text:
    Willie W. JOHNSON, Plaintiff-Appellee, v. James A. ALEXANDER, et al., Defendants-Appellants.
    No. 8450.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.

      Raggio, Cappel, Chozen & Berniard, Christopher M. Trahan, Lake Charles, for defendants-appellants.
    McClain, Morgan & Savoy, Robert E. Morgan, Lake Charles, for plaintiff-appel-lee.
    Voorhies & Labbe, William M. Bass, Lafayette, for defendant-appellee.
    Before GUIDRY, CUTRER and STOKER, JJ.
   GUIDRY, Judge.

This tort suit was before us previously. Willie W. Johnson filed this action against James A. Alexander for damages sustained when a steel pipe being lifted by Alexander, a backhoe operator, fell and struck plaintiff’s forefoot causing extensive injuries. Also named as defendants are Dupont and Alexander Equipment Corporation (hereafter Dupont and Alexander), Alexander’s employer, and Western World Insurance Company (hereafter Western), Dupont and Alexander’s liability insurer. United States Fidelity and Guaranty Company (hereafter U.S.F. & G.), the worker’s compensation insurer of Johnson’s employer, Vincent Construction Company, Inc. (hereafter Vincent), intervened praying for reimbursement for medical expenses and worker’s compensation benefits paid to Johnson as a result of his work-related injuries.

The trial court held in favor of plaintiff granting judgment against all defendants in solido, in the sum of $102,479.06 with interest until paid and ordered that interve-nor, U.S.F. & G. be paid for its expenditures. On appeal, we found that the evidence supported the conclusions of the trial court that Alexander was negligent in the operation of the backhoe and that Alexander was not a borrowed employee of Vincent. However, we found that Alexander was a statutory employee of Vincent and concluded that, as such, he was a co-employee of Johnson and, therefore, his exclusive remedy was in worker’s compensation. Accordingly, we reversed the trial court’s judgment and dismissed the plaintiff’s suit with prejudice. Johnson v. Alexander, 406 So.2d 1378 (La.App. 3rd Cir.1981). In rendering judgment as aforestated, we preter-mitted any consideration of the issues concerning contributory negligence, assumption of the risk and quantum.

The Louisiana Supreme Court granted writs, 412 So.2d 88 (La.1982), and ultimately reversed our holding, stating in pertinent part:

“Further, though workmen’s compensation benefits are a statutory employee’s exclusive remedy when injured by employees of the principal, there is no provision in our workmen’s compensation act which grants immunity from suit to a ‘statutory co-employee’ who injures the principal’s employee during the course and scope of employment. Absent a statutory provision to the contrary, the employees of the subcontractor must be considered third persons as far as the employees of the principal are concerned and subject to proceedings in tort. Benoit v. Hunt Tool Co., 53 So.2d 137 (La.1958); Malone & Johnson, supra, Sec. 368 in 14 Louisiana Civil Law Treatise.4 Because the subcontractor may be liable for injuries sustained by an employee of the principal, the subcontractor’s liability carrier, as a solidary obligor, is also liable for plaintiff’s injuries. Ewing v. Sanson, 394 So.2d 849 (La.App. 3rd Cir.1981), writ dismissed 398 So.2d 532; Pearson v. Hart ford Accident & Indemnity Co., 281 So.2d 724 (La.1973). Consequently, plaintiff was not precluded from bringing suit against Alexander, Dupont and Alexander Equipment, and Western World Insurance Company.” (footnote omitted). Johnson v. Alexander, 419 So2d 451 (La.).

This case is now before us on remand with instructions to address the remaining issues. Those issues are:

(1) Was plaintiff contributorily negligent so as to bar his recovery?

(2) Did plaintiff knowingly assume the risk of harm presented by moving the pipe with the backhoe?

(3) Is the award of damages excessive?

CONTRIBUTORY NEGLIGENCE

When this case was first before us, we found no manifest error on the part of the trial court in its conclusion that defendant, Alexander, was negligent and that his negligence was the legal cause of the accident. The trial court concluded that Alexander was negligent, in that he raised the backhoe bucket to such a height that the choker slipped off of the teeth of the bucket, causing the pipe to strike the plaintiff.

Defendants argue that Johnson was also guilty of negligence in the following particulars: failing to place the buckle properly on the teeth of the backhoe; improperly signaling Alexander to begin lifting the pipe; and, using a pipe choke which was unsafe.

There is no evidence in the record to indicate that the buckle was improperly placed or that the signal was improperly given. There was nothing in the initial lifting to suggest any danger. According to Alexander, the pipe remained level and the lift was smooth. The record indicates that the pipe choke used was not the safest method possible but the operation could have been done safely had the pipe not been lifted too high. Furthermore, Johnson, a pipefitter, is not responsible for the method used in moving the pipe. Although he had worked around backhoes all of his life, he never operated one and his knowledge of the operation of backhoes was far inferior to that of the operator, Alexander. The record supports the trial court’s conclusion that contributory negligence was not proved.

