author: SHORES, Justice. MADDOX, Justice

text:
    James T. HENDERSON et al. v. WADE SAND AND GRAVEL COMPANY, INC., a corporation et al.
    79-112.
    Supreme Court of Alabama.
    Aug. 22, 1980.
    Rehearing Denied Oct. 3, 1980.
    Earl D. Hendon, Birmingham, for appellants.
    James E. Simpson and Reid B. Barnes of Lange, Simpson, Robinson & Somerville, Birmingham, for appellees.
   SHORES, Justice.

This action was brought by three Jefferson County homeowners to recover damages for injury caused to their property by the operation of a neighboring quarry. At the close of plaintiffs’ case, the trial court directed a verdict in defendant’s favor. The plaintiffs appealed.

There are occasions when it becomes necessary to reexamine an existing legal doctrine in the light of changed societal conditions. This case presents such an occasion.

The plaintiffs’ houses were constructed roughly fifty years ago, and are located in a residential neighborhood. In 1977, the land on which their houses are situated began to sink, large sinkholes appeared, and their houses began to break up. Investigation disclosed that the sinking of their property was due to the activities of defendant, Wade Sand and Gravel Company, which operated a quarry one-half mile north of plaintiffs’ homes. In the course of its operations, the quarry, which began operating in 1957, periodically pumps water from the bottom of its pits, and empties it into a nearby creek. This resulted in ground water being leeched from under plaintiffs’ land, leaving large underground cavities. Heavy rains then caused water to flow through the empty cavities at an accelerated rate, destroying the structure of the land beneath plaintiffs’ homes, and carrying away much subsoil and surface soil.

In 1969, the U.S. Geological Survey began a study of the sinkhole problem in the Roberts Field area, which includes plaintiffs’ homes and the quarry. The defendant cooperated in the study and was allegedly familiar with the contents of the report subsequently published. Plaintiffs contend that the study predicted that damage of the type complained of would occur if defendant continued to pump water from its pits. The trial court refused to admit the study into evidence.

The trial court held that a verdict for the defendant was dictated by the principles enunciated in Sloss-Sheffield Steel and Iron Co. v. Wilkes, 231 Ala. 511, 165 So. 764 (1936), and Sloss-Sheffield Steel and Iron Co. v. Wilkes, 236 Ala. 173, 181 So. 276 (1938). (Sloss I and Sloss II.) Those cases adopted and applied the so-called “American rule” of reasonable use of percolating waters, holding that where a landowner who

is conducting any sort of operations to which its land is adapted in an ordinary and careful manner, and as a consequence percolating water is drained, affecting the surface owner’s water supply, either of that or adjoining land, no liability for his damage exists. But if the waters are drained without a reasonable need to do so, or are willfully or negligently wasted in such operation in a way and manner as that it should have been anticipated to occur, and as a proximate result the damage accrued to the surface owners so affected, including adjoining landowners, there is an actionable claim ....

231 Ala. 511 at 518, 165 So. 276.

As to adjoining landowners, “there is no difference between the duty to avoid surface disturbances and that to avoid drainage of percolating water, since the duty of subjacent support is not existent.” Id. The trial court directed a verdict for the defendant because it found that plaintiffs had presented no evidence which indicated that the water pumped by the quarry was other than percolating, or that it was pumped unnecessarily or negligently. While we agree with the trial court that Sloss I & Sloss II articulate the applicable law and require the result reached below, on reexamination of those cases, we are convinced that they must be overruled.

According to C.J.S.:

The subject of underground waters is comparatively modern, what has been said to be the first English case having been decided in 1840. From this English source has grown a common-law system of conflicting rules and doctrines, explained by the diversified physical features and characters of the different states, and their peculiarities of climate, soil, density of population, and available water supply.

93 C.J.S. Waters § 86 (1955).

In the eastern United States, the rules as to usage of underground waters have varied according to whether the waters were classified as “percolating water” or as an underground stream. The general rule is that “where a subterranean stream flows in a distinct, permanent, well-known and defined channel, it is governed by the same rules as apply to a natural watercourse on the surface.” 93 C.J.S. Waters § 89 (1955). Where there is no definable channel, water is classified as percolating, and a different set of rules has evolved concerning its use. The English rule, which was followed by most of the eastern states in the nineteenth century, was based upon the doctrine “that a man owned fr.om the top of the sky above his land to the center of the earth beneath him.” 14 Rocky Mountain Mineral Law Institute, “Basic Groundwater Problems,” 501, 504. The Restatement (Second) of Torts § 857 (1979), Introductory Note on the Nature of Ground Water and Theories Concerning Its Use, summarizes the doctrine in the following terms:

The “English rule” ... gave each landowner complete freedom to withdraw and use ground water and made no attempt to apportion the supply among possessors of overlying land or their grantees. It was based on the premise that ground water is the absolute property of the owner of the freehold, like the rocks, soil and minerals that compose it, so that he is free to withdraw it at will and do with it as he pleases regardless of the effect upon his neighbors. . . . Although framed in property language, the rule was in reality a rule of capture, for a landowner’s pump could induce water under the land of his neighbor to flow to his well-water that was in theory the neighbor’s property while it remained in place.

Restatement (Second) of Torts § 857 (1979), p. 256.

This concept is clearly in conflict with the venerable doctrine of sic utere tuo ut alie-num non laedas, and was quickly modified to the rule of “reasonable use,” described in the Restatement thusly:

The “American rule” was based on the same theory of property and power of capture as the English rule, with the addition of a definite prohibition against waste and of some protection for the wells and springs of adjacent owners. The rule was sometimes called the “rule of reasonable use,” but “reasonable” was used in a very special and restricted sense. A waste of water or a wasteful use of water was unreasonable only if it caused harm, and any nonwasteful use of water that caused harm was nevertheless reasonable if it was made on or in connection with the overlying land.... The American rule came into being with the invention of the high capacity pump, when cities bought land or easements for well fields in the country and lowered the water table beyond the reach of the domestic wells of neighboring farmers. The rule forced the cities to pay damages to the farmers or provide them with better wells and pumps and was an application of common tort policies of distributing losses and of requiring those who receive the benefits from a harmful activity to pay its costs.
As between persons using the water on the overlying land, the American rule made no apportionment among users and gave no protection to their wells and springs. If the water was withdrawn for the purpose of making a beneficial use of or on the land from which it was taken, no liability was incurred for resulting harm to an adjoining landowner.

Restatement (Second) of Torts § 857 (1979), pp. 256-257.

It is important to note that the Restatement rules regarding interference with use of water were formulated to deal with situations in which an adjoining landowner’s water supply is impaired by a defendant’s use or waste of ground water, not, as in Alabama, where adjoining land is itself damaged. Although some jurisdictions have followed Alabama’s approach, see e. g., Finley v. Teeter Stone, Inc., 251 Md. 428, 248 A.2d 106 (1968), a case which the appel-lee relies on heavily, others have limited application of the reasonable use rule to situations which involve competing uses of water. In a well-reasoned case from Florida, the Supreme Court of that state concluded that where a defendant diverts ground water from adjoining land as an incident to his use of his own land, and does not utilize the water itself, traditional nuisance law is more appropriately applied than rules governing competing uses of percolating waters. The Court discussed the issue in language which could well be applied to the instant case:

At the outset, it should be noted that we are not here dealing with a problem involving a proprietary competition over the water itself-that is to say, there is no conflict here between the respective rights of persons to make competing proprietary uses of subterranean waters to which they both have access....
It is pointed out by the annotator at page 1404 of 55 ALR that “Practically all the cases in which this rule of correlative rights or reasonable use has been applied were cases in which percolating water was being extracted from land for the purpose of sale at a distance, for use in supplying water to cities and towns.... ”
In the instant case, however, we are concerned with an interference with plaintiffs’ use of the spring on their land, caused by conduct of the defendant not involving a competing use of water and in which the effect on the subterranean water is only incidental to the defendant’s use of its land. Obviously, then, the rule of “reasonable use,” as engrafted upon the old common-law rule of absolute and unqualified ownership of percolating waters, insofar as the proprietary beneficial use of the water is concerned, has no application here where we are concerned with the proprietary use of land, and in which the water is only incidentally affected. Under such circumstances, even at common law, a person was subject to liability for interference with another’s use of water, either for (1) an intentional invasion when his conduct was unreasonable under the circumstances of the particular case, or (2) an unintentional invasion when his conduct was negligent, reckless or ultrahazardous. Restatement of Torts, Vol. IV, Section 849, and Sections 822-840.

Labruzzo v. Atlantic Dredging & Constr. Co., 54 So.2d 673, 675, 29 A.L.R.2d 1346, at 1351 (Fla.1951).

