragraph under Section III of the opinion: “The answer to Watson’s question could neither explain nor rebut any prior issue.”

This expresses, at least in part, the Court’s rationale for affirming the trial Court’s exclusion of a question put to McGee’s witness, Downie, concerning “his understanding” of certain safety provisions of the contract. Ordinarily, this would have been inadmissible because of the form of the question; here, however, the question was in the same vein and but an extension of the questions asked on direct examination and should have been admitted.

Apart from this, it is the Court’s rationale that the question on cross-examination was properly disallowed because the answer “could neither explain nor rebut any prior issue” that invokes, respectfully, my strong and earnest protest. In the first place, nothing was more relevant to this entire law suit than the applicability of the safety provisions of the contract to the defendant McGee. Indeed, relevancy was not assigned or argued as a basis for the objection to the question. In the second place, I do not understand the use of the word “prior” as used in the quoted sentence. Either the subject matter of the question was an issue by virtue of the pleadings and pre-trial order or it was not. The reference to a “prior issue” is strange and foreign to any practice and procedure with which I am acquainted.


author: JONES, Justice.

text:
    M. N. ROBERTSON, Valice Robertson, Belvina Woodard, Stella Pratt, Aster Dixon, Anna Hall and Newton Woodard v. Steve FINCHER et al.
    SC 2118.
    Supreme Court of Alabama.
    July 8, 1977.

      Harvey Jackson, Jr. for Tweedy, Jackson & Beech, Jasper, for appellants.
    Walter Joe James, Jr. for James, Lowe & McNamee, Haleyville, for appellees.
   JONES, Justice.

On this appeal, we are presented with a boundary line dispute between coterminous landowners. The Appellees, Trustees of the Arley Congregational Christian Church, filed a bill seeking to enjoin the maintenance of a fence constructed by M. N. Robertson and Valice Robertson with the knowledge and consent of their lessors, Bel-vina Woodard, Stella Pratt, Aster Dixon, Anna Hall and Newton Woodard, heirs-at-law of C. 0. Woodard (“Woodard heirs”), on land the Trustees allegedly owned by deed, adverse possession, or prescription. In their answer, M. N. Robertson and Valice Robertson alleged that the land was owned by the Woodard heirs.

The Circuit Court of Winston County, sitting without a jury, made findings consistent with the Trustees’ contentions and established the true boundary lines between the parties to be the east right-of-way of the Jasper-Decatur highway (numbered County Road No. 41). This appeal followed. We affirm.

The substance of the Woodard heirs’ contentions is that the Trustees did not prove the requisite intent needed to obtain the property by adverse possession. It is true that “there can be no adverse possession without an intention to claim title.” Killian v. Everett, 262 Ala. 434, 436, 79 So.2d 17, 20 (1955). “[I]t is essential to the proper determination of the character of the possession to consider the intention with which it was taken and held.” Tanner v. Dobbins, 255 Ala. 671, 675, 53 So.2d 549, 551 (1951).

By deed, the church claimed only a 209' X 408' tract of land. Church members, however, had used additional property on which to park automobiles, and to conduct church-related outdoor activities. Witnesses stated, though, that the church only claimed what it rightfully owned. It is this subjective testimony of intent that appellants contend defeats the appellee’s claim of adverse possession.

To possess the requisite intent to adversely obtain property, however, it is not necessary that the possessor be correct in his belief 'as to the true boundary lines. Instead, and as is more often the case, his belief may originate in mistake. The intent required in such cases is the intent to take and possess as one’s own. Sylveat v. Stowers, 276 Ala. 695, 166 So.2d 423 (1964); Duke v. Wimberly, 245 Ala. 639, 18 So.2d 554 (1944); and 3 Am.Jur.2d, Adverse Possession, § 35. “The intent to claim the land actually occupied should be regarded as overriding the less immediate effective intent to hold in conformity with the deed.” 3 Am.Jur.2d, Adverse Possession, § 40, n.16. See also Norgard v. Busher, 220 Or. 297, 349 P.2d 490 (1960); 80 A.L.R.2d 1162.