ASSUMPTION OF THE RISK

With respect to appellant’s argument that plaintiff assumed the risk of injury, this is a subjective test and its application rests solely on the state of mind and knowledge of Johnson. In Prestenback v. Sentry Insurance Company, 340 So2d 1331 (La.1976), the Supreme Court discussed the knowledge element of the defense:

“As we stated in Langlois v. Allied Chemical Corporation, 258 La. 1067, 249 So.2d 133 (1971), “the determination of whether a plaintiff has assumed a risk is made by subjective inquiry .... ” See also McInnis v. Firemen’s Fund Ins. Co., 322 So.2d 155 (La.1975); Prosser on Torts, pp. 447-450 (4th ed., 1971).
In order for a plaintiff to assume a risk, he must knowingly and voluntarily encounter the risk which causes his injury. McInnis v. Firemen’s Fund Ins. Co., cited above. “Knowledge” is the mainstay of this defense, and it must be proved by a preponderance of the evidence.
Recovery is denied if the plaintiff knew or should have known of the risk involved. The defendant argues, and the court of appeal also held, that Presten-bach should have known of the driver’s condition, simply since he had spent most of the evening with him.
However, for purposes of a knowing assumption of risk, we impute knowledge to a plaintiff, not because he was in a position to make certain observations, but only when he actually makes those observations and, from them, should reasonably have known that a risk was involved.”

The risk of harm to Johnson was that Alexander, an expert backhoe operator, would lift the boom to a point where the eye of the sling would slip off the teeth of the backhoe, causing the pipe to fall and strike Johnson. As aforestated, Johnson had no particular knowledge of the operation of backhoes. His function was to steady the pipe and signal the operator, whose expertise he had a right to rely on. The record supports the trial court’s conclusion that assumption of the risk was not proved.

INJURIES AND AWARD

The crux of the defendant’s argument on quantum is that the trial judge erred in concluding that the plaintiff has established that the accident caused the aggravation of a preexisting condition. The trial judge’s thorough analysis of the evidence presented on this issue supports his conclusion. In disposing of this issue, we are pleased to adopt, as our own, the trial court’s cogent reasons which read as follows:

“Plaintiff’s great toe of the right foot was mashed and most of it had to be amputated. He also had compound fractures of the second and third toes. He will have a permanent partial disability loss of use of the right foot directly attributable to the toe injuries variously estimated at from 15 percent to 17 percent.
Plaintiff contends, however, that the final effect of the accident is more serious than just the effect of the injury to three toes. He contends that an arthritic condition resulting from an old ankle injury in 1964 was aggravated by the gait and weight bearing changes brought on by the amputation of the great toe and the ununited fracture of the next two, and that these conditions together render him crippled and permanently disabled.
The medical testimony was presented to the court by way of depositions of three physicians. From these depositions the court has put together the medical history of the right foot as follows.
Plaintiff suffered an ankle injury in 1964. He was treated by Dr. George P. Schneider, a Lake Charles orthopedist. This doctor was not asked at his deposition to supply much detail about the old injury; he testified only as to one specific notation in his clinic records, a notation dated January 29, 1969, and which reflected that the patient was then having increasing degenerative proliferative change about the ankle joint and that he was discharged at that time with a 35 percent disability of the right ankle joint. A more detailed history of the 1964 injury and treatment can be found in the deposition of Dr. Jerome A. Ambrister, a Lake Charles orthopedist who saw plaintiff on November 30, 1965, for evaluation purposes only. From this doctor’s old medical report it is learned that plaintiff injured his right ankle on August 20, 1964, suffering a fracture of the fibula. Although Dr. Ambrister's recounting of his old report in the deposition goes into detail regarding the injury, Dr. Schneider’s treatment, and his own findings on examination and x-rays, Dr. Ambrister says little about the opinion he rendered back then other than the observation that one could expect some degenerative arthritis in the ankle.
Thus, concerning the old injury, the medical evidence in summary reveals plaintiff had a fracture of the right fibula in 1964 from which arthritis of the ankle joint could be expected and arthritic changes were present in 1969.
Moving now to the accident of February 22, 1978, when the pipe fell on his right foot plaintiff again saw Drs. Ambrister and Schneider, only at this time the roles of these two doctors were reversed: Am-brister was the treating physician and Dr. Schneider saw him for evaluation. Dr. Ambrister hospitalized plaintiff between February 22,1980, and February 27, 1980 for the amputation. He was seen three times afterwards by the treating physician, the last time in early July, 1980, when Dr. Ambrister prescribed a below knee brace. This doctor assigned a 17 percent permanent partial disability to the right foot as a result of the toe injuries. He stated the patient was also complaining of a severe ankle pain but this he ascribed to the old arthritic ankle and not the new injury. This doctor stated, however, that if it were true that plaintiff had more pain in the ankle following the 1978 accident than he did previous to it ‘I don't know of any other explanation than the accident to have brought about through some means some increases in the discomfort.’
On November 1, 1979, Dr. Schneider saw plaintiff for evaluation. He stated in his deposition that plaintiff then told him that he was no longer suffering pain from the injury to his toes but that his ankle bothered him. Finding no history of or clinical indication of any additional injury to the previously damaged right ankle, Dr. Schneider opined that the ankle problem was associated with the degenerative changes resulting from his previous injury and not from the more recent injury. The more recent injury, however, resulted by itself in a permanent partial disability of 15 percent of the function of the right foot.
The opinions of both of these doctors that the new injury and the ankle pain are unrelated appears to be based on the fact that when the pipe fell there was no direct injury to the ankle, only to the toes. These doctors were not questioned about nor did they appear to consider the indirect relationship between the toe injuries and enhancement of a dormant ankle problem.
This relationship was considered by the third doctor whose deposition testimony the court has studied, that of Dr. Richard S. Materson of Houston.
Dr. Materson practices the specialty of physical medicine and rehabilitation and has impressive credentials. He saw the patient three times, February 21, 1980, August 12, 1980, and October 8, 1980. His deposition was taken in April, 1980, after the first visit, but his reports of the latter two visits are in evidence to supplement the deposition. He took a thorough history and physically examined plaintiff, and in addition, conducted an electromyo-graphic examination and took x rays (sic). His clinical impression was that plaintiff had an amputation of part of the right great toe, ununited fractures of the mid-portion of the next two toes, and a significant arthritis of the ankle joint of the right foot.
It was Dr. Materson's opinion that the ankle symptoms were enhanced by the amputation of the right great toe, whether or not there was direct injury to the ankle. This is because the gait pattern of the great toe along with the fractures of the second and third toes is dramatically changed from normal. The result is a dramatic change in the weight bearing relationship between the ankle joint and the hind foot, which causes the advancement of degenerative changes post-fracture and increased ankle symptoms. He recommended a four-phase treatment program but opined that in any event plaintiff would be henceforth unable to work without pain unless his work was a sit down supervisory job.
The court finds nothing inconsistent between Dr. Materson’s opinion and that of Drs. Schneider and Ambrister. The court notes that Dr. Materson only takes the medical analysis one step further. The court was impressed by Dr. Materson’s professional opinion and believes that he has correctly analyzed plaintiff’s problem and the prognosis.
This conclusion is supported by other evidence. It was established that despite the arthritic ankle plaintiff worked steadily and without substantial problems as a pipefitter from 1969 until 1978. He also functioned off the job without observed difficulty. These facts were established by plaintiff’s work record and numerous witnesses.
Since 1978, the combination of the ankle and toe problems have substantially inhibited the performance of his work as a pipefitter. He has worked only about half of the time since that accident. He wears a below knee brace that helps take some of the weight off the ankle. He has a pronounced limp and is unable to climb, stoop, or lift. The court finds that this disability is a result of the accident of 1978.
The initial injury to the toes was quite painful. This pain subsided but by four months post accident when he returned to work a new pain problem was present in the ankle which was an enhancement of the arthritic process, an enhancement caused directly by the gait and weight bearing changes resulting from the bad toes. This condition is permanent and the court finds that the pain and suffering which has been and will be endured was substantially caused by the accident of 1978.
The court awards $25,000 for pain and suffering, past and future, $75,000 for disability and lost wages, past and future; and $2,479.06 for medical expenses. Judgment is rendered in favor of plaintiff and against defendants for the total of $102,479.06, with interest.”

