author: BEATTY, Justice. MADDOX, Justice

text:
    GULF ATLANTIC LIFE INSURANCE COMPANY, a corporation v. Rosezenna BARNES.
    80-256.
    Supreme Court of Alabama.
    Oct. 2, 1981.

      Alex T. Howard, Jr., and Steven T. Stine of Johnstone, Adams, May, Howard & Hill, Mobile, and J. Connor Owens, Jr. and Charles C. Simpson, III, Bay Minette, for appellant.
    James R. Owen of Owen & Ball, Bay Minette, for appellee.
   BEATTY, Justice.

Rosezenna Barnes, the appellee, filed suit in the Circuit Court of Baldwin County against the Gulf Atlantic Insurance Company, the appellant. The action arose out of a dispute between the parties concerning the amount of coverage to which the appellee was entitled as a result of the death of one of her children, an insured.

Plaintiff’s complaint, as finally amended, contained four counts: (1) breach of contract for life insurance, (2) fraud and misrepresentation, (3) wrongful, intentional and unreasonable refusal to pay and (4) negligent or wanton breach of an implied duty to deal in good faith and to exercise due care in the contractual relationship. With respect to count one, plaintiff demanded judgment in the amount of $7,000, which she claimed was the face amount of the policy. As to counts two, three and four, plaintiff demanded judgment in the amount of $2,500,000.

The Company contended that it owed only $1,000, the amount of insurance plaintiff applied for, and that $1,000 of the $7,000 claimed under count one had been paid. The Company, by counterclaim, sought reformation of the contract of insurance based upon the following allegations: (a) that the plaintiff applied for benefits of $9,683 in the event of her death and $1,000 in the event of a child’s death; (b) that the policy makes the application part and parcel of the insurance contract; (c) that through a mistake in encoding, the initial policy issued to the plaintiff shows that $7,437 was payable in the event of her death and that $7,000 was payable in the event of an insured child’s death; and (d) that the policy did not reflect the understanding between the parties and was due to be reformed to reflect $9,906 in benefits on the plaintiff’s life and $1,000 in benefits on each child’s life.

The case was tried before a jury on April 16, 1980. At the close of the presentation of the evidence and upon the appropriate motions, the trial court directed a verdict in favor of the Company on count two (fraud and misrepresentation), but denied the Company’s motions for directed verdict as to counts one, three and four; the court also denied the plaintiff’s motions for directed verdict as to counts one, three and four.

The jury returned a verdict for the plaintiff on counts one, three and four in the amount of $1,100,000 “compensatory and punitive damages plus $6,000 plus interest from balance due on policy 9/4/78.” The Company filed a motion for judgment notwithstanding the verdict, or in the alternative, for a new trial, which motion the trial court denied.

The Company raises the following issues on appeal: (1) whether an insurer is liable in tort for the failure to pay the larger of two amounts as to which there is a legitimate question regarding which is the proper coverage amount; (2) whether it was error for the trial court to refuse to reform the contract; (3) whether it was error for the trial court to limit the opening statement of the appellant and to sharply admonish the counsel for the appellant in the presence of the jury; (4) whether a cause of action for intentional bad faith should support an award of punitive damages unless the actions of the defendant were malicious, oppressive, gross or committed with intent to injure; (5) whether the trial court erred in overruling appellant’s objection to improper closing argument on the part of the appellee; (6) whether the trial court erred in admitting certain evidence over the appellant’s objections; (7) whether the trial court erred in giving certain jury instructions requested by the plaintiff, and in refusing certain instructions requested by the Company; and (8) whether the trial court erred in denying the Company’s motion for new trial.

Rosezenna Barnes, a resident of Baldwin County, Alabama, applied to purchase insurance from Gulf Atlantic at her home in February or March of 1978. Mr. T. A. Sherman of the G. L. Sherman and Associates Insurance Agency, which is located in Pascagoula, Mississippi, met with Mrs. Barnes at that time to discuss an insurance program approved by her credit union. Employees of G. L. Sherman and Associates sold life insurance to members of the Bay Slacks Credit Union, which was affiliated with Mrs. Barnes’s employer, Manor Slacks Company. Sherman and Associates forwarded applications received from Manor Slacks employees, such as Mrs. Barnes, to Gulf Atlantic in San Francisco. Testimony presented at trial tended to show that the Bay Slacks Credit Union had an arrangement with Gulf Atlantic whereby the Credit Union would lend its members the amount of the yearly premium on the insurance purchased by participating employees and forward the premium to Gulf Atlantic. In return for the money lent to purchase insurance, employees, such as Mrs. Barnes, signed a note for the loan and also executed an agreement whereby certain payments were withheld from the paychecks of the participating employees to be applied to the repayment of the premium loan. In Mrs. Barnes’s case, her premium was $4.00 each week, or $208 annually, which was deducted from her wages in order to repay the premium loan advanced by the Bay Slacks Credit Union.

T. A. Sherman, the G. L. Sherman and Associates employee who contacted Mrs. Barnes, testified that he and Frank Williams, a co-employee, went to Mrs. Barnes’s home one evening in February or March, 1978, and presented their insurance program to her. That evening Mrs. Barnes signed an application of insurance and Mr. Sherman completed the application in her presence with the exception for his agent’s report on the back of the application. Mr. Sherman testified that he informed Mrs. Barnes that she would receive $9,683 insur-anee for herself, and $1,000 coverage on each of her seven children. Mr. Sherman filled out the amount of insurance in her presence. The application, without dispute, shows these amounts of insurance applied for. The testimony of Mrs. Barnes conflicted with that of Mr. Sherman, however, she testified:

Q What did these gentlemen tell you about this insurance policy?
A Well, they asked me was I interested in joining good insurance from Gulf Atlantic and I was undecided and tried [sic] if they could explain it to me—
Q How were the premiums to be paid for this policy?
A I was suppose [sic] to pay four dollars a week and I got paid every two weeks and that made it eight dollars every two weeks.
Q Were there some kind of arrangements where you could do it through your credit union at Manor Slacks?
A Yes.
Q As a result of this conversation with these agents did you agree to take out an insurance policy with Gulf Atlantic Life Insurance Company?
A Yes.
Q What coverage did these agents tell you you were to receive under this policy?
A They said I would get seven thousand dollars on each child and talked about seventy-two thousand dollars [sic] on myself.
Q You mean seventy-four hundred on yourself?
A Yes, when it came back it was seven thousand four hundred and something on myself.
Q How much was it on the children?
A Seven thousand.
Q All right. Did you sign an application when these gentlemen were out there?
A Yes.

In directly conflicting testimony, Mr. T. A. Sherman stated that Mrs. Barnes had not told him that she wanted approximately $7,500 insurance on her own life, and he also said that he did not ever discuss with Mrs. Barnes any amount of insurance for her children other than the $1,000 amount. Mr. Sherman added that, under the insurance plan in which Mrs. Barnes enrolled, coverage for any child under the children’s rider benefit in an amount in excess of $1,000 was not available.

Subsequently, Mrs. Barnes received through the mail in or around April of 1978, a policy of insurance which is the subject of the controversy. The application attached to the policy showed that Mrs. Barnes applied for $9,683 insurance on her own life and $1,000 children’s rider benefit coverage on each of her seven children. The computer printout page of the policy which was received by Mrs. Barnes, however, indicates that Rosezenna Barnes, the primary insured, was insured for $7,437, not the $9,683 amount that appeared in the application for insurance. Additionally, the policy shows a face amount of $7,000 children’s rider insurance instead of the $1,000 on the application for children’s rider benefits for each child.

The circumstances directly giving rise to the instant lawsuit were triggered in September of 1978, on the death of Glenn E. Barnes, one of the children of Rosezenna Barnes who was listed in the application of insurance signed by Mrs. Barnes earlier that year.

After her son’s death, Mrs. Barnes assigned the policy of insurance in question to Hodge’s Funeral Chapel, the funeral home which handled her son’s burial. Hodge’s Funeral Chapel gave Mrs. Barnes photocopies of a portion of the policy, including the computer printout page, but did not furnish her with a photocopy of the application.

Following the death of her son, Mrs. Barnes called Gulf Atlantic in San Francisco to report her son’s death, and with the help of Frank Williams, an employee of G. L. Sherman and Associates Insurance Agency, filled out and submitted a claim to Gulf Atlantic with respect to her son’s death. Subsequently, Mrs. Barnes retrieved the initial policy from Hodge’s Funeral Chapel and submitted it to Gulf Atlantic in San Francisco in support of the death claim.

The death claim was processed by Clifford “Steve” Rabisa, the death claims examiner for Gulf Atlantic. On October 31, 1978, Gulf Atlantic issued a $7,000 check payable to Mrs. Barnes. Mr. Rabisa testified that he believed the $7,000 amount was the correct children’s rider benefit because the policy issued called for seven units of children’s rider benefits at $1,000 per unit. Thereafter, the $7,000 check was sent to Mr. Luther Douglas Burchinal of the G. L. Sherman and Associates Agency in Pasca-goula, Mississippi, for transmittal to Mrs. Barnes. On receipt of the check, Mr. Bur-chinal called the home office of Gulf Atlantic in San Francisco to report that the $7,000 benefit amount was incorrect and that the $7,000 amount was not the proper children’s benefit for which Mrs. Barnes had applied. When informed by Steve Ra-bisa of the discrepancy between the $1,000 application and the $7,000 figure on the computer printout, William Millar, the Assistant Vice President of Underwriting at Gulf Atlantic went to the coding division of the policy issue department to inquire about the discrepancy.

What did Gulf Atlantic do when it discovered what it claimed was an encoding error?