We agree with the reasoning of this case, and conclude that the reasonable use rule was inappropriately applied in Sloss I & II. While the Sloss rule may have been acceptable, even beneficial, in an earlier era of lower population density and more primitive technology, it could produce disastrous results today. Carried to its logical extension, it would allow a quarry owner to willfully sink the City of Birmingham with impunity, provided that it was done in furtherance of a legitimate enterprise and that due care was exercised in the pumping. A rule which provides no check on a landowner’s ability to utilize his land to the detriment of society cannot be tolerated. The appellee admits that “at some point a balance must be struck between annoyance and inconvenience to plaintiff and the right of defendant to do business,” although they omit to specify when the point is reached. Accordingly, we hold that where a plaintiff’s use of groundwater, whether it be for consumption or, as here, for support, is interfered with by defendant’s diversion of that water, incidental to some use of his own land, the rules of liability developed by the law of nuisance will apply. These are codified in Alabama at Code 1975, Sections 6-5-120 through 6-5-127. We remand the case for further consideration by the trial court consistent with this opinion.

REVERSED AND REMANDED.

JONES, ALMON, EMBRY and BEAT-TY, JJ., concur.

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

MADDOX, Justice

(dissenting).

At some point a balance must be struck between annoyance and inconvenience to one who lives near a quarry and the right of the quarry owner to do business, but a striking of that balance is a function of the legislature. Finley v. Teeter Stone, Inc., 251 Md. 428, 248 A.2d 106 (1968).

It is quite possible that the rule stated in Sloss I and II no longer serves the public good, but if the rule stated in those two prior cases of this Court does not strike a proper balance between the competing interests, a remedy lies with the legislature where the rights, duties and societal interests of those affected could be fully considered and evaluated.

TORBERT, C. J., concurs.

      . While the style of this case appears to name two defendants-appellees, the parties agree that the case actually involves only one, Wade Sand and Gravel Co., Inc.


source: Caselaw Access Project

author: SHORES, Justice. TORBERT, Chief Justice BEATTY, Justice

license: Public Domain

text:
    ALABAMA HOSPITAL ASSOCIATION v. William W. DILLARD, Jr., Chief Examiner, Department of Examiners of Public Accounts of the State of Alabama.
    78-843.
    Supreme Court of Alabama.
    Aug. 29, 1980.
    Rehearing Denied Sept. 26, 1980.

      Torbert, C. J., concurred in the result and filed opinion.
    Beatty, J., filed a dissenting opinion, in which Faulkner, J., concurred.
    Bruce J. Downey, III, of Capell, Howard, Knabe & Cobbs, Montgomery, for appellant.
    Charles A. Graddick, Atty. Gen., John Gibbs, Asst. Atty. Gen., for appellee.
   SHORES, Justice.

Alabama Hospital Association filed suit in the Circuit Court of Montgomery County against William W. Dillard, Jr., Chief Examiner, Department of Examiners of Public Accounts, seeking a determination that certain good faith expenditures made by public hospital association and public hospital corporation members of the Alabama Hospital Association, pursuant to powers granted them by the Legislature, and in pursuit of both a corporate and public purpose, are not made unlawful per se by application of Sections 68 and 94 of the Constitution of Alabama of 1901.

The Association alleged that its public hospital association and public hospital corporation members were, by legislative action, public corporations; that its members were separate entities from the state and from any local political subdivision including a county or city within which they are located; and that actions taken by its members do not constitute actions taken by a county or city within the meaning of Section 68 and Section 94 of the Constitution. After a hearing was held, the trial court entered an order holding that Sections 68 and 94 do apply to the members of the Alabama Hospital Association. This appeal followed.

The single issue to be resolved in this appeal is a question of law: whether otherwise lawful expenditures made by public hospital associations and public hospital corporations are prohibited by Sections 68 and 94 of the Constitution.

Section 68 reads as follows:

The legislature shall have no power to grant or to authorize or require any county or municipal authority to grant, nor shall any county or municipal authority have power to grant any extra compensation, fee, or allowance to any public officer, servant, or employe, agent or contractor, after service shall have been rendered or contract made, nor to increase or decrease the fees and compensation of such officers during their terms of office; nor shall any officer of the state bind the state to the payment of any sum of money but by authority of law; provided this section shall not apply to allowances made by commissioners’ courts or boards of revenue to county officers for ex offi-cio services, nor prevent the legislature from increasing or diminishing at any time the allowance to sheriffs or other officers for feeding, transferring, or guarding prisoners.

Section 94, as amended, reads as follows:

The legislature shall not have power to authorize any county, city, town or other subdivision of this state to lend its credit, or to grant public money or thing of value in aid of, or to any individual, association, or corporation whatsoever, or to become a stockholder in any such corporation, association, or company, by issuing bonds or otherwise. It is provided, however, that the legislature may enact general, special, or local laws authorizing political subdivisions and public bodies to alienate, with or without a valuable consideration, public parks and playgrounds, or other public recreational facilities and public housing projects, conditional upon the approval of a majority of the duly qualified electors of the county, city, town, or other subdivision affected thereby, voting at an election held for such purpose.

We reverse and remand.

The Department of Examiners of Public Accounts contended below and contends on appeal that certain expenditures, even when made in good faith and within corporate powers by public hospital associations and corporations, are unlawful per se by application of the prohibitions contained in Section 68 and Section 94 of the Constitution. The Department contends that the expenditures, though they may be proper business expenditures such as hospital payment for flowers for hospitalized employees and for special events, hospital payment for meals for Board members when they are conducting hospital business, hospital payment of expenses for employee award functions, and hospital payment for employees’ Christmas bonuses, are unlawful per se expenditures because they may inure to the benefit of the corporation or another individual within the proscriptions contained in the Constitution. In support of this argument, the Department contends that public hospital associations and public hospital corporations are subdivisions of the state or the counties or municipalities, and that such expenditures, even if otherwise lawful, are prohibited by the Constitution as extra compensation or aid or thing of value to an individual prohibited by Section 68 and Section 94. We disagree.

The powers of public hospital associations and corporations are defined by statute. Section 22-21-1, Code 1975, et seq.

Under these various statutes, public hospitals have the authority to make expenditures within the corporate powers which are necessary and appropriate and consistent with the maintenance of public health services and facilities. Of course, they are not authorized by statute, nor by common law, to exceed the corporate powers, nor may they ignore the fiduciary responsibilities and duties which are an integral part of all corporate existence.

We simply hold, as we have so often, “that a public corporation is a separate entity from the state and from any local political subdivision, including a city or county within which it is organized.” Opinion of the Justices, 254 Ala. 506, 49 So.2d 175 (1950). See also Water Works Board of City of Leeds v. Huffstutler, 292 Ala. 669, 299 So.2d 268 (1974).

In Knight v. West Alabama Environmental Improvement Authority, 287 Ala. 15, 246 So.2d 903 (1971), this Court held:

[T]he interdictions of Section 94 have reference to the kind of subdivisions of the State defined as political subdivisions such as the counties, cities, towns and probably certain districts which are endowed with governmental functions or powers, even though limited, and which are supported by and are responsible for the protection of public revenues. . . . Separate, independent public corporations are not political subdivisions of the State. They are not subdivisions of the State within the meaning of Section 94 of the Constitution, as amended. [287 Ala. at 20, 21, 246 So.2d at 906]

We hold that public hospital corporations and public hospital associations created pursuant to the statutes referred to above .are not political subdivisions of the state of Alabama and, thus, lawful expenditures by such public corporations or associations are not proscribed by the Constitution of Alabama.

REVERSED AND REMANDED.

MADDOX, JONES, ALMON and EM-BRY, JJ., concur.

TORBERT, C. J., concurs in the result.

FAULKNER and BEATTY, JJ., dissent.

TORBERT, Chief Justice

(concurring in the result).

Because of the posture of this case and the issue presented for our review, I concur in the result. The Alabama Hospital Association, on behalf of its public hospital association and public hospital corporation members, asserts in a most general way that public corporations are not subject to the proscriptive provisions of Sections 68 and 94 of our Constitution. Nowhere has it been pointed out to this Court by the parties that there are various different statutes under which public hospital corporations and associations are organized. The Alabama Hospital Association refers only to the statutes involving Division 1, of Article 4, Chapter 21, Code of 1975 (§§ 22-21-70 through -83), entitled “Hospital Boards.” As pointed out in the dissent of Justice Beatty, this is only one of several statutes authorizing public hospitals; and based upon the particular statutes, the legislature may have intended different results.

Until the issues are better defined and presented, I agree that our case of Knight v. West Alabama Environmental Improvement Authority, 287 Ala. 15, 246 So.2d 903 controls.

BEATTY, Justice

(dissenting):

When is a pubiic hospital corporation tantamount to a private hospital so that the public hospital’s operations are not subject to the strictures of Sections 68 and 94 of the Alabama Constitution of 1901? May a county hospital, with hospital funds, purchase liquor, give discounts to its board members, make gifts to persons indirectly associated with the hospital, or pay the private club dues for its employees, as was done in this case by Cullman County Hospital? These are the questions which are presented by this appeal. I cannot agree with the majority of this Court that the single issue before us is whether “otherwise lawful expenditures” made by public hospital associations and public hospital corporations are prohibited by Sections 68 and 94. Posing the issue in that manner, it seems to me, begs the question whether or not the questioned expenditures are lawful in the first instance. The answer to that question depends upon the nature of the hospital’s creation, i. e., the character of its being.

