author: BOARDMAN, Acting Chief Judge. GRIMES, Judge SCHWARTZ, ALAN R., Associate Judge

text:
    In re ESTATE of Emma JONES, Deceased.
    No. 74-55.
    District Court of Appeal of Florida, Second District.
    July 25, 1975.
    Rehearing Denied Sept. 11, 1975.
    W. Langston Holland of Holland & Holland, St. Petersburg, for appellant.
    Richard T. Earle, Jr. of Earle, Earle & Bryson, St. Petersburg, for appellees.
   BOARDMAN, Acting Chief Judge.

The primary issue in this case is the construction of certain provisions of the last will and testament of Emma Jones, hereinafter referred to as decedent.

The decedent devised the residue of her estate to co-trustees John A. Rhoades, Jr. and The First Gulf Beach Bank and Trust Company.

The pertinent part of the will provides:

SEVENTH
All the rest, residue and remainder of my estate, whether real property, personal property or mixed and wheresoever situated, of which I may die seized or possessed, or which I may own or have any interest in at the time of my death, I give, devise and bequeath to the FIRST GULF BEACH BANK AND TRUST COMPANY, a Florida banking corporation, and JOHN A. RHOADES, JR., as Co-Trustees, IN TRUST, for the uses and purposes as hereinafter set forth. I direct that my Co-Trustees shall collect the income received from the assets comprising the Trust Estate, and shall invest and re-invest the assets comprising the Trust Estate from time to time as may be required or allowed hereunder or by law. My Co-Trustees shall distribute the income from this Trust and certain amounts of the assets in the Trust Estate as hereinafter set out on at least an annual basis.
My Co-Trustee, THE FIRST GULF BEACH BANK AND TRUST COMPANY, shall physically hold and collect >the monies comprising my Trust Estate. My Co-Trustee, JOHN A. RHOADES, JR., shall select the beneficiaries to receive the monies or properties from my Trust Estate in his sole and absolute discretion according to the standards or guidelines set out hereafter.
It is my desire that my Co-Trustee, JOHN A. RHOADES, JR., shall consider my wishes as I have verbally expressed them to him during my lifetime. It is my further wish that my Co-Trustee, (sic) JOHN A. RHOADES, JR., shall consider the needs of the Most Worshipful Grand Lodge, F. & A.M. of the State of Florida, for the use and benefit of their building fund in providing additional facilities for, first, crippled children, and second, a home for the aged. My wishes in this regard are further within the knowledge of my co-Trustee and Attorney, JOHN A. RHOADES, JR.
It is my intention and direction that my co-Trustee, JOHN A. RHOADES, JR., in selecting the beneficiaries hereunder shall in all events require that at least three-fourths (fátiis) of the monies distributed hereunder, but can be more, shall be received by beneficiaries who qualify for charitable deduction purposes pursuant, to the Internal Revenue Code.
It is my further intention that the beneficiaries have Masonic purposes, medical purposes, educational purposes, civic purposes, public purposes or any other non-profit type of activities.
I direct that my Co-Trustees shall disburse at least annually all the net income received from my Trust Estate, and, in addition, shall disburse at least annually four percent (4%) of the original assets of the Trust Estate together with corpus additions thereto as may be received from time to time, in order that this Trust shall terminate as a result of all assets having been disbursed not later than twenty-five (25) years from the date this Trust shall be duly qualified before a court of competent jurisdiction.
My Co-Trustees shall have all powers conferred upon trustees under the Uniform Trust Administration Law of the State of Florida as now enacted or as may be amended from time to time. I give and grant unto my Co-Trustees, full power of sale without the necessity of Court order and request that no bond be required of my Co-Trustees for the faithful performance of their duties.
In the event that my co-Trustee, JOHN A. RHOADES, JR., shall at any time be unable to act as called for under this Trust, then and in that event, THE FIRST GULF BEACH BANK AND TRUST COMPANY shall become the. sole Trustee and exercise all powers and responsibilities as may be required in administering the Trust Estate under the Trust created by me in this Will.
EIGHTH
I hereby acknowledge that in my Last Will and Testament, dated September 29, 1965, which was substantially the same as this Will, that my residuary estate was left to thre^ (3) charitable organizations in equal shares, to-wit:
SALVATION ARMY OF ST. PE-TERSBURG, St. Petersburg, Florida; AMERICAN LEGION HOSPITAL FOR CRIPPLED CHILDREN, St. Pe-tersburg, Florida; and MOUND PARK HOSPITAL FOUNDATION, INC., St. Petersburg, Florida, for cancer research.
I acknowledge and recognize the Florida law relative to charitable beneficiaries and the six (6) months’ provision of said law relative to gifts or devises to charitable beneficiaries, and state that my overall testamentary plan has not changed from my previous Will, but only the selection of the beneficiaries.

The decedent died on March 8, 1973. An order was entered admitting the will to probate on March 9, 1973.

Mrs. Charles R. Pinkston, a/k/a Peggy Ann Pinkston, appellant, the legally adopted daughter and sole heir at law of the decedent, filed her petition for partial 'revocation of probate of will and construction of will. The petition alleged, inter alia, that the dispositive provision of the will to the co-trustee John A. Rhoades, Jr. was invalid in that such devise was violative of the rule against perpetuity and that the designation of the class of beneficiaries to receive distribution from the proposed testamentary trust was so uncertain as to be unenforceable. Appellees, the co-trustees, filed their answer thereto denying the essential allegations of said petition.

The trial court concluded that paragraph “EIGHTH,” supra, read in pari materia with paragraph “SEVENTH” revealed an overall charitable intent coupled with the proviso that three-fourths (%) of the beneficiaries must qualify for charitable deduction purposes pursuant to the Internal Revenue Code. Accordingly, the trial court entered an order finding that article “SEVENTH” creates a good and valid trust for charitable distributions only. The appellant’s petition was denied. From this order the appellant filed this timely appeal.

The main contention of the appellant is that the trust created by the will of decedent is not a charitable trust and that it violates the rule against perpetuities.

On the other hand, the contention of the appellees is that the trust under the .will is a charitable trust and that being such the rule against perpetuities is not applicable.

As a general rule, and the parties are in accord, gifts to charities are not subject to the rule against perpetuities. Gray, The Rule Against Perpetuities, (4th Ed. 1942), § 589. The trust under consideration does not come within any of the exceptions to the rule, supra, and it follows it is valid if in fact it is a charitable trust. If, however, the trust is not a charitable one, it must fail as a gift in gross or in excess of twenty-one (21) years of duration. Gray, supra, § 629. As was held In Re Estate of Gold, Fla.App.3rd, 1966, 189 So. 2d 905, charitable gifts are liberally construed and upheld if reasonably susceptible of a construction which gives them validity. It is too well settled to cite authorities that the primary and cardinal rule of will construction is that the intent of the testator governs and is to be given full force and effect whenever possible. Consequently, a charitable intent on the part of the testator must be evident. 'Our supreme court in the case of Porter v. Baynard, 158 Fla. 294, 303, 28 So.2d 890 (1946), cert. den. Union Trust Co. v. Genau, 330 U.S. 844, 67 S.Ct. 1085, 91 L.Ed. 1289, said:

. [I]n order that a gift shall possess such certainty as will give it validity, the language must require that the fund shall be expended for charity and for nothing else. . . . (citations omitted; 28 So.2d 890, 895).

Counsel for the respective parties urge that the trust is either completely valid or totally void. We agree with this conclusion under the circumstances of this case.

Appellant argues that by placing distribution of the trust’s assets in the hands of the trustee and limiting his discretion only to the extent that three-fourths (%) of the proceeds must go to I. R.S. qualified charities, the trust violates the common law rule against perpetuities and must fail. The appellee argues that the provisions of article “EIGHTH” breathes life into article “SEVENTH” and demonstrates an overall charitable intention.

Our conclusion is that under the language used article “EIGHTH” cannot serve to resuscitate article “SEVENTH.” The decedent’s statement in article “EIGHTH”

. that [her] overall testamentary plan has not changed . . . but only the selection of the beneficiaries

is not supported by a reading of article “SEVENTH.”

The conclusion being reached that the creation of the trust in perpetuity violates the common law rule against perpetuities, and our former adjudication, then a very cogent question arises on the record, viz., what is the legal effect of the invalid provision.

The law of this state is clear and whether the intended trust fails altogether depends upon whether the provision which failed can be separated from the other provisions without defeating the purpose of the settlor in creating the trust. Porter v. Baynard, supra; Restatement of the Law, Second, Trusts, § 65 (1959).

In light of the record, briefs and argument, and upon our review of the applicable principles of law, we are of the view that notwithstanding the fact that three-fourths (%) of the trust is dedicated to benefit charity and can be distributed according to the expressed intention of the decedent, the provision that this percent of the bequest is to be distributed to “ . beneficiaries who qualify for charitable deduction purposes pursuant to the Internal Revenue Code” is not sufficient to designate recipients who qualify under the charity exception to the rule against perpetuities. The stated beneficiaries might well include any number of organizations which are undoubtedly worthy, but are not “charities” within the meaning of the exception. Since no part of the bequest may therefore be saved, we are compelled to conclude that it must all fall to the rule, supra, and pass instead by intestacy.