Millar testified as to the procedure followed by Gulf Atlantic in processing applications like that submitted by Mrs. Barnes. He stated that the Barnes application was submitted to a Gulf Atlantic underwriter for review. In this case, the underwriter, Jane Roelig, testified that she reviewed the Barnes application, and that she approved it and forwarded the application and underwriter’s data sheet to the policy issue department. She stated that the application she approved in the Barnes situation called for one unit of children’s rider benefits which provided $1,000 for each child. She added that under the Gulf Atlantic insurance program in which Mrs. Barnes participated, the insured paid the same amount of premium for one unit of children’s rider benefit regardless of the number of children insured thereby.

Uncontradicted testimony showed that following approval by the underwriter, the application was forwarded to a “coder” in the policy issue department. Millar stated that the duty of the coder was to examine the application and prepare a coding sheet from which the relevant information could be fed into a computer. The end product of the work done by a coder at Gulf Atlantic is the computer printout page which was attached to the Barnes policy. Diane Drapel, who was employed at Gulf Atlantic on or about the date of the issuance of the initial Barnes policy, coded the Barnes policy.

The final step of the process of issuing policies at Gulf Atlantic was the review of the Barnes policy by a “policy checker.” Marilyn Drapel, who checked the Barnes policy, stated that the principal duty of the policy checker entailed reviewing the policy to determine whether the premium amounts noted thereon were correct and to assure that the policy issued matched the application.

The uncontradicted testimony produced at trial indicated that the discrepancy in the amount of insurance on the Barnes application and the amount appearing on the computer printout page of the same policy occurred in the following manner: After Jane Roelig received and processed the application, the application went to Diane Drapel, the encoder in the policy issue department; instead of encoding one unit of children’s rider insurance, she mistakenly encoded seven units because she did not know that by encoding one unit she would thereby provide $1,000 of children’s rider coverage for each of Mrs. Barnes’s seven children. Diane Drapel testified that the coding of insurance policies for employees of the Manor Slacks Company was “something totally new” to her, and that she had only coded a few of those policies at the time of the Barnes application. She further testified that at the time she coded the Barnes policy she did not know that one unit of children’s rider provided $1,000 coverage for each of the Barnes children regardless of how many children were in the family. Acting under the mistaken impression that she had to code a unit for each of the seven children, Diane Drapel programmed into the computer seven units of children’s rider benefits, or $7,000 for each child. Diane Drapel further testified that she was under the impression that what she was doing would result in a total of $7,000 children’s rider benefit which would be divided and split among each of the seven children and that each child would, therefore, receive $1,000 coverage.

According to the testimony of William Millar, the effect of the coding error by Diane Drapel was to reduce the amount of coverage for Mrs. Barnes to the $7,437 amount that appeared on the computer printout page of the initial policy. Mr. Millar explained that Mrs. Barnes had agreed to pay premiums totaling $208 annually. He stated that the premium on each unit of children’s insurance for the Manor Slacks program was $7.50 per unit, and that the premium for one unit of children’s rider benefit remained $7.50 regardless of how many children were in the Barnes family. Herein, Mr. Millar stated that the computer was programmed to first sell one unit of children’s rider coverage (i. e., term coverage) and thereafter apply the balance of the remaining premium amount in order to purchase whole life insurance on Mrs. Barnes, the primary insured. He testified that if the one unit of children’s coverage at the $7.50 per unit premium had been properly coded into the computer, Mrs. Barnes would have received the amount of insurance provided in the corrected policy.

In the Barnes situation, however, Mr. Millar testified that because seven units of children’s rider benefits were incorrectly coded, $52.50 of the annual premium of $208.00 was first applied by the computer to sell the incorrect amount of children’s rider coverage. Millar stated that the effect of the coding error which resulted in the purchase of seven units of insurance was to reduce the amount of the premium that was applied to Mrs. Barnes, the primary insured. Millar stated that when the computer printout which was formulated on the mistake of Diane Drapel was examined, one of the coders in the policy issue department entered the $7,437 amount figure in the HOME OFFICE ENDORSEMENT ONLY space of the application. No such entry was placed in such HOME OFFICE ENDORSEMENT ONLY space with respect to the amount of children’s rider, which on the application remained $1,000.

Marilyn Drapel, the policy checker who reviewed the Barnes policy after the coder fed what the Company contended was the incorrect information into the computer, stated that she had done very little work with policies of insurance regarding Manor Slacks employees at the time of the Barnes application, and that she did not recognize any mistake on the Barnes policy after it had been coded because she, like her sister Diane, did not know that to accomplish $1,000 children’s rider coverage for seven children it was only necessary to encode one unit. She testified that she mistakenly thought that to issue $1,000 coverage to each of the seven children one would have to encode seven units and did not realize that by encoding seven units this would cause the computer to issue $7,000 of children’s rider to each of the seven children.

Millar, the assistant vice president of Underwriting, testified that when he discovered Diane and Marilyn Drapel’s mistake, he determined that the check should have been issued for $1,000 not $7,000, and so advised Mr. Rabisa. Accordingly, Gulf Atlantic issued a new check on November 3, 1978, for $1,000, and Rabisa was directed by William Millar to issue a corrected policy that would restore the amount of permanent insurance for Mrs. Barnes to the level shown in the application and decrease the children’s rider coverage from $7,000 to the $1,000 amount. Millar stated that he gave the instructions regarding the corrected policy in order to reverse what had been done and to revert back so that the policy of insurance for Mrs. Barnes would be written as the Company contended it should have been done in the first instance.

Thereafter, the $1,000 children’s rider benefit check was forwarded to Mr. Burchi-nal in Pascagoula for delivery to Mrs. Barnes. Frank Williams, the G. L. Sherman and Associates employee who had helped Mrs. Barnes prepare the necessary claim information, testified that the $1,000 check was delivered to Mrs. Barnes in the office of Mrs. Ann Neighbors, the bookkeeper of the Bay Slacks Credit Union at Mrs. Barnes’s place of employment. At the time of the meeting in Mrs. Neighbor’s office, Frank Williams testified that either Mrs. Barnes or Ann Neighbors had brought up the fact that one of them or someone at Hodge’s Funeral Chapel thought that the benefit should be greater than $1,000. Frank Williams stated that he told Mrs. Barnes and Ann Neighbors that the benefits payable were $1,000 and that no more than $1,000 was available. Mr. Williams said that he thereafter gave the check to Mrs. Barnes and that he had not heard anything else about Rosezenna Barnes or the check until the instant lawsuit, which was filed on June 22, 1979. Mr. Williams stated that he recalled transmitting the check to Mrs. Barnes in November of 1978.

Mrs. Barnes testified after receiving the $1,000 check, she negotiated it. She received the corrected, new policy of insurance, which the Company claimed reflected the intent of the application.

Mrs. Barnes testified she showed one or two photocopies of the initial policy to both Ann Neighbors of the Credit Union office and to Carmen Fuller, a co-employee at Manor Slacks. Mrs. Fuller testified that Rosezenna Barnes told her that she (Mrs. Barnes) was to receive $7,000 insurance on the life of each child, and that something was wrong because the revised policy reflected only $1,000. Mrs. Fuller also testified that on one occasion she had seen Mrs. Barnes put her head down and cry while at work, and that Mrs. Barnes had discussed with her certain problems she was having concerning a large bill with the mortician who handled her son’s burial. Mrs. Fuller recounted that at that time Mrs. Barnes said, “I don’t know what Fm going to do,” whereupon Mrs. Fuller advised Mrs. Barnes to consult an attorney and show both policies to the attorney.

At trial, Mrs. Barnes testified that she had never received any explanation from anyone regarding the difference between the $7,000 amount on the face of the initial policy and the $1,000 payment she received. On the other hand, there was testimony of Frank Williams and Ann Neighbors to the contrary. Ann Neighbors stated that Mrs. Barnes once told her that she was supposed to receive $7,000 for the death of her son, and that Mrs. Neighbors called to speak with G. L. Sherman and Associates about this situation. Mrs. Neighbors testified that she recounted to Mrs. Barnes that Mr. Burchinal had told her a typographical error had caused the problem. When Ann Neighbors related to Mrs. Barnes the explanation given by Mr. Burchinal, Ann Neighbors stated that Mrs. Barnes “didn’t say anything, except that she understood.”

The record indicates that there was very little communication between the insured and the Company concerning the matter of the discrepancy either at the instigation of the insured or the Company. For example, William Millar of Gulf Atlantic stated that he did not himself provide for Mrs. Barnes a description of how the clerical error occurred. James Beckett of Gulf Atlantic did state that he was aware of an arrangement that had been made with the G. L. Sherman and Associates staff in Pascagoula whereby it was agreed that the agency staff in Pas-cagoula would tell Mrs. Barnes about the change or correction in the second policy. Millar testified that he had been informed by Jim Beckett that the person who delivered the claims check to Mrs. Barnes would tell her about the clerical error. In any event, a Company witness did confirm that he was not aware of any written communication from Gulf Atlantic to Mrs. Barnes that had been made to explain the corrective process; therefore, the jury could have concluded that the Company made no direct attempt to explain to its policyholder the reason why $7,000 was not paid instead of $1,000. On the other hand, Mrs. Barnes admitted that she had not corresponded or said anything to Gulf Atlantic Insurance Company about the alleged discrepancy in the amounts of insurance from the time she negotiated the $1,000 check in November of 1978, up until the time her attorney wrote Gulf Atlantic on June 7,1979, and she filed suit against Gulf Atlantic on June 22, 1979.