The majority concedes that public hospital associations and corporations obtain their powers by legislative enactment. Examination of those statutes, Code of 1975, § 22-21-1 et seq. reveals that the legislature has authorized several different forms of being for hospitals, with varying degrees of “public” character.

Under § 22-21-72, a “public corporation” may be organized to operate a “public hospital” whenever a minimum of three natural persons, the incorporators, make application to a county commission. Corporations organized under this section are governed by a board of directors who serve without compensation, § 22-21-76. These particular “public corporations” have specified corporate powers and other powers incident thereto, § 22-21-77. Hospitals organized under these sections are not agencies of the governmental subdivision which authorized their creation because the terms of the legislation did not make them such. And it is such hospitals, in my opinion, to which the majority direct their attention.

But in an entirely different division of the Code than that in which such public corporations are found are located legislative enactments authorizing the creation of hospital corporations of an entirely different nature. See Division 2, §§ 22-21-100 through -112. Unlike those authorized under § 22-21-72, § 22-21-101 authorizes a county to “designate a hospital corporation in the county as the agency of the county to . .. operate ... public hospital facilities ....” (Emphasis added.) And “[w]hen a •hospital corporation has been designated as an agency of the county .. . then the proceeds thereafter collected from any such special tax ... for public hospital purposes shall be paid over to said hospital corporation .... ” (Emphasis added.) § 22-21-102.

Under Article 5, § 22-21-131, incorporated cities and towns are given the power to authorize “public corporations as political subdivisions of the state for the purpose of providing public hospital facilities ....” (Emphasis added.) These corporations likewise have specified incidental powers § 22-21-137, and are governed by boards of directors, § 22-21-135.

Article 6, § 22-21-171, states that city or county hospitals are authorized as public, non-profit corporations, with boards of directors serving without compensation, but with the powers and authority inuring in, or conferred upon, counties in the state of Alabama operating public hospitals.

Thus it is clear that the legislature has authorized the creation of hospital authorities which are not alike. Some are specifically “agencies of the county.” Some are specifically “political subdivisions of the state.” That language needs no explanation, particularly when it co-exists with language authorizing other instrumentalities not so described. In the case of “county” hospitals, if they are “agencies” of the county, they are acting for the county as the alter egos of the county, and thus derive their authority from their county creators. Since counties are political subdivisions of the state created to aid in the administration of state law for the purpose of local self-government, State v. Page, 19 Ala.App. 303, 97 So. 244 (1923), the hospital, which is created as an “agency of the county” likewise is an “agency of the state.”

It has been suggested that all “public hospital corporations” must be allowed to operate in a competitive manner with private enterprise, given the present economic situation and the shortage of trained nurses and other personnel. Without the power to expend public funds for “moral,” “goodwill,” and “promotional” purposes, it is suggested, public hospitals will lose out in the competition for trained personnel. Conceding arguendo these difficulties, nevertheless, it is also a truism that those who serve in “public” or quasi-public organizations traditionally have not obtained the same perquisites or emoluments available in the private sector. Whether this differentiation is justifiable is a policy decision exclusively relegated to the legislature by our system of government. It is not for this court to impose its will upon the administration of such clearly-defined limitations as the legislature has expressed on this subject. For these reasons, it is my opinion that the expenditure of money raised by public taxation for the purposes identified above violates the restrictions of both Sections 68 and 94 of the Alabama Constitution, when those expenditures are made by a hospital corporation identified statutorily as “an agency of the county” or a “political subdivision of the state.”

I take note, also, that this suit was filed by the Alabama Hospital Association and that it alleges that certain of its members suffer from injury due to the acts of the State Department of Examiners of Public Accounts. I question whether this plaintiff has the standing necessary to bring this action in the first place. Rule 17(a), ARCP, requires that “Every action shall be prosecuted in the name of the real party in interest.... ” The “real party in interest” is the party “... who possesses the substantive right being asserted under the applicable law.” Wright & Miller, Federal Practice and Procedure: Civil § 1541 at 635. As we stated in Frazer v. Alabama State Policemen’s Association, Ala., 346 So.2d 959 (1977), “Decisions under the Federal Rule 17(a) have denied to incorporated associations the standing to assert in court the personal rights of [their] members, absent statutory authority.” See also Alabama Independent Service Station Association, Inc. v. Shell Petroleum Corp., 28 F.Supp. 386 (N.D.Ala.1939). The long and short of it is that an association or corporation does not have the capacity to enforce separate property rights of its individual members without some legislative authority. For these reasons I respectfully dissent.

FAULKNER, J., concurs.


author: MADDOX, Justice.

text:
    Charles E. HOWELL et al. v. Ken MALONE et al.
    79-117.
    Supreme Court of Alabama.
    Sept. 12, 1980.

      Ronald P. Slepian and Gordon 0. Tanner of McDermott, Slepian, Windom & Reed, Mobile, for appellants.
    Charles A. Graddick, Atty. Gen., and Herbert I. Burson, Jr. and Ron Bowden, Counsel for Dept, of Revenue, and Asst. Attys. Gen. and Maury Friedlander, Mobile, for appellees.
   MADDOX, Justice.

The central issue involved in this appeal is whether Alabama’s system of classification of property for ad valorem taxation, as authorized by amendment 373 to the Alabama Constitution, violates the equal protection clause of the Fourteenth Amendment to the Constitution of the United States.

The specific issue presented is whether the state can place “single-family owner-occupied residential property” in a separate classification from other types of residential property.

Taxpayers (plaintiffs-appellants), stand in various positions with regard to the ownership of real property, and by reason of that fact, their liability for ad valorem taxes as assessed and collected by various taxing authorities (defendants-appellees), is greater than other “residential” taxpayers. The taxpayers occupy the following positions:

(1) The Howells own residential rental apartment units and multi-family dwellings;

(2) The Barnetts are homeowners whose niece lives with them and does not pay rent;

(3) Mrs. Rabby is a homeowner whose niece lives with her and does pay rent;

(4) Mr. Maisel owns a duplex, occupies one-half of it, and rents the other one-half to another;

(5) Mr. Mitchell owns an unimproved residential lot, is temporarily away from Mobile, and intends to return to Mobile and build a home on the lot and occupy it as a residence;

(6) Mr. Lubel is a homeowner, and the owner of an unimproved, unoccupied residential lot;

(7) The Curries are tenants in Cabana apartments under a lease with a tax escalation clause;

(8) Mr. Garsey is the owner of a townhouse condominium, which he occupies as his home and which is attached together with other townhouses in a four-unit building;

(9) Mrs. Childers owns and occupies a residence in Mobile, a portion of which she rents to a couple who are not her relatives;

(10) Mrs. Adamson is a homeowner who shares her home with a roommate, who contributes to joint household expenses but does not pay rent.

The taxpayers filed a declaratory judgment action in which they claim that their property should be taxed at the same rate as “single-family owner-occupied residential property.” The Circuit Court of Mobile County declared that the provisions of Amendment 373, Constitution of Alabama (1901), and Act No. 46, which amends Code 1975, § 40-8-1, violated no state or federal constitutional provisions. The court did declare that the property of the Barnetts (homeowners whose niece lives with them but does not pay rent), Mrs. Adamson (homeowner who shares her home with a roommate who contributes to joint household expenses, but who does not pay rent), and Mr. Garsey (owner of a townhouse condominium in a four-unit complex), was “single-family owner-occupied residential property,” and, therefore, entitled to Class III classification; the court left the classification of the property of the other plaintiffs as Class II undisturbed.

Amendment No. 373, amending Section 217 of the Constitution of Alabama (1901), states in pertinent part:

(a) On and after October 1, 1978, all taxable property within this state, not exempt by law, shall be divided into the following classes for the purposes of ad valorem taxation:
Class I. All property of utilities used in the business of such utilities.
Class II. All property not otherwise classified.
Class III. All agricultural, forest and single-family owner-occupied residential property, and historic buildings and sites.
Class IV. All private passenger automobiles and motor trucks of the type commonly known as “pickups” or “pickup trucks” owned and operated by an individual for personal or private use and not for hire, rent or compensation.
(b) With respect to ad valorem taxes levied by the state, all taxable property shall be forever taxed at the same rate. On and after October 1, 1978, such property shall be assessed for ad valorem tax purposes according to the classes thereof as herein defined at the following ratios of assessed value to the fair and reasonable market value (except as otherwise provided in subsection (j) hereof) of such property:
Class I. 30 per centum.
Class II. 20 per centum.
Class III. 10 per centum.
Class IV. 15 per centum.

Act No. 46, which amends Code 1975, § 40-8-1, reads substantially the same as Amendment 373 insofar as the pertinent part is concerned.