Reversed.

SCHWARTZ, ALAN R., Associate Judge, concurs specially with opinion.

GRIMES, J., concurs in part and dissents in part with opinion.

GRIMES, Judge

(concurring in part, dissenting in part):

A valid charitable trust does not violate the rule against perpetuities. Brown v. Saake, Fla.App.2d, 1966, 190 So.2d 56. Moreover, a testator may leave to his trustees the responsibility of selecting the charitable purposes to which the trust funds shall be devoted. IV Scott on Trusts, § 396.

The difficulty arises in this case because the testator did not use language which precisely limited the disposition of the trust to charitable purposes.

This problem is considered in depth in § 398 of the Restatement of Trusts 2d which states:

“(1) Where by the terms of the trust the trustee is directed to apply the trust property to purposes which are not limited to charitable purposes but include noncharitable purposes for which a trust or power cannot validly be created, the intended trust fails altogether, except as stated in Subsections (2), (3) and (4).
(2) If the settlor manifested an intention that the whole of the trust property should be applied to charitable objects unless the trustee should choose to apply a part of it to non-charitable objects for which a trust or power cannot validly be created, and his primary purpose was to apply it to the charitable objects, the power to apply the property to the other objects is invalid, and there is a valid charitable trust of the whole of the property.
(3) If it was not the primary purpose of the settlor to apply the property to charitable objects, but the maximum amount which would.be required for the accomplishment of the non-charitable objects can be ascertained, the trust fails only as to the amount so required, and the charitable trust of the balance is valid.
5k >k * * * *

The comments on subsections (2) and (3) are also revealing:

“Comment on Subsection (2):
g. Where the charitable purpose is primary. Where by the terms of the trust the trustee is directed to apply the trust property to charitable purposes, but he is authorized to apply part of the property to a non-charitable object for which a trust or power cannot validly be created, a valid charitable trust of the whole of the property is created. In such a case the testator’s primary purpose is to apply the property to charitable purposes, and since the power to apply part of the property to the other objects is invalid, the trustee is under a duty to apply the whole of the property to the intended charitable purpose.
Thus, where a testator bequeaths property in trust to use the income for charitable purposes, and adds a provision that the trustee for the time being may in his discretion apply part of the income to the perpetual maintenance of the testator’s grave, the trustee in the absence of a statute otherwise providing cannot properly apply any part of the income for the maintenance of the grave, but there is a valid charitable trust of the whole of the property.
Comment on Subsection (3):
h. Where amount required for invalid objects is ascertainable. Where by the terms of the trust the trustee is directed to apply the trust property to several objects, and some of these objects are charitable but the others are non-charitable objects for which a trust or power cannot validly be created, and the maximum amount which would be required for the accomplishment of the non-charitable objects can be ascertained, the charitable trusts will be valid to the extent of the balance of the property, even though the primary purpose of the testator was to apply the property to the invalid non-charitable objects. If his primary purpose was to apply the property to the charitable objects, there is a valid trust of the whole of the property (see Subsection (2)); and if neither purpose was primary, the property will be equally divided among the several objects and the intended trust will be upheld as to the shares to be applied to the charitable purposes under the circumstances stated in Subsection (4).
Thus, if a testator bequeaths a large sum of money in trust to apply a part of the income in keeping the testator’s grave in repair, and to apply the balance of the income for charitable purposes and the intended trust for the repair of the grave is invalid as a perpetuity (see § 124), the court will determine the sum necessary to yield an income sufficient to care for the grave, and the trust as to so much of the principal sum will be held invalid, but the charitable trust of the balance will be upheld.”

At first blush, the trust established by Emma Jones appears to be of the type discussed in subsection (2), because it is obvious from a reading of the seventh and eighth articles of the will that she had charitable purposes primarily in mind. Yet, nowhere in the will is found a provision specifically limiting the trust to charitable purposes. The paragraph which comes the closest reads as follows:

“It is my further intention that the beneficiaries have Masonic purposes, medical purposes, educational purposes, civic purposes, public purposes or any other non-profit type of activities.”

While a charitable activity could be expected to be a non-profit activity, there are many non-profit activities which could not, by any stretch of the imagination, fall within the definition of charitable activities. Since the enumerated purposes are listed in the disjunctive, it follows that under this provision, the application of the trust funds is not limited to charitable purposes.

However, I cannot agree that the entire trust must fail. There is an additional paragraph in the seventh article of the will which reads:

“It is my intention and direction that my co-Trustee, JOHN A. RHOADES, JR., in selecting the beneficiaries hereunder shall in all events require that at least three-fourths (J^ths) of the monies distributed hereunder, but can be more, shall be received by beneficiaries who qualify for charitable deduction purposes pursuant to the Internal Revenue Code.”

I am persuaded that by virtue of the inclusion of this paragraph, the trust falls within the provisions of subsection (3) of § 398.

There are many definitions of charity, but most of them are broad. IV Scott on Trusts, § 368 says:

“§ 368. What purposes are charitable. It is impossible to enumerate all the purposes which have been held by the courts to be charitable purposes or which may hereafter be held to be charitable purposes. Certain purposes are clearly charitable. These include the relief of poverty, the promotion of education, the advancement of religion. So too, it is well settled that the promotion of health is a charitable purpose. So are governmental or municipal purposes, such as the erection of bridges, and the like. In addition to these purposes there must be added a more general and indefinite category, a general catchall, to include the vast number of miscellaneous purposes which are properly held to be charitable. Perhaps these can best be included under the heading of other purposes the accomplishment of which is beneficial to the community. This category is, indeed, broad enough to cover all charitable purposes, including those more specifically enumerated above. ...”

Moreover, the definition of charity is subject to change. As stated in Porter v. Baynard, 1946, 158 Fla. 294, 28 So.2d 890:

“. . . The courts should be left free to apply the standards of the time — on the theory that what may be charitable in one generation may be non-charitable in a later age, and vice versa. Ideas regarding social benefits and public good change from century to century and vary in different communities. It must expand with the advancement of civilization and the daily increased needs of man. Bogert on Trusts and Trustees, Vol. 2, 3368, p. 1129.”

§ 170(c) of the Internal Revenue Code represents the fruits of an effort to draft a reasonable definition of what could be considered a charitable contribution in today’s society. In Mitchell v. Reeves, 1938, 123 Conn. 549, 196 A. 785, the testator left the residue of her estate to organizations “devoted exclusively to religious, charitable, scientific, literary, historical or educational purposes, including the encouragement of art and which under the federal and state succession, transfer and inheritance tax laws at the time of my death or the time they are assessed are exempt from taxation.” In construing this will the court said:

“ . . . The inclusion in the description of the corporations, organizations, or trusts to which the income might be distributed under the will of the requirement that they shall be ‘exempt’ from federal and state transfer and inheritance taxes establishes beyond question the intent of the testatrix that only such corporations, organizations, or trusts as are exclusively devoted to charitable uses are entitled to receive the income. To give effect to that intent we so construe the terms of the will before us.”

By having specified that the beneficiaries of at least three-fourths of the trust be parties who qualify for charitable deduction purposes pursuant to the Internal Revenue Code, I believe the testator adequately circumscribed that portion of the trust for charitable purposes. Therefore, only one-fourth of the trust should fail.

This conclusion is supported by IV Scott on Trusts, § 398.2(3) in which it is said:

“ . . .It has been held in a number of cases that where property is bequeathed in trust for charitable purposes and other purposes which fail, and it is possible to ascertain the maximum amount which could properly be applied for the other purposes if they were valid purposes, the trust fails as to that amount, but the balance of the property is applicable to the charitable purposes. . . ”

For reasons which I suspect to have been tactical, both sides indicated that they felt that the trust was either fully valid or fully invalid. As authority for that position, reference was made to Porter v. Bay-nard, supra, in which the court struck down a trust fund as violating the rule against perpetuities. I believe the parties have misconstrued the application of this case. There, the trust was established in perpetuity with a provision that one-half of the annual net income should be reinvested in the trust and that donations to certain specified charities should be made from the other half of the net income. The court held that because half of the income was reinvested in the trust, the trust could not be considered a charitable trust. The court then stated:

“The conclusions having been reached that the creation of the Porter-Genau Memorial Fund in perpetuity violates the common law rule against perpetuities and our former adjudications, then a pertinent question arising on the record is viz, what is the legal effect of the invalid provision of paragraph 19 on the charitable provision of the same paragraph, and arguendo, conceding that the charity provision is public in character. Bogert on Trusts and Trustees, Vol. 1, § 217, pp. 669, 670, states the rule thusly:
‘The accumulation trust is generally connected with another trust or a gift of succeeding interest. Wherever possible, the courts will separate out the other valid gift and support it. The void accumulation provision will cause the invalidation of another trust or gift only when the two are intimately connected, and to leave the other gift standing without the accumulation trust would be to violate the intent of the settlor and frustrate his broad general purpose. Occasionally, a valid accumulation provision may be so linked with a later void gift as to fall with it.’
41 Am.Jur. 100, 101, par. 57, states the rule viz: ‘When a part only of a gift is invalid by reason of the rule against per-petuities and the invalid limitation is an essential part of the general scheme of the will or gift, the several parts of the devise or the grant are treated as inseparable and the whole is adjudged void. Thus, if a part of the testator’s general scheme or dominant intent is that an estate shall be kept entire for an unlawful period, no part of the scheme can be sustained, and the estate to which the void provisions relate vests immediately in the heir. * * * The test is whether the invalid parts are so interwoven with those which are valid that the former may not be eliminated without interfering with or changing in any essential the main testamentary scheme. This can usually be done when it is clear that the gifts which do not transgress the rule are so independent that it is manifest that the testator would have desired that they should stand if he had been aware of the invalidity of the rest, but if the valid and invalid gifts are so connected that the presumed wishes of the testator would be defeated if one portion was retained and other portions rejected, or if manifest injustice would result from such construction to the beneficiaries or some of them, then all the gifts must be construed together and all must be held illegal and must fall. * * *