At trial certain testimony was presented regarding the validity of the Barnes claim and certain settlement negotiations that transpired between the plaintiff’s attorney and Gulf Atlantic. Mr. Beckett testified that he received a demand letter from plaintiff’s attorney on June 12, 1979, and that Gulf Atlantic was served notice of the lawsuit on June 28, 1979. He added that Mr. Steve Rabisa of Gulf Atlantic had tried to contact plaintiff’s attorney on the morning of the 28th before service was effected. After suit was filed, Mr. Beckett stated that he offered to pay $6,000 as settlement to the plaintiff’s attorney, but that Mr. Owen, plaintiff’s attorney, would not accept that amount. Mr. Beckett also testified that he had asked the attorney for the plaintiff which policy Mrs. Barnes wanted to keep when he spoke to plaintiff’s attorney regarding the settlement offer. Mr. Beckett testified that he believed the best way to handle the Barnes situation “way back then [when suit was filed] was for a settlement in Mrs. Barnes’ favor and dismissal of the suit.” There was some further testimony regarding plaintiff’s settlement negotiations. Mr. Beckett answered interrogatories for Gulf Atlantic to the effect that “by mistake the policy was written with $7,000 life insurance,” “the company mistakenly paid the $1,000 benefit which appeared in the insurance policy,” and that when Gulf Atlantic received “knowledge of the second mistake it offered to pay an additional $6,000 but such offer was declined by plaintiff’s attorney.”

As to the validity of the Barnes claim, William Millar stated unequivocally that the insurance policy remained in full force, that all premiums had been paid by Mrs. Barnes, that there was no question that Mrs. Barnes’s son had died, and that Mrs. Barnes’s son was covered by the policy. Mr. Millar stated that he believed Mrs. Barnes had a valid claim for $1,000, and that her son was insured for “whatever the amount should have been.” Mr. Beckett testified that he believed the $1,000 amount that had been paid to Mrs. Barnes was “all we owe her” because no one had ever told him that Gulf Atlantic owed $6,000 more on the Barnes claim; nevertheless, Mr. Beckett admitted in his deposition that “we believe we owe $6,000 more,” and his answer to plaintiff’s interrogatory number 16 states that “we are ready, willing and able to pay $6,000.”

The record shows that the Company’s motion to dismiss plaintiff’s complaint was denied by the court on September 10, 1979, that the Company’s answer was filed on November 27, 1979, and contemporaneously therewith the Company asked leave of court to deposit the $6,000, plus interest ($443), in court; the court granted the request and ordered the clerk to deposit the money.

The question presented by this appeal is whether these facts presented a jury question on the tort of bad faith refusal of the insurance company to pay the proceeds of the first policy.

The Company contends that the plaintiff wholly failed to establish that it was guilty of a bad faith refusal to pay a valid claim. The insured, on the other hand, contends that there was sufficient evidence, applying the guidelines set out in recent decisions of this Court, to merit recovery for the tort of bad faith.

To determine which party’s contention is correct, we believe it is desirable to restate once again the requirements, under Alabama law, for establishment of the tort of bad faith refusal to pay a valid claim. The latest pronouncement by this Court on this question was made in Chavers v. National Security Fire and Casualty Company, 405 So.2d 1 (Ala.1981), wherein a majority of this Court stated that “We recognize the intentional tort of bad faith in first party insurance actions.” Other cases which involve a similar or related question are: American Road Service Co. v. Inmon, 394 So.2d 361 (Ala.1980); Vincent v. Blue Cross-Blue Shield of Alabama, Inc., 373 So.2d 1054 (Ala.1979); Old Southern Life Ins. Co. v. Woodall, 295 Ala. 235, 326 So.2d 726 (1976), appeal after remand, 348 So.2d 1377 (Ala.1977).

Bad faith is the intentional failure by an insurer to perform the duty implied by law of good faith in fair dealing. Chavers v. National Security Fire and Casualty Company, supra. In Chavers the Court stated:

We next address the issue of what standard of proof an insured is required to meet in order to recover on a claim for bad faith. In so doing we adopt the test promulgated by the dissent in Vincent and hold that an actionable tort arises for an insurer’s intentional refusal to settle a direct claim where there is either “(1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) intentional failure to determine whether or not there was any lawful basis for such refusal.” [405 So.2d at 7.]

The dissent of Mr. Justice Embry in Vincent v. Blue Cross-Blue Shield of Alabama, Inc., 373 So.2d 1054, 1065 (Ala.1979), was neither expansive nor definitive of the tort of bad faith. It was not necessary then to expound on the elements comprising the tort. The time has come, however, to examine the parameters of the test for determining whether an insurer has intentionally refused to settle a first party insurance claim.

The first tier of the test promulgated by Mr. Justice Embry and adopted by this Court in Chavers establishes that the tort of bad faith refusal to honor a direct claim arises when there exists “no lawful basis for the refusal coupled with actual knowledge of that fact.” “No lawful basis,” as expressed in that opinion, means that the insurer lacks a legitimate or arguable reason for failing to pay the claim. See Michael v. National Security Fire & Casualty Co., 458 F.Supp. 128 (N.D.Miss.1978). That is, when the claim is not fairly debatable, refusal to pay will be bad faith and, under appropriate facts, give rise to an action for tortious refusal to honor the claim. Anderson v. Continental Insurance Co., 85 Wis.2d 675, 271 N.W.2d 368 (1978). When a claim is “fairly debatable,” the insurer is entitled to debate it, whether the debate concerns a matter of fact or law. “Coupled with actual knowledge of that fact” implies conscious doing of wrong. Bad faith, then, is not simply bad judgment or negligence. It imports a dishonest purpose and means a breach of known duty, . e., good faith and fair dealing, through some motive of self-interest or ill will.

The second tier of the test is an elaboration on the first. The trier of fact, by finding, on the part of the insurer, an “intentional failure to determine whether or not there was any lawful basis for refusal,” may use that fact as an element of proof that no lawful basis for refusal ever existed. The relevant question before the trier of fact would be whether a claim was properly investigated and whether the results of the investigation were subjected to a cognitive evaluation and review. Implicit in that test is the conclusion that the knowledge or reckless disregard of the lack of a legitimate or reasonable basis may be inferred and imputed to an insurance company when there is a reckless indifference to facts or to proof submitted by the insured. Of course, if a lawful basis for denial actually exists, the insurer, as a matter of law, cannot be held liable in an action based upon the tort of bad faith. Otherwise, the insurer’s knowledge of the non-existence of any debatable reasons for refusal would be a question for the finder of fact, i. e., the jury.

The Supreme Court of Wisconsin expressed the views which we now adopt concerning the tort of bad faith when it concluded:

We are satisfied that the application of the test formulated above, which recognizes the intentional nature of the tort of bad faith and puts the test upon an objective basis, will minimize the fears expressed by the defendant insurance company that to permit claims for bad faith will result in extortionate law suits. Such result cannot follow when an insurance company in the exercise of ordinary care makes an investigation of the facts and law and concludes on a reasonable basis that the claim is at least debatable. [Anderson v. Continental Insurance Co., 85 Wis.2d 675, 693, 271 N.W.2d 368, 377 (1978).]

California is the leading jurisdiction allowing tort recovery for bad faith. Fletcher v. Western National Life Insurance, 10 Cal.App.3d 376, 89 Cal.Rptr. 78 (1970); Gruenberg v. Aetna Insurance Company, 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973); Silberg v. California Life Insurance Company, 11 Cal.3d 452, 113 Cal.Rptr. 711, 521 P.2d 1103 (1974). These decisions reflect the policy that an insured purchases insurance and not an unjustified court battle when he enters into the insurance contract. Furthermore, they stand for the proposition that there will not be an unlicensed recovery of punitive damages in every bad faith case.

Because the violation of the duty of good faith and fair dealing is tortious in nature, punitive damages as well as compensatory damages are recoverable in the proper case. A distinction must be drawn, however, between that conduct which gives rise to tort liability in the first instance and conduct that justifies imposition of punitive damages.

In Silberg v. California Life Insurance Company, supra, the Supreme Court of California discussed the distinction:

It does not follow that because plaintiff is entitled to compensatory damages that he is also entitled to exemplary damages. In order to justify an award of exemplary damages, the defendant must be guilty of oppression, fraud or malice. [Citing a California statute] . . . While we have concluded that defendant violated its duty of good faith and fair dealing, this alone does not necessarily establish that defendant acted with the requisite intent to injure plaintiff. [Id. at 462, 113 Cal. Reptr. at 718, 521 P.2d at 1110.]

Accord, Escambia Treating Company v. Aetna Casualty & Surety Co., 421 F.Supp. 1367 (N.D.Fla.1976).

Alabama allows recovery of punitive damages when the plaintiff shows that he suffered, at least, nominal damage and that the acts complained of were committed with malice, willfulness, or wanton and reckless disregard of the rights of others. Mid-State Homes, Inc. v. Johnson, 294 Ala. 59, 311 So.2d 312 (1975); Ray Hughes Chevrolet, Inc. v. Gordon, 294 Ala. 638, 320 So.2d 652 (1975). Thus, for punitive damages to be awarded in Alabama, a defendant must not only intentionally have breached his duty of good faith, but in addition must have committed acts of the nature described above. Recoverable damages may include mental distress and economic loss. Chavers v. National Security Fire & Casualty Co., 405 So.2d 1 (Ala. 1981). And, under Alabama law, the amount of damages is left largely to the discretion of the jury; however, this discretion is not absolute. Lowe v. General Motors Corporation, 624 F.2d 1373 (5th Cir. 1980). The court may set aside or reduce a verdict which it believes is not merely overly generous, but so excessive that it demonstrates “bias, passion, prejudice, corruption or other improper motive or cause.” Airheart v. Green, 267 Ala. 689, 693, 104 So.2d 687, 690 (1958).

We have set out extensively the testimony of the various witnesses to show the basis for our determination that, under the facts of this case, and applying the test adopted in Chavers, the plaintiff proved a prima facie case that the insurance company was guilty of the tort of bad faith refusal to pay a claim.

