author: BLOODWORTH, Justice.

text:
    Wiley R. DEAL, Trustee in Bankruptcy of Covington Grain Co., a corporation, a Bankrupt v. Rodney R. JOHNSON et al.
    77-213.
    Supreme Court of Alabama.
    Aug. 18, 1978.
    Rehearing Denied Sept. 15, 1978.

      G. M. Harrison of Merrill & Harrison, Dothan, for Edward S. Allen of Balch, Bingham, Baker, Hawthorne, Williams ■ & Ward, Birmingham, and for Abner R. Powell, Jr., of Powell & Sikes, Andalusia, for appellant.
    Oakley Melton, Jr., of Melton & Espy, Montgomery, for appellee, Rodney R. Johnson.
    Maury D. Smith and Charles M. Crook, Montgomery, for McDonald appellees..
   BLOODWORTH, Justice.

Plaintiff, Wiley R. Deal (Trustee), trustee in bankruptcy of Covington Grain Company, appeals from the denial of his motion for a new trial and from a verdict and judgment of $15,000 in his favor against defendant Morris E. Rabren, president and director of the bankrupt corporation, from a verdict and judgment in favor of defendants J. E. McDonald and Rodney R. Johnson, directors of the corporation, and from a directed verdict in favor of the other three defendants, stockholders and alleged directors of the corporation.

This appeal is taken only as to Count III of Trustee’s complaint which sought damages from the defendants as officers or directors of the Covington Grain Company for their misfeasance or malfeasance in the performance of their corporate duties. It is alleged that the directors relinquished their duties and turned over control of the business to the president, Morris Rabren, and that this amounted to gross negligence. As a result of this gross negligence, it is claimed, the company lost $640,592 through speculative commodity contracts entered into by Rabren.

The Trustee’s position, as stated in his reply brief, is as follows:

“. . . [T]he Appellees earnestly insist that under said Section [§ 10-2-58 (Code 1975)] the Appellees had the right to rely on the report made to the Corporation by its President, Morris Rabren, to the effect that the commodity contracts that the Corporation had with Merrill Lynch were for ‘the protection of the business’ and the other report that he gave to the Appellees ‘that the Corporation was having the best year it ever had’.

“We would respectfully call to the Court’s attention another provision of the Alabama Business Corporation Act which was part and parcel of the original Act passed in 1959, being Section 10-2-5 of the Code of Alabama of 1975 and being Title 10, Section 21(97) of the Code of Alabama of 1940 as amended. This Section is as follows:

“ ‘Neither an unqualified statement of rights or powers nor an unqualified grant of authority in this chapter shall be taken, or construed, to abrogate, repeal, displace, modify or impair the fiduciary obligations of directors or other officers or employees of any corporation or of stockholders having or exercising control thereof, or of any function thereof, whether by reason of ownership of a majority or other controlling interest therein or otherwise, or the jurisdiction of the courts to grant relief by way of injunction or otherwise, in order to forestall, prevent, correct, remedy or allow damages for fraud, oppression, imposition or other inequitable or remedial conduct in conformity with the applicable principles and practices of law.’

“Thus it will be seen from the direct language of the last quoted provision of the Alabama Business Corporation Act that the same does not give the Directors the right to blandly rely upon a report by the President of a Corporation, but such Directors must exercise fiduciary duties as a Director notwithstanding such reports. . . .”

******
“. . . [T]he Appellees, McDonald and Johnson, as prudent businessmen, did not exercise that degree of diligence characterized as ordinary, which an ordinary prudent man would exercise about his own affairs. But to the contrary, they did absolutely nothing to keep themselves informed about the business affairs of the Corporation and what was being done with the corporate assets and property confided to their care and the undisputed evidence shows that through speculation on the part of Morris Rabren, the President of the Corporation and the person to whom the Appellees had committed the management of the affairs of the Corporation ... a total of $685,-000.00 was lost. . . . As a matter of law, the Appellees, McDonald and Johnson, were guilty of ‘gross negligence’ and under the undisputed evidence they are answerable for the losses of the corporation occasioned as a result of such gross negligence.”

In answer thereto, the defendants McDonald and David Jefferies state in brief as follows (omitting transcript references):

“. . . The crux of the Trustee’s theory of recovery in this case is that Morris Rabren, as President of the company, caused it to engage in speculation in the commodities futures market, and that the defendants [McDonald and Johnson], as members of the Board of Directors, should have known that he was doing this and put a stop to it. . ”

******

“The Trustee contends that at some point during the latter part of the year 1974, Morris Rabren started purchasing commodities futures contract^] on behalf of Coving-ton Grain at a time when he did not have offsetting sales which needed to be hedged. Thus, he contends that Morris Rabren started purchasing speculative commodities contracts rather than legitimate hedges, and that because the price of soybeans thereafter went down, Covington suffered large losses which precipitated its bankruptcy.

“In approximately August of 1974, a meeting of the stockholders and directors of the company was held at the offices of the company’s accountants. At this meeting, the company’s financial statement for the year ending April 30, 1974, was presented and explained by the company’s certified public accountant. Some question was raised about certain commodities contracts reflected in the statement. At that time, Morris Rabren explained that the purpose of these transactions was merely to protect the company’s position, and that they were not speculative contracts. The company accountant and all of the defendants cautioned Morris that he should be careful not to engage in any speculation, and Rabren was in complete agreement with this view. The company’s certified public accountant, who had served in that capacity since the company’s inception, testified that he had no reason whatsoever to doubt Mr. Rabren’s truthfulness, and that Rabren had been a responsible businessman in the community for many years. Further, based upon his examination of the company’s affairs, the accountant saw no reason whatsoever to recommend a special audit regarding commodities transactions. The financial statements which were presented at this meeting showed that the company had a profit of $63,000.00, . . . . (Four months later, . . . the company [was] in bankruptcy). These facts are not disputed by the Trustee. . . . The Trustee’s contention is that the directors should have thereafter gone into the offices of the company and conducted their own independent examination to determine whether Rabren was lying to them as to the nature of the company’s commodities transactions. The validity of this contention is totally destroyed by the Trustee’s own knowledgeable witnesses, i. e., Mr. Winkler and Mr. Katz, brokers with Merrill, Lynch, Pierce, Fenner and Smith. . . .”

$ $ 4: ‡ ‡ ‡

“Mr. Katz testified that if, after opening a hedging account, Rabren thereafter decided to engage in transactions which were not legitimate hedges but were in fact speculation, this would have been extremely difficult to detect, and would have required total knowledge about everything connected with the business. To detect this, it would have been necessary to know the total amount of beans which Covington had received from farmers, how many were priced and how many were unpriced, how many were held in storage and how many were shipped or sold to others, how many were sold priced and how many were sold unpriced, and other factors. Mr. Katz testified that he had been in the brokerage business for a number of years and is generally familiar with corporate practices relating to commodity transactions, and he does not know of any particular ledger or book that anyone could refer to to determine whether speculation was in fact occurring, and such record keeping is a very complex affair. Even with his experience and knowledge of the field, Mr. Katz does not feel that he himself would be qualified to determine under these circumstances whether a particular transaction was a legitimate hedge, as represented, or whether it was speculative, even if he had the authority to go into the offices of the company and look at any record or book as long as he wanted to. To make this determination, it would be necessary to hire a certified public accountant, and he does not feel that an ordinary businessman could conduct such an analysis.”

The trial judge granted a motion for directed verdict as to defendants Joseph E. McDonald, Jr., Robert R. McDonald, and David A. Jefferies, stockholders and alleged directors, on the ground that there was no proof that they were directors of the corporation. The jury returned a verdict for defendants J. E. McDonald and Rodney Johnson, directors, but against defendant Morris Rabren in the sum of $15,000. Trustee’s motion for a new trial as to all defendants was denied.

On appeal, Trustee advances the same grounds for reversal as he presented in his motion for a new trial, i. e., the verdict in favor of J. E. McDonald and Rodney Johnson was contrary to the great preponderance of the evidence, the directed verdict in favor of Joseph E. McDonald, Jr., Robert McDonald, and David Jefferies was in error because there was a scintilla of evidence that they were directors, and the verdict against Morris Rabren was wholly inadequate.

Verdict for J. E. McDonald and Rodney Johnson

This court has stated many times that verdicts are presumed to be correct and that no ground in a motion for a new trial is more carefully scrutinized and more rigidly limited than that the verdict is contrary to the weight or preponderance of the evidence. S. S. Kresge Co. v. Ruby, 348 So.2d 484 (Ala.1977).

When there is evidence presented which, if believed, supports the verdict, a motion for a new trial on the ground that the verdict is against the weight or preponderance of the evidence may be properly denied. Edmondson v. Blakey, 341 So.2d 481 (Ala.1976).

The presumption in favor of the correctness of the verdict is strengthened by the denial of a motion for a new trial. Edmondson v. Blakey, supra. Moreover, the denial of a motion for a new trial will not be reversed by this court unless, after allowing all reasonable presumptions as to the verdict’s correctness, the preponderance of the evidence is so against it that this court is clearly convinced that it is wrong and unjust. Edmondson v. Blakey, supra.

We are not clearly convinced that the preponderance of the evidence is so against the jury verdict in favor of defendants J. E. McDonald and Rodney Johnson that it is wrong and unjust. As directors, they are liable for losses to the corporation resulting from their wilful and intentional departures from duty, fraudulent breaches of trust, gross negligence, or ultra vires acts. Sellers v. Head, 261 Ala. 212, 73 So.2d 747 (1954). They are not liable to the corporation if they act in good faith and without gross negligence supporting an imputation of fraud. King v. Livingston Manufacturing Co., 192 Ala. 269, 68 So. 897 (1915).

There is evidence in the record which, if believed, supports a finding that these two defendants acted in good faith in reliance upon reports and statements made to them by Morris Rabren and by an independent certified public accountant. Such good faith reliance by directors is sanctioned by statute. § 10-2-58 (Code 1975). Moreover, we cannot say that evidence of gross negligence supporting an imputation of fraud so outweighs other evidence in support of the verdict that reversal is required to prevent an injustice.

Directed Verdict for Joseph McDonald, Jr., Robert McDonald and David Jefferies

Trustee claims that there was a scintilla of evidence to support his allegation that Joseph McDonald, Jr., Robert McDonald, and David Jefferies were directors or de facto directors, and that the question of their liability should have been submitted to the jury.