Applying these principles to the case at hand, the court then said:

“ . . . The charities are contingent on the receipt of income as no part of the corpus can be expended for charitable purposes. Thus it is to be observed that the financial provisions of the Porter-Genau Memorial Fund and the several charitable bequests become dependent on each other; the source of financial existence and income for the two funds are inextricably interwoven; there is such a co-mingling of the two funds as to render them inseparable; if the cy pres doctrine is applied the two funds remain indivisible. The illegality of the Porter-Genau Memorial Fund takes with it and renders void the several bequests in paragraph 19 for charity.”

The trust in the instant case is different. The source of financial existence and the income for the valid portion of the trust can he completely separated from the invalid portion. Three-fourths of the assets can be distributed according to the terms of the trust, and the other one-fourth would revert to the testator’s estate.

The trust provisions of the will were in-artfully drawn, and the trust cannot be upheld in its entirety. Yet, the will does reflect an unmistakable intent on the part of Emma Jones. She specifically included a provision disinheriting the adopted daughter who is now contesting her will, and she manifested a clear desire to leave her trust estate for charitable purposes. The charitable trust is a favorite of the law. S Page on Wills, § 41.7; 5 Fla.Jur., Charities, § 4. When Mrs. Jones said that at least three-fourths of her trust must be given to organizations who qualify for a charitable deduction, it does no violence to established rules of construction to hold that this constituted a mandate for that much of her trust property to be applied to charitable purposes. As construed by the majority of this court, I suggest that her intent is being frustrated.

I would affirm the judgment below to the extent of upholding three-fourths of the trust; I would reverse as to the balance.

SCHWARTZ, ALAN R., Associate Judge

(specially concurring).

While I concur entirely both in the decision of the Court and in Judge Boardman’s opinion, I believe that the views so well expressed by Judge Grimes call for a brief rejoinder. It may be assumed — the contentions of both parties to the contrary notwithstanding — that, as Judge Grimes states, a portion of the trust could be saved from the onslaught of the Rule against Perpetuities if that portion were properly designated for “charitable purposes” within the meaning of the exception to the Rule. I cannot agree, however, that the will’s provision that three-quarters of the trust estate must be distributed to “ . . . beneficiaries who qualify for charitable deduction purposes pursuant to the Internal Revenue Code . . . ” meets this requirement.

The contrary view, as expressed in the partial dissent, is necessarily based upon one or the other of these conclusions: (a) those entities presently designated in 26 U.S.C., § 170(c) as qualifying for a “charitable deduction” are in fact ones which involve “charitable purposes” under the law of trusts; or (b) the very meaning of “charitable purposes” is to be defined by the terms of that provision of the Internal Revenue Code; that, in other words, Congress, rather than the courts, is to determine the “modern” extent of the “charitable purpose” exception to the Rule. It seems to me that neither conclusion is sound.

It seems perfectly clear, first of all, that many of those organizations now specifically listed in § 170(c) would not, even under an expansive definition, qualify as having “charitable purposes” under the law. The prime example is contained in § 170(c)(3) which provides that veterans’ organizations qualify for the deduction. But see In re Meyers, [1951], 1 All E.R. 538; In re Thomas’s Will Trust, [1969], 3 All E.R. 1492. Thus, were the will before us to be upheld, even in part, the trust income could be employed for purposes which could not have been sustained had they been specifically spelled out in the instrument.

The fallacy in the other proposition— that something is a charity if a contribution to it can be taken as a deduction on one’s federal income tax return — lies, I think, in the fact that, as its very provisions conclusively demonstrate, § 170(c) does not represent the results of an effort by Congress to draft a modern definition of “charity,” let alone to prescribe the modern boundaries of the “charitable purposes” exception to the Rule against Per-petuities. The provision is, instead, simply one of legislative largesse to a group of entities which have been designated, not in any objective terms of their purposes (however they may be labelled), but simply because, after and as a result of the legislative process about which we all know, Congress desired to confer this benefit upon them. I cannot agree that it would be wise to permit the law of trusts to be written in this manner.

      . Comment d of § 398 of the Restatement of Trusts 2d states in part:
      “d. Same — Conjunctive and disjunctive provisions. Where by the terms of the trust the property is to be applied to purposes having certain characteristics, some of which are charitable and some of which are not, it is a question of construction whether the property can properly be applied only to purposes which have all of the enumerated characteristics, so that the application is restricted to purposes which must be charitable regardless of what other characteristics they are required to have; or whether the property can properly be applied to purposes which have any one or more of the enumerated characteristics but not necessarily those which are charitable. Whether the characteristics are enumerated in the conjunctive or in the disjunctive is a factor to be considered in the interpretation of the instrument. If the enumerated characteristics are stated conjunc-tively, it is easier to interpret the instrument as meaning that the property is to be applied only to purposes which have all of the enumerated characteristics than it is if they are stated disjunctively.
      * * * * *
      On the other hand, if the direction were to apply the property ‘for charitable or useful purposes,’ this would ordinarily be interpreted as though it read ‘for purposes which are both charitable and useful or either.’ If so, the application of the property is not restricted to purposes which, being useful, must nevertheless be charitable. It could therefore be applied to purposes which, although useful, are not charitable. In such case, since application may be made to purposes which are not charitable, regardless of what other characteristics they are required to have, a valid charitable trust is not created as to any part of the property as to which the direction is made.”


source: Caselaw Access Project

author: MERRILL, Justice.

license: Public Domain

text:
    Wilson G. WILKERSON v. John L. MOORE, as Judge, etc., et al.
    SC 1139.
    Supreme Court of Alabama.
    Aug. 21, 1975.
    Robert S. Edington, Mobile, for appellant.
    Daniel G. Sayers, Mobile, for John L. Moore, as Probate Judge and for Ralph W. Havard, as Tax Collector.
    Hamilton, Butler, Riddick & Latour and James W. Tarlton, III, Mobile, for heirs of estate of J. T. Trehern and Mrs. Leila Trehern, appellees.
   MERRILL, Justice.

This appeal is from an order dismissing the complaint of Wilson G. Wilkerson which sought the re-establishment or restoration of a lost tax certificate issued by the State of Alabama.

The suit was filed against the Probate Judge of Mobile County, the Tax Collector, and the State Commissioner of Revenue as State Land Commissioner.

The gist of the complaint follows. In June, 1966, the State purchased the 26 acres involved at a tax sale, the property being assessed to J. T. Trehern. On July 13, 1967, Wilkerson paid the State Land Commissioner $127.26 and the Commissioner transferred the State’s interest in the property to Wilkerson by assignment of the certificate of purchase. Notice of the transfer was placed on the delinquent tax docket for real estate in Mobile County, and on the tax return list for real and personal property. There is no double assessment of the property and all taxes have been paid by Wilkerson.

In 1974, Wilkerson requested the probate judge to issue to him a duplicate tax certificate and a tax deed to the property. The judge declined to issue the deed without a tax certificate and refused to issue a duplicate certificate. The State Land Commissioner also refused to issue a duplicate tax certificate without an order from a court of competent jurisdiction, but he did issue a statement recognizing the fact that “the State transferred its interest in said [J. T. Trehern] property to Wilson G. Wilkerson by assignment of the Certificate of Purchase for the consideration of $127.-26.” Exhibit B.

The complaint showed that the tax certificate was subsequently lost or destroyed without having been recorded. Wilkerson’s wife filed an affidavit which stated in part:

“3. About a year or two after that we had some domestic difficulties and one day I was very upset with him and burned up all of his papers that I could find around the house. I am certain that the subject tax certificate was in that batch of papers.
“4. Since then we have gotten back together and are living together quite happily and we have tried to find the tax certificate. We have been through every place in the house that we can think of and through all of our luggage and into the attic and in every drawer and can’t find any trace of it whatsoever. I am absolutely certain as I have already said that it was burned up with those papers in 1968 or 1969 and that it is forever lost. I know that my husband never sold the property to anybody else and never transferred the tax certificate, as we have lived on the property all of this time, except until recently when we went to Hattiesburg, where he could get better work and then rented the property to may brother and his family and they are living on the property now.
“5. I know that the tax certificate has been destroyed or completely lost, and I also know that it was never sold by my husband to anyone and that we have paid the taxes on the property since 1967 and have lived on the property since 1967 and until we rented it to my brother, and his family to occupy while we are temporarily working at a better job over in Hattiesburg.”