Accordingly, we find that the award of $102,479.06 to plaintiff was well within the great discretion afforded the trier of fact on damages.

For the above and foregoing reasons, the judgment of the trial court is affirmed. Costs of appeal are assessed against the defendants, James A. Alexander, Dupont and Alexander Equipment Corporation and Western World Insurance Company, in soli-do.

AFFIRMED.


source: Caselaw Access Project

author: DOMENGEAUX, Judge.

license: Public Domain

text:
    Doris VIDRINE, Individually, and as Natural Tutrix of her Minor Son, Clifford FULTON, Plaintiff-Appellee, v. STEWART AND LANDRY, INC., et al., Defendants-Third Party Plaintiffs-Appellees, v. Carl E. ROBINSON, Sr., et al., Third Party Defendants-Appellants.
    No. 82-292.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.

      Pugh & Boudreaux, Charles Boudreaux, Lafayette, for defendants-relators.
    Young & Burson, Joseph Ortego, Eunice, Guglielmo & Lopez, James C. Lopez, Opel-ousas, for plaintiff-respondent.
    Woodley, Barnett, Cox, Williams & Fen-et, Terry Thibodeaux, Brame, Bergsgedt & Brame, Joe A. Brame, Lake Charles, for appellee.
    Mouton, Roy, Carmouche, Bivins, Judice & Henke, John Bivins, Lafayette, for defendants-respondents.
    Before DOMENGEAUX, FORET and LABORDE, JJ.
   DOMENGEAUX, Judge.

This action was filed on behalf of a minor, Clifford Fulton, by his natural tutrix, Doris Vidrine, for injuries Clifford sustained when his right foot slipped into a moving grain auger at the facilities of Ba-sile Rice Drier, Inc. The plaintiff, on behalf of her minor son, originally filed suit against defendants, Stewart and Landry, Inc., Long Manufacturing of North Carolina, Inc., and Suck-Up Stayaway. The petition was later supplemented and amended to add James Stewart, Sidney Landry, Fort Worth Steel and Machinery, and Fred Kies-el, d/b/a Kiesel Electric Company. Rock-wood Insurance Company, the workmen’s compensation insurer for Basile Rice Drier, Inc., Clifford’s employer, filed an intervention for workmen’s compensation benefits. Third party demands were filed on behalf of Fort Worth Steel and Machinery and the other defendants against Basile Rice Drier, Inc. and Carl Robinson, Sr., the President of Basile Rice Drier, Inc., as well as their liability insurer, St. Paul Fire & Marine Insurance Company.

In their petition the third party plaintiffs allege that the third party Robinson had actual knowledge of the condition causing the accident. They further allege that the employment of the minor was in violation of the laws of the State of Louisiana as well as various federal laws, and should result in liability on the part of these third party defendants. In addition, it was alleged that third party defendants, because of their deliberate, unlawful, and intentional acts, should be subject to liability inasmuch as said acts give rise to an action in tort not excluded by our workmen’s compensation statute, La.R.S. 23:1021, et seq.