The scintilla rule is the standard by which the trial judge determines the propriety of granting a motion for a directed verdict. Alabama Power Co. v. Taylor, 293 Ala. 484, 306 So.2d 236 (1975); Rule 50(e) ARCP. A directed verdict may be granted where there is a complete absence of pleading or proof on an issue material to the claim or where there are no controverted issues of fact upon which reasonable men could differ. Loeb & Co. v. Martin, 295 Ala. 262, 327 So.2d 711 (1976); Alabama Power Co. v. Taylor, supra.

We have found no proof in the record that these three defendants were de jure directors of the bankrupt corporation. Directors are to be elected at the first annual meeting of the stockholders and at each annual meeting thereafter. § 10-2-51 (Code 1975). It is uncontroverted that these defendants were never elected to the board of directors, nor were they designated directors in the articles of incorporation.

A person is not a de facto director when he is not holding office under color or appearance of right or when he is not generally exercising the functions of his position. 19 C.J.S. Corporations, § 740.

In support of his allegation that these defendants were de facto directors, Trustee cites testimony by Morris Rabren that the company had a policy that stockholders were considered directors, and testimony of others that these defendants were stockholders. Rabren further testified that they were invited to attend and did attend directors’ meetings and that they participated in the discussions held during these meetings. However, Rabren testified that he did not know whether these defendants were directors or not and that he could not recall if they voted at the directors’ meetings. On cross-examination he stated that they never assumed the duties of directors.

It does not appear that there is a scintilla of evidence to prove that the defendants held the office of director under color of right or that they exercised the functions of directors. Rabren’s statement alone that the company had a policy that’ stockholders were considered directors does not constitute a scintilla of evidence that these defendants were directors. There are only two ways to become a de jure director: designation in the certificate of incorporation or election by the stockholders. § 10-2-51 (Code 1975). A de facto director holds office under color of right, through designation or election, but fails being a de jure director by some irregularity in his election or by his ineligibility or failure to qualify as required. Thus, in order to prove that a person is a de facto director, there must be some evidence of an election or designation, and the record is devoid of such proof here.

Verdict Against Morris Rabren

Finally, Trustee argues that the verdict in his favor against Morris Rabren in the amount of $15,000 is “wholly inadequate” and that the trial court erred in overruling his motion for new trial on this ground.

The basic reason for disturbing a jury verdict because of inadequate damages is the same as stated previously regarding verdicts contrary to the preponderance of the evidence. Allen v. Harper, 277 Ala. 691, 174 So.2d 331 (1965); Yarbrough v. Mallory, 225 Ala. 579, 144 So. 447 (1932). After allowing all presumptions in favor of its correctness, we are convinced that the evidence against the verdict is so decided as to clearly convince us that it is wrong and unjust.

We have been unable to find any evidence in the record to support the award of $15,000 damages against Rabren. All the evidence clearly points toward an award substantially greater than this amount. Much of the evidence relating to the amount of loss suffered by Covington Grain is undisputed — even by Rabren himself. The jury cannot disregard the testimony of competent witnesses and substitute its own conclusion for undisputed evidence. Farmers & Ginner’s Cotton Oil Co. v. Reliance Ins. Co., 341 So.2d 147 (Ala.1976).

For the foregoing reasons, this cause is due to be affirmed as to appellees McDonald, Johnson and Jefferies and reversed and remanded as to appellee Rabren.

AFFIRMED IN PART.

REVERSED IN PART AND REMANDED.

TORBERT, C. J., and FAULKNER, AL-MON and EMBRY, JJ., concur.


source: Caselaw Access Project

author: EMBRY, Justice.

license: Public Domain

text:
    Mary C. HICKS v. LONGFELLOW DEVELOPMENT COMPANY, INC., a corp.
    77-189.
    Supreme Court of Alabama.
    Sept. 15, 1978.

      Michael A. Figures of Crawford, Blacksher, Figures & Brown, Mobile, for appellant.
    Irvin J. Langford of Howell, Johnston, Langford, Finkbohner, & Lawler, Mobile, for appellee.
   EMBRY, Justice.

The issue presented for review on this appeal is whether summary judgment was erroneously entered in behalf of Longfellow Development Company, Inc., a corporation, in statutory proceedings instituted by it to recover possession of premises belonging to it and occupied by Mary C. Hicks.

The action began in the district court upon the filing of an affidavit by plaintiff as provided for in Tit. 31, § 35, Code 1940 (§ 35-9-80, Code 1975):

“In all cases where a tenant shall hold possession of lands or tenements over and beyond the term for which the same were rented or leased to him, or after his right of possession has terminated or been forfeited, and the owner of the lands or tenements shall desire possession of the same, such owner may by himself, his agent or attorney-in-fact or attorney-at-law demand the possession of the property so rented, leased, held or occupied; and if the tenant refuses or omits to deliver possession when so demanded, the owner, his agent or attorney-at-law or attorney-in-fact may go before the district court in the county in which the land lies, and make oath of the facts.”

A writ of possession was issued as provided for in Tit. 31, § 36, Code 1940 (§ 35-9-81, Code 1975):

“When the affidavit provided for in section 35-9-80 shall be made, the district court before whom it was made shall grant and issue a writ or process directed to the sheriff or his deputy or any lawful constable of the county where the land lies, commanding and requiring him to deliver to the owner or his representative full and quiet possession of the lands or tenements mentioned in the affidavit, removing the tenant with his property found thereon away from the premises.”

Longfellow Development’s affidavit recited that Mary C. Hicks had been given a ten day notice to vacate. This was apparently done to comply with Tit. 31, § 3, Code 1940 (§ 35-9-3, Code 1975):

“Where no time is specified for the termination of tenancy, the law construes it to be from December 1 to December 1 but if it is expressly a tenancy at will, then either party may terminate it at will, by 10 days’ notice in writing.”

Mary Hicks arrested the proceedings by filing an affidavit as provided for by Tit. 31, § 37, Code 1940 (§ 35-9-84, Code 1975). After submission upon affidavits, the district court entered judgment for possession and Mary Hicks appealed to the circuit court for trial de novo.

In the circuit court, Longfellow Development filed its motion for summary judgment and submitted on affidavits in support thereof which, in substance, stated that Mary C. Hicks owed rent for the period 14 January 1977 through 14 September 1977 inclusive and she had been served with two ten day “quit” notices; one on 9 July 1977, another on 23 July 1977. Mary Hicks submitted on affidavits which, in substance, stated Longfellow had no right to possession, she was not indebted to it, she had a lease which was still in effect, Longfellow refused to accept her rent payment when attempt was made to pay before it was due, and rent would be current but for the refusal of it. Motion for summary judgment was granted, judgment entered by the circuit court for possession of the premises, after which this appeal was timely taken.

The record contains no pleadings; none are required by these statutory proceedings, but the better practice would be to utilize pleadings so the issues might be clearly framed. The proceedings, authorized by §§ 35-9-80 through 35-9-88, are designed to afford an owner or landlord a speedy remedy to recover possession of his land after expiration of the term of the tenancy or right of possession of the tenant. Riley v. Riley, 257 Ala. 636, 60 So.2d 432 (1952).

In this case the affidavits, upon which the motion for summary judgment was submitted, do not reveal the nature of Mary Hicks’ tenancy. The only hint of it is found in her affidavit where she states that her lease was still in effect. Without evidence of the nature of the tenancy, it is impossible to determine whether her right to possession had terminated or expired. Non-payment of rent, of itself, does not work forfeiture of possessory right or create the right of re-entry. Hyde v. Bains, 247 Ala. 8, 22 So.2d 324 (1945).

For a thorough discussion of the construing of these statutes with the statutes relating to unlawful detainer see Garrett v. Reid, 244 Ala. 254, 13 So.2d 97 (1943).

It was the burden of Longfellow Development to show that Mary Hicks was holding over and beyond the term for which she rented the premises or after her right of possession was terminated or forfeited. Garrett, supra. From the affidavits it cannot be determined for what term the premises were rented, therefore we cannot know whether she was holding over and beyond that term. Similarly, there is no evidence from which we can determine whether her right of possession was terminated or forfeited.

Most certainly, the evidence in this regard is not such that it may be said there is no genuine issue as to any material fact in this case which makes entry of summary judgment appropriate.

REVERSED AND REMANDED.

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


author: ALMON, Justice.

text:
    Ottis CULVER, Executor of the Will of Samuel D. King, Deceased v. Donald E. KING et al.
    77-193.
    Supreme Court of Alabama.
    Sept. 15, 1978.

      Barry D. Vaughn, Sylacauga, for appellant.
    Thomas R. Bell, Jr., Sylacauga, for appel-lees.
   ALMON, Justice.

Ottis Culver, Executor of the Will of Samuel D. King, deceased, appeals from a judgment of the circuit court holding that the proponent Culver had not proved a pri-ma facie case that King had duly executed his will. We reverse.

Samuel D. King died of a protracted illness on March 14,1976, at the age of seventy. King was survived by his eight children, who are contesting his will.

The purported will, dated March 1, 1976, leaves the bulk of King’s estate to Ottis Culver and his wife. The will was offered for probate and upon a contest filed by the appellees, the cause was removed to the circuit court.

There were three attesting witnesses. They were Mike Cleckler and Ray Robbins, members of the law firm of Gaines, Hereford, Cleckler, Robbins and Blair in Tallade-ga, Alabama, and Betty Thomas, a legal secretary for the firm. At trial, the proponent offered the testimony of Betty Thomas and Mike Cleckler to the effect that the will was properly executed. Ray Robbins was at a local hospital with his wife and did not testify.

At the close of the proponent’s case, the contestants rested and moved for a directed verdict. The court granted the motion on the ground that the proponent had failed to prove a prima facie case because one of the attesting witnesses was not called to testify. The court also denied the proponent’s motion to reopen the case to allow this witness to testify.

The statute requires that a will must be attested to by at least two witnesses. § 43-1-30, Code of Alabama 1975. The purpose of this requirement is to remove uncertainty as to the execution of wills and safeguard testators against frauds and impositions. Elston v. Price, 210 Ala. 579, 98 So. 573 (1923); Riley v. Riley, 36 Ala. 496 (1860).

It is not denied by either party that if there are only two attesting witnesses and the will is contested, then both must testify or the proponent must account for their absence in order to meet his burden of proof that the will was duly executed. E. g., Ferrell v. Minnifield, 275 Ala. 388, 155 So.2d 345 (1963).