The complaint, verified by Wilkerson, also stated that the certificate had not been further assigned or endorsed by him.

The complaint was filed under the provisions of Tit. 7, § IS and, in a second aspect, under the general equity jurisdiction of the circuit court. Tit. 7, § 15 reads:

“The circuit courts of this state shall have jurisdiction at the suit of the state, county or municipality, or any citizen who will give security for the costs of the proceeding, to establish or restore any lost, destroyed or mutilated records of the state, county, or municipality, or of any department, agency or instrumentality of the state, county or municipality. Such court shall have jurisdiction and power to prescribe all necessary rules, regulations, and proceedings proper or necessary to substitute or restore lost, destroyed, or mutilated records and when so established or restored, declare them to be the proper and legal records as the original which was so lost, destroyed or mutilated. The proceedings shall be ex parte, and any citizen of the state who will give security for the costs of the appeal may appeal from the order, judgment, or decision of the circuit court, establishing or restoring or refusing to establish or restore such records, to the supreme court of the state, provided the appeal is taken within six months from the rendition of the judgment, order or decree of the circuit court. The evidence on the hearing in the circuit court may be by depositions or affidavits, and witnesses may be examined orally and their testimony taken down by the court stenographer and transcribed and certified by him as being true and correct, and on appeal to the supreme court, the transcript of the record, proceedings and all testimony shall be certified by the circuit court to the supreme court. Upon the hearing in the supreme court, the supreme court may affirm or reverse the judgment or order of the circuit court, or may render such judgment, order or decree as the circuit court should have rendered on the record and evidence so certified. The proceeding under this section shall not be deemed exclusive, but additional or supplementary to any other remedy given by common law or statute.”

The trial court dismissed the complaint on the ground that the tax certificate was not the record of the state, county or municipality, and that those records still existed, but the tax certificate “is the private property of the petitioner, Wilson G. Wilkerson.” Counsel for the probate judge and tax collector support that point in brief on appeal. We cannot agree.

In this instance the certificate, a state record, was issued to Wilkerson. Under the provisions of Tit. .51, § 276, Code 1940, the judge of probate can only execute and deliver a deed “upon the return of the certificate.” Unless the purchaser can get a duplicate of the state record, he is effectively cut off from his lawful remedy. The statement from the Commissioner of Revenue establishes that Wilkerson ' was entitled to the certificate. The documentary proof establishes prima facie that the certificate was lost or destroyed while in Wilkerson’s possession and that he had not assigned it to anyone else under Tit. 51, § 270.

This court, in considering tax records that have been lost, stolen or destroyed, said in Wise v. State, 208 Ala. 58, 93 So. 886 (citations omitted):

“The records in question are a part of the basis of, or jurisdictional fact on which must rest, the state’s right to collect the taxes on property, and such a record is oft-times the foundation of title to property purchased by strangers at tax sales. * * *
***#*>♦c
“The inherent power in a court of general jurisdiction to restore and establish its lost or destroyed records exists, under the common law, independently of statute. * * * This right of restoration extends to the whole or part of a record. Where a part of a record is substituted, it must be consistent with the part remaining, and as substituted must not alter or vary its legal effect. The power of substitution exists either before or after judgment.
“ When records become material in the determination of rights between parties, and those records are shown to have existed, and to have been after-wards lost or destroyed, their contents, like those of documentary evidence may be shown by testimony in its nature secondary.’
Jfc 45 * * ‡ *
“ ‘They were records, and should have been preserved. But, if sufficient when made and filed, their destruction has not destroyed their efficacy, if the contents can now be established by proof. Parol testimony, if clear and satisfactory, is competent * * * to establish their existence, loss and contents.’ ”

Later, in Cade v. Walker, 214 Ala. 675, 108 So. 594, this court again stated that “The jurisdiction of courts of equity to establish lost deeds and to require the grantors therein to execute new deeds in their stead seems to be thoroughly well settled.”

Counsel for the probate judge and the tax collector recognize these principles but they say as to Cade v. Walker, supra, that it “deals with a lost deed, not a tax certificate”; as to Wise v. State, supra, they remind us “that the property in the case at bar seeking to be restored as the personal property of Mr. Wilkerson, and the records that belong to the state or agency thereof, are still in existence and need not be duplicated.”

We have already shown that the tax deed cannot be issued unless the original certificate or a duplicate is presented to the probate judge. Thus, the certificate becomes as important as the deed and, in such a case, we can see no reasonable reason why the certificate, a state record, could not be duplicated under court order as well as the deed. Also, we cannot agree that the tax certificate was any more or less the personal property of the holder than a deed is the personal property of the grantee.

We hold that Wilkerson made out a prima facie case under both Tit. 7, § 15, and the general power of the courts to restore lost or destroyed records under the common law, independently of statute. The judgment of the trial court is reversed and the cause is remanded.

Two more matters require discussion. Many tax certificates are lost before being presented to the probate judge, but probate judges have been following opinions of the Attorney General, the fullest and most adequate of which was written by Assistant Attorney General John Vardaman, later President of the Alabama State Bar Association, in Opinions of the Attorney General, Vol. 30, Jan., Feb., Mar., 1943, at p. 32. He correctly advised a probate judge that “the requirements of Title 51, Section 276, supra, are fulfilled by the presentation of a duplicate certificate of purchase.” Other excerpts state:

“The danger in accepting such a duplicate certificate is in the fact that the original certificate may have been assigned by the purchaser at the tax sale to some other person. Such an assignment is provided for by Code 1940, Title 51, Section 270. * * *
“It is my opinion that you would be adequately protected in accepting a duplicate certificate issued by the tax collector provided you secure from the person presenting such certificate an affidavit that he has not assigned the original certificate and that he is still the owner thereof. You should also have the records in the tax assessor’s office checked to see whether or not an as-signee has assessed such property as is provided for in the above-quoted excerpt of Title 51, Section 270.
“If you still desire to protect yourself further you could, as suggested in the opinion to Hon. W. C. Bragg, supra, require the applicant to give an indemnifying bond or you could, as suggested in the opinion to Hon. E. A. Hammett, supra, require the applicant to have his lost certificate re-established in a court of equity following the precedent outlined in Wise v. State, 208 Ala. 58, 93 So. 886.”

Most land sold to the State for taxes is considered to be of little value and the purchaser who has lost his certificate usually is called upon to post a small indemnifying bond. The 26-acre tract here involved was probably in the small value classification when sold in 1966, but the subsequent discovery of oil in that region would greatly increase its value if, in fact, oil were to be found near it. For that reason, a “small indemnifying bond” would probably not be suitable. However, under the facts as here presented, an affidavit by Wilkerson that he had not transferred or assigned the certificate, plus an affidavit by his wife substantially the same as she made in the instant case, filed with the proper authorities, would be sufficient to justify the issuance of the duplicate certificate and the deed.

The other matter concerns the amicus curiae brief of the heirs of J. T. Trehern, who was the record owner of the 26 acres. They asked, and were granted, permission to file such a brief.

The heirs insist that Wilkerson is not entitled to the relief sought in the instant case because the Trehern heirs were not parties to it, but are parties to a suit to quiet title to the tract which was filed in January, 1975, after the decision in the instant case in the Circuit Court of Mobile County. We do not agree.

Our decision here merely gives Wilkerson the right to apply for a duplicate tax certificate if it is established that the original certificate was lost, destroyed or stolen and that he has not transferred or assigned it; and that such duplicate certificate, if ordered issued, could be returned and exchanged for a tax deed under Tit. 51, § 276. No attempt is here made to intimate or suggest who has superior title to the land involved.

Reversed and remanded.

HEFLIN, C. J., and MADDOX, JONES and SHORES, JJ., concur.


author: EMBRY, Justice.

text:
    VILLAGE INN PANCAKE HOUSE OF MOBILE, INC., an Alabama Corporation v. Charles H. HIGDON.
    SC 1237.
    Supreme Court of Alabama.
    July 31, 1975.

      Donald F. Pierce and William C. Roed-der, Jr., Mobile, for appellant.
    Charles H. Erwin, Mobile, for appellee.
   EMBRY, Justice.

Appeal by plaintiff below from judgment of the Circuit Court of Mobile County rendered after trial without jury on evidence adduced ore tenus. The provisions of the judgment complained of in this appeal denied rescission of that part of a stock redemption agreement containing a noncom-petition covenant and denied money judgment for plaintiff against defendant in the sum of $10,000 plus interest. We affirm.

Defendant Charles Higdon and wife owned fifty percent of the stock (30 shares) of Village Inn Pancake House of Mobile, an Alabama Corporation. Mr. and Mrs. Higdon managed the restaurant of that corporation known as Village Inn Pancake House. On 29 August 1971 they entered into an agreement under which the corporation purchased for redemption the stock owned by the Higdons for the sum of $57,500 payable in five installments. Paragraph 6 of the agreement states:

“6. Charles H. Higdon, one of the Stockholders, personally covenants and agrees that he will not directly or indirectly for a period of three years from September 10, 1971, within the area commonly known as Metropolitan Mobile, Alabama, engage in the operation, management, supervision or employment with, a popular priced family-style non-liquor serving restaurant and/or coffee shop facility. In consideration therefor, Mobile promises to pay Charles H. Hig-don $10,000 in cash or certified funds on or before September 10, 1971, or upon such later date as Charles H. Higdon may specify in writing to Mobile.”