If a lawful basis for refusal had existed, the insurance company would have valiantly argued that fact. Instead, after plaintiff filed suit, the insurer offered to pay the remainder of the face value of the policy. If the trial judge had found a lawful basis, i. e., legitimate or arguable reason, for refusal, he would have directed a verdict in favor of the insurer on Count III, the wrongful, intentional and unreasonable refusal to pay. When presented with the opportunity to direct such a verdict, however, he refused to do so. Moreover, even with the value of hindsight after the conclusion of the jury trial, the trial judge continued to find no lawful basis for refusal. Otherwise, he would have granted the insurer’s motion for judgment notwithstanding the verdict or, in the alternative, for a new trial. After reviewing the evidence, we find that the jury could reasonably have concluded that the insurer tried to cover its “mistake” without any existing debatable reason. The policy was valid from the date of its issuance and the insurer never had any lawful basis for refusing to pay the face value.

The judgment rendered against the insurance company in the amount of $1,100,000, however, is excessive and obviously the result of passion and prejudice on the part of the jury. We, therefore, direct the trial court to require within thirty days a remittitur in the amount of $1,000,000 as a condition to the denial of a new trial. Rule 59(f), ARCP.

The Company makes several other claims as error, which we do not address in view of our holding with regard to the judgment rendered against the Company “in the sum of $1,100,000.” The judgment in the sum of “$6,000 plus interest from balance due on policy from 9/4/78” is due to be affirmed.

We find sufficient evidence from which the jury could have concluded that the Company made a counter-offer which was accepted by the policyholder. Any error committed during the trial insofar as the $6,000 judgment is concerned would be harmless. Rule 45, ARAP.

We also affirm the judgment of the trial court which denied the Company’s request to reform the policy. The plaintiff has now established her claim to the validity of the policy in the amount shown on the policy, which includes, of course, a lesser amount of insurance on her life than she applied for. We reach this judgment also in the interest of having the rights and obligations of the parties under the initial policy finally determined.

AFFIRMED CONDITIONALLY, AND AFFIRMED IN PART.

FAULKNER, JONES, EMBRY, SHORES and ADAMS, JJ., concur.

MADDOX, J., dissents with opinion, in which TORBERT, C. J., concurs.

ALMON, J., dissents without opinion.

MADDOX, Justice

(concurring, in part; dissenting, in part).

I concur that the judgment in the sum of “$6,000 plus interest from balance due on policy from 9/4/78” is due to be affirmed, and I also agree that the judgment of the trial court which denied the insurance company’s request to reform the policy is also due to be affirmed. I must disagree that plaintiff, under the undisputed facts of this case, proved a claim of bad faith refusal to pay a valid policy obligation.

There are certain undisputed facts in this ease. It is undisputed that the face amount of the children’s rider was different from the amount of insurance applied for on the application. It is also undisputed that the plaintiff applied for a policy which called for a children’s rider of only $1,000. The evidence is also undisputed that a Company employee encoded the children’s rider benefit improperly. While the jury could have found from the evidence that the issuance of the policy with a $7,000 children’s rider was a counter-offer, which plaintiff accepted, nevertheless, the existence of a valid claim for the $7,000 benefit was not determined until the jury, after reviewing the evidence presented at trial, and after having been instructed on the law of contracts relative to counter-offer and acceptance of counter-offers, decided the issue in plaintiff’s favor.

As I view the matter, until the judgment was entered today in favor of the policyholder on her claim that she was entitled to $7,000 instead of $1,000, and until today, when this Court upheld the trial court’s denial of the company’s claim that the policy should be reformed, the parties were litigating their respective rights; therefore, the Company’s obligation to pay $7,000 instead of $1,000 was not finally determined until this Court affirmed the judgment of the trial court on these issues.

In order for the tort of bad faith to arise, it must be established that there was no question as to the terms, conditions or obligations of the parties under the contract. Since there was a variance between the $1,000 children’s rider benefit amount on the application, and the face amount of the policy, there was a justiciable controversy between the parties as to the correct amount due and owing.

Where there is a variance between the policy and the application, complex legal questions arise. It has been stated as follows:

If both the policy and the application therefor form a part of the contract of insurance, both should be given effect if a reasonable construction will permit. In case of a conflict, most cases adopt the rule that the policy, as the later and final expression of the intent of the parties, controls. There are, however, some courts which have given controlling effect to the application in such a case.

43 Am.Jur.2d Insurance, § 368 (1969).

In Alabama, I do not believe that the mere fact that a policy is issued which does not conform to the application submitted necessarily amounts to a counter-offer. Cf. Life Insurance Company of Georgia v. Miller, 292 Ala. 525, 296 So.2d 900 (1974); Barnes v. Atlantic and Pacific Life Insurance Company of America, 295 Ala. 149, 325 So.2d 143 (1975); and Liberty National Life Insurance Company v. Smith, 356 So.2d 646 (Ala.1978).

Under all the facts of this case, it is plain that a valid and subsisting dispute existed between the insured and the insurer as to the amount of insurance payable under the children’s rider, and that this dispute was not finally resolved until today, when this Court affirmed the judgment entered upon a jury verdict which found in favor of the policyholder on this issue. Because of this valid and subsisting dispute, I believe that the company had a lawful basis upon which to refuse to pay the $6,000 until the matter was resolved by the parties themselves or in a court proceeding such as was filed in this case.

The majority holds:

After reviewing the evidence, we find that the jury could reasonably have concluded that the insurer tried to cover its “mistake” without any existing debatable reason. The policy was valid from the date of its issuance and the insurer never had any lawful basis for refusing to pay the face value.

The majority errs, in my opinion, in making a legal determination that there was valid policy from the time the policy was issued, under the facts of this case. As already pointed out, the question of which amount was due the policyholder was not finally determined until today. The fact that the claim to the $7,000 was being litigated, and the fact that the company was attempting to have the policy reformed, constitute a legal basis upon which the company could refuse to pay the claim.

The holding in this case, in view of the fact that the claim was in litigation, seems inconsistent with the suggestion in Chavers, 405 So.2d 1 (Ala.1981), that á company, when faced with a question of its legal obligation to pay, could file a declaratory judgment action, and if entitled to a declaration of rights, could prevent the maintenance against it of an action for bad faith refusal to pay a claim, even if the declaration was adverse to the company.

Because of these reasons, I would reverse the judgment on the bad faith claim.

TORBERT, C. J., concurs.


source: Caselaw Access Project

author: HOLMES, Judge.

license: Public Domain

text:
    CHAMPION INTERNATIONAL CORPORATION v. STATE of Alabama.
    Civ. 1938.
    Court of Civil Appeals of Alabama.
    Oct. 24, 1979.
    Rehearing Denied Nov. 21, 1979.

      Douglas Arant, J. Robert Pleenor, Robert C. Walthall, Linda Friedman of Bradley, Arant, Rose & White, Birmingham, for appellant.
    Charles A. Graddick, Atty. Gen., Herbert I. Burson, Jr., Chief Counsel, Dept, of Revenue and Asst. Atty. Gen., John J. Breckenridge, Asst. Counsel, Dept, of Revenue and Asst. Atty. Gen., for appellee.
   HOLMES, Judge.

Champion International Corporation (hereinafter Champion) appeals from an order of the Circuit Court of Montgomery County upholding final sales and use tax assessments imposed by the State of Alabama Department of Revenue.

These assessments total $542,437.08 and involve purchases of equipment to be used in a paper and pulp mill operated by Champion.

The dispositive issue is whether the purchases are exempt from sales and use taxation as purchases made by the Industrial Development Board of the Town of Court-land (the Board) with its own funds.

This case was tried upon the pleadings and a stipulation of facts entered into by the parties. We therefore review this case without any presumption of correctness we afford when an ore tenus hearing is conducted. It thus becomes our task to consider the evidence anew and to render a judgment in light of that evidence and applicable legal principles. State v. Ball-Co Contractors, Inc., Ala.Civ.App., 372 So.2d 331, cert. denied, Ala., 372 So.2d 335 (1979).

The stipulation of the parties reveals the following: Champion operates a paper and pulp mill near Courtland, Alabama. The land on which it is situated, the buildings, and the mill equipment are owned by the Board and leased to Champion. The Board is a public corporation organized under §§ 11-54-80 et seq., Code of Ala.1975.

This article, known as the Cater Act, authorizes citizens of municipalities to organize nonprofit public corporations for the purpose of promoting trade by inducing industry to locate in Alabama. Such corporations, or industrial development boards, are allowed to finance acquisitions of property by issuing bonds payable solely from revenues derived from the lease or sale of these facilities. The legislature has expressly mandated that the act be liberally construed in conformity with its avowed intention of aiding in the promotion of industry. § ll-54-81(b), Code of Ala.1975.

The mill project in this instance was to be built and equipped by the Board after it authorized and issued $125,000,000 of its revenue bonds. A construction fund was set up, and a trustee authorized to expend monies in accordance with the provisions of the lease with Champion.

The proceeds of the $125,000,000 bond issue were expended prior to October 10, 1974. After this date, all money in the construction fund was deposited by Champion as called for in one of the lease provisions.

The lease, besides requiring Champion to make such deposits, also allowed Champion to place money directly into the fund for disbursement by the trustee to cover purchases. There was an alternative provision wherein Champion could pay costs itself in the form of advances. Champion would then be reimbursed for these expenditures from the fund.

Champion was the duly appointed purchasing agent for the Board. All purchases pertinent to this appeal were made by the Board and in its name through Champion pursuant to purchase orders. As provided, Champion would pay the vendors and then be reimbursed by the trustee with funds Champion had deposited. Title was taken in and remains in the name of the Board. The Board’s credit was obligated for all purchases.

The Board, pursuant to the Cater Act, is afforded certain exemptions from taxation.

Section ll-54r-96, Code of Ala.1975, provides:

The industrial development board and all properties at any time owned by it and the income therefrom and all bonds issued by it and the income therefrom shall be exempt from all taxation in the state of Alabama.

In December of 1967, Champion wrote the State Department of Revenue requesting a determination of whether purchases made by it as purchasing agent would enjoy tax exempt status. It was explained that reimbursement would come from the trustee through the construction fund.