The third party defendants filed a motion for summary judgment and exceptions of no cause of action, alleging that Clifford Fulton was an employee of Basile Rice Drier, Inc., and therefore, the sole remedy was in workmen’s compensation. The third party defendants also claimed that Mr. Robinson was an officer, director, or shareholder of Basile Rice Driver, Inc., and, as such, he was immune from liability under the Executive Officer Act.

This matter was heard before the trial court where the motion for summary judgment and exception were overruled. The third party defendants then filed an application for supervisory writs with this Court. On June 23, 1982, we granted the writ and made it peremptory granting the motion for summary judgment and sustaining the exception of no cause of action, and thereupon dismissed the third party action. Thereafter, our Supreme Court granted writs and remanded the action to us with instructions to allow the issues herein to be briefed, argued, and decided with opinion.

The issues presented on appeal are:

(1) Do third party plaintiffs, by the mere fact that they allege a violation of the child labor laws, establish a claim in tort not excluded by La.R.S. 23:1101; and

(2) Do the factual allegations raised in the third party petition as amended allege facts sufficient to establish a cause of action arising from an intentional tort.

The third party plaintiffs contend that third party defendants’ actions in violating various provisions of the child labor laws of this state expose said defendants to tortious liability not protected by the exclusive remedies afforded under workmen’s compensation. In support of their proposition they cite Boyer v. Johnson, 360 So.2d 1164 (La.1978).

In Boyer, supra, our Supreme Court specifically addressed the issue of whether or not the violation of child labor laws supports a cause of action in tort against an officer or employee of the employer. The Court in Boyer held that although the employer corporation was immune to tort suits against it by its employees, an employer’s individual officers, agents, and other employees could be sued individually, as such, for their own fault where the tortious conduct occurred prior to the 1976 amendment to the workmen’s compensation statute. In the present case, however, the work related injury occurred subsequent to the aforesaid amendment which precludes suits against officers, directors, stockholders, partners, employees, or principals for their tortious conduct (other than intentional acts) resulting in work related accidents. We do not view Boyer as giving rise to a separate cause of action in tort, as well as workmen’s compensation, whenever it can be shown that the violation of child labor laws occurred and said violation is proximately linked to the on-the-job injury. For that reason, we find that Boyer is limited to its facts and has no application herein.

Secondly, the third party defendants aver that the third party plaintiffs have not alleged sufficient facts to establish a cause of action in intentional tort, and therefore, the trial court erred in overruling their exception of no cause of action. We agree.

La.R.S. 23:1032 grants to an injured employee an exclusive remedy in workmen’s compensation benefits against his employer, or any principal or officer, director, stockholder, partner, or employee of such employer or principal. The exception to this tort immunity is injury resulting from an intentional act.

The Louisiana Supreme Court in Bazley v. Tortorich, 397 So.2d 475 (La.1981) gave the following test for intentional tort in the context of the above mentioned statute:

“... we construe the legislation under review as providing that the exclusive remedy rule shall be inapplicable to intentional torts or offenses. The meaning of intent in this context is that the defendant either desired to bring about the physical results of his act or believed they were substantially certain to follow from what he did. Several courts of appeal have stated the two prongs of the definition in the conjunctive, thus requiring a plaintiff to prove, in order to recover, that the defendant desired the physical results of his act in every case ....
Intent is not, however, limited to consequences which are desired. If the actor knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result.”

The issue of the intentional tort exclusion was recently dealt with by this Court in Shores v. Fidelity & Casualty Company of New York, et al., 413 So.2d 315 (La.App. 3rd Cir.1982), and Freeman v. Insurance Company of North America, et al., 413 So.2d 692 (La.App. 3rd Cir.1982). Both cases reiterate the position that courts may disregard allegations which are not facts but are mere conclusions of the pleader.

The third party plaintiffs allege that Carl E. Robinson, Sr. committed an intentional tort that caused Clifford Fulton’s injury, and therefore Mr. Robinson is exempted from the workmen’s compensation exclusive remedy provision. The allegations were worded specifically to meet the Bazley test for allegations of intentional tort. However, these allegations are mere conclusions of the pleader and are not facts. In Shores, supra, we address this exact issue as follows:

“... Accepting as true all of the allegations of fact as to the acts and omissions of the defendants, they do not constitute facts which show that defendants had knowledge that this plaintiff or any other employee assigned this job was substantially certain to be seriously injured in an accident as a result of the alleged acts and omissions. There are no specific facts pleaded to show how or why the defendants knew plaintiff’s injury was a substantial certainty, nor are any facts pleaded as to the knowledge of any defendant of unsafe conditions under which the plaintiff was working.”

Since the third party plaintiffs’ petition does not contain allegations of the actual facts upon which the assertion is based, the petition does not set forth a cause of action for intentional tort against the third party defendants. In light of the recent decisions, the trial court’s denial of appellant’s exception of no cause of action was in error. Also, appellant’s motion for summary judgment should have been granted by the trial court, dismissing the third party demand against Basile Rice Drier, Inc., Carl Robinson, Sr., and his insurer, St. Paul Fire & Marine Insurance Company.