The complaint of Village Inn sought:

1. To permanently enjoin Higdon from violating the noncompetition covenant contained in paragraph 6 of the agreement.

2. To direct specific performance of the terms of paragraph 6.

3. To pnter judgment against Higdon in the sum of $10,000, plus interest and costs, from the date on which the noncompetition covenant was found to be first violated.

4. For such further or other relief to which Village Inn might be entitled or for which it moved during the pendency of the litigation.

Higdon’s answer denied breach of the noncompetition provision of the Redemption Agreement. Issue was joined and trial proceeded on these questions: (A) Was the noncompetition provision violated? (B) Did Village Inn suffer loss and damage as a result of any violation of the noncompetition provision? (C) Was the Redemption Agreement a severable contract so that the noncompetition provision could be rescinded and the $10,000 consideration allocated to that provision be restored to Village Inn ?

After hearing the evidence the trial court: (1) found Mr. Higdon in violation of the covenant not to compete (non-competition provision) beginning January 1974 to the date of the action (filed 22 March 1974); (2) plaintiff Village Inn had suffered no financial loss as a result of such violation; (3) denied injunctive relief, as by its terms the covenant was due to expire 10 September 1974 and injunction under those circumstances was not warranted in light of admission by plaintiff Village Inn that it had sustained, and was sustaining, no loss; (4) denied rescission of the covenant (paragraph 6 of the entire agreement) not to compete; (5) declined to award plaintiff Village Inn the sum of $10,000 for total failure of consideration by defendant Mr. Higdon competing indirectly within the convenanted period on the ground it could not grant partial rescission of an entire transaction and plaintiff had not sought relief by way of total rescission of the whole transaction; and finally, (6) awarded plaintiff Village Inn nominal damages in the sum of $5.00.

The trial court further found that to enforce the noncompetition provision only, would be a partial rescission of the Redemption Agreement when the noncompetition provision therein was made in conjunction with the redemption of the stock of defendant and wife, Gerda G. Higdon. The trial court also ruled there may be no partial rescission of the noncompetition covenant alone.

The assignments of error present this question for review: (1) Is the covenant not to compete severable from the agreement for redemption of the stock thus entitling Village Inn to rescind the covenant and have restored to it the $10,000 consideration when the covenant is violated by defendant Mr. Higdon? We answer in the negative, therefore need not discuss the validity of Higdon’s contention that the covenant is an unreasonable restraint of trade prohibited by Code of Ala., Tit. 9, §§ 22, 23.

Village Inn urges that the findings of fact of the trial court be reviewed, and it be reversed in its conclusions based thereon, for such findings not having support in the evidence. This we may do only if the findings of the trial court are clearly erroneous. Rule 52(a), ARCP; Eubanks v. Richards, 294 Ala. 30, 310 So.2d 883. The inquiry is thereby limited to whether there was credible evidence to support the finding that, under applicable law, the Redemption Agreement was an expression in writing of a contract relating to a single, entire transaction of which the covenant not to compete was an integral, nonsevera-ble part ?

The record contains ample evidence from which the trial court could deduce that, according to the intention of the parties and the subject matter of the “REDEMPTION AGREEMENT” such was an entire contract, not a severable one. The objective of the parties, when entering into negotiations, was the transfer of stock of Village Inn owned by Higdon and wife from them to the Village Inn Corporation. This was the entirety of the transaction. The terms and conditions attendant upon that transfer were integral parts of the whole. The covenant by Mr. Higdon not to compete was simply a nonseverable incident condition, term or part. It is clear from the evidence that Village Inn would not have agreed to purchase the Higdons’ stock absent Charles Higdon’s agreement not to compete. Concomitantly, Higdon most certainly would not-have so agreed except as a condition to the sale of stock by him and Mrs. Higdon.

The apportionment or allocation of stated consideration to the noncompetition provision is not persuasive to the conclusion that the contract was severable. There was evidence from which the trial court could properly conclude that Village Inn found tax advantage in so doing rather than intending such to make the agreement severable and susceptible of rescission as to the noncompetition provision. The general history of these covenants show they are made only in conjunction with other agreements, generally sale of goodwill or employment contracts. See Blake, Employee Agreements Not to Compete, 73 Harv.L.Rev. 625 (1960). As noted, the trial court found, and the record supports such finding, that the apportionment of the $10,000 to the covenant was made, in part, for tax advantage to Village Inn.

Although not cited by either party to this appeal we should point out the inaptness of Blythe v. Embry, 36 Ala.App. 596, 61 So.2d 142, to the case under consideration. In that case it was said:

“The consideration to be paid, and not the subject or thing to be performed, determines whether a contract is entire or severable. If it is expressly, or by implication, apportioned, the contract is severable. Kirkland v. Oates, 25 Ala. 465.”

Under the facts, within the context of the issues, the quoted rule was decisive in that case. The errors assigned in Blythe related to refusal of the trial court to give certain charges requested by appellant Blythe (defendant below), those charges being affirmative in nature. It was a suit on the common counts by appellee Embry (plaintiff below) seeking recovery of monies claimed due under an oral severable contract. Blythe contended that an oral entire contract was entered into between the parties with different terms than those which would make it a severable one. There was a direct conflict as to which was the real contract and that question of fact was for the jury. The jury accepted the version of appellee Embry. The quoted statement was followed without intervening comment by these words: “Thus, if appellee’s version be accepted, the contract was severa-ble * * *.” By the conflict in evidence as to the “versions” of the contract the additional factors to be considered in determining severability of a contract were necessarily considered by the jury. Those additional factors were, intention of the parties and subject matter of the contract. Worthington v. Gwin, 119 Ala. 44, 24 So. 739 (1898). See also 6 Williston on Contracts, § 860 (3d Ed., 1962), p. 255.

“ ‘The divisibility of the contract does not alone depend upon the multiplicity or the separability of the items therein, but upon the intention of the parties and the object of the contract. If it was the intention of the parties to treat the contract as an entire contract, and it appears that their engagements would not have been entered into except upon the clear understanding that the full object of the contract should be performed, it is not a divisible contract * * * 6 Williston on Contracts, § 862, p. 271 (emphasis added).

We-hold that the divisibility of a contract depends on the intention of the parties as found from the apportionability of the contract’s consideration, the subject matter and object of the entire contract, and any other pertinent facts surrounding its making at the time it was made. While the consideration on both sides of the contract is capable of apportionment, these other factors preponderately indicate it was not the intention of the parties that the covenant not to compete be severable from the other provisions of the stock Redemption Agreement.

It follows that the judgment of the learned trial judge holding he could not grant partial rescission of the contract was correct since the contract provisions were not divisible, Americanized Finance Corp. v. Yarbrough, 223 Ala. 266, 135 So. 448 (1931). The extreme circumstances which might justify partial rescission of such a contract were not present. Woodlawn Theatre Co. v. Continental Securities Corp. of Alabama, 237 Ala. 88, 185 So. 763 (1939).

By its own admission Village Inn suffered no actual loss, therefore no damages were proved. The contract was entire, therefore no partial rescission was permissible; ergo no restitution of consideration was required and nominal damages for the breach of the covenant not to compete were sufficient.

Affirmed.

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


author: ALMON, Justice.

text:
    Julia A. FINCH, as executrix, etc. v. Grace YORK et al.
    SC 942.
    Supreme Court of Alabama.
    Aug. 21, 1975.

      James R. Davis, Beavers, Debuys, Davis & Johnson, Birmingham, for appellant.
    Conrad M. Fowler, Jr., Columbiana, Peter J. Palughi, Mobile, for appellee-interve-nor Doris Numberg.
   ALMON, Justice.

Grace York, appellee, plaintiff below, filed her original complaint' seeking the sale and division of certain real property situated in' Shelby County, Alabama. The property in question had been deeded to appellee and her brother, John Edward Finch, defendant below , by their father, Edward F. Finch. The conveyance was transacted in Mobile, Alabama, five years before the father's death and over six years prior to the commencement of this action. Present at the conveyance were Edward F. Finch; George D. Tonsmeire, the elder Finch’s attorney; Grace York; and John Edward Finch.

The complaint alleged that prior to the execution of the déed, Mr. Tonsmeire, at the direction of the grantor, secured sworn oral promises from grantees that they would in turn each recoiivey by deed one-half of their respective interests, or an undivided one-quarter interest in the entire parcel, to two other sisters neither of whom were present at the conveyancing. The sister who was alleged to have been the intended beneficiary of defendant’s promise to reconvey, Doris Numberg, was allowed to intervene; the other sister, Marion Blythe, was added as a party defendant.

Trial was had without a jury and from the testimony and depositions received into evidence the trial court found that each of the four parties were entitled to an undivided one-quarter interest in the property .