The requirement that a will must be proved by the testimony of the attesting witnesses, if possible, is codified in § 43-1— 44, Code of Alabama 1975. Speaking of this requirement in Whitt v. Forbes, 258 Ala. 580, 584, 64 So.2d 77, 80 (1953), the court stated that the section:

“. . . recognizes a rule of ancient origin which is seemingly grounded in the law of evidence, which makes the testimony of the subscribing witnesses the best evidence of its due execution and attestation, and where their evidence is available requires that they be called to prove the execution of wills offered for probate. Reynolds v. Massey, 219 Ala. 265, 122 So. 29.”

Although the parties cite numerous cases in support of their respective position, suffice it to say that this precise issue has never been directly addressed by this court. The strongest support for contestants’ position is the following language from the case of Bowling v. Bowling, 8 Ala. 538, 540 (1845):

“. . . although it might be sufficient in a case where the will was not contested, to admit it to probate on the proof of one witness, who subscribed the will, he testifying also to the subscription by the other witnesses, in the presence of, and at the request of the testator, we are clear that in a case like the present, when the heir contests the will, he has the right to demand that all the witnesses be called. They are required by the statute for his protection, and they are best qualified to speak, not only of the fact of the execution of the will, but also of the capacity of the testator to make a will.” (Emphasis added.)

In Bowling, a will was offered for probate upon the testimony of two of the three attesting .witnesses, the third witness was out of the state and thus, unavailable. The court held that the will was duly executed by the testator. However, as stated in the decision in Bowling, the statute required that wills of land be attested by three witnesses. 8 Ala. at 539. Later, the statute was changed to its present form, requiring only two attesting witnesses. See Barnewall v. Murrell, 108 Ala. 366, 18 So. 831 (1895); Hoffman v. Hoffman, 26 Ala. 535 (1855). Thus, the language of the Bowling opinion stating that “all the witnesses,” if available, are required to prove due execution is not controlling.

Section 43-1-30, Code of Alabama 1975, provides that a will must be subscribed by two witnesses to be valid and § 43-1-44 provides that a will must be proved by one or more of the subscribing witnesses. Reading these two sections together we believe that two subscribing witnesses can establish a prima facie case of execution even if there are additional witnesses. Neither of these statutes require the testimony of all subscribing witnesses and there is no reason for this court to impose such a requirement.

Additionally, we are of the opinion that the court abused its discretion in not reopening the case to allow the testimony of Ray Robbins. We quote from the record:

“MR. PROCTOR: And I further show unto Your Honor that Ray Robbins has just called the Judicial Building here in Talladega and informed the Court that his child is born.
THE COURT: Let me state that Mr. Robbins has not talked to me.
MR. PROCTOR: He talked to the Clerk of the Court.
THE COURT: You said talked to the Court. You may have meant clerk.
MR. PROCTOR: And further that Mr. Robbins notified us that he could be here in ten minutes to testify in this case. Further in support of our motion to reopen the case, Judge, we request that if it’s not convenient for the Court to take the testimony of Ray Robbins at this time to recess the Court until 9:00 a. m. in the morning or some convenient time that the Court finds to take his testimony. As I stated earlier Mr. Robbins has notified us that he can be here within ten minutes if the Court so desires. We offer this in support of our motion. The reason that the Proponent is making this offer or motion for Your Honor is to reopen this case is based upon the fact that the Proponent feels that by offering the testimony of two of the three attesting witnesses to this will that we had sufficiently satisfied the requirements set out by Alabama Law in order to introduce the will into evidence and to make out a prima facie case on behalf of the Proponent. It was only after the Proponent rested and the Contestant filed a motion for a directed verdict, and further after Your Honor told the counsel for both parties in your chamber that it was your judgment that a third attesting witness was required under the law — (Interrupted)
THE COURT: I don’t believe I said that three attesting witnesses were required. I believe the statement I made was all attesting witnesses are required. MR. PROCTOR: All attesting witnesses were required when in fact the will in question does have three witnesses. One of those being Ray Robbins, and it was only after Your Honor made this explanation and indicated to us that you intended to give a directed verdict that we make this offer in support of our motion to reopen the case and we feel like that justice can only be served in this case by the reopening of it.”

We consider the better practice is to call all the witnesses to the execution of a will. But under the present circumstances we are of the opinion that two witnesses were sufficient to make a prima facie case. It is inferable from the record that if the contestants seriously thought that the missing witness’ testimony would in any way enhance their case, they would have subpoenaed that witness and insisted on his presence before trial, or would have been amenable to the motion to reopen, the case.

The judgment of the trial court is hereby reversed and the cause is remanded.

REVERSED AND REMANDED.

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


text:
    G. Alvon DAMPIER, d/b/a Dampier-Harris & Associates v. James C. PEGUES et al.
    77-241.
    Supreme Court of Alabama.
    Sept. 15, 1978.

      William M. Acker, Jr., Susan E. Dominick, Birmingham, for appellant.
    Gene R. Smitherman, The University of Alabama in Birmingham, for appellees.
   ALMON, Justice.

Dampier filed an action seeking a writ of mandamus to require James C. Pegues, fiscal officer for the University of Alabama in Birmingham (UAB) and S. Richardson Hill, President of UAB, to pay him $14,325.66 allegedly due under a contract. The circuit court granted the defendant’s motion to dismiss. We reverse.

The basic question is whether the allegations of the complaint are sufficient to bring the claim within the holding of Hardin v. Fullilove Excavating Co., Inc., 353 So.2d 779 (Ala.1977) and State Board of Administration, et a1. v. Roquemore, 218 Ala. 120, 117 So. 757 (1928), so as to avoid UAB’s constitutional immunity.

The essential allegations of the complaint are as follows:

“1. On or about November 20, 1972, the plaintiff and the Board of Trustees of the University of Alabama, by and through its lawfully authorized agent, Joseph F. Yolker, then President of the University of Alabama in Birmingham, entered into a written contract for the performance by plaintiff of architectural and consulting services for the construction of the Holmes Addition to Spain Rehabilitation Center at the University of Alabama Hospitals and Clinics, Birmingham, Alabama. A copy of said contract is attached hereto as Exhibit “A” and incorporated herein by reference.
2. A sufficient sum was budgeted and available for the performance of this work according to a schedule of fees contained in said contract.
3. Plaintiff performed all of the work and services called for in the architectural contract, and said services were accepted, approved and used by the University of Alabama in Birmingham.”

The motion to dismiss contains several grounds. The first ground is that the suit is barred by sovereign immunity. Article I, Section 14, Alabama Constitution 1901. The second ground asserts that mandamus is inappropriate because an adequate remedy exists through the State Board of Adjustment. The third and fourth grounds assert res judicata and collateral estoppel because of a prior suit by Dampier against the University of Alabama Board of Trustees.

Basically, Hardin holds that state officials may not arbitrarily withhold payment where the other party has undisputedly performed in accordance with the contract. In the defendant’s answer to the petition they asserted as a defense that Dampier breached the contract and consequently is not entitled to the final payment. Whether the contract was breached or not is a fact question.

The complaint is not to be construed strictly against the pleader when challenged by a motion to dismiss. Butts v. Weiss, 346 So. 422 (Ala.1977). It is clear that if the plaintiff proved each allegation in his complaint, his claim would fall squarely within the holdings of Hardin and Roquemore. In these two cases, this Court affirmed the issuance of a writ of mandamus to compel state officials to pay sums of money due under executed contracts.

Therefore, considering the complaint in a light most favorable to the plaintiff, we hold that his petition is sufficient to withstand a motion to dismiss.

Motions to dismiss should only be granted when it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Jeannie’s Grocery v. Baldwin County Elec. Mem. Corp., 331 So.2d 665 (Ala.1976).

The other grounds in the motion to dismiss are also without merit. Possible redress through the State Board of Adjustment will not prevent mandamus. Dunn Construction Co. v. State Board of Adjustment, 234 Ala. 372, 175 So. 383 (1937).

The prior suit by Dampier against the Board of Trustees of the University of Alabama will not prevent the maintenance of this suit. The parties in the two suits were not the same. The sole issue decided in Dampier’s prior suit was the immunity of UAB under § 14. See Ellison v. Abbott, 337 So.2d 756 (Ala.1976); Hutchinson v. Board of Trustees of University of Alabama, 288 Ala. 20, 256 So.2d 281 (1971). However, State immunity is subject to certain exceptions, one of which is recognized in Hardin. This cause is not barred by any principles of res judicata or collateral estop-pel. Webster v. Gunter, 336 So.2d 170 (Ala. 1976).

The judgment of the circuit court is reversed and the cause is remanded.

REVERSED AND REMANDED.

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


text:
    The CITY OF BREWTON, Alabama v. WHITE’S AUTO STORE, INC., a corp., et al.
    77-263.
    Supreme Court of Alabama.
    Sept. 15, 1978.
    Harold Albritton, Andalusia, Joe B. Thompson, Jr., Brewton, for appellant.
    John L. Jernigan, III, of Stokes & Jerni-gan, Brewton, for appellees, White’s Auto Store, Inc., a Corp., L. L. Salter, d/b/a Salter Floor Covering, Clyde Thomas, Hugo Moye, d/b/a Moye’s Printing and Office Supplies, Auto-Owners Ins. Co.
    Griffin Sikes of Powell & Sikes, Andalusia, for appellee, White’s Auto Store, Inc., a Corp.
    Bert S. Nettles and J. F. Janecky of Bryan, Nelson, Nettles & Cox, Mobile, for appellees, Southern Guaranty Ins. Co., Lumberman’s Mut. Cas. Co., American Manufacturer’s Mut. Ins. Co., Home Ins. Co. and Home Indemn. Co.
    Thomas M. Galloway, Jr. of Collins, Galloway & Smith, Mobile, for appellee, Motors Ins. Corp.
    Johnnie B. Byrd, Jr. of Caffey & Owens, Brewton, for appellee, Safeco Ins. Companies, Inc.

      Bishop K. Walker, Jr. of Nash & Walker, Oneonta, for appellees, Control, Inc. and William E. Bright, Inc.
    Drayton N. Hamilton, Montgomery, Gen. Counsel, Alabama League of Municipalities, amicus curiae.
   ALMON, Justice.