For the above and foregoing reasons the judgment of the trial court is reversed and it is hereby Ordered, Adjudged, and Decreed that there be judgment herein in favor of third party defendants and against third party plaintiffs sustaining said defendants’ exception of no cause of action and granting their motion for summary judgment.

All costs at trial and on appeal are assessed against the third party plaintiffs.

REVERSED AND RENDERED.

      .Actually, the allegations of third party plaintiffs concerning third party defendants are based upon the acts or omissions of third party defendant, Carl Robinson, Sr.

      . Acts of the State of Louisiana 1976 Act # 147.

      . 420 So.2d 449 (La.1982).

      . It is alleged that the third party defendants violated La.R.S. 23:161 et seq., in employing a minor to do work restricted under state statute.

      . Prior to Act 147 of 1976, an officer or agent of an employer could be held liable in tort for his own personal fault, notwithstanding the employer’s immunity. See La.R.S. 23:1101 (prior to the 1976 amendment).

      .The court in Boyer also noted that in that case neither pleadings nor briefs raised the issue of workmen’s compensation as the exclusive remedy of recovery for work related injuries.


author: GUIDRY, Judge.

text:
    Albert C. SMITH, Plaintiff-Appellant, v. ROYAL GLOBE INSURANCE COMPANY et al., Defendants-Appellees.
    No. 82-323.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.

      Kramer & Hammill, Joseph Kutch, Alexandria, for plaintiff-appellant.
    Trimble, Randow, Percy, Smith, Wilson & Foote, Lon P. Wilson, Alexandria, for defendants-appellees.
    Before GUIDRY, CUTRER and STOKER, JJ.
   GUIDRY, Judge.

This lawsuit arises out of an accident which occurred on February 1, 1981. Albert C. Smith, plaintiff-appellant, was driving a vehicle which he had borrowed from Walker Oldsmobile Company, Inc. (hereafter Walker) which he was considering purchasing. Smith alleges that the accident was caused by an underinsured motorist and he sued Royal Globe Insurance Company (hereafter Royal Globe) alleging that it provided uninsured and underinsured motorist coverage on the automobile he was driving through a policy issued to Walker. The policy covering the automobile in question, was in fact issued to Walker by American & Foreign Insurance Company (hereafter American), a member of the Royal Insurance Group. Royal Globe did not issue any policy of insurance to Walker. Both Royal Globe and American responded to the plaintiff’s suit and a motion for summary judgment was filed by both, with it being noted that American had been erroneously referred to as Royal Globe. This is not an issue on the present appeal. The motion for summary judgment was granted on the ground that Smith was not one of the named individuals covered by the underin-sured motorist clause of the insurance policy. Smith appeals from the judgment dismissing his suit.

Smith contends that the policy of liability insurance in effect on February 1, 1981 between Walker and American provided underinsured motorist protection and medical payments for him since he was using Walker’s automobile with Walker’s express permission.

There is no dispute that Foster Walker, III, the duly authorized agent of Walker, executed a written rejection of uninsured motorist coverage, rejecting said coverage as to all persons except certain named individuals and their spouses, and that Smith was not one of those named individuals. Smith’s only argument is that such a waiver is against public policy.

The sole issue on appeal is whether or not the insured can elect to waive all uninsured motorist coverage except as to certain named individuals.

Louisiana Statutes Annotated R.S. 22:1406D(1)(a) provides in part:

“No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in not less than the limits of bodily injury liability provided by the policy ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; provided, however, that the coverage required ... shall not be applicable where any insured named in the policy shall reject in writing- the coverage or select lower limits....” (Emphasis ours)

The intent of our uninsured motorist statute and the policy endorsement issued thereunder is to afford protection to the insureds when they become the innocent victims of the negligence of uninsured motorists. Booth v. Fireman’s Fund Insurance Company, 253 La. 521, 218 So.2d 580 (La.1969). However, the statute specifically gives the named insured the right to waive uninsured motorist coverage. The obvious legislative intent was to give to the named insured the option to waive uninsured motorist coverage and thus decrease his insurance premiums to an affordable rate.

Smith contends that the rejection of uninsured or underinsured motorist insurance for all persons not expressly named on the rejection form is void as contrary to the public policy of this state. He relies on Elledge v. Warren, 263 So.2d 912 (La.App. 3rd Cir.1972), writ refused, 262 La. 1096, 266 So.2d 223 (La.1972) and Guillot v. Travelers Indemnity Company, 338 So.2d 334 (La.App. 3rd Cir.1976), writ denied, 341 So.2d 408 (La.1977), both of which concern certain policy exclusions inserted by the insurer which sought to limit uninsured motorist protection. Elledge and Guillot are inapposite. Neither of the cited cases involved a situation where the named insured had specifically rejected uninsured motorist coverage. Rather in both cases the insured had opted for uninsured motorist protection. In Elledge, we held that LSA-R.S. 22:1406D(1), which requires uninsured motorist protection unless specially waived, did not allow the exclusion inserted by the insurer in that the provision narrowed the coverage mandated by the statute. This holding was followed in the Guillot case which involved a similar situation.

It is Smith’s contention that the public policy of this state, as expressed by the Legislature, is no less binding on Walker than it is on the insurance industry. We cannot agree. The mandatory provisions of the statute which prohibited the policy exclusions inserted by the insurer in Elledge and Guillot are expressly inapplicable when there is a waiver by the insured. Furthermore, the statute is directed to the insurer not the insured.