Appellant first argues that the holding in Walling v. Couch, 292 Ala. 33, 288 So.2d 435 (1973), rendered certain evidence received by the trial court of statements made by Edward F. Finch regarding the intended beneficiaries of the conveyance inadmissible under our Dead Man’s Statute, Code of Alabama 1940, Recompiled 1958, Tit. 7, § 433. Although the trial court found that there was sufficient evidence to support its ruling independent from that challenged under the Dead Man’s Statute, we will address the issue and the field of application of the holding in Walling. In Walling the only evidence which supported the trial court’s finding of a constructive trust was that of a husband’s testimony concerning conversations with his then deceased wife. In reversing, the court held that the Dead Man’s Statute did apply to those who succeed to the rights of a decedent by an inter vivos transaction.

In distinguishing this case from Walling, it is significant to note that here the estate of the deceased under the facts and pleadings cannot be increased or diminished ; neither is the deceased’s estate a party. In Walling the $10,000.00 was to come from the deceased’s estate and the estate was a party defendant. We therefore conclude that the evidence in question is not barred by virtue of the Dead Man’s Statute and could have been considered by the trial court as well as here on appeal.

Appellant’s next contention is not so readily disposed of. Specifically, parol evidence was introduced over objection which was allegedly at variance with the fee simple deed conveying the property in question from Edward F. Finch to John Edward Finch and Grace York. Our cases are uniform to the effect that in the absence of fraud, a parol condition subsequent cannot be engrafted on a deed conveying a fee simple title. Smith v. Smith, 153 Ala. 504, 45 So. 168 (1907); Nearhos v. City of Mobile, 257 Ala. 161, 57 So.2d 819 (1952). The gist of appellant’s argument then is that the trust, if it existed at all, was established entirely by parol and therefore falls within the operation of the statute of frauds unless and until the proponent has shown such trust to have arisen ex maleficio or under circumstances where equitable relief has been traditionally available as against a fraudulent procurer. Patton v. Beecher, 62 Ala. 579, 591 (1878); Roberts v. Monroe, 261 Ala. 569, 75 So.2d 492 (1954). Those special circumstances have been found to exist where (1) there is a fiduciary relationship or special trust between the parties coupled with a breach of such fiduciary duty(s) or trust, Putnam v. Putnam, 274 Ala. 472, 150 So.2d 209 (1963) (breach of duties owed between husband and wife); Knowles v. Canant, 255 Ala. 331, 51 So.2d 355 (1951) (breach of duties owed by son-in-law handling transaction to mother-in-law); or (2) undue influence, Strickland v. Strickland, 206 Ala. 452, 90 So. 345 (1921); Cox v. Parker, 212 Ala. 35, 101 So. 657 (1924).

We agree that appellant has accurately stated the law recognized in this State — viz., the statute of fraud bars the introduction of parol agreements at variance with express deeds, Brindley v. Brindley, 197 Ala. 221, 72 So. 497 (1916), unless there is an averment that the breach of the parol agreement constitutes fraud. Dean v. Roberts, 182 Ala. 221, 62 So. 44 (1912). This rule has been codified in Tit. 47, § 149:

“No trust concerning lands, except such as results by implication or construction of law, or which may be transferred or extinguished by operation of law, can be created, unless by instrument in writing, signed by the party creating or declaring the same, or his agent or attorney lawfully authorized thereto in writing.” (Emphasis ours).

Therefore, in order to resolve the question of whether this parol trust was within the operation of the statute of frauds, we must necessarily review the evidence before the trial court tending to establish fraud on the part of John Edward Finch. This we have done and in the process noted ample evidence, a substantial portion of which was taken ore tenus, that (1) Edward F. Finch had repeatedly expressed his intention to divide the property between the four children now involved in this litigation, that (2) immediately prior to the execution of the deed a sworn promise was secured from John Edward Finch and Grace York that they would reconvey, that (3) neither of the grantees made any objections to so reconvey, and that (4) immediately thereafter John Edward Finch told Grace York that he had no intention of carrying out his promise. From this we hold that there was a permissible inference that the grantor desired that the conveyance be expressly contingent upon subsequent reconveyance on the part of the grantees and that John Edward Finch never intended to fulfill his promise.

In holding that such conduct was tantamount to fraud and thereby affirming the finding of a constructive trust by the trial court, we are not unmindful of prior decisions which in effect have held that violation of a parol trust agreement or its subsequent repudiation is not of itself that character of fraud which will suffice to sustain a constructive trust. Pierce v. Murphee, 274 Ala. 20, 145 So.2d 207 (1962); Talley v. Talley, 248 Ala. 84, 26 So.2d 586 (1946); Bartlett v. Bartlett, 221 Ala. 578, 130 So. 194 (1930). In each of these cases, however, it was expressly found that no fraud existed contemporaneously with the challenged transaction.

Had we viewed the alleged promise of appellant to reconvey as simply a contractual obligation to hold one-half of his share in express trust, then, as previously noted, such promise would be inoperative under the statute of frauds. But where, as here, there is evidence of a fraudulent intent to repudiate an express promise (such promise being the inducement for the conveyance itself), the statute of frauds becomes immaterial as the fraud vitiates the entire transaction. Doswell v. Hughen, 266 Ala. 87, 94 So.2d 377 (1957); Smith v. Smith, 153 Ala. 504, 45 So. 168 (1907); Manning v. Pippen, 86 Ala. 357, 5 So. 572 (1888).

“The essence in such cases is not the breach of a promise, but the fraudulent intent not to perform; . . . .”3 Pomeroy, Equity Jurisprudence, § 887d (5th ed.).

In affirming the decision of the trial court we hasten to note that there was considerable evidence also introduced which would have supported a contrary result. Specifically, that the true intention of the father was to vest title to the property in the recited grantees so that they could in turn sell a portion thereof and use the proceeds to discharge a long-standing lien on the entire parcel thereby eliminating the threat of foreclosure. Moreover, Mr. Tonsmeire deposed that he had no recollection of taking any sworn promise from either of the grantees at the time of the conveyance. Because of the equitable nature of this form of relief, however, we have not in the past nor have we attempted here to impose any unyielding formula as to those factual circumstances which will or will not support a constructive trust. Cherpes v. Cherpes, 279 Ala. 346, 185 So.2d 137 (1966). Rather, inasmuch as the constructive trust is a creature of equity, every presumption is indulged in favor of the findings of the trial court and will not be disturbed unless palpably wrong. Sims v. Reinhart, 285 Ala. 658, 660-61, 235 So.2d 802 (1970).

Affirmed.

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

      . During the pendency of this appeal, appellant died. We granted the motion of Julia A. Finch, executrix and personal representative of his estate, to revive the action in the name of appellant’s estate.

      . The matter of sale of the property was set for trial; that evidentiary hearing never transpired as appeal to this court was taken immediately.


author: SHORES, Justice.

text:
    In re Woddie E. HARRISON, Plaintiff-Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellant.
    CER. 1.
    Supreme Court of Alabama.
    Aug. 28, 1975.
    Balch, Bingham, Baker, Hawthorne, Williams & Ward and C. William Gladden, Jr., Birmingham, for defendant-appellant.
    Robert M. Hill, Jr., Florence, for plaintiff-appellee.
   SHORES, Justice.

The Honorable John R. Brown, Chief Judge of the United States Court of Appeals, Fifth Circuit, recently remarked that Barnes v. Atlantic & Pacific Ins. Co. of America, 514 F.2d 704 (5 Cir. 1975), was an historic case, “. . ; not because of the intrinsic difficulty of the issues, but because this is our first published opinion utilizing the certification provisions recently adopted by the citizens of Alabama.” (Emphasis Supplied)

This, too, is an historic case, since it is the first case from this court answering questions certified to us under the provisions of the new Judicial Article, Art. VI, § 140(b)(3).

Justice Brandéis, writing one of his last opinions, said in Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938):

“. . . Except in matters governed by the Federal Constitution or by Acts of Congress, the law to be applied in any case is the law of the state. . . .”

That doctrine requires a federal court, in a case based upon diversity of citizenship between the litigants, to apply the law of the state wherein it sits. Since each state is sovereign under our system of government, this court is the final authority on Alabama law. While the federal courts are considered the primary experts on National law, the state courts are the final expositors of the law of their respective jurisdictions. The burden placed on the federal courts by Brie is frequently a heavy one, particularly where the law of the state is unclear or has not been expressed. On occasions, those courts are put in the awkward position of having the state courts “overrule” them by subsequently deciding a question 'Contrary to the conclusion reached by the federal court.

In recognition of this problem and in an effort to ameliorate it, this court adopted, pursuant to Art. VI, § 140(b)(3), Constitution, ARAP 18(a), which provides:

“When it shall appear to a court of the United States that there are involved in any proceeding before it questions or propositions of law of this State which are determinative of said cause and that there are no clear controlling precedents in the decisions of the Supreme Court of this State, such federal court may certify such questions or propositions of law of this State to the Supreme Court of Alabama for instructions concerning such questions or propositions of state law, which certified question the Supreme Court of this State, by written opinion, may answer.”

We are confident that this procedure will be utilized by the Federal Bench for the purpose for which it is intended — to allow the federal court to obtain authoritative answers to difficult questions of Alabama law. In the words of Professor Philip B. Kurland, reproduced in 24 F.R.D. 481, 490, perhaps the process can serve as a “. . . demonstration of cooperative judicial federalism which would justify those of us who think that the federal form of government has a contribution to make toward the preservation of justice in this country.”