The City of Brewton appeals by permission under Rule 5, ARAP, from an order of the circuit court denying its request for declaratory relief seeking to limit its liability under authority of Act No. 673, passed by the 1977 Regular Session of the Alabama Legislature. We affirm.

During the early morning hours of January 6, 1976, an explosion occurred in the downtown area of Brewton, Alabama, causing widespread damage to property. During the next year, twelve lawsuits involving thirty-seven separate property owners were filed against The City of Brewton, and other defendants, seeking damages in excess of $1,000,000.00. All of the suits in this consolidated appeal, except one, are subrogation claims by insurance companies.

Subsequent to the filing of these suits, the Legislature passed Act No. 673 (found in § 11-93-1 through § 11-93-3, Code of Alabama, 1975) which limits the amount recoverable against a governmental entity for property damage, bodily injury, and death. As to property damage, § 2 of the Act provides:

“ . . . Recovery of damages under any judgment against a governmental entity shall be limited to $100,000.00 for damage or loss of property arising out of any single occurrence. No governmental entity shall settle or compromise any claim for bodily injury, death or property damage in excess of the amounts herein-above set forth.” •

By way of a counterclaim, Brewton sought declaratory relief to limit its liability under the Act. The plaintiffs opposed Brewton’s claim on grounds that the Act is not to be given retrospective application and that the Act is unconstitutional. The court dismissed Brewton’s counterclaim. We find that the Act is not retrospective and therefore do not reach the constitutional question.

Courts indulge every presumption in favor of construing actions of the legislature to have a prospective operation unless the legislature’s intention is otherwise stated in express terms, or clearly, explicitly, and unmistakenly permit of no other meaning. 73 Am.Jur.2d, Statutes, § 350, p. 487. The rule was stated in Ex parte Buckley, 53 Ala. 42, 54-55 (1875), as follows:

“ . . . Retrospective statutes, when within legislative competency, are not favored, and it is a sound rule of judicial construction, that they shall operate prospectively only, unless the terms show a clear legislative intent, that they shall operate retrospectively. Cooley’s Con. Lim. 369; Sedgwick on Stat. and Cons. Law, 161. The statutes excluded from judicial favor, and subjected to this strictness of judicial construction — statutes which may be properly denominated retrospective, are such as take away or impair vested rights, acquired under existing laws, or create a new obligation, impose a new duty, or attach a new disability, in respect to transactions or considerations already past. Society, &c., v. Wheeler, 2 Gall. 139 [105]. Such statutes are offensive to the principles of sound and just legislation, and it is of these the authorities to which we have been referred, use the term ‘odious,’ and other epithets expressive of judicial opprobrium. . ."

See also, Mobile Housing Board v. Cross, 285 Ala. 94, 229 So.2d 485 (1969); Fuqua v. Fuqua, 268 Ala. 127, 104 So.2d 925 (1958); McGregor v. McGregor, 249 Ala. 75, 29 So.2d 561 (1947); New England Mortgage Security Co. v. Board of Revenue of Montgomery County, 81 Ala. 110, 1 So. 30 (1887); B. F. Goodrich Company v. Butler, 336 So.2d 1357 (Ala.Civ.App.1976); Bell v. Mar-Mil Steel and Supply Co., 54 Ala.App. 432, 309 So.2d 471 (1975).

Appellant argues that the Act applies to judgments rendered after the effective date of the Act. We consider this to be a strained construction in view of the authorities cited. The Act also makes reference to “occurrence.” The occurrence which gives rise to these suits happened over a year prior to the passage and effective date of Act No. 673. Giving the Act a prospective application only, we hold it has no application to these cases.

The order of the circuit court denying appellant’s request for declaratory relief is hereby affirmed.

AFFIRMED.

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


author: JONES, Justice. MADDOX, Justice

text:
    In re ASSURED INVESTORS LIFE INSURANCE CO. v. NATIONAL UNION ASSOCIATES, INC., et al. Ex parte Jesse C. BISHOP and Wayne L. Kerns.
    77-322.
    Supreme Court of Alabama.
    Sept. 15, 1978.

      W. Eugene Rutledge, of Rutledge, Williams, Williams & Norton, Anniston, for petitioners.
    William J. Baxley, Atty. Gen. and William P. Eldridge, Asst. Atty. Gen., for respondent, Judge William A. Thompson, Jr., 10th Judicial Circuit.
    Earl C. Morgan, Dist. Atty. and George Hugh Jones, Deputy Dist. Atty., Birmingham, for respondent, State of Ala. ex rel. Earl C. Morgan.
   JONES, Justice.

Petitioners, Jesse C. Bishop and Wayne L. Kerns, seek a Writ of Mandamus from this Court to compel Judge William A. Thompson, Jr., Circuit Court for the Tenth Judicial Circuit, to vacate his Order of February 3, 1978, and permit discovery concerning certain documents in the possession of Earl C. Morgan, District Attorney for the Tenth Judicial Circuit. A Writ of Mandamus, directing the Circuit Court to vacate the Protective Order of February 3, 1978, and to conduct a hearing on the Motion of the District Attorney for a Protective Order consistent with the principles stated in this opinion, is due to issue.

Petitioners áre the holders of record of 7,352 shares of common stock of Assured Investors Life Insurance Company. On August 17, 1977, Assured Investors Life Insurance Co. v. National Union Associates, Inc., Civ. Action No. CV-77 504-029 WAT, was filed in the Circuit Court seeking adjudication of certain claims against officers, directors and stockholders of Assured. Originally, the action was brought on behalf of Assured by a Special Committee designated by its Board of Directors to investigate and recover on claims made by Bishop. Eventually, the parties were realigned and Bishop and Kerns proceeded as Plaintiffs, both individually and derivatively as stockholders of Assured.

On January 30, 1978, Petitioners filed a notice of taking deposition and subpoena duces tecum for deposition upon oral examination addressed to Morgan. The subpoena sought, inter alia:

“10. Transcripts of any and all proceedings occurring during any meeting of any kind or nature whatsoever between yourself and any member of your office and Ronald J. Creel [a named Defendant in the Civil Action mentioned above].”

On February 3, 1978, Morgan filed a Motion for Protective Order pursuant to Rule 26(c), ARCP, seeking to deny discovery of the Creel documents. As grounds therefor, Morgan alleged that the documents were the work product of an ongoing criminal investigation collateral to the civil action. At the hearing, he further alleged that such documents were protected under an executive privilege. No supporting affidavit was filed, but the Court, relying upon Morgan’s oath as an officer of the Court and his oath as District Attorney, accepted these contentions and ordered that the deposition and subpoena duces tecum be disallowed.

It appears that the District Attorney’s office conducted investigations of Assured and its officers and directors for possible violations of the insurance laws of this State. In so doing, a statement made by Creel was obtained and signed by him. It is a transcript of this statement which Petitioners seek.

In December, 1977, the Jefferson County Grand Jury returned indictments against several of the civil co-defendants, but not against Creel. Morgan asserts that this investigation is ongoing and that, therefore, the requested documents are privileged.

Preliminarily, we note that, by their Answers to this Petition, both Morgan and Judge Thompson contend that the documents sought were not subpoenaed properly pursuant to Rule 45(d), ARCP. It appears, however, that this contention was not raised below and, thus, we may not review the matter here. Cole v. Cole Tomato Sales, Inc., 293 Ala. 731, 310 So.2d 210 (1975). See also Miller v. Sun Chemical Corp., 12 F.R.D. 181 (D.N.J.1952); McDuffie v. Hooper, 294 Ala. 293, 315 So.2d 573 (1975); and Fountain v. Vredenburgh Saw Mill Co., 279 Ala. 68, 181 So.2d 508 (1965).

Our Rules of Civil Procedure are based upon, and are strikingly similar to, the Federal Rules of Civil Procedure. Because these two sets of Rules are virtually verbatim, a presumption arises that cases construing the Federal Rules are authority for construction of the Alabama Rules. Ex parte Rice, 265 Ala. 454, 92 So.2d 16 (1957). See also Ex parte Huguley Water System, 282 Ala. 633, 213 So.2d 799 (1968); and Smith v. Flynn, 275 Ala. 392, 155 So.2d 497 (1963).

Rule 26, ARCP, provides:

(b) Scope of Discovery. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:
(1) In General. Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action . . It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.
(c) Protective Orders. Upon motion by a party or by the person from whom discovery is sought, and for good cause shown, the court in which the action is pending or alternatively, on matters relating to a deposition or production or inspection, the court in the circuit where the deposition or production or inspection is to be taken may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense . . (Emphasis added.)

Thus, to be entitled to a protective order, a movant must either show good cause why the objected-to deposition or production of documents would be unduly burdensome or expensive, oppressive, embarrassing or annoying, or that the subject matter sought to be discovered is privileged. The record before us is totally without “good cause shown.” Therefore, because the material sought is undisputably otherwise within the scope authorized above, it is discoverable unless it is “privileged.” See, generally, Glick v. McKesson & Robbins, Inc., 10 F.R.D. 477 (W.D.Mo.1950); and Allen v. Jones, 259 Ala. 98, 65 So.2d 217 (1953).

It is well settled that the Rules on deposition and discovery are to be broadly and liberally construed. Cole, supra. Rule 26(c), supra, recognizes, however, that the right to discovery is not unlimited, and the trial court has broad powers to control the use of the process to prevent its abuse by any party. See Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962); and DeLong Corp. v. Lucas, 138 F.Supp. 805 (S.D.N.Y.1956). The Rule does not allow an arbitrary limit on discovery; instead, it vests the trial court with judicial discretion in the discovery process. The question on review, then, becomes one of whether, under all the circumstances, the court has abused this discretion. Campbell v. Regal Typewriter Co., 341 So.2d 120 (Ala.1976). An appellate court may not decide whether it would, in the first instance, have permitted the prayed for discovery. Furthermore, it is unusual to find abuse of discretion in these matters. Swanner v. United States, 406 F.2d 716 (5th Cir. 1969); Tiedman v. American Pigmant Corp., 253 F.2d 803 (4th Cir. 1958); Ex parte Alabama Power Co., 280 Ala. 586, 196 So.2d 702 (1967); and 35A C.J.S. Federal Civil Procedure §§ 532, 592.