The request stated that such a procedure was needed because the processing of payments on purchase invoices by the trustee (Chase Manhattan Bank in New York) would be unwieldly; time consuming and costly. It was feared that cash discounts would be lost if Champion could not make prompt payments directly to vendors.

By letter of January 15, 1968, the Sales Tax Division of the Department of Revenue advised Champion that purchases made by the Board through Champion would not lose their tax exemption even if Champion paid the vendors directly. However, the State required that Champion be reimbursed from the construction fund, that the property be bought in and remain in the name of the Board, and that the Board’s credit be obligated.

In February of 1968, the Department of Revenue issued its Rule G27-916 which made this policy official and specifically exempted from sales and use tax the tangible personal property purchased by any industrial development board, provided the purchase was made in the name of the board and the board’s credit was obligated. The rule also allowed the appointment of a purchasing agent so long as the agent made its purchases in the name of the board and the board’s credit was obligated.

However, on October 10,1974, the department amended this regulation. Rule G27— 916, as amended, provides:

An industrial development board created by an incorporated municipality within the State of Alabama under the Cater Act, Chapter 17, Title 37, Sections 815-830, Code of Alabama of 1940, would be exempt from sales or use tax on any tangible personal property purchased by the board, provided the purchases are made in the name of the board, the board’s credit is obligated, and paid for with funds belonging to the board. An industrial development board may appoint an agent to purchase its materials, but the agent must purchase the materials in the name of the board, the board’s credit must be obligated, and paid for with funds belonging to the board. (Emphasis indicates the words added by the amendment.)

As indicated, Champion continued to make purchases as agent of the Board and then sought reimbursement. The monies for these reimbursements came from Champion’s own contributions to the now exhausted construction fund.

The State assessed the appealed from taxes, claiming that the purchases were being made with Champion’s funds and not those of the Board in violation of the amended Rule G27-916. The learned and distinguished trial judge agreed, stressing in his final decree that the reimbursements came from money Champion itself had deposited into the fund.

At the outset, we acknowledge that § 11-54-96, which is contained within the Cater Act, is an exemption statute. As such, it should be construed strictly against the taxpayer and favorably for the State. State v. Hunt Oil Co., 49 Ala.App. 445, 273 So.2d 207 cert. den., 290 Ala. 371, 273 So.2d 214 (1973). Likewise, the taxpayer bears the burden of proving it is entitled to a claimed exemption. Brundidge Milling Co. v. State, 45 Ala.App. 208, 228 So.2d 475 (1969).

However, as we have indicated, the legislature has seen fit to direct that the Cater Act be afforded a liberal construction. We accommodate these facially contradictory rules of review by construing “funds of the board” to include monies placed in a construction fund such as this by the lessee and then looking to see if Champion has met its burden of proof.

We find that it has and we reverse, deciding that in this instance the purchases were indeed made with funds belonging to the Board. In reaching this determination we make reference to a memorandum of the Department of Revenue dated February 9, 1976, and made a part of the record. We do so because this memorandum, although not compelling authority, is beneficial in illustrating what constitutes “funds belonging to the board” for purposes of amended Rule G27-916.

Basically, the Department therein takes the position that if the lessee deposits money in the established and authorized bank account of the Board, then the funds so deposited become funds of the Board. It is not required that the Board and the lessee have entered into a loan agreement. Neither need there be any mention of repayment.

It is clear to this court that this requirement was met and we hereby adopt this test as a proper one in a case such as this.

Indeed, the State concedes that there would have been no taxable transaction had the money been deposited into the fund so that the trustee could directly disperse it to the vendors. We see no practical distinction between such a method of payment and that employed here. For purposes of the exemption, the end result in both situations is the same. When Champion placed the money in the fund it became the money of the Board. Champion advanced the money to the Board when it acted as agent and paid the vendors for property bought for the Board and in its name. It received Board funds as reimbursement.

To find that Rule G27-916 was not followed would necessitate stopping this complicated series of transactions in midstream and looking to one isolated incident as opposed to the end result wherein Board funds ultimately paid for the purchases. We feel that the memorandum referred to contemplates this very situation where it might become necessary for a lessee to deposit money in the Board’s account so that such a mutually beneficial enterprise might better prosper. Thus, it is provided, and we rule, that the funds so deposited become those of the Board, so that necessary purchases might be consummated within the other provisions of Rule G27-916.

We would be remiss if we did not acknowledge the soundness of the State’s arguments in justifying the amendment to Rule G27 — 916. We are told that prior to the amendment a lessee could theoretically purchase equipment with its own funds so long as it was invoiced to an industrial development board. It was possible the board might never even become aware of the purchase. It is obvious the drafters of the Cater Act did not intend to sanction such a patent evasion of our tax laws.

It is equally obvious no such abuse is before us today. In a case such as this, reimbursement and the ensuing tax exemption can come only if the trustee of a board-maintained account approves the purchase and the expending of board funds.

Indeed, if Champion’s unchallenged assertions are correct, direct purchases allow it to capitalize on cash discounts that would otherwise be lost. To tax a lessee such as Champion on these facts would be to penalize it for effecting a savings ultimately realized by the Board. Such a result would be blatantly contrary to the provisions of the Cater Act.

In so concluding, we are in accord with our decision in State v. Allied Paper Incorporated, 56 Ala.App. 661, 325 So.2d 171 (1975), cert. den., 295 Ala. 420, 325 So.2d 176 (1976). There, we allowed the exemption because all the provisions of Rule G27-916 were met. Here, for the reasons stated, all the provisions of the amended rule were met. It follows that the exemption afforded such boards when they act as purchaser should have been allowed here as it was in that case.

This case is to be distinguished from our recent decision in State v. Ball-Co Contractors, Inc., supra. There, we were faced with a claimed exemption under § 11-56-21, Code of Ala.1975. This section exempts from state use taxation all projects of public building authorities as opposed to those of industrial development boards. There is no similar Revenue Department regulation for such entities and this court refused to apply Rule G27 — 916 to them. We there decided this rule applies only to industrial development boards created under the Cater Act.

We thus were forced to devise our own criteria in Ball-Co, and we held that purchases made by a contractor who was not a purchasing agent, with its own funds, were not exempt even if the contractor was later reimbursed. As there was no agency relationship, we concluded the funds used were those of the contractor, not the Authority. In the instant case, the crucial agency was specifically created and Champion was authorized to act for the Board in making purchases.

Furthermore, we noted in Ball-Co that the purchase orders were not prepared by the Building Authority but were prepared for it. We noted the contractor’s own funds were used. We noted we had no contract before us indicating in whose name the purchases were made. Nor did we have any evidence as to whose credit was obligated.

We do have these factors before us in this case as well as the objective criteria afforded by Rule G27-916. For these reasons, we reverse and remand this case with instructions to the trial court to find the assessments were invalid as these were exempt purchases by the Board.

REVERSED AND REMANDED WITH INSTRUCTIONS

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


author: PER CURIAM. JONES, Justice

text:
    Ex parte State of Alabama. (re CHAMPION INTERNATIONAL CORPORATION v. STATE of Alabama).
    79-183.
    Supreme Court of Alabama.
    Aug. 22, 1980.
    Rehearing Denied Oct. 10, 1980 and Jan. 9, 1981.
   ON REHEARING

PER CURIAM.

The original opinion in this cause is withdrawn and the following is substituted therefor.

The single issue dispositive of this case is whether equipment purchases made for use by the taxpayer (Champion International) were paid for with funds belonging to the Industrial Development Board of the Town of Courtland.

The trial court determined that the equipment purchases were paid for with checks drawn and made payable on Champion’s account, and were not paid for with funds belonging to the Board. The Court of Civil Appeals, 405 So.2d 928, reversed the judgment of the trial court, “. . . deciding that in this instance the purchases were indeed made with funds belonging to the Board.” We reverse.

The Court of Civil Appeals correctly holds that the tax exemption statute here involved should be construed strictly against the taxpayer and favorably for the State, and that the taxpayer has the burden of proving its entitlement to the exemption.

The distinguished judges of that court are also correct in stating that the provisions of the Cater Act are to be liberally construed to effect its stated intention of promoting industrial development; they candidly admit the soundness of the State’s argument that unless the purchases of equipment were required to be paid for by the Board, that the Board might never become aware of some purchases, and that “[i]t is obvious the drafters of the Cater Act did not intend to sanction such a patent evasion of our tax laws.” Nevertheless, the learned judges concluded:

“It is equally obvious no such abuse is before us today. In a case such as this, reimbursement and the ensuing tax exemption can come only if the trustee of a board-maintained account approves the purchase and the expending of board funds.
“Indeed, if Champion’s unchallenged assertions are correct, direct purchases allow it to capitalize on cash discounts that would otherwise be lost. To tax a lessee such as Champion on these facts would be to penalize it for effecting a savings ultimately realized by the Board. Such a result would be blatantly contrary to the provisions of the Cater Act.
“In so concluding, we are in accord with our decision in State v. Allied Paper Incorporated, 56 Ala.App. 661, 325 So.2d 171 (1975), cert. den., 295 Ala. 420, 325 So.2d 176 (1976). There, we allowed the exemption because all the provisions of Rule G27 — 916 were met. Here, for the reasons stated, all the provisions of the amended rule were met. It follows that the exemption afforded such boards when they act as purchaser should have been allowed here as it was in that case.”

The tax exemption provision of the Cater Act provides:

“The industrial development board and all properties at any time owned by it and the income therefrom and all bonds issued by it and the income therefrom shall be exempt from all taxation in the state of Alabama.”