When properly utilized, we think this in-tersovereign certification procedure can have that effect.

The following was certified to us on March 17, 1975:

“CERTIFICATE FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT TO THE SUPREME COURT OF ALABAMA, PURSUANT TO ARTICLE 6, § 140(b)(3) OF THE ALABAMA STATE CONSTITUTION, AS AMENDED 1973

“To The Supreme Court of Alabama and the Honorable Justices thereof:

“It appears to the United States Court of Appeals for the Fifth Circuit that this case involves questions or propositions of the law of the State of Alabama which are determinative of the cause, and there appear to be no clear controlling precedents in the decisions of the Supreme Court of Alabama. This court hereby certifies the following questions of law to the Supreme Court of Alabama for instructions concerning the same, based on the facts recited herein, pursuant to Article 6, § 140(b)(3) of the Alabama State Constitution, as amended 1973, as follows:

“1. Style of the case.

“The style of the case is Woddie E. Harrison, Appellee, v. Insurance Company of North America, Appellant, being case No. 73-3161, United States Court of Appeals for the Fifth Circuit, an appeal from the United States District Court for the Northern District of Alabama.

“2. Statement of the case.

“On December 21, 1972, Woddie E. Harrison, the appellee, filed his complaint against Insurance Company of North America [TNA’j, the appellant, alleging that INA on October 1, 1965, insured plaintiff against loss resulting from bodily injuries caused by accident; that said insurance provided that one year after continuous total disability, INA will pay permanent total disability benefits of $50,000; and that on August 13, 1969, plaintiff suffered an accidental injury which caused permanent and total disability.

“On February 21, 1973, defendant filed its answer alleging that the policy of insurance alluded to in the original complaint, dated October 1, 1965, had been duly executed by the Tennessee Valley Authority [‘TVA’] (Harrison’s employer) and INA as a group disability policy; that the policy of insurance sued on was renegotiated and replaced by a subsequent policy on October 1, 1966; that the 1966 policy was the only contract in force and effect; that the 1966 policy differed from the previous policy in that the 1966 policy excluded disability benefits for injuries for which benefits are payable under the Federal Employees’ Compensation Act [‘FECA’]; that plaintiff is receiving disability benefits under FECA (this was later stipulated); and that plaintiff has not suffered a permanent total disability.

“Defendant’s motion for summary judgment was denied on April 2, 1973. Thereafter on April 18, 1973, a trial on the merits commenced. At the conclusion of all the evidence the trial judge ruled as a matter of law that Alabama law applied to determine the rights and liabilities of the parties; that notice of the changed policy admittedly received by TVA did not constitute notice to Harrison; and that TVA was not the agent of Harrison for the purpose of receiving notice of the changed policy. The court submitted to the jury for determination the issues as to whether Harrison had notice of the changed policy and whether Harrison had suffered permanent total disability. In answer to five special interrogatories, the jury on August 20, 1973, returned its special verdict, in part, as follows: (1) plaintiff did not, prior to the accidental injury of August 13, 1969, receive a copy of the 1966 Certificate of Insurance or otherwise have notice of the change in insurance coverage, (2) INA did not take action reasonably calculated to provide insured employees with a copy of the new Certificate of Insurance or with other notice of the change in insurance coverage, and (3) as of August 13, 1970, plaintiff was completely unable as a result of said accidental injuries to perform his occupation as a machinist or to engage in any occupation or employment for which he was fitted by reason of education, training or experience. .

“On April 26, 1973, the District Court entered its Opinion and Judgment based on the jury’s special verdict and the applicable law, holding that the plaintiff recover of INA the sum of $50,000, together with interest and costs.

“Motion for Judgment Notwithstanding the Verdict and for New Trial was filed on May 4, 1973, and overruled on June 28, 1973.

“Notice of Appeal to the United States Court of Appeals for the Fifth Circuit was filed on June 28, 1973.

“A. Choice of law

“Harrison is and has been a resident and citizen of the State of Alabama, and INA is a corporation incorporated under the laws of the State of Pennsylvania. TVA’s home office is in Knoxville, Tennessee. The 1960 accident policy was executed by INA through its Vice-President and Assistant Secretary in the city of Philadelphia, Pennsylvania, and countersigned by an authorized representative of INA, in Knoxville, Tennessee. (See Exhibit S — 1, page 514 of Appendix.) The 1966 policy of insurance was executed by INA through its Vice-President and Assistant Secretary in the city of Philadelphia, Pennsylvania, but was not countersigned. (See page 523 of Appendix.)

“INA originally contracted with TVA to afford coverage to TVA employees in 1960. The evidence showed that coverage was afforded for eligible employees of TVA. TVA employees paid premiums to TVA through a payroll deduction system, and TVA forwarded the monies to INA in a lump sum.

“Harrison, as well as other insured employees, applied for insurance coverage at TVA’s Muscle Shoals plant in Alabama. Harrison received a Certificate of Insurance in October 1965. The Certificate was handed to him on the job by one of the office personnel of TVA.

“Plaintiff was injured on August 13, 1969, while employed with TVA at the Wilson Dam Hydro plant in Muscle Shoals, Alabama. Harrison testified that the 1966 Certificate was received by him through the mail from TVA’s office six or seven months after he was hurt.

“The policies of insurance obtained by TVA provided:
“Conformity with State Statutes: Any provision of this policy which, on its effective date, is in conflict with the statutes of the state in which the Insured resides on such date is hereby amended to conform to the minimum requirements of such statutes.
“Legal Actions: . . . No such action shall be brought after the expiration of three years (or the minimum time, if more than three years, permitted by the law in the State where the insured resides) .

“B. ' Notice to Harrison

“The original INA group master policy, Accident Policy SGA-420 covering insured TVA employees, was awarded by TVA to INA, under competitive bid, effective October 1, 1960. In 1963 this policy was renewed for a three-year period.

“On September 7, 1965, Harrison made application for said accident insurance in the principal sum of $50,000. INA issued Harrison a Certificate of Insurance, delivered to plaintiff by one of the office personnel of TVA and effective October 1, 1965.

“The original group master policy remained in effect without change in coverage until 1966, and included coverage for injuries for which benefits under the Federal Employees’ Compensation Act were payable. In 1966 changes were negotiated, without competitive bid, between INA and TVA, whereby benefits under the original group policy would be denied for accidents occurring on the job and covered by the Federal Employees’ Compensation Act. This new contract was made effective October 1, 1965.

“The insurance premium paid by the insured employees remained the same under the original policy and the 1966 policy.

“New Certificates of Insurance under the 1966 policy were printed on July 14, 1966, in INA’s offices in Philadelphia, Pennsylvania, and mailed in bulk to INA’s offices in Nashville, Tennessee, then mailed from Nashville to TVA’s offices in Knoxville, Tennessee. INA mailed a sufficient number of certificates for distribution to all covered employees. INA kept no further records of the new Certificates after mailing same to TVA in Knoxville. No records were kept relating to the delivery of Certificates to TVA employees. There was no policy of surrendering an old Certificate if a new Certificate was issued. There was no record, or knowledge, of anyone having delivered the 1966 Certificate of Insurance to plaintiff Harrison.

“Harrison did not receive any notice of a change in the coverage of his 1965 Certificate until after his employment-connected accident. Some six or seven months subsequent to said accident he received the new INA Certificate of Insurance from TVA through the U.S. Mail.

“3. Questions to be certified.

“1. Under the Alabama law of conflict of laws, is the law to be applied to the insurance covering Harrison that of Alabama, Tennessee or Pennsylvania?

“2. If Alabama law applies, is the 1966 insurance contract effective as to the insured employee, Harrison, who received no notice of the new contract and its provi-sioris, there being notice to the policyholder-employer, TVA ?

“The entire record in this case, together with copies of the briefs of the parties and certification in this court, are transmitted herewith.”

QUESTION NO. 1.

Both Harrison and INA agree that the general conflict of laws rule provides that the law of the state wherein the contract was executed is determinative of the rights and liabilities of the parties to the contract. This is correct. Furst & Thomas v. Sandlin, 208 Ala. 490, 94 So. 740 (1922). However, the precise question as to what law governs with respect to group insurance has not been specifically answered in Alabama. In 43 Am.Jur.2d, Insurance, § 39, the following appears:

“From the circumstance that group insurance involves a triangular contractual relationship among the insurer, the employer, and the insured employee, distinctive questions of conflict of laws arise in respect thereof. On the question whether the rights of an insured employee under a group policy are governed by the law of the state where the master policy is issued and delivered or by the law of the state where the certificate is issued and delivered to the employee, there is a conflict of authority. . . .”

We hold that, under the facts of this case, the law of Alabama applies. Not only was the certificate issued and delivered to the employee in Alabama, but additionally, after INA issued the original group master policy and agreed to insure “eligible persons,” “employees of TVA,” Harrison completed an application for accident insurance in the principal amount of $50,000 on himself and $10,000 on his wife. The form which he signed, in Alabama, is entitled “APPLICATION FOR ACCIDENT INSURANCE AND PAYROLL DEDUCTION AUTHORIZATION.” The body of the certificate of insurance issued pursuant to such application and delivered to Harrison in Alabama carries this language:

“THE COMPANY HEREBY CERTIFIES that the employee and eligible dependents, if any, listed on the above application . . . are insured under . [the master policy].”