Against this broad policy of liberal discovery, Morgan contends that the document sought to be discovered is privileged. “Privileged,” as used in Rule 26(b)(1), ARCP, means “ ‘privileges’ as that term is understood in the law of evidence.” United States v. Reynolds, 345 U.S. 1, 6, 73 S.Ct. 528, 531, 97 L.Ed. 727 (1953). As stated, Morgan bases this argument upon two premises: (1) That the material sought is the “work product” of the District Attorney’s office, gathered in preparation of a criminal action; and (2) That the material sought is privileged under a broad claim of executive or “Crown” privilege.

The “work product” argument is inapplicable because:

“The written statement of a witness, whether prepared by him and later delivered to the attorney, or drafted by the attorney and adopted by the witness, is not properly considered the ‘work product’ of an attorney. It records the mental impressions and observations of the witness himself and not those of the attorney.” Scourtes v. Fred W. Albrecht Grocery Co., 15 F.R.D. 55, 58 (N.D.Ohio 1953), citing, Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947).

Here, the mere fact that the District Attorney’s office obtained this statement does not render it their work product. The transcription and recordation of the statement was incidental to the statement itself, which was not the product of counsel. Therefore, we are left with the sole question of whether the statement is nondiscov-erable under the concept of executive privilege.

“Executive privilege” is a privilege claimed by a governmental body when it fears that discovery of its confidential information will seriously impair its ability to function. Wood v. Breier, 54 F.R.D. 7 (E.D. Wis.1972). Historically, it has been reserved for military and diplomatic state secrets and is founded upon the “unfortunately necessary policy of fettering justice to promote national health.” Timken Roller Bearing Co. v. United States, 38 F.R.D. 57, 63 (N.D.Ohio 1964).

In the instant action, the privilege is claimed so as to prevent possible hampering of an ongoing criminal action. Morgan, however, asserted this privilege, not by affidavit or under oath, but upon bare allegations at the motion hearing. Though the document was offered to the Court for in camera examination, no such review took place.

As stated in Timken, at 63:

“It can no longer be claimed that a naked assertion of privilege by the executive is sufficient to assure non-disclosure. ‘Judicial control over the evidence in a case cannot be abdicated to the caprice of executive officers.’ (Reynolds, 345 U.S., at 9-10, 73 S.Ct. 528.) Therefore the responsibility of evaluating the claim of privilege devolves upon the Court. This can no longer be questioned.”

See also Gaison v. Scott, 59 F.R.D. 347 (D.Hawaii 1973); and Conway v. Rimmer, [1968] Law Rpts. (Appeal cases) 910, overruling, Duncan v. Cammell Laird & Co., 1 All E.R. 587 (1942).

In deciding to uphold or overrule claims of executive privilege, the role of the trial court is limited to a determination of three fundamental questions: (1) Whether the claim falls within one of the categories of privileges recognized in the law of evidence; (2) Whether the' claim has been properly invoked; and (3) Whether the circumstances of the case under consideration are appropriate for the exercise of the claim. Jabara v. Kelley, 75 F.R.D. 475 (E.D.Mich.1977). See also Reynolds, supra. Underlying these deceptively simple questions is the more important task of determining the proper balance that must be struck between competing fundamental interests. On the one hand, there is the undeniable interest of the executive branch of government in maintaining confidentiality over certain types of information necessary for the performance of its constitutional duties. On the other hand, there is the unquestionable interest of the litigant in seeking information for the just resolution of the legal dispute. United States ex rel. Jackson v. Petrilli, 63 F.R.D. 152 (N.D.Ill. 1974); Frankenhauser v. Rizzo, 59 F.R.D. 339 (E.D.Pa.1973); and Wood, supra. Finally, there is also the perplexing separation of powers question that is lurking in the background of every claim of executive privilege.

In light of the balance of interest which must be resolved in such cases, it is essential to emphasize that claims of executive privilege, like other evidentiary privileges, must be narrowly construed so as to permit the broadest possible discovery otherwise allowed under the Rules. 35 C.J.S. Federal Civil Procedure § 709. The governmental interest in favor of maintaining confidentiality under the cloak of privilege must be tempered by the historical function of the courts to provide compulsory process for the production of material needed for a just determination of the legal dispute. To insure that justice is done, the trial court should, therefore, initially weigh the balance of interest in favor of liberal discovery of all facts needed for a fair determination of the dispute. Jabara, supra; Equal Employment Opportunity Comm. v. Los Alamos Constructors, Inc., 382 F.Supp. 1373 (D.N.M.1974); Wood, supra; Glick, supra; and 35A C.J.S. Federal Civil Procedure § 738.

The executive privilege applicable to information held by the government during an ongoing criminal proceeding is a qualified one. Timken, supra. But see Capitol Vending Co. v. Baker, 36 F.R.D. 45 (D.D.C.1964). The trial Judge in this case did not view the document in camera. While ordinarily this is not required, certainly it is permissible so long as such in camera inspection itself would not violate important confidential affairs. See Reynolds, supra. Yaffe v. Powers, 454 F.2d 1362 (1st Cir. 1972); and Kinoy v. Mitchell, 67 F.R.D. 1 (S.D.N.Y.1975). In the case before us, the trial Court abused its discretion by accepting the bare assertions of the District Attorney that the material sought was privileged. Also, because no military or state secrets are involved, we hold that the trial Court must examine the document to determine whether the whole entity, or any part thereof, is properly discoverable. It is only through such an examination that the proper balancing determination can be made. During the pendency of such examination, however, the Court must be careful not to disclose the very thing the privilege, if any, is designed to protect.

If, upon the notification of this decision, the Circuit Court does not vacate the Protective Order of February 3, 1978, and proceed to conduct a hearing on the Motion of the District Attorney for a Protective Order consistent with the principles stated in this opinion, a Writ to effectuate such action will issue upon the request of Petitioners.

WRIT GRANTED CONDITIONALLY.

BLOODWORTH, FAULKNER, EMBRY and BEATTY, JJ., concur.

TORBERT, C. J., and MADDOX, J., dissent.

MADDOX, Justice

(Dissenting).

It may have been better if the District Attorney had filed an affidavit that the statement sought related to an ongoing investigation, but I do not think Judge Thompson “abused his discretion” by accepting the assertion of the District Attorney, which was made in open court. I also disagree that the court must examine the document, in camera.

In Capitol Vending Co., Inc. v. Baker, 35 F.R.D. 510 (1964), Judge Alexander Holtzoff stated:

“The plaintiff, Capitol Vending Company, brings this suit against one Robert G. Baker and others and alleges as its cause of action that the individual defendants wrongfully and illegally diverted certain business and contracts of the plaintiff to another and a rival corporation. The plaintiff has now served a subpoena duc-es tecum on the Attorney General of the United States requiring him to produce voluminous documents relating to the activities of the defendant Baker. The Acting Attorney General has moved to quash the subpoena and has asserted a claim of executive privilege, giving as the ground for the privilege the fact that:
“ ‘The materials contained in the files of the Department of Justice relating to the defendants named in this action were obtained through a continuing investigation of possible violations of criminal laws. Premature exposure of what might be used as evidence in any subsequent criminal prosecution to public scrutiny as well as to the attention of prospective defendants could only result in seriously prejudicing such a proceeding before it is commenced.’ “There has been some discussion in the
oral argument on this motion as to whether the head of a government agency may, without the personal authority of the President of the United States, assert what is called executive privilege. It is not necessary for the purposes of this motion to determine that question.
“Perhaps it was not necessary to use the term ‘executive privilege’. The government has certain privileges in reference to disclosure or refusal to disclose certain documents that are not accorded to private individuals. For example, such a privilege exists specifically as to matters involving national defense or foreign relations with other governments. So, too, the Court is of the opinion that such a privilege exists in respect to documents that the government is using in connection with an investigation of possible violations of criminal laws.
“The Court is of the opinion, therefore, that the documents, on the basis of the affidavit of the Acting Attorney General, are privileged from disclosure as relating to a continuing investigation of possible violations of criminal laws. The Court is entitled to accept a statement to that effect made by a member of the President’s Cabinet at its face value and it will not require the materials to be submitted to the Court for its inspection. It must be realized that a continuing investigation of possible violations of criminal laws may have many ramifications and the Court may not even be in a position to determine in camera whether a particular document may or may not relate to such an investigation.
“The Court realizes, however, that private litigants have certain rights and also that the Department of Justice may not retain documents indefinitely and keep them from disclosure on a statement that the investigation is still continuing. There must be a reasonable terminus.
“Accordingly, the Court will grant the motion to vacate the subpoena duces te-cum against the Acting Attorney General, with the privilege of renewing the subpoena if the investigation is prolonged for an unreasonable length of time.”

In Freeman v. Seligson, 132 U.S.App.D.C. 56, 405 F.2d 1326 (1968), documents under the control of the Secretary of Agriculture which a trustee in bankruptcy sought to examine by means of a subpoena duces tecum were, to the extent that they were under study by the Department of Justice with a view to possible criminal action by the government, held to be excluded from production.

If a district attorney tells a trial judge a document is being held for use in a possible criminal action, and the trial judge believes him and does not desire to put the district attorney under oath, require an affidavit, or to examine the statement, in camera, I would not hold that the trial judge abused his discretion. I do not question the right of a court to make an in camera inspection in most situations. I do question whether the petitioner here has shown that he has a clear legal right to require the trial judge to conduct such an in camera inspection.

TORBERT, C. J., concurs.

      . As stated, this action concerns a Writ of Mandamus. While mandamus does not normally lie to control the exercise of discretion, it is nevertheless appropriate to compel an official both to exercise his discretion and to exercise it under a proper interpretation of applicable law. Shepherd v. Superior Court of Alame-da County, 17 Cal.3d 107, 130 Cal.Rptr. 257, 550 P.2d 161 (1976). Mandamus is the proper means of review to determine whether the trial judge abused his discretion in limiting the right to discovery. See Ex parte Alabama Power Co., 280 Ala. 586, 196 So.2d 702 (1967).


text:
    Thomas W. JONES v. ALABAMA POWER COMPANY et al.
    77-411.
    Supreme Court of Alabama.
    Sept. 15, 1978.
    L. W. Scholl, Birmingham, for appellant.
    C. William Gladden, Jr. of Balch, Bing-ham, Baker, Hawthorne, Williams & Ward, Birmingham, for appellee, Alabama Power Co.
    Ollie L. Blan, Jr., Birmingham, for appel-lee, Brasfield and Gorrie, Inc.
   ALMON, Justice.