Appellants make three contentions:

(1) Amendment 373 constitutes unreasonable class legislation which violates the equal protection clause of the Fourteenth Amendment of the United States Constitution.

(2) “Residential property” comprises a natural class for purposes of taxation, the division of which is unconstitutional.

(3) Amendment 373 fails to give clearly ascertainable standards to guide the taxing authorities.

We will treat appellants’ first two contentions, that Amendment 373 constitutes unreasonable class legislation and that “residential property” constitutes a natural class of property for purposes of taxation, as one issue.

We begin this discussion of the constitutional issue presented by stating some general principles of law which apply when the constitutionality of a tax statute is questioned. First, states are presumed to have acted within their constitutional power despite the fact that in practice their laws result in some inequality; a statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it. Second, the equal protection clause “imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation.” Allied Stores of Ohio v. Bowers, 358 U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480 (1958). The states are subject to the requirement of the equal protection clause of the Fourteenth Amendment to the Constitution of the United States, and there is a point beyond which the state cannot go without violating that clause. As the Supreme Court of the United States opined in Allied Stores of Ohio, supra :

. .. The State must proceed upon a rational basis and may not resort to a classification that is palpably arbitrary. The rule often has been stated to be that the classification “must rest upon some ground of difference having a fair and substantial relation to the object of the legislation.” F. S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415 [40 S.Ct. 560, 561, 64 L.Ed. 989;] Louisville Gas & Electric Co. v. Coleman, 277 U.S. 32, 37, [48 S.Ct. 423, 425, 72 L.Ed. 770;] AirWay Electric Appliance Corp. v. Day, 266 U.S. 71, 85, [45 S.Ct. 12, 15, 69 L.Ed. 169;] Schlesinger v. Wisconsin, 270 U.S. 230, 240, [46 S.Ct. 260, 261, 70 L.Ed. 557;] Ohio Oil Co. v. Conway, 281 U.S. 146, 160, [50 S.Ct. 310, 74 L.Ed. 775.] “If the selection or classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.” Brown-Forman Co. v. Kentucky, 217 U.S. 563, 573, [30 S.Ct. 578, 580, 54 L.Ed. 883.] State Board of Tax Comm’rs v. Jackson, 283 U.S. 527, 537, [51 S.Ct. 540, 543, 75 L.Ed. 1248]. That a statute may discriminate in favor of a certain class does not render it arbitrary if the discrimination is founded upon a reasonable distinction, or difference in state policy. American Sugar Ref. Co. v. Louisiana, 179 U.S. 89, [21 S.Ct. 43, 45 L.Ed. 102;] Stebbins v. Riley, 268 U.S. 137, 142 [, 45 S.Ct. 424, 69 L.Ed. 884.]

In order for a state taxing classification to withstand a challenge on constitutional grounds under the equal protection clause of the fourteenth amendment, there must be a “rational basis” for the possible discriminatory effect of that- tax. This Court, in Gideon v. Alabama State Ethics Commission, 379 So.2d 570 (Ala.1980), citing Buckley v. Valeo, 424 U.S. 1, 96 S.Ct. 612, 46 L.Ed.2d 659 (1975), defined the operation of the rational basis test:

... Under the rational basis test the Court asks: (a) Whether the classification furthers a proper governmental purpose, and (b) whether the classification is rationally related to that purpose.

Does the classification of residential property into different classes further a proper governmental purpose? Before we answer that question, we deem it advisable to set forth some of the principles which govern our judicial review of the taxing scheme.

The Supreme Court of the United States, in passing on the judicial function of review of legislative actions, stated:

This restriction upon the judicial function, in passing on the constitutionality of statutes, is not artificial or irrational. A state legislature, in the enactment of laws, has the widest possible latitude within the limits of the Constitution. In the nature of the case it cannot record a complete catalogue of the considerations which move its members to enact laws. In the absence of such a record courts cannot assume that its action is capricious, or that, with its informed acquaintance with local conditions to which the legislation is to be applied, it was not aware of facts which afford reasonable basis for its action.

Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 510, 57 S.Ct. 868, 872, 81 L.Ed. 1245 (1937). This Court, in Woco Pep Co. of Montgomery v. City of Montgomery, 213 Ala. 452, 105 So. 214 (1925), has essentially adopted the same rule:

Much must be left to the discretion of the Legislature, for exact equality of taxation can never be reached. So long as the burden falls with equal weight upon every member of a given class, natural and artificial persons alike, it is difficult to formulate an argument that such levy violates any provision of our own, or of the federal Constitution. Neither of them requires a horizontal tax. City of Troy v. W. U. T. Co., 164 Ala. 482, 487, 51 So. 523, 27 L.R.A.(N.S.) 627.

213 Ala. at 457, 105 So. at 219.

The rule as to the relationship between tax laws and the equal protection clause might best be stated as it was in Kahn v. Shevin, 416 U.S. 351, 355, 94 S.Ct. 1734, 1737, 40 L.Ed.2d 189 (1973):

A state tax law is not arbitrary although it “discriminate[s] in favor of a certain class ... if the discrimination is founded upon a reasonable distinction, or difference in state policy,” not in conflict with the Federal Constitution. Allied Stores v. Bowers, 358 U.S. 522, 528, 79 S.Ct. 437, 441, 3 L.Ed.2d 480.

In the Kahn case, the Court, in a footnote to its opinion, quoted from Ferguson v. Skrupa, 372 U.S. 726, 730, 83 S.Ct. 1028, 1031, 10 L.Ed.2d 93 (1963), as follows:

We have returned to the original constitutional proposition that courts do not substitute their social and economic beliefs for the judgment of legislative bodies, [which] are elected to pass laws. Ferguson v. Skrupa, 372 U.S. 726, 730, 83 S.Ct. 1028, 1031, 10 L.Ed.2d 93.

Challenges to Alabama’s scheme of ad valorem taxation are not uncommon. As this Court said in Thorn v. Jefferson County, 375 So.2d 780, 783-84 (1979):

The constitutional and statutory scheme for taxing property in Alabama has generated a substantial amount of concern and controversy over the past two or three decades. These disputes have been precipitated principally because of the failure of the Legislature and the taxing authorities to follow the mandates of the Constitution of 1901, which specifically provided for equality of ad valorem taxation. For example, § 211 and § 217 of the Constitution of 1901, provided, as follows:

Sec. 211. Property taxes to be assessed in exact proportion to value of property.
All taxes levied on property in this state shall be assessed in exact proportion to the value of such property, . .. ******
Sec. 217. Property of private corporations, associations and individuals to be taxed at same rate; exception as to religious, educational and charitable property.
The property of private corporations, associations, and individuals of this state shall forever be taxed at the same rate; . . .

The appellate courts of this state have interpreted these sections of the Constitution to mean that all property must be taxed at uniform ratios for ad valorem purposes. State of Alabama v. Alabama Power Co., 254 Ala. 327, 48 So.2d 445 (1950); Hamilton v. Adkins, 250 Ala. 557, 35 So.2d 183 (1948); State of Alabama v. Murphy, 45 Ala.App. 637, 235 So.2d 888 (1970).

In fact, this Court specifically said in the Alabama Power Company case, supra, that the intent manifested by § 211 and § 217 was, as follows:

... It can hardly be contended that after all these years of constitutional history there is a power to classify land and personal property of one taxpayer and tax it on a different basis from the land and personal property of others in the face of §§ 211 and 217.
Nevertheless, neither the Legislature nor the taxing authorities varied their taxing schemes. The inevitable happened in 1971, when a class action was filed in federal court, in which the plaintiffs alleged that the intentional and systematic refusal of state taxing officials to perform their duties in accordance with state law had denied them equal protection of the law under Amendment 14 to the Federal Constitution. A three-judge Federal District Court, noting that this Court had held that Alabama’s own constitution had been interpreted as requiring “ ‘uniformity and equality among all taxpayers, private corporations, associations and individuals alike,’ both as to ratio and percentage of taxation and also as to rate of taxation,” declared Alabama’s statutory scheme violated not only the Alabama Constitution, but also the Federal Constitution as well. Weissinger v. Boswell, 330 F.Supp. 615 (M.D.Ala.1971).
Alabama’s answer to Weissinger was Amendment 325 which amended Section 217 of the 1901 Constitution to change the uniformity and equality among taxpayers to provide for three classes of property and to establish three different ratios of taxation for the three separate classes. The Legislature, in turn, enacted the statute under attack now, § 40-8-1(e).

This case involves an attack upon the State’s latest attempt to classify property for ad valorem taxation-Amendment 373, which amends § 217 of the Constitution.

Unquestionably, the State, by adopting Amendment 373, attempted to establish, among other things, a classification of property. The only specific classification claimed to be unconstitutional in this case is the one which makes a distinction between “single-family owner-occupied residential property” and all other residential property. We note that Amendment 325, the predecessor of Amendment 373, classified only “residential property.” One of the taxpayers’ arguments here is that “residential property” comprises a natural class for purposes of taxation, the division of which is unconstitutional. We now address the constitutional issue posed in this case.