Smith further contends that the mandatory provisions of the statute are only inapplicable where the named insured totally rejects coverage, not where the named insured rejects only a portion of the coverage. We disagree. The greater right to waive uninsured motorist coverage in its entirety logically includes the lesser right to reject only a portion of the coverage. By rejecting uninsured motorist coverage for all insureds except certain specified insureds, the named insured was able to retain some uninsured motorist coverage at a premium he could afford. The purpose of the statute is not served by requiring the named insured to reject uninsured motorist coverage entirely rather than reject uninsured motorist coverage except as to certain named individuals. This is quite different from the situation in Elledge and Guillot.

We conclude that neither the statute nor public policy invalidates the waiver by the named insured of uninsured or underin-sured motorist coverage except as to a certain specified group of individuals.

For the reasons assigned the judgment of the trial court is affirmed. All costs of the appeal are assessed against the plaintiff-appellant, Albert C. Smith.

AFFIRMED.


author: DOUCET, Judge.

text:
    Eula Mae LOGAN, et al., Plaintiffs-Appellants, v. Dan HOLLIER, et al., Defendants-Appellees.
    No. 82-329.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.

      Ortiz & Barriffe, Eugene Barriffe, Jr., New Orleans, for plaintiffs-appellants.
    Sanders, Downing, Kean & Cazedessus, Charles S. McCowan, Jr. and Pamela C. Walker, Baton Rouge; Onebane & Associates, James L. Pate, Lafayette, for defendants-appellees.
    Before CULPEPPER, DOUCET and YELVERTON, JJ.
   DOUCET, Judge.

The trial judge found that no direct action exists against an interlocal risk management agency and, accordingly, dismissed plaintiffs’ claim against defendant Louisiana Municipal Risk Management Agency. Plaintiff appeals. We affirm.

The plaintiff, Eula Mae Logan, filed suit in her capacity as administratrix of the estate of her minor grandchildren for damages resulting from the death of her daughter, Glenda Jean-Lewis, the mother of five minors.. Named defendants were two police officers of the City of Breaux Bridge, the City of Breaux Bridge, the Breaux Bridge Police Department and an unknown insurer. The petition was amended to name as defendants members of the Breaux Bridge City Council and the Chief of Police of the Breaux Bridge Police Department. The petition was amended a second time, with leave of court, to add as defendant the Louisiana Municipal Risk Agency, an association formed pursuant to LSA-R.S. 33:1341 et seq. for the development and administration of an interlocal risk management and group self insurance funds, which insures the City of Breaux Bridge. Louisiana Municipal Risk Management Agency, hereinafter referred to as LMRMA, filed an exception of no right or cause of action on the grounds that it was not an insurer, therefore no direct action existed against it under LSA-R.S. 22:655. The exception was sustained and judgment was rendered dismissing the plaintiff’s claim against LMRMA. From that judgment plaintiff perfected the present appeal.

Issues presented on appeal are: 1) Whether defendant LMRMA is subject to direct action as an insurer; 2) Alternatively, is the plaintiff a third party beneficiary of the contract between defendant LMRMA and the City of Breaux Bridge; and 3) Whether a statutory scheme which purports to prevent a right of direct action against interlocal risk management agencies is discriminatory and a denial of equal protection.

As stated by appellant, LMRMA is a de facto insurer functioning, in all respects, as an insurance company with the sole exception, perhaps, of the profit factor. The organization is established pursuant to LSA-R.S. 33:1341 which was enacted with the intended purpose of affording financial relief to the participating political subdivisions by allowing them to pool their resources to form a trust fund under which municipalities could be self insured while still providing the protection theretofore maintained.

Sub-part B of the Intergovernmental Functions portion of Local Government provisions contained in Title 33, entitled Joint Self-Insurance Programs by Local Governmental Subdivision, contains the following section which was the basis for dismissal of plaintiff’s claim against LMRMA:

§ 1345. Interlocal risk management agency not an Insurance company or Insurer
An interlocal risk management agency is not an insurance company or an insurer under the laws of this state and the development and administration by such agency of one or more group self insurance funds shall not constitute doing an insurance business. Intergovernmental agreements providing for the creation and maintenance of an interlocal risk management agency shall not be deemed to constitute insurance as defined by R.S. 22:5, nor shall the interlocal risk management agency or the development of a group self insurance fund be subject to the provisions of Title 22, Chapter 1, of the Louisiana Revised Statutes of 1950. Added by Acts 1979, No. 462, § 1.

By its clear and unequivocal terms, an in-terlocal risk management agency is not an insurance company nor will its actions constitute doing an insurance business. Equally clear is that such an interlocal risk management agency is not subject to the provisions of Title 22, Chapter 1 of the Louisiana Revised Statutes. The direct action statute, R.S. 22:655, is one of the provisions of Chapter 1 of Title 22. Nevertheless, appellant contends that the Legislature only intended to remove the risk management agencies from the “regulatory aspects” of Title 22 and did not intend to preclude direct actions. However, had the Legislature intended such a limited qualification, it could have easily done so. When a law is clear and free from ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. LSA-C.C. Art. 13; Gill Trailer & Equipment Rentals, Inc. v. S. D’Antoni, Inc., 282 So.2d 714 (La.1973). We find nothing in the statutes indicating any contrary interpretation. Without enabling legislation, the right to direct action does not exist. Vincent v. Penrod Drilling Co., 372 So.2d 807 (La.App. 3rd Cir.1979). R.S. 33:1345’s meaning is entirely free from ambiguity: No direct action is available under the circumstances presented.