This is an appeal from a judgment granting a motion to dismiss for failure to state a claim upon which relief can be granted in favor of defendants-appellees, Alabama Power Company and Brasfield & Gorrie, Inc. We affirm the judgment of the trial court.

Plaintiff, Thomas W. Jones, operated a service station from September 29, 1971, until September, 1975, in Birmingham, Alabama. In July of 1974, defendant Brasfield and Gorrie, Inc. began construction of a multi-level parking deck on property owned by Alabama Power Company. Plaintiff’s service station was located on the northwest corner of the intersection of Seventeenth Street and Sixth Avenue, North. Alabama Power Company’s property occupied the northeast corner of the intersection of Seventeenth Street and Sixth Avenue, and was directly across the street from the plaintiff’s business. Alabama Power Company’s property extended the full length of the block between Sixth and Seventh Avenues, North. Sixth Avenue controls one-way traffic westward, and Seventeenth Street controls one-way traffic southward. Each street has four lanes of traffic.

In December of 1974, the defendants barricaded Seventeenth Street, North, between Sixth and Seventh Avenue. Defendants acknowledged that the westernmost lane of Seventeenth Street was not opened to traffic until approximately April 15,1975. Two more lanes were opened for traffic on approximately June 15,1975. The record does not indicate when the fourth lane was finally opened.

The plaintiff filed suit alleging that the defendant’s barricade and the resulting restriction of vehicular traffic caused the loss of business customers, the loss of business revenues, and that the barricades constituted “intentional acts of interference in the operation of a lawful business.”

The plaintiff’s claim against both defendants was dismissed. The trial court ruled that, as a matter of law, the complaint failed to state a claim upon which relief could be granted. Rule 12(b)(6) ARCP. In the final order, the court noted that the defendants claimed that the obstruction of traffic “was lawfully done in connection with the construction and with the express consent and permission of the City of Birmingham,” and the court noted that the plaintiff’s attorney stated “that he had no evidence that this was other than true.”

Although the parties have treated the dismissal as though it was a dismissal for failure to state a claim under Rule 12(b)(6), ARCP, it is obvious that the trial court considered the uncontroverted aver-ments in the defendant’s answer in dismissing the claim. Therefore, we shall consider the dismissal as a judgment on the pleadings under Rule 12(c) ARCP as to defendant, Brasfield & Gorrie.

A motion for judgment on the pleadings disposes of a case when the material facts are not in dispute. McCullough v. Alabama By-Products Corp., 343 So.2d 508 (Ala.1977).

There appears to be no dispute that the municipal authorities gave their consent to the erection of the barricades, and absent any allegations that this action was wrongful, the trial court properly entered judgment for the defendants. The authority of the city’s action is not questioned. Alabama Constitution, Art. XII, § 220; § 11-49-1, Code of Alabama, 1975.

With the pleadings in this posture no factual issues are presented. The judgment is therefore affirmed.

AFFIRMED.

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


author: HOLMES, Judge.

text:
    HOME TILE AND EQUIPMENT COMPANY, INC. v. STATE of Alabama.
    Civ. 1455.
    Court of Civil Appeals of Alabama.
    June 7, 1978.
    Rehearing Denied July 12, 1978.

      Lawrence B. Voit and Irving Silver, Mobile, for appellant.
    William J. Baxley, Atty. Gen., State of Ala., and Herbert I. Burson, Jr., Counsel, Dept, of Revenue and Asst. Atty. Gen., and Philip C. Davis, Asst. Counsel, Dept, of Revenue and Asst. Atty. Gen., for the State of Alabama, appellee.
   HOLMES, Judge.

This is an appeal by Home Tile and Equipment Company, Inc., from an adverse judgment rendered by the Circuit Court of Mobile County in a sales tax assessment case.

In its judgment, the trial court found that Home Tile and Equipment Company, Inc., (hereinafter taxpayer) was engaged in installing carpets in homes built in Mississippi on a contract basis. The court further found that in order to fulfill these contracts, taxpayer withdrew from its inventory carpets which had previously been purchased at wholesale. That withdrawal from inventory, the court concluded, constituted a retail sale within the purview of Tit. 51, § 786(2)(j), Code of Ala. 1940 [§ 40-23-l(a)(10), Code of Ala. 1975], and therefore subject to sales tax. The taxpayer appeals.

At the outset, we note § 40-23-l(a)(10), in pertinent part, as follows:

“The term ‘sale at retail’ or ‘retail sale’ shall also mean and include the withdrawal, use or consumption of any tangible personal property by anyone who purchases same at wholesale, except property which has been previously withdrawn from the business or stock and so used or consumed and with respect to which property the tax has been paid because of such previous withdrawal, use or consumption, . . . and such wholesale purchaser shall report and pay the taxes thereon.”

With the above in mind, a review of the record is necessary for an understanding of the issue in this case.

The taxpayer is in the business of selling, at wholesale and retail, carpeting, linoleum, tile, and other flooring related materials and supplies. The record indicates that the appellant does not pay a tax when it purchases carpeting and other flooring materials at wholesale.

The transaction giving rise to the tax assessment in the instant appeal involved an agreement by the taxpayer with a contractor building houses in Mississippi. Specifically, taxpayer agreed to furnish the labor and flooring materials on all of the builder’s houses being constructed in Mississippi.

This agreement was carried out in the following manner. The builder would call the taxpayer, identify a house as ready for carpet by location and plan, and would indicate what carpet was to be installed in each room. Taxpayer would then arrange for carpet installers to install the carpet. These installers would pick up the carpet at the taxpayer’s warehouse in Mobile and transport it to the Mississippi building sites. Upon completion of the job, the installers would bill the taxpayer who would then in turn bill the Mississippi builder for labor and materials. Taxpayer would then pay the installers.

A final assessment was made by the Alabama Department of Revenue against the taxpayer for unpaid sales taxes, allegedly due on these transactions between taxpayer and the Mississippi builder. This tax deficiency of approximately $7,100 was premised on withdrawals by taxpayer of flooring materials for use in fulfilling contracts to furnish and install flooring as outlined above. As previously indicated, Code of Ala. 1975, § 40-23-l(a)(10), was used as the basis for such tax assessment.

Taxpayer appealed this tax assessment to the Circuit Court of Mobile County pursuant to Code of Ala. 1975, § 40-2-22. As noted above, the trial court sustained the assessment. Hence, this appeal.

The taxpayer contends the transaction in question amounted solely to a sale consummated in Mississippi and that the withdrawal provision of the Alabama sales tax statute is not applicable. Specifically, taxpayer argues that the withdrawal of merchandise from its inventory was merely a step in a chain of actions leading to a completed sale of the withdrawn items in Mississippi. In support of its argument, taxpayer points to the fact that title to the goods did not pass until they were accepted by the Mississippi builder. Along the same line, appellant contends that, due to the above, there was no “close” transaction in Alabama making the sales subject to the Alabama sales tax. We cannot agree.

It is well settled that the purpose of § 40-23-l(a)(10) [formerly Tit. 51, § 786(2)(j)] is to reach and tax transactions which would not be taxed because there was a withdrawal, use, or consumption by the purchaser at wholesale but no sale by him to another. See State v. Kershaw Manufacturing Co., 273 Ala. 215, 137 So.2d 740 (1962); State v. Helburn Co., 269 Ala. 164, 111 So.2d 912 (1959).

As noted above, taxpayer was a purchaser at wholesale. Taxpayer paid no sales tax on the flooring supplies and carpets when it purchased them at wholesale. Contrary to the contentions of the taxpayer, we find, as did the trial court, substantial evidence to show there was no sale of flooring materials to the Mississippi builder. These materials were withdrawn from the inventory of the taxpayer to be used by the taxpayer in its obligation to furnish and install carpeting for the Mississippi builder. Thus, the withdrawal of the materials from inventory qualified as a taxable “retail sale” under § 40-23-l(a)(10). See Department of Revenue v. James A. Head & Co., Inc., 54 Ala.App. 136, 306 So.2d 5, cert. denied 293 Ala. 751, 306 So.2d 12 (1974); Ex parte Alabama Precast Products, Inc., 357 So.2d 985 (Ala., 1978).

Taxpayer argues that the tax assessment judgment is in error because there was no “close” transaction occurring in the state. In support of this argument, it points to the fact that the carpet was installed in Mississippi and that the sale was not final until the builder approved the job.

The law in Alabama, however, proves to be to the contrary. Rule W9-011, promulgated by the State of Alabama Department of Revenue on November 13, 1970, provides in pertinent part that:

“Withdrawal from Stock, Contractors
“Contractors who are both making retail sales and withdrawing for use in fulfilling a contract from the same stock of goods are to purchase at wholesale all of the goods so sold or used and report both retail sales and withdrawals for use under the Sales Tax Law.
“Materials, supplies, equipment or any other tangible personal property which is purchased at wholesale and subsequently withdrawn for use in fulfilling a contract within or without the State are subject to the tax and are to be included in the gross proceeds of sales. The value to be placed upon such goods is the price paid for them by the person withdrawing them.”

This court in Department of Revenue v. James A. Head & Co., Inc., supra, noted that “contractor” has been defined generally as one who formally undertakes to do anything for another, Stocking v. Johnson Flying Service, 143 Mont. 61, 387 P.2d 312 (1963), or one who contracts to furnish a product or service to another. Grand Rapids Gravel Co. v. State Department of Treasury, 14 Mich.App. 677, 166 N.W.2d 53 (1968). A “contractor” has also been understood to be the person who undertakes to supply labor and materials for specific improvements under a contract with an owner or principal. See Moorhead v. Grassle, 254 Minn. 103, 93 N.W.2d 678 (1958).

As noted above, the evidence reveals that the taxpayer had undertaken an obligation to supply the labor and flooring materials that the Mississippi builder required in building his homes in Mississippi. It is clear to this court that the taxpayer falls within the purview of Rule W9-011 and Ex parte Alabama Precast Products, Inc., supra, and that taxpayer was subject to taxation due to the withdrawal of the goods to fulfill its contract with the Mississippi builder.

In view of this court’s finding that the taxpayer did not sell flooring materials to the Mississippi builder in Mississippi, the taxpayer’s contention that this transaction is a sale in interstate commerce is without merit. The withdrawal of the flooring materials was a retail sale under § 40-23-l(a)(10). This withdrawal occurred in Mobile, Alabama, and thus constituted a closed, taxable transaction within this state. The fact that the flooring materials were transported and used out of the state did not transform this retail sale into a sale in interstate commerce. The taxation of the sale was a taxation of an intrastate transaction. See Ex parte Alabama Precast Products, Inc., supra; Rite Tile Company v. State, 278 Ala. 100, 176 So.2d 31 (1965).