Intent being a mental operation, no man may determine in a vacuum the intentions of another. It is for this reason that we have held that a possessor’s intent may be more clearly shown by his acts.

“[Primarily, it is the acts of the adverse claimant to which the court must look to determine objectively whether there is a claim of right to the disputed area openly and exclusively for ten years.” Kubiszyn v. Bradley, 292 Ala. 570, 575, 298 So.2d 9, 13 (1974). (Emphasis added.)

Particularly is this true when the intent in question is that of an incorporated entity, such as the church in this case. The trial court is not bound by the intent of an individual member, but instead must discern the intent of the entity as evidenced by the acts of the body as a whole. The question, as stated by Kubiszyn, is whether the possessors’ acts clearly display an intent to possess the land as its own. 292 Ala. at 575, 298 So.2d 9.

Evidence was introduced that the church, since at least 1948, had been the exclusive possessor of the strip in dispute, and had used it as a parking area on Sundays and Wednesdays, and had engaged in picnics and conducted “singings” thereon. (The disputed area came into being when the County changed the location of the public road in front of the church, thus enlarging the church yard.) While no attempt has been made to set out all the evidence, the above will suffice to show that the boundaries, as determined by the trial Court, are supported by credible evidence, and such findings are not plainly and palpably wrong.

Our oft-stated rule, in cases heard ore tenus, is to favor the decree of the trial court with a presumption of correctness, which will not be disturbed on appeal, when supported by credible evidence, unless palpably wrong or manifestly unjust. Francis v. Tucker, 341 So.2d 710 (Ala.1977). Particularly is this true where, as here, the Judge has personally viewed the property in question. Casey v. Keeney, 290 Ala. 94, 274 So.2d 68 (1973).

Applying the ore tenus rule of review, we hold that the final decree entered by the trial Court fixing the boundary line between these parties is due to be affirmed.

AFFIRMED.

TORBERT, C. J., and BLOODWORTH, ALMON and EMBRY, JJ., concur.


author: MADDOX, Justice.

text:
    Joseph A. BAKER et al. v. Bill BAXLEY et al.
    CER-10.
    Supreme Court of Alabama.
    July 22, 1977.

      William M. Dawson, Jr. and Edward Still, Birmingham, for Intervenors.
    William J. Baxley, Atty. Gen. and Edward E. Carnes, Asst. Atty. Gen., for State of Alabama, et al.
   MADDOX, Justice.

Pursuant to ARAP Rule 18, the United States District Court for the Middle District of Alabama has requested this Court to answer questions of law which that court deemed determinative of an action before it on which there is no clear controlling precedent in the decisions of the Supreme Court of Alabama.

In .support of the certificate, the Federal District Court submitted the following facts:

(2) This suit is brought by the plaintiff who is an inmate of the Alabama penal system. Roland C. Gamble and Terry Ray Taylor, also inmates of the state penal system, have been allowed to intervene and have standing. The defendants are Bill Baxley, individually and in his official capacity as Attorney General of the State of Alabama, and Judson C. Locke, Jr., individually and in his official capacity as Commissioner of the Alabama Prison System.
“Plaintiff and plaintiff intervenors contend that on July 29, 1976, the Alabama Legislature passed, over the Governor’s veto, Legislative Act No. 182,1 [footnote omitted] Regular Session, 1976, which allowed the Alabama Board of Corrections to award incentive good time credit in exceptional cases of good behavior and industriousness to prison inmates. At the request of the Commissioner of the Board of Corrections, the Attorney General’s Office issued an opinion2 [footnote omitted] on September 8, 1976, declaring the Act to apply retroactively. That pursuant to this opinion several hundred prison inmates were given credits and released from prison. On November 24, 1976, the Attorney General personally issued a second opinion3 [footnote omitted] declaring under the authority of Gayle v. State, 261 Ala. 84, 72 So.2d 848 (1954), that an act could not have retroactive application unless this feature was included in the title of the act. This opinion concluded that ‘under no circumstances should any prisoner be released after the receipt of this opinion if that release is dependent in any way on a retroactive application of Act No. 182. The commutation time of all prisoners currently confined should be computed or re-computed by applying Act No. 182 to them from its effective date only.’ The Commissioner of the Board of Corrections thereafter rescinded his earlier calculations for incentive good time credits for all inmates who had not yet been released, including plaintiff and plaintiff intervenors, and recomputed the incentive good time credits pursuant to the opinion of November 24, 1976.
“The plaintiff and plaintiff intervenors claim discrimination by the defendants between themselves and those inmates who were credited with incentive good time pursuant to the Attorney General’s opinion of September 8, 1976, and released from custody while they, although credited with such good time but before being released, had their good time revoked and recalculated pursuant to the Attorney General’s opinion of November 24, 1976, thus establishing a more future date of release than that established for them under the September 8, 1976, opinion. In order to determine whether the defendants have discriminated between plaintiff, plaintiff intervenors and those inmates who were given credit for good time and released and the constitutional dimensions involved, it is necessary to know whether Act No. Í82 is retroactive or nonretroactive in it application and if retroactive only what effect does this have on plaintiff and plaintiff interve-nors. Accordingly,
“(3) Under the law of the State of Alabama:
“1. Is Act No. 182 retroactive in its application?
“2. If Act No. 182 is declared not to be retroactive in its application, what effect does this have on those prison inmates who were granted incentive good time credits pursuant to the Attorney General’s Opinion of September 8,1976, but had the granting thereof revoked and continued in custody pursuant to the November 24, 1976, Opinion of the Attorney General?
This certificate has been prepared by said federal court.”

We answer Certified Question No. 1 in the negative.

In answer to Certified Question No. 2, we opine that incentive good time granted retroactively to inmates under Act No. 182 as a reward for good behavior exhibited by the inmates prior to the effective date of Act No. 182, July 29, 1976, was granted without authority of law. Consequently, the fact that the Board of Corrections granted “good time” to some inmates because of a mistaken apprehension of the law would not require the Board to perpetuate its mistake by granting similar good time to inmates such as plaintiff and plaintiff inter-venors.

I

Act No. 182 was not intended to be retrospective. In arriving at the legislative intent, we have applied the rule of statutory construction consistently applied in Alabama that “statutes are to be considered prospective, unless the language is such as to show that they were intended to be retrospective.” Mobile Housing Board v. Cross, 285 Ala. 94, 229 So.2d 485, 487 (1969). The words of the statute do not clearly state that “good behavior” of an inmate at the time prior to the effective date of the Act can be considered by the Board of Corrections in computing the inmates’ so-called “good time.” In fact, from the words used by the legislature, a contrary inference must be drawn. The legislature used words such a “a new classification ” and “the newly created classification ” in Section 2 of the Act. These words imply that the legislature intended that the Act would look to the future. Furthermore, in Section 3 of the Act, the legislature stated:

“It is the intent of this act that the custody classification provided for in Section 2 of this act be used by the Board only in exceptional cases of good behavior and industriousness in order that inmates be given a meaningful incentive for good behavior.” [Emphasis added.]

The word “incentive,” means “something that constitutes a motive or spur” and “serving to encourage, rouse, or move to action.” Webster’s Third New International Dictionary, Unabridged. The word “incentive,” by definition, necessarily, implies prospeetiveness.

II

The second certified question concerns those inmates who were initially granted sentence reduction credits for good behavior exhibited prior to the effective date of Act No. 182, but who were later told that they could not receive credit for good behavior exhibited before Act No. 182 became law.

As set out in the Certified Questions:

“The plaintiff and plaintiff intervenors claim discrimination by the defendants between themselves and those inmates who were credited with incentive good time pursuant to the Attorney General's opinion of September 8, 1976, and released from custody while they, although credited with such good time but before being released, had their good time revoked and recalculated pursuant to the Attorney General’s opinion of November 24, 1976, thus establishing a more future date of release than that established for them under the September 8, 1976, opinion.”