Under the classification scheme set forth in Amendment 373, real property is divided into several classes and subclasses. Under the scheme, property is taxed at a different rate depending on the use to which it is devoted. For example, all property of utilities used in the business of those utilities is taxed at three times the rate of property used for forestry or agricultural purposes. “Residential property” is classified as class III or class II property, depending on the use to which it is devoted. If the owner of the property uses it as a single-family residence, the property is taxed at 10%. If the residential property is used for a purpose other than as a single-family residence, it is taxed at the rate of 20%.

After examining the law and the judgment of the trial court, we conclude that the State has a “rational basis” for classifying real property for ad valorem taxation based upon the use to which the property is devoted. In this case, that classification, based upon use, discriminates in favor of the owners of residential property who use it as single-family residences; however, that a statute may discriminate in favor of a certain class does not render it arbitrary if the discrimination is founded upon a reasonable distinction, or difference in state policy. We think the policy of Amendment 373, regarding the taxation of residential property is plain-the State intended to tax owners of single-family residences at a lower rate than owners of other residential property, because residential property which is not used as a single-family residence generally is used as income-producing property. We recognize that some residential property, as the facts of this case show, would fall within the Class II category, but would not be income-producing, but we are confident that the equal protection clause imposes no “iron rule of equality.” The fact that Amendment 373 discriminates in favor of owners of single-family residences does not render it arbitrary because the discrimination is founded upon a reasonable distinction or difference in state policy. Allied Stores, supra.

It is not for this Court to substitute its social and economic beliefs for the judgment of the legislature or the people.

The taxing scheme in question places a greater tax burden on those who are using their residential property for income-producing purposes. This is rational. The discrimination can be justified on the basis that the government is either providing more governmental services, on the one hand, or, on the other hand, is interested in relieving the tax burden on specified property owners to further some social or economic policy.

We conclude that Amendment 373, classifying residential property in separate categories, does not violate the equal protection clause of the Fourteenth Amendment to the Constitution of the United States.

We now turn to the appellants’ contention that Amendment 373 fails to give clearly ascertainable standards to guide the taxing authorities. Amendment 373 clearly specifies that Class III property is “all agricultural, forest and single-family owner-occupied residential property.” Appellants contend the words “single-family owner-occupied residential property” is not defined with clarity and that the failure of the legislature to define these words “renders these terms to be vague and vulnerable to highly discretionary interpretation by local tax assessors of each of the counties.” A taxing statute, they contend, must be complete when it leaves the legislature and must provide clearly ascertainable and well-defined standards to guide ministerial officers, such as the tax assessors. Weis-singer v. Boswell, 330 F.Supp. 615 (M.D.Ala. 1971). Appellants then assert that “[t]he record of trial is replete with examples of the disparity of local interpretation of the Act and the Amendment.” Tax assessors from Jefferson County and Mobile County testified at the trial and the record does show that the two tax assessors used standards which did vary to some degree; however, both assessors stated that the primary factor they used in determining whether a residence was a single — family owner-occupied residence was whether or not the owner filed for a homestead exemption. The two assessors were questioned about how they handled different types of residential property. The following comparison shows how each assessor handled each separate type of property:

TYPE OF PROPERTY JEFFERSON MOBILE COUNTY COUNTY

Unimproved residential lot Class II Class II

House where owner has moved Class III Class III

Homeplace occupied with non-relatives Class III Class III

Duplex Class II Class II

Condominium (assuming compliance with condominium act) Class III Class III

Homeplace but rents room Class III Class III

We are aware that it has been stated that in order to prevent discrimination laws should provide explicit standards and that a law which confers absolute discretion on a state official to grant or deny a right or privilege is unconstitutional. See Tyson v. New York City Housing Authority, 369 F.Supp. 513, 520 (S.D.N.Y.1974); Smith v. Ladner, 288 F.Supp. 66 (S.D.Miss.1968).

This Court, however, has repeatedly held that the legislature may grant authority and discretion in the application of laws to such ministerial agents as is necessary. As was stated in Wheeler v. River Falls Power Co., 215 Ala. 655, 111 So. 907 (1927):

Legislative competency to enact laws of this character, i. e., laws “authorizing their own appointed agencies to make such minor rules and regulations as are necessary or appropriate for the administration and enforcement of the general laws of the state,” has been approved and upheld by this court. Parke v. Bradley, 205 Ala. 455, 86 So. 28.

The rationale behind the allowance of a delegation of power was stated in Porter Coal Co. v. Davis, 231 Ala. 359, 165 So. 93 (1936):

The legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend which cannot be known to the lawmaking power, and must therefore be a subject of inquiry and determination outside of the halls of legislation.

This Court in Marcet v. Board of Plumbers Examination and Registration of Alabama, 249 Ala. 48, 29 So.2d 333 (1947), approved the vesting of discretion in administrative officials:

And within the constitutional limitation that the legislature may not delegate its power to make law, it may vest a considerable measure of discretionary authority in the officers or agencies charged with administering its enactments. 12 C.J. § 329, pp. 844, 845, 16 C.J.S., Constitutional Law, § 138; Railroad Commission of Alabama v. Alabama Great Southern R. Co. et al., 185 Ala. 354, 64 So. 13, 13 L.R.A. 1915D, 98; State ex rel. Crumpton et al. v. Montgomery, 177 Ala. 212, 59 So. 294. This principle is also illustrated in Opp Cotton Mills v. Adm’r of Wage and Hour Div., 312 U.S. 126, 61 S.Ct. 524, 85 L.Ed. 624.

We hold that the constitutional amendment and the legislative act do not vest an absolute discretion in the tax assessors to determine what constitutes “single-family owner-occupied residential property” but vests in them an interpretative discretion. The two tax assessors who testified stated that they used the filing of a homestead exemption as a criterion for determining whether to classify residential property as Class III or Class II. The assessors were asked how they would classify a resort or recreational home which would not qualify for a homestead exemption because the owner had already claimed his homestead exemption on his permanent residence. Each stated that the resort or recreational house would be classified as Class III if the owner of the property identified it to the assessor as being for personal use only, that is, it was not used in order to produce income. We uphold the finding of the trial judge that the taxpayers failed to show that Amendment 373 was unconstitutional because it failed to give clearly ascertainable standards to guide the taxing authorities.

While we hold that the taxpayers here have failed to show that the interpretation placed by the tax assessors on the words “single — family owner-occupied residential property” has caused them to be discriminated against, we do not hold that other taxpayers, in another setting, might not be able to show such a disparity between interpretations by tax assessors as to constitute a discrimination forbidden by law. The legislature might be advised to define specifically the term “single-family owner-occupied residential property” so that unanimity and uniformity would prevail throughout the state.

Having examined each of the contentions raised by the appellants, we hold that the judgment of the trial court is due to be affirmed.

AFFIRMED.

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

      . While not a factor in our decision, we note that on March 11, 1980, the people of the State of Alabama rejected a proposed constitutional amendment which would have amended subsection (a) of Section 217, Constitution of Alabama of 1901, as amended by Constitutional Amendments No. 325 and 373, so that “Class III” property would include all residential property except licensed hotels and motels. See 1979 Ala. Acts 975, Act No. 79-541.


author: PER CURIAM.

text:
    Charles N. NETTLES et al. v. The FIRST NATIONAL BANK OF BIRMINGHAM et al.
    78-592.
    Supreme Court of Alabama.
    Sept. 26, 1980.

      William Roberts Wilson, Jr., Pascagoula, Miss., for appellants.
    L. Murray Alley of Cabaniss, Johnston, Gardner, Dumas & O’Neal, Birmingham, for appellee The First Nat. Bank of Birmingham.
    Bert S. Nettles, Mobile, and Clarence M. Small, Jr., Birmingham, for appellees Peter-man State Bank and J. R. Harper, J. F. Nettles, A. A. Nettles Sr., A. A. Nettles, Jr., W. W. Eddins, R. A. Wible and Plato G. Britton.
   PER CURIAM.

This appeal arises from a suit brought by appellant Charles N. Nettles, as an individual, and appellant Peterman Lumber Company (Company), the corporation of which Mr. Nettles is the principal owner. The defendant-appellees are the Peterman State Bank (PSB), seven directors and officers of PSB, and the First National Bank of Birmingham (FNB). FNB is involved in the suit because one of its officers, Plato G. Britton, served on the board of directors of PSB.

Appellants brought suit against appellees seeking $2,500,000 compensatory and $5,000,000 punitive damages as a result of a series of events leading to the PSB’s foreclosure of mortgages it held on both the Company’s assets and Mr. Nettles’s personal assets. The complaint claimed relief on the following grounds: fraud, economic coercion, breach of fiduciary relationship, breach of contract, misrepresentation, deceit, embezzlement, and negligence.

The case was tried before the judge without a jury. Appellants presented testimony for some five or six days. At the close of appellants’ case, all appellees filed motions to dismiss under Rule 41(b), ARCP. The trial court took the matter under advisement, and the parties filed extensive briefs. Subsequently, the trial court issued an order granting the motion dismissing the action. This appeal followed.