The taxpayer further contends that the imposition of a sales tax under § 40-23-l(a)(10) would result in double taxation. As noted above, the taxpayer has already paid approximately $11,000 in sales tax in Mississippi in which no credit can be given. This contention fails in that it is not interstate commerce which is being taxed, but an intrastate transaction. That the installation of the carpet in Mississippi may be subjected to a tax in Mississippi does not change the fact that the withdrawal of the goods constituted a taxable event irrespective of the ultimate destination of the goods. See Rite Tile Company v. State, supra.

The above being dispositive of the issues in this case, the trial court is due to be and is affirmed.

AFFIRMED.

WRIGHTi P. J., and BRADLEY, J., concur.

      . We would note that a sales tax of approximately $11,000 was paid the State of Mississippi by the taxpayer on the transactions with the Mississippi builder. Alabama and Mississippi do not have a reciprocity agreement whereby sales tax paid in one state may be credited against the payment of sales tax in the other state on transactions of this type.


author: SHORES, Justice.

text:
    Ex parte HOME TILE AND EQUIPMENT COMPANY.
    77-685.
    Supreme Court of Alabama.
    Sept. 29, 1978.
   SHORES, Justice.

WRIT DENIED.

TORBERT, C. J., and MADDOX, JONES and BEATTY, JJ., concur.


author: WRIGHT, Presiding Judge.

text:
    GRANITE STATE INSURANCE CO. v. Devan LOWE, as Executor of the Last Will and Testament of Wayne Lowe, Deceased.
    Civ. 1435.
    Court of Civil Appeals of Alabama.
    July 12, 1978.
    Rehearing Denied Aug. 23, 1978.
    Howard B. Warren and Jack W. Torbert, Gadsden, for appellant.
    J. Richard Carr, Gadsden, for appellee.
   WRIGHT, Presiding Judge.

This is an action upon an automobile insurance policy. Plaintiff’s intestate brought suit to collect upon the fire and theft provisions of his policy with defendant. The material facts were stipulated at trial.

Plaintiff purchased an automobile. He obtained fire and theft insurance upon the automobile from defendant. The automobile was stolen from plaintiff and subsequently found destroyed by fire. It was learned that the automobile had been stolen in Ohio before being purchased by plaintiff. The defendant denied payment on the ground of absence of an insurable interest by plaintiff. Upon motion for summary judgment, it was stipulated that plaintiff was an innocent purchaser for value of the stolen automobile. The court rendered judgment for plaintiff.

The issue presented by the appeal of defendant is whether an innocent purchaser for value of a stolen automobile has an insurable interest therein. This issue is of first impression in Alabama.

Other jurisdictions which have considered this issue have rather evenly split. A discussion of these differences is to be found in 33 A.L.R.3d 1417. That publication characterizes the finding of no insurable interest as the general rule, although there is substantial authority for the other view. Oregon has held an insurable interest regardless of proof of an innocent purchase. Treit v. Oregon Auto. Ins. Co., 262 Or. 549, 499 P.2d 335 (1972).

The view of those jurisdictions holding no insurable interest is based upon the “legal interest” theory. They require that an insurable interest be founded upon a legal interest in the property. The more recent view is the “factual expectation” theory. That view is that an insurable interest exists if the insured will gain economic advantage from the continued existence of the property or will suffer economic disadvantage upon damage to or loss of the property. Harnett & Thornton, Insurable Interest in Property: a Socio-Economic Reevaluation of a Legal Concept, 48 Colum.L.Rev. 1162 (1948); Vukowich, Insurable Interest: When It Must Exist in Property and Life Insurance, 7 Williamette L.J. 1 (1971).

We believe Alabama by statute and court decision has already espoused the “factual expectation” theory of insurable interest. Section 27-14-4(b), Code of Alabama (1975) provides:

“ ‘Insurable Interest,’ as used in this section, means any actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction or pecuniary damage or impairment.”

Our supreme court has stated that one can have an insurable interest, although he has no property in the thing insured, but any limited or qualified interest, equitable right or expectation of advantage is sufficient. Pacific Nat’l Fire Ins. Co. v. Watts, 266 Ala. 606, 97 So.2d 797 (1957); American Equitable Assur. Co. v. Powderly Coal & Lumber Co., 225 Ala. 208, 142 So. 37 (1932). Put another way, insurable interest exists where insured would suffer a loss from the property’s destruction. McKinney v. State Farm Mut. Auto. Ins. Co., 349 So.2d 1091 (Ala.1977); Rogers v. Lumbermans Mut. Cas. Co., 271 Ala. 348, 124 So.2d 70 (1960).

We believe it consonant with the law of insurable interest already prevailing in Alabama to hold that an innocent purchaser for value has an insurable interest in an automobile previously stolen. We hold that such a purchaser has a pecuniary interest in the continued existence of such an automobile and would suffer an economic loss from its theft or destruction. He has the right to possession and use of the automobile against everyone but the rightful owner. He has a monetary investment in the automobile which he has an interest in protecting so long as his right of possession remains without challenge or termination by the legal owner. Treit v. Oregon Auto Ins. Co., supra; 67 Am.Jur.2d Sales § 257.

We therefore affirm the judgment below.

AFFIRMED.

BRADLEY and HOLMES, JJ., concur.


text:
    Ex parte GRANITE STATE INSURANCE COMPANY.
    77-761.
    Supreme Court of Alabama.
    Sept. 29, 1978.
   SHORES, Justice.

WRIT DENIED.

TORBERT, C. J., and MADDOX, JONES and BEATTY, JJ., concur.


author: BRADLEY, Judge.

text:
    L. M. CATER v. Daniel R. HARALSON.
    Civ. 1444.
    Court of Civil Appeals of Alabama.
    July 12, 1978.
    Rehearing Denied Aug. 16, 1978.
    C. Neal Pope, Phenix City, for appellant.
    Kenneth H. Looney, Birmingham, for ap-pellee.
   BRADLEY, Judge.

The events which culminated in this appeal arose out of a dispute regarding a land sales contract between the parties. Under the terms of the contract in question, appellant-L. M. Cater (hereinafter referred to as seller) agreed to sell certain real property to appellee-Daniel R. Haralson (hereinafter referred to as buyer). Pursuant to this agreement buyer deposited $5,000 in an escrow account to be held there until the transaction was actually completed. After the money had been placed in this account a misunderstanding occurred between the parties.

Buyer claimed that seller refused to sign the real estate sales agreement which had been entered into by the parties. Thus, buyer concluded that seller was no longer willing to sell him the land he (buyer) desired and demanded that seller return the $5,000 “earnest” money payment. When seller refused to return the money, buyer filed an action seeking recovery of the $5,000 payment.

On the other hand, seller asserted that buyer had requested that he (buyer) be given an additional period before the completion of the conveyance in order to obtain financing for the purchase, and that subsequent to his request, buyer contacted seller, informed seller that he was unable to obtain financing and demanded the refund of the money held in the escrow account. Upon learning that buyer had brought a suit against him, seller filed a counterclaim alleging that buyer had defaulted under the terms of the real estate sales agreement and that seller was entitled to retain the $5,000 payment. Maintaining that he was still willing to convey the real estate, seller also demanded that buyer pay him a broker’s fee because of the latter’s default with regard to the provisions of the contract.

Following the above described events, buyer made a motion for a summary judgment under Rule 56, ARCP. After an examination of the pleadings and affidavits submitted on behalf of both parties, the trial court granted buyer’s motion for summary judgment, ordered seller to return the “earnest” money payment and dismissed the seller’s counterclaim with prejudice. From the order of the trial court granting buyer’s motion for summary judgment seller appeals.

We believe that the trial court correctly granted the motion for summary judgment on the basis that the moving party (buyer) was entitled to a judgment as a matter of law.

The real estate sales contract entered into by the parties provided that:

“This instrument shall be regarded as an offer by the party who first executes the same, to the other, and is open for acceptance by the other until noon, on the — day of-, 19_, by which time it must have been accepted and executed by both Seller and Purchaser in triplicate and have been actually received by the Agent.”

The blank spaces in this provision of the contract were never filled in. However, buyer signed the agreement and a real estate agent took the document to seller in order to obtain his signature. Nonetheless, the real estate a.gent stated in her affidavit, which was submitted in support of buyer’s motion for summary judgment, that seller refused to sign the real estate sales contract. At the pre-trial conference which was held on this matter seller admitted that he did not sign the contract. Thus, there was no genuine issue as to any material fact regarding this portion of the contract. Buyer executed the instrument by his signature and thereafter the document evidenced an offer which was contingent upon the seller’s acceptance via his signature. Seller never signed the instrument and buyer withdrew his offer. We believe that buyer had every right to take such action in view of the fact that seller never complied with the contractual terms necessary to create acceptance of the offer.

A party who makes an offer to purchase a parcel of land has the right to stipulate in his offer whatever conditions and terms he desires, provided such conditions are within the law. Federal Land Bank v. Bridgeforth, 233 Ala. 679, 173 So. 66 (1937); Ingalls Steel Products Co. v. Foster & Creighton Company, 226 Ala. 122, 145 So. 464 (1932). Accordingly, the offeror may stipulate conditions as to the mode of acceptance and may withdraw his offer if the offeree fails to comply with the mode of acceptance which he (the offeror) has provided. See Federal Land Bank v. Bridgeforth, supra; Ingalls Steel Products Co. v. Foster & Creighton Company, supra. In the instant case, seller’s signature was necessary to create a valid acceptance; however, seller failed to sign the agreement and thus buyer was entitled to withdraw his offer and recover his “earnest” money payment.

Nor do we agree that the trial court erred in granting a summary judgment in favor of buyer because of the purported oral agreement between the parties to delay the completion of the land transaction.

Seller argues that conditions of acceptance contained in buyer’s offer were waived because of a conversation between the parties which occurred after the terms of the offer had been agreed upon. However, the subsequent oral arrangement between buyer and seller pertained to the period of time within which the transaction was to be completed. This subsequent agreement had nothing to do with the requirement that seller’s signature was essential to the acceptance of the offer. Accordingly, there was no evidence presented to the trial court, by affidavit or otherwise, which indicated that buyer had waived the condition that seller’s signature was necessary before the buyer’s offer could be deemed to have been accepted.