Facially, under the fact situation posed, we fail to see how the Board could be guilty of the type of invidious discrimination prohibited by Alabama’s Constitution and the Fourteenth Amendment to the Federal Constitution. The equal protection clause is violated only when state action is without any reasonable basis and is arbitrary. Board of Trustees v. Talley, 291 Ala. 307, 280 So.2d 553 (1973).

The unequal application of Act No. 182, as we understand the facts, was based upon a misapprehension of the Act’s legal effect, and was not based upon an unjustifiable standard such as race, religion, sex or other arbitrary classification. Consequently, the unequal application would not violate the equal protection clause of either the state or federal Constitution. Cf. Oyler v. Boles, 368 U.S. 448, 82 S.Ct. 501, 7 L.Ed.2d 446 (1962).

The fact that some inmates may have been released prematurely because the Board of Corrections was relying upon a misapprehension of the law cannot work a discrimination because of the Board’s refusal to release others. Whether the Board could take back into custody those who . have been erroneously released, we need not say. It is sufficient to point out that the Board was not legally or constitutionally required to perpetuate its mistake. See State Board of Administration v. Jones, 212 Ala. 380, 102 So. 626 (1925), where this Court said:

“ ‘. . . So where the language of the statute is reasonably plain in its meaning, such interpretation and practice will not be accorded the effect of an amendment or repeal, and the legislative intent will be nevertheless declared and enforced as expressed. . . .’” [Emphasis added.]

The misapprehension of law in the Jones case endured for forty years before the legislative mandate was finally vindicated. The erroneous interpretation and practice involved here went uncorrected for less than three months. We opine, as this Court held in the Jones case, that “such interpretation and practice will not be accorded the effect of an amendment or repeal.”

CERTIFIED QUESTIONS ANSWERED.

TORBERT, C. J., and BLOODWORTH, FAULKNER, JONES, ALMON, SHORES, EMBRY and BEATTY, JJ., concur.

      . Act No. 182 provides:
      “To provide for commutation of time for certain prisoners for good behavior at a rate to be determined by the Board of Corrections within the limits herein provided and to provide that such good time earned apply toward parole eligibility.

        Be it Enacted by the Legislature of Alabama:

      “Section 1. In order to encourage prison discipline commutation time shall be used as a reward for good behavior at the discretion of the Board of Corrections.
      “Section 2. The Board of Corrections is hereby empowered to create within the existing classification system a new classification which would authorize a maximum deduction from the term of the sentence of an exceptional inmate of two (2) days for each one (1) day served. Inmates serving a term for life shall not be eligible for the newly created classification hereby authorized except for the purpose of computing time served toward parole eligibility as hereinafter provided in Section 6.
      “Section 3. It is the intent of this act that the custody classification provided for in Section 2 of this act be used by the Board only in exceptional cases of good behavior and industriousness in order that inmates be given a meaningful incentive for good behavior.
      “Section 4. A prisoner under two (2) or more concurrent sentences shall be allowed commutation as if they were all one sentence.
      “Section 5. For any misconduct in violation of any Federal or State law or prison rule or regulation, including escape or attempt to escape, any part or all of the commutation which shall have accrued in favor of the prisoner to the date of said misconduct may be forfeited and taken away by the Board.
      “Section 6. Any and all cummutation of time shall be included and computed as time served toward parole eligibility. Inmates serving under a sentence of life shall not be subject to the custody classification provided for in Section 2 of this act for the purpose of earning a commutation of time. The provisions of Section 2 shall apply to those inmates serving life sentences provided, however, that said custody classification shall be used solely for the purpose of computing time served toward parole eligibility such time earned not to exceed two (2) years. The provisions of Section 3 of this act shall be applicable to classification of inmates serving life sentences in the same manner as classification of other inmates.
      “Section 7. The provisions of this act are severable. If any part of the act is declared invalid or unconstitutional, such declaration shall not affect the part which remains.
      “Section 8. All laws or parts of laws which are in conflict with this act are hereby repealed.
      “Section 9. This act shall become effective immediately upon its passage and approval by the Governor, or upon its otherwise becoming a law.!’