The facts in the case are somewhat involved. Appellant Charles Nettles was a successful businessman for many years and a prominent member of his community. The Company, which he practically wholly owned, was the principal industry and employer in the general area. PSB was the only bank in the area and was the Company’s principal creditor.

For many years the Company enjoyed great financial success, and Mr. Nettles amassed considerable individual wealth. However, in 1963 a portion of the mill was destroyed by fire. It was rebuilt in 1964, but without adequate financing, and was never again profitable. Appellant Nettles’s son, Bill Nettles, who had previously come to work for the Company, left active employment with the Company in 1968 due partly to the Company’s adverse financial condition.

The financial condition of the Company became acute in 1970. Appellant Nettles was in poor health and advancing in years. The Small Business Administration (SBA) held a first mortgage against the Company and was applying pressure for a sale of the business, or in the alternative foreclosure. Bill Nettles consulted an attorney in regard to bankruptcy, but was advised against such a course of action.

Bill Nettles also conferred with appellee Robinson Harper, President of PSB, informing Mr. Harper that bankruptcy was being considered. As a result of this conversation and the concern it generated, Mr. Nettles, his son Bill, and various representatives of PSB met to determine what could be done to avoid bankruptcy and all agreed that a sale of the business was the only viable solution-to sell the Company as a going concern. An assignment for the benefit of creditors had been contemplated; however, PSB refused to consummate the assignment on the advice of its attorney. The trial court expressly found that there was a mutuality of interests as to both appellants and appellees in preventing foreclosure and liquidation of the business. The trial court further found that appellant Nettles considered his courses of action and elected to attempt to continue the operation of the Company in order to sell it as a going concern.

Subsequently, Bill Nettles, after much difficulty in finding a purchaser, negotiated a sale of the business to Darrell Kelsoe. Bill Nettles handled the negotiations between Mr. Kelsoe and himself, but PSB was kept informed of the progress of the negotiations. Mr. Kelsoe was the only potential purchaser and was acceptable as such to PSB. A buy-sell agreement was prepared by PSB’s attorney and was signed by Charles Nettles and Darrell Kelsoe on September 21, 1970. Appellant Nettles relinquished control, and Mr. Kelsoe began running the Company immediately thereafter.

For reasons that are not clear, but apparently due to intervention by the SBA, the sale itself was never consummated, although Mr. Kelsoe continued to operate the Company. Accordingly, an agency agreement, prepared by PSB’s attorney, was executed by Charles Nettles, as President of the Company, in October 1970 (backdated to September 23,1970), authorizing Mr. Kelsoe to operate the Company “for the benefit of its creditors until such time as some orderly disposition of the assets of said Corporation can be made.” The next day, at the request of Charles Nettles, the agency agreement was modified to provide that Mr. Kelsoe could be dismissed upon seven days notice by the Company.

The Company continued to have financial difficulties. It had difficulty in meeting its payroll and had several bad checks outstanding. In a further effort to save the Company, Charles Nettles executed additional notes to PSB secured by mortgages on his personal assets, including his home and certain tracts of land.

In the early part of 1971, the SBA continued to threaten foreclosure unless the Company’s financial condition improved. In order to forestall that eventuality, PSB acquired the SBA’s interest in the first mortgage. However, the situation did not improve, and in June 1971, PSB foreclosed on the property of the Company and appellant Nettles, with the exception of Mr. Nettles’s home, which was foreclosed on in March 1972. PSB’s bid on certain properties was the highest received at the foreclosure sales, and it became the purchaser of such properties. Subsequently, in order to clear title to the properties so that a greater amount could be realized upon resale, Charles Nettles and his wife executed a waiver of redemption rights in the foreclosed properties. Thereafter, a sale was held in which several bids were made. Certain of the properties were sold to various directors of PSB, their bids being the highest.

The amounts realized from the resales were credited to the obligations of Charles Nettles and the Company, reducing the total indebtedness from $435,890.05 to $107,-175.34 plus interest and additional expenses. PSB rendered Mr. Nettles’s attorney an accounting in June 1972.

The issue we are called upon to review is whether the trial court erred in granting the Rule 41(b) motion. Rule 41(b), ARCP, provides in pertinent part as follows:

After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence... .

The Committee Comments to Rule 41(b) reveal the following:

In a jury case, Rule 50 applies and the court is limited to a question of law (thereby preserving jury trial right) as to the sufficiency of plaintiff’s prima facie case. In a non-jury case, the court, under Rule 41(b), as ultimate trier of fact, is free to weigh the evidence and the credibility of the witnesses....

Moreover, as to our review of the trial court’s finding of fact, Rule 52(a) of the ARCP provides, “Findings of fact shall not be set aside unless clearly erroneous ....” The Committee Comments to Rule 52(a) state, “The scope of review under present Alabama practice prevents reversal of the trial court’s findings where the evidence was taken in open court, or partly so, and the trial court has had the advantage of seeing the witnesses, unless the trial court’s conclusion is plainly and palpably contrary to the weight of the evidence.”

Accordingly, the standard for review on appeal of a trial court’s disposition under a Rule 41(b) motion is whether the trial court’s action is supported by the evidence. Strickland v. National Gypsum Co., 348 So.2d 497, 498 (Ala.Civ.App.1977).

Appellants contend, however, that the ore tenus rule is inapplicable in this case because only a portion of the evidence was heard orally by the trial court and the facts of the case were indisputably established. In support of this proposition, appellants cite Hendrix, Mohr & Yardley, Inc. v. City of Daphne, 359 So.2d 792 (Ala.1978); Taylor v. Godsey, 357 So.2d 979 (Ala.1978); and City Stores v. Williams, 287 Ala. 385, 252 So.2d 45 (1971). Thus, appellants argue that this court is not bound by the trial court’s findings. However, the Comments to Rule 52(a), as set out above, state that the presumption in favor of the trial court’s findings applies even when the evidence only partly consists of oral testimony before the trial court. Moreover, as will appear below, the factual premises underlying appellants’ theories for relief are not immutably established by the evidence. Therefore, the question becomes whether there was sufficient evidence to support the trial court’s findings.

The trial court ruled: “[T]he majority of the plaintiff’s [appellants’] claims are barred by the statute of limitation. The Court is further satisfied that the evidence is insufficient to create a trust relationship.” We agree that the majority of appellants’ claims are barred by the applicable statutes of limitations. The events leading to foreclosure occurred in the fall of 1970-ten years ago-and the foreclosure itself occurred in mid-1971 with resale of the property in the spring of 1972. Suit in this case was not filed until four years later, on November 10, 1976. The complaint broadly alleges recovery on the following theories of relief: fraud; deceit; misrepresentation; embezzlement, a criminal action; economic coercion; negligence; breach of contract; and breach of fiduciary relation. The majority of these claims are clearly barred by the statutes of limitations. The tort claims-fraud, deceit, misrepresentation, economic coercion, and negligence-are barred by the one-year statutes of limitations. See Code 1975, §§ 6-2-3 & -39. The remaining theories of recovery, and the theories argued on appeal, are for breach of contract or breach of some fiduciary relationship.

Appellants’ contentions on appeal revolve around two focal points: first, the series of events in the fall of 1970 leading to relinquishment of the operation of the Company to Mr. Kelsoe and, second, the resale of certain foreclosed properties in 1972.

Appellants first contend that PSB, during the events leading to the Kelsoe operation of the Company, assumed control of the Company and, thereby, became a mortgagee in possession. A mortgagee in possession, appellants contend, is a trustee for the mortgagor. Accordingly, appellants reason “that there is a remedy available to the plaintiff under the law of trust,” PSB being a mortgagee in possession. The exact nature or theory of the trust (or fiduciary) relationship asserted by appellants is not clear. Appellants state that “this case is one of first impression” and “it becomes this court’s task to define what duties were owed plaintiffs by defendants during the fall of 1970 and the spring of 1971.”

A mortgagee in possession does hold the property as a trustee to the extent that he must account to the mortgagor for rents and profits and must exercise reasonable diligence in collecting such rents and profits as well as in preventing waste of the estate. See, e. g., Alexander v. Hicks, 242 Ala. 243, 5 So.2d 781, 783 (1942).

Notwithstanding the legal responsibility of a mortgagee in possession, it must first be established that the mortgagee is actually in possession or has taken control of the property-a question of fact. The trial court found that PSB did not assume control of the Company: “The Court is not satisfied by the evidence that the bank assumed the operation of the mill in the fall of 1970.” The trial court found that had the business been liquidated in the fall of 1970, Mr. Nettles’s personal losses would have been much less; however, the trial court was not satisfied that any'of the appellees induced appellant Nettles not to liquidate or bankrupt. On the contrary, the trial court determined that Mr. Nettles wanted to salvage the business as much as appellees did. The trial court found that appellees, in fact, actively participated in the attempt to save the Company, even to the extent of preparing documents, but concluded “[t]he fact that certain documents were prepared by the defendant Bank’s attorney or representations that Kelsoe had entered into a ‘binding contract’ to purchase the mill, [do] not satisfy the Court that the defendant bank had in effect assumed the operation of the mill.” We find from the record evidence to support the trial court’s finding.