An oral agreement may be presented to demonstrate that the written terms of an offer have been modified, waived or varied. See Federal Land Bank v. Bridgeforth, supra; Bell-Carns Realty Co. v. Drennen, 219 Ala. 450, 122 So. 424 (1929). However, oral agreements to extend the time for performing previous agreements merely supplement, rather than change, such agreements’ terms and obligations in other respects. See 17 Am.Jur.2d Contracts § 471. In this instance seller’s pleading was limited to an allegation that he and buyer had orally agreed to delay the transaction between them. There was no allegation that buyer had agreed to waive seller’s signature as a condition for acceptance of the offer.

The pleadings and affidavits submitted by the parties in this cause demonstrated that there was no genuine issue as to any material fact and that the moving party was entitled to a judgment as a matter of law. Consequently, the trial court acted correctly in granting buyer’s motion for summary judgment and the judgment rendered in accordance with that action is due to be affirmed.

AFFIRMED.

WRIGHT, P. J., and HOLMES, J., concur.


text:
    Ex parte L. M. CATER.
    77-748.
    Supreme Court of Alabama.
    Sept. 29, 1978.
   SHORES, Justice.

WRIT DENIED.

TORBERT, C. J., and MADDOX, JONES and BEATTY, JJ., concur.


text:
    MOBILE PSYCHIATRIC SERVICE, INC., a corporation, d/b/a Tranquilaire Hospital v. EMPLOYERS LIFE INSURANCE COMPANY, a corporation.
    Civ. 1493.
    Court of Civil Appeals of Alabama.
    July 12, 1978.
    Rehearing Denied Aug. 16, 1978.

      Thomas M. Galloway of Collins, Galloway & Smith, Mobile, for appellant.
    Jack H. Harrison, Birmingham, for appel-lee.
   HOLMES, Judge.

The Circuit Court of Mobile County granted the defendant-insurance company’s motion for summary judgment. The plaintiff appeals and we reverse.

Defendant-Employers Life Insurance Company filed an action for declaratory judgment in the Circuit Court of Mobile County, seeking to determine if Tranqui-laire Hospital was a “hospital” as defined by the terms of defendant’s group medical insurance policy. Both plaintiff and defendant filed motions for summary judgment. The trial court granted defendant’s motion, holding that Tranquilaire was not a “hospital” as required by the terms of the policy. Plaintiff-Tranquilaire appeals.

At the outset, we note that this court on appeal from summary judgment, looks at the same factors which the court below considered in ruling on the motion. See 2A Ala. Digest Appeal & Error <®=»863.

The record reveals that there is no dispute in the facts. Defendant issued a group medical insurance policy to the Alabama Dental Association; Dr. John A. Pit-man being among those insured. His daughter was also an insured within the terms of the policy. The policy was in full force and effect while the daughter was a patient in Tranquilaire from February, 1976, to May, 1976. While a patient at Tranquilaire, she was treated for a psychiatric disorder.

After her release from the hospital, Dr. Pitman assigned his benefits under the policy to Tranquilaire. Defendant refused to pay plaintiff-Tranquilaire’s charges for Dr. Pitman’s daughter’s hospitalization. Defendant based this refusal on its contention that Tranquilaire is not a “hospital” within the meaning of the policy provisions. As noted above, the Circuit Court of Mobile County, in granting defendant’s motion for summary judgment, held that plaintiff was not such a “hospital” within the terms of the policy.

Since the dispositive issue on appeal is whether plaintiff-Tranquilaire is a “hospital” within the terms of the policy, we deem it appropriate to set out such provisions, in pertinent part, as follows:

“ ‘Hospital’ means a legally constituted institution which is licensed as a hospital (if hospital licensing is required where it is situated), which is open at all times and is operated primarily for the care and treatment of sick and injured persons as in-patients, which has a staff of one or more licensed physicians available at all times, which continuously provides 24-hour nursing service by graduate registered nurses, which provides organized facilities for diagnosis and major surgery and which is not primarily a clinic, nursing, rest or convalescent home, or similar establishment.”

Initially, defendant contends plaintiff is not a hospital since it does not treat the “sick and injured” but instead treats those with psychiatric disorders. We do not agree with this contention.

Sickness has been defined to embrace the term “sickness and injury.” Sickness is any affection of the body which deprives the body temporarily of the power to fulfill its usual functions. See Globe Life Insurance Co. of Alabama v. Howard, 41 Ala.App. 621, 147 So.2d 853 (1962). Furthermore, it has been generally stated that a hospital is a place for the care of the sick, whether in mind or body. See Bennett v. Bennett, 27 Ill.App.2d 24, 169 N.E.2d 172 (1960).

In this instance, the term “sick and injured” within the policy provision would include a psychiatric disorder in that, to this court, such disorder is clearly a sickness.

In the second and more difficult issue, defendant contends plaintiff is not a hospital within the terms of its policy due to its lack of facilities for major surgery. Appellant-plaintiff however contends it is such a hospital within the terms of the policy by virtue of its written patient transfer agreement with Doctors Hospital. Doctors Hospital is located within 100 feet of Tranqui-laire and provides facilities for major surgery.

The agreement, in pertinent part, between Doctors Hospital and Tranquilaire provides for the following:

“B. IN THE INTEREST OF THE HIGHEST QUALITY OF PATIENT CARE AND UPON THE RECOMMENDATION OF A PATIENT’S ATTENDING PHYSICIAN AT TRANQUILAIRE, WITHOUT REGARD TO RACE, CREED OR NATIONAL ORIGIN, DOCTORS HOSPITAL HEREBY AGREES TO ADMIT SUCH PATIENTS TO THEIR FACILITY PROVIDED THE FOLLOWING CONDITIONS ARE MET:
“1. The Tranquilaire Hospital Patient’s attending physician shall be a member of the Medical Staff of Doctors Hospital with admitting privileges or he/she shall refer the patient to the care of a physician who is a member of the Medical Staff of Doctors Hospital with admitting privileges, and
“2. All conditions of eligibility for admission to Doctors Hospital shall be met by the patient, and
“3. Provided suitable space for such patients is available at Doctors Hospital, and
“4. The Patient’s psychiatric condition shall be taken into consideration in determining his eligibility for admission to Doctors Hospital.”

At this point, we note that this appeal presents an issue of first impression in Alabama and we must resort to other jurisdictions for its resolution.

The law in Alabama, however, is settled concerning interpretation of an insurance policy. It is necessary to give effect to all parts of the policy and give a reasonable interpretation to all its provisions. An isolated sentence or term is not to be construed alone, but in context with the other provisions of the policy. It is only in this way that the intent and purpose of the parties can be determined. See Aetna Life Insurance Company v. Hare, 47 Ala.App. 478, 256 So.2d 904 (1972).

As noted above, the defendant contends plaintiff does not qualify as a “hospital” within the terms of the insurance policy due to the absence of facilities for major surgery. The appellant-plaintiff, however, presents evidence that there is an agreement with another hospital for surgical facilities and, therefore, compliance with the terms of the policy is met.

The Florida court, in Travelers Insurance Company v. Esposito, Fla., 171 So.2d 177 (1965), held that such an arrangement, as stated above, with another hospital was sufficient to comply with the requirements of having facilities for diagnosis and operative surgery.

Furthermore, in Reserve Life Insurance Company v. Marr, 254 F.2d 289 (9th Circuit 1958), cert. denied 358 U.S. 839, 79 S.Ct. 63, 3 L.Ed.2d 74, the issue involved the term “hospital”, to wit, “an institution which has a laboratory, x-ray equipment and an operating room where major surgical operations may be performed.” The court held a “hospital” to include an institution which had contracted for the use of an operating room and laboratory work at other nearby institutions. The court further held that they could find no requirement in the policy that the operating room be on the premises or within the confines of a building or buildings operated by the hospital as an integrated whole. Accord, Raynor v. American Heritage Life Insurance Company, 123 Ga. App. 247, 180 S.E.2d 248, cert. denied (1971).

In the present case, Tranquílame and Doctors Hospital have a patient transfer agreement which has existed for several years. The record reveals that such transfers have taken place in the past. Furthermore, in order to meet accreditation requirements, Tranquilaire must continue to maintain an agreement with another licensed, accredited general facility which offers surgical procedures. Such an agreement is sufficient to bring this case within the purview of Esposito, Marr, and Raynor, supra.

We further note that when a policy defines a “hospital” by prescribing certain standards, it is sufficient that the institution in question substantially conforms to those requirements. See Reserve Life Insurance Co. v. Marr, supra; Couch on Insurance 2d § 41:847; Dortlon v. Union Fidelity Life Insurance Co., La.App., 326 So.2d 383 (1976).

Able counsel for defendant has cited, in brief filed with this court, respectable authority to support its position that a patient transfer agreement is not sufficient to bring plaintiff within the policy provisions. However, the overwhelming majority of cases hold that such a transfer agreement constitutes compliance with policy provisions. See 46 A.L.R.3d 1244. Provisions in a health or medical policy should be given a liberal interpretation to the end that equity be done and the underlying beneficial purposes of the contract not be rendered nugatory. See Reserve Life Insurance Co. v. Mattocks, 6 Ariz.App. 450, 433 P.2d 303 (1967).

The Louisiana court, in McKinney v. American Security Life Insurance Co., 76 So.2d 630, 634 (1954), cert. denied (1955), aptly stated that:

“Certainly policy holders in order to determine the effect of the contract should not be required to check technical equipment and nursing qualifications maintained at hospitals.”

This opinion should not be construed as disregarding plain and explicit language, but as holding that a liberal and reasonable construction of the language of the policy supports our finding that the hospital in which the insured was confined was in compliance with the definition of a “hospital” contained in the policy.

The above being dispositive of the issues in this case, this cause is due to be and is reversed and remanded for entry of a judgment consistent with this opinion.

REVERSED AND REMANDED WITH DIRECTIONS.

WRIGHT, P. J., and BRADLEY, J., concur.


author: JONES, Justice.

text:
    Ex parte EMPLOYERS LIFE INSURANCE COMPANY.
    77-749.
    Supreme Court of Alabama.
    Sept. 29, 1978.
   JONES, Justice.

WRIT DENIED.

TORBERT, C. J., and MADDOX, SHORES and BEATTY, JJ., concur.