With regard to appellant’s contention that the contract between LMRMA and the City of Breaux Bridge is a stipulation pour autrui, the requisites to such a claim were set forth in Crowley v. Hermitage Health and Life Ins. Co., 391 So.2d 53 (La.App. 3rd Cir.1980), wherein an employee sued an insurance company as third-party beneficiary of an accident policy issued by defendant to the self-insured employer. This court in Crowley stated:

“The general rule is that parties to a contract may stipulate only for themselves.4 As a result, a third person not a party to a contract lacks the relationship necessary to sue for recovery of any of the contractual benefits. Nevertheless, there is an exception recognizing that contracting parties may agree between themselves that a third person not a party to their contract may derive benefit from it.5 This is the stipulation pour autrui and it allows the third party, for whose benefit the advantage is stipulated, an action to enforce the stipulation. The requirements of a stipulation pour autrui are that it be in writing and that it clearly express the intent to benefit another. See LSA-C.C. Art. 1890 and Art. 1902. With respect to this second requirement of clear intent by the parties to benefit one not a party, Professor J. Denson Smith, in his law review article on third party beneficiaries, warned:
“But it is also true that not every promise, the performance of which may be advantageous to a third person, will create in him an actionable right. The problem is to separate the cases where an advantage has been stipulated from those where the advantage relied upon is merely an incident of the contract between the parties.”6 (footnotes omitted)

See: Smith, Third Party Beneficiaries in Louisiana: The Stipulation Pour Autrui, 11 TUL.L.REV. 18 (1936).

In support of her position plaintiff calls our attention to the policy language which provides that when “the amount of ultimate net loss becomes certain, the company will, upon request of the insured, make such payment to claimant on behalf of the insured.” (emphasis added). Although the requirement of writing is clearly present, we find no provision in the contract which either evidences an intent to create a stipulation pour autrui or obliges the defendant to make payments to plaintiff. Rather, the policy contemplates determination of liquidated damages and subsequent request by the insured for indemnity as a condition precedent to recovery by plaintiff. We consider the contract to be for the benefit of the city and any benefit ultimately received by plaintiff is a mere incident of the obligation owed the City.

Related hereto is Fontenot v. Marquette Casualty Co., 258 La. 671, 247 So.2d 572 (1971), holding that neither contract of reinsurance nor the direct action state conferred rights in third party against the reinsurer; and Allen and Currey Manufacturing Co. v. Shreveport Waterworks Co., 113 La. 1091, 37 So. 980 (1905), reaching a like result under analagous circumstances.

Finally, appellant makes the ipse dixit claim that the statutory scheme is discriminatory and violative of due process. However, inasmuch as appellant cites no authority in support of her proposition, we need not address this issue. We pretermit, without holding, that a rational basis exists for the classifications imposed by the legislative scheme whereby direct action is not available against interlocal risk management agencies.

For the reasons assigned, the judgment of the trial court dismissing the claim of plaintiff against Louisiana Municipal Risk Management Agency is affirmed at appellant’s cost.

AFFIRMED.


text:
    FARMERS DUSTING COMPANY, INC., Plaintiff-Appellant, v. Sidney GIBBS and Parker Gibbs, Defendants-Appellees.
    No. 82-332.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.

      Boatner & Luke, R.H. Luke, Bunkie, for plaintiff-appellant.
    Robert Royer, Alexandria, for defendant-appellee.
    Before DOMENGEAUX, FORET and LABORDE, JJ.
   DOMENGEAUX, Judge.

Plaintiff, Farmers Dusting Company, Inc., brought this suit to enforce a laborers and materialman’s lien and privilege on crops and for judgment on open account in the amount of $26,000.00 against defendants, Sidney Gibbs and Parker Gibbs, individually, and doing business as Gibbs Farms, a Louisiana farming operation.

Parker Gibbs filed an exception of no right of action which was maintained by the trial judge, on the grounds that Parker was an employee and not a partner with Sidney Gibbs in Gibbs Farms. It is this judgment that the plaintiff has appealed.

The record shows that in 1977 the defendant, Sidney Gibbs, was in dire financial straits, and he asked his son, Parker, to stay on the farm until they could get it back on its feet. Sidney paid Parker a salary of approximately $750.00 a month, furnished him with living quarters, a pickup truck and an automobile, and paid Parker’s gasoline and phone bills. The record also shows that Sidney Gibbs retained total control of the farming operation and was obligated to pay all losses the farm might suffer. Sidney Gibbs also owned all of the farm equipment and the pickup truck and automobile used by Parker. Management decisions regarding the operation of the farm were made by Sidney Gibbs. No partnership income tax returns were ever filed by Sidney and Parker Gibbs. The testimony of both men reveals that neither of them ever intended to form a partnership or joint venture.

La.C.C.P. Article 927(5) lists the objection of no right of action, or no interest in the plaintiff to institute the suit, as one which may be raised through the peremptory exception. In reference to this, the Court in Invest, Inc. v. State of Louisiana, 247 So.2d 175 (La.App. 1st Cir.1971), commented:

“The want of interest raised by the exception relates primarily to whether the particular plaintiff falls as a matter of law within the general class in whose favor the law grants the cause of action sought to be asserted by the suit, with the factual evidence admissible being restricted as to whether this particular plaintiff does or does not fall within the general class having legal interest to sue upon the cause of action asserted.”