The record discloses that both appellants and appellees were desirous of continuing the operation of the mill. Appellant Nettles had considered liquidation of the business; however, he, as well as appellees, did not want to see the business close down. Accordingly, it becomes clear from the record that the parties shared a mutual interest in keeping the Company operating, and they began working together in the fall of 1970 to achieve this common end.

Appellees took an active role in attempting to improve the Company’s financial position: appellees made various recommendations, caused various documents to be prepared, made additional secured loans, and kept close tabs on the Company’s operation. Notwithstanding this active role, the essential relationship between the parties remained that of debtor-creditor, and the parties dealt with each other at arm’s length. Appellees did take an active role in regard to the Company’s position-it was, after all, the principal employer in the area and the principal debtor of PSB-and appellant Nettles did acquiesce in the recommendations of appellees, but he was free to reject appellees’ recommendations and pursue his own course of action. Mr. Nettles, when questioned why he executed a particular instrument or took a particular course of action, repeatedly answered in his testimony that it was because PSB told him to. Mr. Nettles reposed great confidence in ap-pellees and freely co-operated with them; however, PSB cannot be said to have ousted Mr. Nettles and assumed control of the Company by the mere fact of such co-operation.

Mr. Nettles was an experienced businessman, though admittedly in poor health during the fall of 1970, and he had the advice of counsel and of his son. There is evidence that he was informed of the operation of the Company and initiated correspondence with creditors of the Company after execution of the agency agreement. Furthermore, Mr. Nettles admitted that he did have the power under the agency agreement to terminate Mr. Kelsoe’s agency:

Q. Your agreement, the agency agreement, had been with Mr. Kelsoe, not with the bank, had it not?
A. In name, yes.
Q. And under the terms of the agency agreement, you could have terminated it either on written notice, or certainly on the terms of your modification, within seven days, at any time, after October 19, could you not?
A. That was in the contract.

The operation of the Company was placed in the hands of a third party, Mr. Kelsoe, originally pursuant to a buy-sell agreement negotiated by Bill Nettles. Later, when the sale did not go through due to the demands of the SBA, an agency agreement was executed permitting Mr. Kelsoe to continue to operate the mills, which agreement, at the insistance of appellant Nettles, was amended to allow him to terminate Mr. Kelsoe’s agency upon seven days’ notice.

Although appellees took an active role in attempting to save the Company, the facts simply do not establish that they assumed control of the management of the business. Similarly, the fact that appellant Nettles reposed great confidence in appel-lees’ ability to save his business and the fact that he acquiesced in their recommendations, ultimately to his financial detriment, does not serve to establish some special fiduciary relationship which renders appel-lees liable for the unfortunate events of this case.

Appellants rely heavily upon the case of Nelson v. Bowen, 124 Cal.App. 662, 12 P.2d 1083 (1932), in support of their contention that PSB was a mortgagee in possession. In that case, an insurance company held a mortgage on an orchard. The orchard company could not secure financing to fund the annual harvesting of the crops and so informed the insurance company. The trust deed given to secure the indebtedness to the insurance company empowered said company to do the necessary work to care for the crops should the orchard company fail to do so. Accordingly, the insurance company hired an agent to move onto the farm and cultivate the crops; the insurance company advanced the necessary funds and superintended all the work in managing the farm, caring for and harvesting the crops. The owner of the orchard company moved with his family from the farm to another city, where he sold the orchard company to a third party, and never returned. The court determined that the insurance company was a mortgagee in possession, at least as to the claim alleging conversion of the crops upon subsequent sale.

The instant case is sufficiently distinguishable. There were no documents granting PSB the power to assume management of the Company. None of PSB’s agents or employees entered the premises and operated the business. Mr. Kelsoe, a third party located by Bill Nettles in connection with a contemplated sale, ran the business as an agent of the Company, not PSB, and the agency was terminable at will. PSB did advance operating funds in the form of secured loans to the Company, but did not directly pay its day-to-day expenses. Appellant Nettles did not sell his interest in the Company, but instead remained keenly interested in the business, suggesting plans of action even though he was asked not to interfere with Mr. Kel-soe’s operation of the business.

Thus, we find that there was sufficient evidence to support the trial court’s finding that PSB did not assume control of the Company, and was not, therefore, a mortgagee in possession. ,;

Appellants’ second contention is that a trust and contractual relationship resulted from the execution of the waiver of redemption rights by appellant Nettles and his wife. Since some of the appellee-di-rectors of PSB purchased Mr. Nettles’s home and land at the resale, appellants assert that appellees violated their trust responsibilities by engaging in self-dealing. Appellants contend, that as a result of breach of trust they are “armed with an election to affirm [or] to disaffirm” and, accordingly, they seek to disaffirm the resale and to recover the properties or, in the alternative, to liquidate the properties for the benefit of appellant Nettles’s creditors. Appellants also assert that appellees contracted with Mr. and Mrs. Nettles to obtain a considerably greater price at resale of the foreclosed properties if they would waive their rights of redemption in the properties. Appellants contend the properties were resold for much less than the values assigned to the properties in a PSB directors’ meeting and therefore appellees are liable for breach of contract. In support of both theories of recovery, appellants rely on Tolleson v. Henson, 207 Ala. 529, 93 So. 458 (1922).

In preparing for the foreclosure sales in the instant case, estimates of values were assigned to the properties to be sold. At the foreclosure sales, the actual amounts bid for some of the properties were the estimated values; however, the bids of PSB were in many instances the highest bids for the properties PSB purchased at foreclosure. PSB planned a resale of the property it acquired at the foreclosure sale. On the advice of its attorney, the directors determined that if the title was cleared by the Nettleses’ waiving their redemption rights, a higher price could be obtained upon resale. The bids at resale, again, were not as high as the values estimated for the properties. Some of the properties were purchased individually by some of the appel-lee-directors; nevertheless, the amounts realized upon resale were greater than the amounts for which the properties were sold at the foreclosure sales. For instance Mr. Nettles’s ^farm and timberland went for $20,950 more at resale. The amounts realized from the resale were credited to appellants’ indebtedness.

In Tolleson, plaintiff, decedent’s widow, individually and as administratrix of her husband’s estate, filed a bill in equity for an accounting to purge part of a mortgage debt of usury and for a decree for money had and received. Plaintiff and her husband had owned 400 acres of land. They gave first and second mortgages to G. M. Forman and third and fourth mortgages to defendant. Forman’s transferee foreclosed on the second mortgage of $423.15, and defendant purchased the property at public sale for $450, subject to the first mortgage of $3,869.15. In return for a quitclaim of their rights of redemption, defendant had promised to sell the property and, after deducting the amount of the first mortgage and the amounts due him as mortgagee under the third and fourth mortgages, to pay them the balance. The property was sold for $11,000; defendant never remitted any sums to plaintiff and her husband. The court upheld the trial court’s overruling of the demurrer to the bill. The court found that the bill for an accounting contained equity since the averments showed mutual accounts between the parties. Additionally, the court stated, “the bill also discloses facts showing that a fiduciary relation exists between the parties,” 207 Ala. at 530, 93 So. at 459; however, the court did not specify the nature of such relationship nor the legal consequences stemming therefrom. Moreover, the statement concerning fiduciary relationship was made in the context of a finding that the bill for an accounting contained equity so that it was not demurrable.

In the instant case, the matter went beyond the pleading stage to a full presentation of appellants’ case on the merits. Furthermore, appellees fully accounted for the proceeds from resale, unlike the defendant in Tolleson. Notwithstanding the language in Tolleson as to a fiduciary relationship, we are not satisfied that any relationship existed between these parties other than that of debtor-creditor, with both parties attempting to effect as profitable a resale as possible. The trial court expressly stated, “In this case the Court questions the judgment and actions of the defendant directors in purchasing at resale certain of the plaintiff’s foreclosed properties, yet the Court is not satisfied by the evidence that there were others willing to pay as much.” We find that the trial court’s finding was supported by the evidence.

As to the contract claim for failing to sell the properties for their estimated value, the waiver of rights of redemption instrument executed by Mr. and Mrs. Nettles and PSB recites that in consideration of $1.00 and other valuable considerations, appellant Nettles and his wife, grant, bargain, sell and convey unto PSB their statutory rights of redemption. Thus, selling the properties for “considerably” more than was realized at the foreclosure sales was not a condition or term of the contract; if anything, it was, as appellees contend, an inducement to enter into the contract.