This statutory provision does not specifically mention sales and use taxes, but the Department of Revenue, through the issuance of Rule G27-916, has interpreted the tax exemption provision to apply to sales and use taxes on purchases by industrial development boards, provided certain conditions are met. In State v. Allied Paper, Inc., 56 Ala.App. 661, 325 So.2d 171, cert. den., 295 Ala. 420, 325 So.2d 176 (1975), the Court of Civil Appeals held that Allied had satisfied every requirement of Rule G27-916 then in effect — that is, that the purchases were by the Board and were made in the name of the Board and the Board’s credit was obligated. The State, in this case, concedes that the purchases were made in the name of the Board, and that the Board’s credit was obligated; nevertheless, the State contends that the additional requirement, by Amended Rule G27-916, that the property was “paid for with funds belonging to the Board,” was not met and, therefore, the exemption does not apply. The trial judge agreed with the State’s position, holding:

“The transactions on which the Department of Revenue has determined Champion is liable for the taxes here involved, are those instances wherein Champion paid vendors of tangible personal property used in the project with checks drawn by Champion and made payable on Champion’s account. As such Champion did not comply with Rule G27-916, as amended, when it paid for the purchases which are the subjects of the present assessments with checks drawn on Champion’s account. In order for Champion to have complied with Rule G27-916, as amended, the purchases must have been paid for with funds belonging to the Board. Since the purchases were paid for with checks drawn and made payable on Champion’s account, this did not constitute payment with funds belonging to the Board. The fact that Champion later deposited monies in the Construction Fund and applied to the trustee for reimbursement did not cure this fatal defect. The fact is the purchases were not paid for with funds belonging to the Board but were paid for with funds belonging to Champion.”

Who was the purchaser here? That is a crucial question because the sales and use taxes are levied upon the purchaser. We think the trial court was correct.

This Court, by refusing to review the decision of Allied, should not be understood as having approved, for tax exempt status, every purchase made in the name of an industrial development board. The opportunity for tax avoidance would be rampant if this Court authorized such a practice. We do not think the framers of the Cater Act intended such a practice.

The Cater Act, by granting power to industrial development boards to borrow money, mentions specifically only the authority of a board “To issue its bonds for the purpose of carrying out any of its powers,” [§ ll-54-87(a)(7)], and “[to] . . . borrow money for temporary use for any of its corporate purposes ...” [§ 11 — 54-91(a)]. It appears that the framers of the Cater Act envisioned that funding for building and equipping its facilities would be through the issuance of bonds and by temporary borrowing. The Department of Revenue, which is charged with the administration of the taxing statutes, provides another alternative for funding purchases.

It is apparent that the department will consider an industrial development board to be the “purchaser” when the requirements of its rules are met, even though the funds used for the purchase were not borrowed by the board, but were deposited with the board by the board’s lessee. We do not hold that the Department of Revenue could not adopt a rule to permit such a practice; we do hold, as did the trial judge, that under the facts of this case, the Industrial Development Board was not the “purchaser” because the purchases were not paid for with funds of the Board.

REVERSED AND REMANDED.

MADDOX, FAULKNER, ALMON and EMBRY, JJ., and MERRILL, Retired Judge, concur.

JONES, J., concurs specially.

BLOODWORTH, SHORES and BEAT-TY, JJ., dissent.

TORBERT, C. J., not sitting.

JONES, Justice

(concurring specially on rehearing):

Upon further study of the record, including the stipulation of facts submitted to the trial Court, I have changed my view of this case. I am now of the opinion that the rationale expressed in my dissenting opinion in State v. Allied Paper, Inc., 56 Ala.App. 661, 325 So.2d 117, cert. den. 295 Ala. 420, 325 So.2d 176 (1975), is equally applicable here. Initially, I felt that the facts of the two cases were sufficiently distinguishable to require different results. I now believe that the facts of the instant case are even stronger than those in Allied Paper in support of the State’s position.

ON APPLICATION FOR SECOND REHEARING

Champion argues in its application for rehearing that this Court, in determining who was the “purchaser,” has ignored a stipulation made between the parties, namely stipulation # 10, which reads as follows:

“The construction of the Project and purchase and installation of the Leased Equipment commenced in 1968 and continued through the periods here involved. The Board duly appointed Champion as its purchasing agent by an agency agreement with Champion dated as of February 1, 1973, a copy of which is attached hereto as Exhibit 8. The Board also duly appointed Brown & Root, Inc. as its purchasing agent by an agency agreement dated as of February 1, 1973, a copy of which is attached hereto as Exhibit 9. All purchases were made by the Board and in its name through one of its duly authorized purchasing agents pursuant to purchase orders in the form attached as Exhibit 10. Title was taken in and remains in the name of the Board. The Board’s credit was obligated for all purchases. All purchases were invoiced by the vendors to and in the name of the Board in the form set forth as Exhibit 11. Champion made advances of the moneys necessary to pay the invoices for such purchases. Champion thereafter submitted to the Trustee monthly requests approved by the Board for reimbursement from the Construction Fund for such advances in the form attached hereto as Exhibit 12. The Trustee paid to Champion, from the Construction Fund the amounts necessary to reimburse Champion for such advances pursuant to Section 4.3 of the Lease.”

Champion asserts that Stipulation # 10 is dispositive of the issue which this Court described as the single dispositive issue, that is, who actually made the purchases in question.

Stipulation # 10 does state that the purchases were made by the Industrial Development Board of the Town of Courtland and that the Board’s credit was obligated. This Court, on original deliverance, was aware of that stipulation. We said:

“The State, in this case, concedes that the purchases were made in the name of the Board, and that the Board’s credit was obligated; nevertheless, the State contends that the additional requirement, by Amended Rule G27 — 916, that the property was ‘paid for with funds belonging to the Board,’ was not met and, therefore, the exemption does not apply.”

We realize that facts stipulated by the parties are to be taken as true by the Court, Benedict v. Little, 288 Ala. 638, 264 So.2d 491 (1972), and Harper v. Talladega County, 279 Ala. 365, 185 So.2d 388 (1966), and Stipulation # 10, standing alone, and in another factual setting, would control. As we stated in the original opinion, the dispositive issue in this ease was a determination of who the “purchaser” was. That was the ultimate fact to be determined. Stipulation # 10 is of the type which may be properly characterized as a stipulation of a conclusion in this factual context. Stipulations of conclusions which are contrary to the facts may properly be disregarded by the reviewing court. Commissioner of Internal Revenue v. Cummings, 77 F.2d 670 (5th Cir. 1935).

The taxpayer, on rehearing, states that “[t]ax avoidance, as opposed to evasion is not improper or illegal.” We agree, and this case comes immeasurably close to the category of legal tax avoidance. We recognized all those arguments on original deliverance. We decided this case after an examination of a totality of the facts, and after a thorough examination of the intent of the legislature concerning exemption from taxation of industrial development boards.

The Department of Revenue, in its administration of the tax laws, in the past has authorized a scheme of tax avoidance in cases similar to this one. Rule G27-916 prior to its amendment was consistent with the prevailing law that purchases made by an industrial development board were exempt from taxation if they were made in the name of the board and the board’s credit was obligated. The department, however, after the State v. Allied Paper, Inc., 56 Ala.App. 661, 325 So.2d 171, cert. den. 295 Ala. 420, 325 So.2d 176 (1975), experience, changed its administrative practice by amending its rule to add a requirement that such purchases must be paid for with funds belonging to the board. The trial court found that this requirement was not met. We determined that the purchases were not paid for with funds belonging to the Board.

We have carefully examined the taxpayer’s additional arguments which it makes on rehearing, but we are still convinced that under Alabama law, these purchases were not tax exempt; the Industrial Development Board of the Town of Courtland was not the “purchaser.”

OPINION EXTENDED, APPLICATION FOR REHEARING OVERRULED.

MADDOX, FAULKNER, JONES, AL-MON and EMBRY, JJ., and MERRILL, Retired Judge, concur.

SHORES and BEATTY, JJ., dissent.

TORBERT, C. J., not sitting.

      . The original opinion read:
      “BEATTY, Justice.
      “The decision of the Court of Civil Appeals is affirmed.
      “AFFIRMED.
      “Torbert, C. J., Bloodworth, Jones and Shores, JJ., concur.
      “Maddox, Faulkner, Almon and Embry, JJ., dissent.”
      On June 30, 1980, the Court entered the following order:
      “ORDER
      “This cause has been placed on rehearing by the Court.

        “It appears that Chief Justice Torbert re-cused himself from oral argument of this cause. His name is accordingly withdrawn from the concurrences. It is ordered that further proceedings be had in this cause pursuant to Section 6.10 of Amendment No. 328 of the Constitution of Alabama which authorizes the Chief Justice to assign appellate justices and judges to any appellate court for temporary service and trial judges, supernumerary justices and judges, and retired trial judges and retired appellate judges for temporary service in any court; and also pursuant to § 12-2-5, Code 1975, which provides that in the event of the inability of the chief justice to perform any duty or function required by law or rule, such duty or function may be performed by the senior associate justice available in the seat of government, provided he is requested to do so by the chief justice.
      “The Chief Justice being disqualified in his opinion to make an assignment of a judge for temporary service in this cause, the Chief Justice requests Associate Justice Hugh Maddox, the Senior Associate Justice available in the seat of government to assign a judge for temporary service in this case.”
      On July 2, 1980, the Honorable Hugh Maddox, Senior Associate Justice on duty, entered the following order:
      “ORDER
      “The Chief Justice being disqualified in his opinion to make an assignment of a judge for temporary service in this cause, the Chief Justice requests me as the Senior Associate Justice available in the seat of government to assign a judge for temporary service in this cause.
      “There being a need for an additional judge to perform duties in this case, I, Hugh Maddox, Senior Associate Justice now on duty in the Supreme Court, pursuant to the authority contained in the provisions of Section 6.10 of the Judicial Article (Constitutional Amendment 328) and § 12-2-5, Code 1975, do hereby assign Honorable Pelham J. Merrill, a retired justice of the Supreme Court of Alabama, for temporary service on the Supreme Court of Alabama in this cause with full and complete authority as if he were an active justice of the Supreme Court of Alabama until the determination of this case.”


text:
    CHAMPION INTERNATIONAL CORPORATION v. STATE of Alabama.
    Civ. 1938.
    Court of Civil Appeals of Alabama.
    Feb. 4, 1981.
   HOLMES, Judge.