INA asserts that the document executed by Harrison in securing coverage and authorizing payroll deductions was not an “ ‘application’ in the legal sense of the word,” but rather a mere signing up for automatic coverage, and that contract of insurance was the master policy and “the certificate is practically insignificant.”

This argument loses its force, however, when it is recognized that one must look to the certificate, and not the master policy, to determine the amount of coverage afforded. INA offered, for a given sum, to insure TVA employees who made application for such coverage and authorized payroll deductions for the payment of the premium. Harrison accepted that offer in Alabama; therefore, the contract was made in Alabama, Ingalls Steel Products Co. v. Foster & Creighton Co., 226 Ala. 122, 145 So. 464 (1932), and is governed by Alabama law.

In addition, Title 28, § 10, Code of Alabama 1940, provides:

“All contracts of insurance, the application for which is taken within the state, shall be deemed to have been made within this state, and subject to the laws thereof.”;

and the policy itself proclaims:

“. . . Any provision of this policy which, on its effective date, is in conflict with the statutes of the state in which the Insured resides on such date is hereby amended to conform to the minimum insurance requirements of such statutes.”

Both our cases and statute dictate the application of the law of Alabama.

QUESTION NO. 2.

Having" concluded that Alabama law applies, we next turn to the second question, i. e., is the 1966 insurance contract effective as to the insured employee, Harrison, who received no notice of the new contract and its provisions, there being notice to TVA, his employer.

Stated differently, the question is whether notice of the cancellation or termination of the 1965 policy and the issuance of a new one in 1966 was required to be given the insured and if so, was notice to his employer, TVA, sufficient.

Alabama law on this subject is unclear, which, of course, explains why the question was certified to this court by the United States Fifth Circuit Court of Appeals.

In Shears v. All State Life Ins. Co., 242 Ala. 249, 254, 5 So.2d 808, 812 (1942), this court held:

“The policy may be allowed to lapse by non-payment of premiums by the employer, or the insurer may cancel it for that reason, or it may terminate upon the expiration of its term without action on the part of anyone, or upon the termination of the employee’s employment, because the contract so provides. Undoubtedly, where the employee contributes to the premium payment, he should have something to say regarding the cancellation; at least where the cancellation is by the affirmative action of either the insurer or the employer, or both. Under such circumstances, he has more than the interest of a third party beneficiary. He has an interest obtained through an expenditure of his own money. He must be regarded as a party to the insurance contract at least to the extent that the group policy cannot be can-celled without his consent.”

Poch v. Equitable Life Assur. Society, 343 Pa. 119, 22 A.2d 590, was relied on in Shears, and the following statement from the Supreme Court of Pennsylvania was approved:

“ . . . ‘Upon a review of the authorities, and upon reason as well, our conclusion is that, under a group policy like that now before us [and in all material respects like the one involved here], the insured employee must be regarded as a party to the insurance contract at least to the extent that the group policy cannot be cancelled or any of its effective provisions eliminated by either the employer or insurer, except in a manner provided by the policy, without giving such employee notice of the intended cancellation or modification, so that he may timely exercise any conversion privilege which may be available to him under the terms of the policy or, where such privilege is not given, in order that he may seasonably obtain similar insurance protection on his own account elsewhere : further, that in the absence of notice, an agreement of cancellation or modification like that here entered into between the Association [employer] and the Society [insurer] is, as to such employee, legally ineffective to relieve the insurance company from liability under the original policy.’ ” (242 Ala. at 254, 5 So.2d at 812)

Shears was closely examined by the Court of Appeals in Metropolitan Life Ins. Co. v. Korneghy, 37 Ala.App. 497, 71 So.2d 292 (1954). In Korneghy, the insured employee received written notice of the termination of the group coverage, but contended that it could not be terminated without his consent. The Court of Appeals held that a group policy could be terminated without the consent of the insured but said:

“Our diligent study of the authorities leads us to the conclusion that a majority of the appellate courts of the country hold to the view that, under factual circumstances analogous to those in the case at bar, timely notice should be given the insured of any amendments to or cancellation of the master group policy.
“While we are not called upon at this time to declare that we adopt this rule, we are frank to state that it certainly seems to be more in accord with fair treatment of the insured employee.” (37 Ala.App. at 506, 71 So.2d at 301)

This court, in Hill v. Metropolitan Life Ins. Co., 266 Ala. 285, 96 So.2d 185 (1957), held that the Court of Appeals correctly construed Shears on the issue of consent of an insured to the cancellation of a group policy.

Meyerson v. New Idea Hosiery Co., 217 Ala. 153, 115 So. 94 (1927), has frequently been cited as contra to Shears and Korneghy. See 68 A.L.R.2d at 249.

Although admittedly confusing, Meyerson is readily distinguishable from Shears and Korneghy. In Meyerson, the employer, New Idea, bought group life insurance on its employees and notified them that it had done so. They were given the right to acquire additional coverage if as many as 75% of them agreed. More than 75% did agree, including Meyerson, and authorized payroll deductions for payment of the premiums on this additional coverage. New Idea allowed the coverage to lapse without giving notice to its employees. Meyerson subsequently died and his widow beneficiary sued New Idea for breach of contract, contending that New Idea had a contractual obligation to continue to pay the premiums and thereby to retain coverage. The court held that she had failed to prove one of the essential elements of her contract count, i. e., that there was no proof that the undertaking to deduct the premiums and pay the insurer was other than a gratuitous undertaking by the employer, or stated differently, there was no proof that the employer received any consideration for this undertaking and, therefore, a failure of proof of one of the essential elements of the contract count.

The widow also sued New Idea for negligence in allowing the insurance to lapse without first giving notice to the plaintiff (beneficiary) or her husband. The trial court sustained demurrers to the negligence count. In affirming, this court said:

“It is a familiar principle of the law of agency that, when one party intrusts the transaction of a matter of business to another who enters upon the execution of his agency, though the undertak-' ing is gratuitous, and does it amiss through want of due care, and as a proximate consequence of such negligence damage ensues to the principal, the agent is liable to the principal in an action on the case as for such misfeasance. [Citations Omitted].
“And a gratuitous agent who undertakes and enters upon the business of his principal is liable to the third person for affirmative acts of negligence proximately resulting in personal injury or property damage to such third person. Liability of the latter class rests upon a breach of duty to such third person arising out of the performance of the work, and exists, not because of the agency, but regardless of it. [Citations Omitted].
“ . . . The fault in appellant’s [widow’s] contention here is that these counts are lacking in averments showing that the defendant was plaintiff’s [beneficiary] agent to keep the insurance, or any part of it in force, and the negligence complained of is the failure to give notice before allowing the insurance to lapse so that the insured might protect his interest in procuring other insurance. It may be conceded that, under the circumstances presented by these counts, in view of its undertaking to pay the insurance out of the insured’s compensation, the law imposed on the defendant the duty to notify the insured before allowing his insurance to lapse, and that the failure to give such notice was negligence that would afford a cause of action to its principal — the insured — but for such negligence it was not liable to the plaintiff [beneficiary], [Citation Omitted] ” (Emphasis Supplied) (217 Ala. at 157,115 So. at 97)

Thus, as we read Meyer son, it stands only for the proposition that in that case the beneficiary was unable to prove her contract count, in that there was no proof that the employer, in forwarding the premiums to the insurer, was acting other than gratuitously. Her negligence counts were defective in that the employer owed her no duty as a beneficiary to notify her that the policy had lapsed.

That is not the question in this case. The question here is whether the insurer has that duty and, if so, is it discharged by notice to the employer. We hold that the insurer does have that duty under Shears, and that notice to the employer is not sufficient.

Under the facts of this case, and we note that each case must depend upon its own facts, we think TVA was the agent of INA in so far as the notice issue is concerned. In All States Life Ins. Co. v. Tillman, 226 Ala. 245, 146 So. 393 (1933), on the agency question in a group insurance case, this court said:

“It is quite well settled by our decisions that the payment by the employee of his monthly premium through a deduction from his monthly salary by his employer, who, by prearrangement, is to retain the same, and make payment of monthly premiums on the group policy, is payment to the insurer so far as such employee is concerned.
“The entire plan of insurance enables the insurer to do business with one party in this regard, and provision is made in the policy ... by which the employer and the insured shall keep check of the employees who are insured from time to time, and of the payment of their premiums. The insurer issues no receipt to the insured employee for premium paid; he is provided with no means of knowledge as to the business operations between the employer and insurer; and, having fully performed by continuing in the employment, and paying his contribution to the premium in the manner devised in this scheme of insurance, he must be considered of the group covered by the policy. [Citations Omitted].” (Emphasis supplied) (226 Ala. at 247, 146 So. at 393)

The answer to Question No. 2, as certified, is No. The 1966 insurance contract is not effective as to Harrison who received no notice of the new contract.

All the Justices concur.