Our review of the record in this case fails to show that appellees represented to Mr. Nettles’s son that on resale the foreclosed properties would sell for the protective bid prices established by the board of directors of PSB in connection with the foreclosure sales. The only evidence we find was from the report of director A. A. Nettles, Jr., contained in the minutes of the meeting of the board held November 9, 1971, as follows:

It was emphasized to him [Bill Nettles] that cooperation on the part of his father through the signing of the rights of redemption to the bank was very important to the prompt and orderly liquidation of the assets represented by Peterman Lumber Co. and lands formerly owned by his father. He was also told that it was the intention of the bank to apply all proceeds from the liquidation of property to the reduction of the indebtedness, and that we expected to be able to offer the property financed as soon as the title could be cleared, and would sell it for considerably more than the bank bought it in for at the mortgage foreclosure sale. Any additional funds from such a sale would benefit his father through the reduction in his indebtedness. [Emphasis added.]

In any event, appellees did sell the properties on the whole for “considerably” more than the foreclosure bids and the proceeds were applied in reduction of appellants’ indebtedness. Clearing the title to the properties by obtaining a waiver of the rights of redemption was a good faith effort to realize the maximum amount possible at resale to the mutual benefit of appellants and PSB. We cannot say that because the resale values were not as high as originally estimated for the purpose of protective bidding, that appellees breached any duty, contractual or otherwise, to appellants. We find no evidence from the record that the sale was not conducted properly or that reasonable efforts were not made to render it successful.

The events of this case are unfortunate. However, after careful consideration, we find that there was sufficient evidence to support the trial court’s findings and that the motions to dismiss were properly granted.

Accordingly, this case is due to be affirmed.

AFFIRMED.

TORBERT, C. J., and MADDOX, FAULKNER, ALMON and EMBRY, JJ., concur.


text:
    Yvonne Dunn NOTTAGE v. Hallie Scott JONES et al.
    78-743.
    Supreme Court of Alabama.
    Sept. 26, 1980.

      C. Knox McLaney, III, Montgomery, for appellant.
    E. H. Graves, Jr., Eufaula, for appellees.
   PER CURIAM.

This is an appeal from a judgment in a will contest wherein the jury rendered a verdict in favor of the contestants. We affirm.

Yvonne Dunn Nottage, the proponent, offered for probate the purported last will and testament of her grandfather, Oscar Scott, Sr. The contestants, Oscar’s children, removed the administration of the estate from the probate court to the circuit court. They then filed a petition contesting the proffered will and alleged that the will had not been duly executed, that the proponent occupied a confidential relationship with the testator and that she used that position to unduly influence him to execute the will. Fraud and unlawful conspiracy were also alleged.

In order to correct a procedural error, contestants moved to remand the matter to the probate court. Once this motion was granted, they promptly filed a contest in the probate court and, once again, successfully petitioned for and transferred the cause to the circuit court. The jury found the will submitted by the proponent not to be the last will and testament of Oscar Scott, Sr., and accordingly returned a verdict for the contestants. Proponent appealed to this Court after the circuit court denied her motion for new trial.

We must first determine whether the circuit court obtained jurisdiction to hear the contest. This issue, raised by the proponent, arises from the technical procedural requirements imposed by the statutes governing will contests.

Section 43-1-70, Code 1975, authorizes will contests; it provides:

A will, before the probate thereof, may be contested by any person interested therein, or by any person, who, if the testator had died intestate, would have been an heir or distributee of his estate, by filing in the court where it is offered for probate allegations in writing that the will was not duly executed, or of the unsoundness of mind of the testator, or of any other valid objections thereto; and thereupon an issue must be made up, under the direction of the court, between the persons making the application, as plaintiff, and the person contesting the validity of the will, as defendant; and such issue must, on application of either party, be tried by a jury.

In addition to the probate court, the circuit court has jurisdiction to hear will contests under certain circumstances. Section 43-1— 78, Code 1975, provides:

Upon the demand of any party to the contest, made in writing at the time of filing the initial pleading, the probate court, or the judge thereof, must enter an order transferring the contest to the circuit court of the county in which the contest is made, and must certify all papers and documents pertaining to the contest to the clerk of the circuit court, and the case shall be docketed by the clerk of the circuit court and a special session of said court may be called for the trial of said contest or, said contest may be tried by said circuit court at any special or regular session of said court. The issues must be made up in the circuit court as if the trial were to be had in the probate court, and the trial had in all other respects as trials in other civil cases in the circuit court. An appeal to the supreme court may be taken from the judgment of the circuit court on such contest within 42 days after the entry of such judgment. After a final determination of the contest, the clerk of the circuit court shall certify the transcript of all judgments of the circuit court in such proceedings, together with all of the papers and documents theretofore certified to the circuit court by the probate court, back to the probate court from which they were first certified to the circuit court, and thereafter shall be recorded in the probate court as all other contested wills are recorded in the probate court.

Although this Section empowers the circuit court to hear contests, its grant of jurisdiction is limited. Under the language and judicial interpretation of this section, there must be a valid will contest pending in the probate court before the probate judge can transfer the contest to the circuit court. Thigpen v. Walker, 251 Ala. 426, 37 So.2d 923 (1948); Ex Parte Pearson, 241 Ala. 467, 3 So.2d 5 (1941).

We find that the contestants complied with the statutory requirements for transferring the contest and that the circuit court had jurisdiction over the matter. Although we recognize that initially the circuit court did not have proper jurisdiction because the contestants failed to file a contest in the probate court, this jurisdictional defect was cured when the circuit court remanded the action to the probate court where a contest was filed.

We now address the other issues raised by the proponent. Specifically, the issues are (1) whether a presumption of undue influence arises when a granddaughter, raised as a child in the home of her grandfather, is active in the preparation of her grandfather’s will; and (2) whether a beneficiary’s typing of a will pursuant to the testator’s instructions constitutes undue influence.

The general rule is that a presumption of undue influence arises when a person stands in a confidential relation to the testator, dominates the relationship and procures the execution of the will by participation in undue activity. Arrington v. Working Woman’s Home, 368 So.2d 851 (Ala. 1979); Pruitt v. Pruitt, 343 So.2d 495 (Ala. 1977); Reed v. Shipp, 293 Ala. 632, 308 So.2d 705 (1975). Ordinarily, this presumption does not arise, however, where the testator is the parent and the person active in the procurement of the will is the testator’s child. As we stated in Raney v. Raney, 216 Ala. 30, 112 So. 313 (1927):

So, we think it may be said that, ordinarily, the dominance of the will of the parent in will cases will be presumed to continue despite family association or business connection. But when old age weakens the physical and mental powers of the one, and full maturity brings strength to the other, when the parent comes to lean upon the child for counsel, leadership, the conduct of his affairs, the making of a home, it may come to pass, and the law so recognizes, that the natural order may be reversed and the will of the parent pass under the dominant will of the child.
The law does not and cannot define the unnumbered conditions that may bring this about. It is an issue of fact for the jury upon evidence giving rise to a just inference. When it does appear that the child has obtained a general dominance over the parent, and has been active in procuring a will giving a favored position over the other children, the presumption of undue influence arises. The burden is then cast upon proponent. All evidence is admissible which tends to show this altered position of the parties in general, or as relates to the making of the will in particular.

Proponent contends that, because she was raised as a child in her grandfather’s home, she should be considered as his child and receive the benefit of the rule that undue influence is not automatically presumed when a child participates in the making of a parent’s will. Thus, proponent asserts that the contestants should have been required to prove that the natural dominance of the grandfather over the proponent ceased to exist in order to raise the presumption of undue influence.

In reviewing the record, we find that at no time did the proponent raise this issue before the trial court nor did the proponent object to jury instructions given by the trial court which conflict with her contention that she should be considered the child of the testator. As such, we find that the trial court did not err in failing to treat proponent as the child of the testator.

It is the opinion of this Court that sufficient evidence was presented to support the jury’s finding that the proponent exercised a general dominance over her grandfather and that she used this dominance to procure the will. The fact that she typed the will pursuant to his instructions is but one factor to be considered. There was other evidence which showed that the grandfather was advanced in years and illiterate. The proponent lived with her grandfather for a number of years and helped him conduct his business; she did all of his reading and writing for him as well as the keeping of his business records. Clearly, these circumstances establish the existence of a confidential relationship between the two. The fact that the will typed by the proponent left the bulk of his estate to her, while a will written two years earlier left his estate to his children, could be considered by the jury as evidence of an unnatural disposition of his property as a result of undue influence on the part of the proponent.

In cases of this nature, the verdict of the jury will not be overturned unless shown to be clearly wrong and unjust. Wilson v. Payton, 251 Ala. 411, 37 So.2d 499 (1948); Watkins v. Yeatman, 189 Ala. 370, 66 So. 707 (1914). The fact that the trial judge refused to grant the proponent’s motion for new trial strengthens this presumption in favor of the verdict. Johnson v. Howard, 279 Ala. 16, 181 So.2d 85 (1965). After a careful review of the record, we find that the jury’s verdict is not clearly wrong and unjust, and the judgment entered in favor of the contestants is hereby affirmed.

AFFIRMED.

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