The prior opinion of this court, Ala.Civ. App., 405 So.2d 928, has been reversed and remanded by the Supreme Court. Ala., 405 So.2d 932. On remand to this court, and in compliance with the Supreme Court’s opinion of August 22, 1980, this cause is now affirmed.

AFFIRMED.

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


text:
    Patsy TILLIS, now Smith v. Lowell A. TILLIS.
    Civ. 2586.
    Court of Civil Appeals of Alabama.
    June 17, 1981.
    Rehearing Denied July 15, 1981.
    James H. Farmer, Jr. of Farmer, Farmer, Price & Espy, Dothan, for appellant.
    James W. Rane, Abbeville, for appellee.
   EDWARD N. SCRUGGS, Retired Circuit Judge.

The pivotal question in this case is: Do periodic alimony payments, which are separate from child support payments, terminate as of the date of the admitted or uncontested remarriage of the former spouse to whom such alimony is paid?

The 1973 judgment which divorced the parties was approved and incorporated therein their agreement whereby the husband, Mr. Tillis, weis to pay monthly child support of $500 and periodic alimony of $300 per month to the wife, who subsequently remarried and is now Mrs. Smith. When she remarried, the periodic alimony payments of Mr. Tillis were current, but he cesised making such payments at that time and has made no alimony payment since.

Mrs. Smith filed her petition to place Mr. Tillis in contempt of court, among other things, for an arrearage totaling $13,200 in periodic alimony payments. Mr. Tillis later filed a petition to terminate such alimony as of the date of Mrs. Smith’s remarriage. After an evidentiary hearing, by means of a learned six-page judgment the trial court, in effect, denied enforcement of Mrs. Smith’s petition, and, by separate order, granted the relief sought by Mr. Tillis. Mrs. Smith now appeals.

The statute in controversy appears in the pocket parts to the Code of Alabama (1975) as § 30-2-55 as follows:

Any decree of divorce providing for periodic payments of alimony shall be modified by the court to provide for the termination of such alimony upon petition of a party to the decree and proof that the spouse receiving such alimony h£is remarried or that such spouse is living openly or cohabiting with a member of the opposite sex. This provision shall be applicable to any person granted a decree of divorce either prior to April 28, 1978, or thereafter; provided, however, that no payments or alimony already received shall have to be reimbursed.

The first sentence of that act was enacted in 1978 and the last sentence was added by an amendatory act in 1979. At the November 1980 general election, the people adopted an amendment to Alabama’s constitution, which provided that the legislature “may pass laws to provide for the termination of alimony upon the remarriage of the spouse receiving the alimony... . Such laws may be made to apply retrospectively.” Act 81 — 155 of the 1981 legislature merely reenacted in toto § 30-2-55 as above copied.

Mrs. Smith’s brief in this court states, “[I]t is clear that this statute applies to the case at bar.” Mr. Tillis concurs in that conclusion. Their disagreement is as to when her periodic alimony should terminate — as of the date of her remarriage or on the date of the belated filing of his petition to terminate alimony.

Hearn v. Hearn, 379 So.2d 595 (Ala.Civ. App.1979), cert. denied, 379 So.2d 597 (Ala. 1980) is our only appellate decision touching upon the point in question. There the circuit court terminated the wife’s periodic alimony as of the date of the filing of the husband’s alimony termination petition, and that judgment was affirmed on appeal. Factually, however, the cases are greatly distinguishable. There, the husband was required to pay a lump sum of $185 per week as “alimony and child support,” and a court hearing and judgment were essential to ascertain the amount of the $185 which was attributable to alimony and what amount thereof should be allocated to child support. Here the two items of alimony and child support were separated by the terms of the approved agreement of the parties and the award of periodic alimony was already distinct from child support payments. In Hearn it was stated:

In this instance, the trial court had to first make a determination of what amount of the support award was alimony and what amount was child support. Such a determination was essential in order for the court to terminate the alimony. That is, until there was a determination by the trial court of an allocation of a portion of the award to alimony and a portion to child support, there could logically be no termination of alimony.
Once the trial court determined the amount of alimony, it had the duty, under § 30-2-55, to terminate such alimony upon petition of the husband and proof of remarriage. This the trial court did.
The statute contemplates the termination of alimony. Under circumstances where the support being paid to the wife does not differentiate between alimony and child support, the statute cannot become operative until alimony is fixed as a sum certain.
In this instance, the husband urges us to hold that termination of the alimony relates back to the date of remarriage. However, it was only until the trial court determined what portion of the award being paid was alimony that there was any point in time from which the alimony could terminate. .. .
In this instance, to relate back the termination of alimony to the date of remarriage would be contrary to the expressed intent of § 30-2-55 and its purpose in that until alimony is fixed as a sum certain there is no amount that can be terminated. Therefore, the trial court was correct in terminating future alimony to the wife from the date of the filing of the petition for modification. (Emphasis supplied.)

In this case the monthly periodic payment of alimony was fixed and ascertained from the date of the 1973 judgment. Monthly alimony was established at $300 and child support at $500. The trial court had no allocation nor determination to make in that regard. Therefore, the reason stated in Hearn for delaying the alimony termination to the date of the filing of a termination petition does not exist in the present case. Further, the language of Hearn strongly indicated that if the alimony provision had initially been separate from the child support award, a different result would have there occurred and the periodic alimony would have terminated upon the former wife’s remarriage.

Mrs. Smith readily testified to her remarriage. That fact was not contested by her, but she contends that she is entitled to recover at least $13,200 from her former husband for periodic alimony, all of which accrued after the date of her present marriage to Mr. Smith. Such is unconscionable. It is very inequitable. It is contra to the intent of the legislature in enacting, amending and reenacting the statute. It is against the apparent public policy of this state as evidenced by the quoted constitutional amendment. The legislature and the people have spoken and have given their opinion that a receiving spouse’s right to collect periodic alimony should cease upon that person’s remarriage to a third party.

Under Mrs. Smith’s contention, she would not be entitled to collect any periodic alimony if Mr. Tillis had promptly filed a termination petition. He should not be penalized over $13,000 for his lack of diligence in presenting the issue to the court, nor should she be unjustly enriched on that account.

In a case where the alimony to be paid periodically is separate and apart from any other required payments under the judgment and where there is no real controversy that the spouse receiving the alimony has remarried, we comprehend no valid reason to impose or extend the periodic alimony obligation upon the paying spouse beyond the date of the remarriage of the receiving spouse.

Since Mr. Tillis’ periodic alimony obligation did not extend beyond the date of her marriage to Mr. Smith, no such alimony accrued or matured after her remarriage date.

The judgment of the circuit court is affirmed.

The foregoing opinion was prepared by retired Circuit Judge EDWARD N. SCRUGGS while serving on active duty sta-tu^ ias a judge of this court under the provisions of § 12-18-10(e) of the Code of Alabama (1975) and this opinion is hereby adopted as that of the court.

AFFIRMED.

All the Judges concur.


author: FAULKNER, Justice.

text:
    Ex parte Patsy TILLIS, now Smith. (Re: Patsy TILLIS, now Smith v. Lowell A. TILLIS).
    80-745.
    Supreme Court of Alabama.
    Oct. 30, 1981.
   FAULKNER, Justice.

WRIT DENIED — NO OPINION.

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


author: WRIGHT, Presiding Judge.

text:
    Ronald Franklin MENTON v. Marlene Elizabeth MENTON.
    Civ. 2599.
    Court of Civil Appeals of Alabama.
    June 17, 1981.
    Rehearing Denied July 22, 1981.

      Charley W. Shults, Birmingham, for appellant.
    Douglas Corretti and Robert H. Adams of Corretti & Newsom, Birmingham, for ap-pellee.
   WRIGHT, Presiding Judge.

This is a case of modification of a prior divorce decree. The issue is whether the trial court erred in denying modification because of failure of proof of change of circumstances since the last decree. We find the trial court erred in applying the law to the facts.

The facts are established by an agreed record compiled under Rule 10, Alabama Rules of Appellate Procedure. The record as compiled indicates little if any dispute as to basic material facts.

The record indicates the following: The parties were divorced by judgment of May 22, 1980. There was an agreement as to custody of the two children, visitation, alimony and child support and other matters. The agreement was incorporated in the judgment.

The marriage of the parties had endured for thirteen years. The husband for some years preceding the divorce had been employed in public relations for the Alabama Credit Union League. In December 1979 the husband notified the League that he resigned his position effective in six months. He ceased his employment on May 1, 1980. It had been his intent to form a business of his own in the booking and planning of conventions. He expected investment by others in his corporation and to secure a Small Business Administration loan. The expected investors all reneged except one, who invested $2,500. SBA denied a loan for lack of operating capital.

Prior to his resignation from his employment, and the divorce, the husband had an income of $25,000. From May 1, 1980, until the hearing upon his petition in October 1980, he had earned in his new business only $2,000. On the 15th of October 1980, the husband filed his voluntary petition in bankruptcy, noting $14,000 indebtedness without security. At the time of hearing on October 28, 1980, the husband was current in his child support payments except for one bi-monthly payment of $362.50. He had maintained the sizeable payments ordered in the divorce with money returned to him by his former employer from accumulated retirement and profit-sharing funds.

After the husband’s testimony, the trial judge expressed his opinion that the petition for modification was due to be denied because of the reversal by this court of a prior ease with similar facts in which he granted a petition to modify. He therefore denied the relief requested by the husband. Husband appealed.

Appellee has premised her support of the judgment below upon the argument that at the time the husband made the agreement subsequently adopted by the court, he had already resigned his lucrative employment with the League and had no income with which to meet the terms of his agreement; he had only a new business which he optimistically expected to succeed. His optimism proved to be misplaced. At the time of the hearing he had no income. Thus, he was broke when he agreed to pay. He is broke now. There has been no change of circumstances. Therefore he should continue to be bound by an agreement with which he undisputedly has not the present ability to comply.

We do not consider that the cases cited by appellee support such a contention or principle of law. The argument of appellee points up the clear change in circumstances. That is, at the time of the judgment of May 22, 1980, the husband was beginning a new business which he had been planning for at least six months. He had promises of capital investment with which to qualify for an SBA loan. He obviously had great expectations. His wife apparently was equally expectant for she accepted his promises, assumed custody of the children and ended a thirteen-year marriage. Clear sailing appeared ahead. But the bubble burst!

The husband’s business venture failed. The change from a time of optimism and expectation on May 22, 1980, to a time of complete failure and bankruptcy in October represents a material change in circumstances sufficient to invoke consideration of relief by the court. To continue in force a judgment requiring performance which the evidence clearly indicates is impossible to achieve is a useless thing. The law will not require the doing of a vain or useless thing. McNello v. John B. Kelly, Inc., 283 F.2d 96 (3rd Cir. 1960); Merchants National Bank of Mobile v. Morris, 273 Ala. 117, 136 So.2d 193 (1961).

We reverse the judgment denying relief without a full hearing upon the merits and remand for further hearing as necessary to determine the present financial ability of the husband to contribute to the needs of his family. Judgment should be entered thereafter as the evidence requires.

Attorney’s fees as requested by the wife for her representation in this appeal are denied.

REVERSED AND REMANDED WITH DIRECTION.

BRADLEY and HOLMES, JJ., concur.

      . We are not aware of nor cited to the case which the learned trial judge was referring to.


author: MADDOX, Justice.

text:
    Ex Parte Marlene Elizabeth MENTON. (Re: Ronald Franklin MENTON v. Marlene Elizabeth MENTON).
    80-757.
    Supreme Court of Alabama.
    Oct. 30, 1981.
   MADDOX, Justice.

WRIT DENIED — NO OPINION.

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


text:
    Thomas A. BOSTON v. NATIONAL LIFE & ACCIDENT INSURANCE COMPANY.
    Civ. 2669.
    Court of Civil Appeals of Alabama.
    July 15, 1981.
    Rehearing Denied Aug. 19, 1981.
    Robert M. Hill, Jr., Florence, for appellant.
    Robert E. Jones, III, of Poellnitz, Cox, McBurney & Jones, Florence, for appellee.
   WRIGHT, Presiding Judge.

Plaintiff appeals from a judgment of the Lauderdale County Circuit Court denying him benefits under a policy of disability insurance. We affirm.

The policy sued upon, issued and effective April 21, 1978, provided coverage to plaintiff for “disability from sickness originating after the policy date . . . and causing total disability which commences while this policy is in force.” Shortly after the policy date, plaintiff sought medical treatment because of pain and cramping in his feet. Subsequently plaintiff was diagnosed as having the disease peripheral neuropathy, resulting in deterioration of the peripheral nerves that supply the feet. Neither the fact of plaintiff’s total disability nor the amount of benefits claimed under the policy are contested.

The dispositive issue on appeal is whether, as the trial court obviously found, plaintiff’s disability is from sickness originating prior to the policy date and thus excluded from coverage under the policy.

In Alabama, as in many jurisdictions, a disease, illness or sickness (using the words interchangeably) will ordinarily be deemed to originate or have its inception when it first becomes manifest or active or when there is a distinct symptom or condition from which one, learned in medicine, can, with reasonable accuracy, diagnose the disease. United Security Life Insurance Company v. Moore, 275 Ala. 642, 157 So.2d 674 (1963); United Security Life Insurance Company v. Hilyer, 41 Ala.App. 226, 128 So.2d 736, cert. denied, 272 Ala. 710, 128 So.2d 741 (1961); 94 A.L.R.3d 990. In cases such as this the burden of proof is upon the insurer to establish that the insured’s sickness originated prior to the effective date of the policy. United Security Life Insurance Company v. Hilyer, supra.

In addressing the primary issue, we initially note that there is no evidence regarding actual or possible diagnoses prior to the policy date. For that reason, the question of whether the sickness causing plaintiff’s disability originated prior to the policy date necessarily depends upon whether such sickness became manifest or active prior thereto.

The case was tried before the court sitting without a jury upon stipulations of fact, exhibits and deposition testimony. The pertinent facts appear as follows;

Plaintiff applied for a policy of disability insurance with defendant. The policy became effective April 21, 1978. On May 1, 1978, plaintiff was treated by his family doctor for cramping and pain in his feet. At that time plaintiff gave the doctor a history of having these problems with his feet as early as March of 1978, predating the issuance of the policy. The doctor referred plaintiff to a neurosurgeon. The symptoms continued and progressed. He was referred to and examined by specialists, both orthopedic and neurologic. He was hospitalized and determined to be suffering from peripheral neuropathy and totally disabled.

The evidence is indicative of plaintiff’s sickness manifesting itself or becoming active prior to the policy date. Further indicative is the expert testimony of plaintiff’s doctor that the symptoms complained of in March 1978 were of the same disease which caused disability. The undisputed evidence supports the conclusion that the sickness causing plaintiff’s disability became manifest or active prior to the policy date. See, McDaniel v. State Farm Mutual Insurance Company, 3 Kan.App.2d 174, 591 P.2d 1094 (1979); Beard v. Jefferson Life and Casualty Company, 95 So.2d 379 (La.App.1957).

Plaintiff, through counsel’s well-written brief, admits that the symptoms or problems existed prior to the policy date but argues that such were only of an irritating and not disabling nature at that time. As noted, the test for purposes of this case is whether the sickness became manifest or active prior to the policy date, not whether it was disabling at such time. We are unable to accept plaintiff’s contention that the case of National Casualty Co. v. Hudson, 32 Ala.App. 69, 21 So.2d 568 (1945) establishes the standard of a disabling manifestation. Likewise, the fact that the exact nature of plaintiff’s sickness was not diagnosed until much later, upon admission to the hospital, is not determinative. See, McDaniel v. State Farm Mutual Insurance Company, supra.

The judgment of the trial court is due to be affirmed.

AFFIRMED.

BRADLEY and HOLMES, JJ., concur.


author: ADAMS, Justice.

text:
    Ex Parte Thomas A. BOSTON. (Re: Thomas A. BOSTON v. NATIONAL LIFE & ACCIDENT INSURANCE COMPANY).
    80-871.
    Supreme Court of Alabama.
    Oct. 30, 1981.
   ADAMS, Justice.

Writ Denied — No Opinion.

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


text:
    C. R. WAMBLES v. Bobby Hobson DAVIS and Roy Crane.
    Civ. 2683.
    Court of Civil Appeals of Alabama.
    July 15, 1981.
    Rehearing Denied Aug. 12, 1981.
    Larry R. Grissett of Prestwood & Prest-wood, Andalusia, for appellant.
    Ab Powell III of Powell & Powell, Andalusia, for appellee.
   HOLMES, Judge.

This is a negligence case.

Wambles sued Davis and Crane, claiming damages for personal injury and injury to property. A jury returned a verdict in favor of Wambles and against Davis and Crane and assessed property damages at $1,500. Damages for personal injury were not awarded.

Wambles appeals, contending, among other things, that the trial court erred in instructing the jury that it could not award property damages in excess of the reasonable cost of repairs.

We reverse.

The record reveals that Wambles’ automobile was damaged in a traffic accident. At trial Wambles testified that the reasonable market value of the automobile prior to the accident was $3,000 and that its reasonable value after the accident was $150. Wambles also testified, without objection, that in his opinion repair costs would total at least $2,000.

The trial court gave the following instruction to the jury:

I will tell you that the measure of damages for property damage is the difference in the reasonable market value of the property injured just before the injury and just after the injury. Not to exceed the reasonable cost of repair. . . . ”

Wambles, through counsel, made timely and proper objection.

Wambles contends that the instruction was erroneous and we agree.

The trial court instructed the jury that recoverable damages could not exceed the reasonable cost of repairs. That is not the law, but rather the converse is the correct rule. Evidence of the reasonable cost of repairs can be used to establish the difference in market values and the plaintiff can thus, in effect, recover the cost of repairs, but in no event can the amount of recoverable damages exceed the difference between the before and after value of the automobile. Merrill v. Badgett, Ala.Civ.App., 385 So.2d 1316, writ denied, 385 So.2d 1319 (1980); Smith v. Springsteen, Ala.Civ.App., 385 So.2d 56 (1980); Winn-Dixie Montgomery, Inc. v. Holt, 57 Ala.App. 499, 329 So.2d 556 (1976); Fuller v. Martin, 41 Ala.App. 160, 125 So.2d 4 (1961); 7A Ala.Digest, Damages § 113; Alabama Pattern Instructions — Civil, § 11.24 (1974).

In the instant case there was evidence that the difference between the before and after value of the automobile was $2,850. The jury awarded $1,500 as damages. Since the trial court’s jury instruction erroneously limited the measure of recoverable damages, we cannot say that the error was harmless. For this reason the case must be reversed.

We find that we must make one further comment regarding this case and that we would be remiss in failing to do so.

Wambles, through counsel, on appeal presented five issues in addition to the issue discussed above. The presentation of those issues was not sufficiently in compliance with Rule 28, ARAP, to be considered by this court. In any event, discussion of those issues is pretermitted by the reversal of the case.

The case is due to be reversed.

REVERSED AND REMANDED.

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


text:
    Ex parte Bobby Hobson DAVIS and Roy Crane. (Re: C. R. WAMBLES v. Bobby Hobson DAVIS and Roy Crane)
    80-838.
    Supreme Court of Alabama.
    Oct. 30, 1981.
   FAULKNER, Justice.

WRIT DENIED — NO OPINION.

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