We are of the opinion that the trial court erred in maintaining Parker Gibbs’ exception of no right of action. Although there appears to be ample support in the record for the trial judge’s conclusion that Sidney and Parker Gibbs were not partners, we find the record devoid of evidence indicating that the plaintiff lacked a legal interest in the subject matter of the litigation. Actually, the evidence that was presented dealing with the existence or non-existence of a partnership between Sidney and Parker Gibbs should not have been admissible in the hearing on the exception of no right of action under the rule established in Invest, Inc., supra. Clearly, Farmers Dusting Company was a member of the general class having a legal interest to sue upon the cause of action asserted and its suit against Parker Gibbs was improperly dismissed.

The exception of no right of action is not available to urge a defense to the effect that the plaintiff is without interest simply because the defendants have a defense to the suit. West v. City of Ville Platte, 237 So.2d 730 (La.App. 3rd Cir.1970); Invest, Inc., supra. The non-existence of a partnership between Sidney and Parker Gibbs simply constituted a defense to the plaintiff’s action. Such defense should have been pled by Parker Gibbs by way of an answer and tried on the merits.

For the above and foregoing reasons, it is Ordered, Adjudged, and Decreed that the judgment of the trial court maintaining the peremptory exception of no right of action filed by Parker Gibbs against Farmers Dusting Company, Inc., be and the same is hereby reversed.

It is further Ordered that this case be remanded to the trial court for proceedings not inconsistent with this opinion.

All costs at the hearing of the exception of no right of action and on appeal are assessed against Parker Gibbs.

REVERSED AND REMANDED.


author: YELVERTON, Judge.

text:
    The ADVERTISER DIVISION OF THE INDEPENDENT, INC., Plaintiff-Appellee, v. SOUTHWEST MORTGAGE AND INVESTMENT, INC., Defendant-Appellant.
    No. 82-330.
    Court of Appeal of Louisiana, Third Circuit.
    Dec. 22, 1982.
    J. Lomax Jordan, Jr., Lafayette, for defendant-appellant.
    Victor E. Kellner, of Dragon & Kellner, Lafayette, for plaintiff-appellee.

      Before CULPEPPER, DOUCET and YELVERTON, JJ.
   YELVERTON, Judge.

Defendant appeals from a judgment on open account in the amount of $1,967.84. We affirm.

Plaintiff, The Advertiser Division of the Independent, Inc., is in the newspaper business. Defendant, operating under the name of Southwest Mortgage, is in the mortgage loan business. Between July, 1979 and January, 1981, Southwest Mortgage ran periodic advertisements in the plaintiff’s daily newspaper. The accounts were paid with regularity through September, 1980. The amount sued for represents the charges for advertising for the four month period between October, 1980 and January, 1981.

Southwest Mortgage opened its account with The Advertiser in July, 1979. The mortgage company provided its own advertisement layout which consisted of its name, its address and phone number, and information concerning the availability of loans. After the initial contact and credit arrangements, all business between plaintiff and defendant was conducted by telephone, with someone from Southwest Mortgage simply calling the newspaper and requesting that the advertisement be run. The layout never changed during the 19 months the advertisements were run, except that during the month of July, 1980, three ads appeared which added the words “Jude Du-hon” to the normal format.

The defense at trial and the basis for this appeal is the contention that the plaintiff did not prove the defendant contracted for the advertising services rendered during the contested period. The factual basis for this defense appears to be, as testified by Southwest Mortgage’s president and major stockholder, that he suspended operation of his company’s business for a period of “three or four months” sometimes during 1980, and allowed one Jude Duhon, a broker, to take over the premises and phone number and operate Duhon’s separate brokerage business there. Defendant accordingly contends that all ads run after it suspended operations and Jude Duhon began conducting his business from the premises were not authorized by defendant and therefore were not its debt. From this position defendant further contends that even after it resumed its business operation, which we find from the evidence to have been no later than September 30, 1980, it is not liable for bills incurred after that date.

There is no legal or factual basis to support these contentions. A creditor suing on open account has the burden of proving that the defendant, alleged to be the debtor, contracted for the sales on open account. Ville Platte Concrete v. Western Casualty and Surety, 399 So.2d 1320 (La.App. 3rd Cir.1981). Plaintiff produced evidence that an open account existed for 19 months and that every ad it ran was done on the basis of a telephoned request from Southwest Mortgage. Even if plaintiff might be said to have established it was not responsible for the bills incurred during the period when its president-owner was, as he described it, “on vacation” (July, August and September) the record shows the bills for those months are not at issue for they have been paid, apparently by the party placing the ads. Only the ads placed after September 30, 1980, are unpaid. There is no question that the unpaid ads were run in the newspaper, nor is there any question that defendant was back in business and that Jude Duhon was no longer doing business at that address. The trial court found that these ads were run at the request of defendant pursuant to the open account contract that .continued to exist between the parties. We find no error in these conclusions.

. The judgment of the trial court is affirmed and defendant is cast for costs on appeal.

AFFIRMED.


text:
    MONEY MART, INC. OF MENDENHALL, d/b/a Money Mart Mortgages of Pascagoula, et al. v. John T. LOMAX, Jr.
    No. 53821.
    Supreme Court of Mississippi.
    Dec. 15, 1982.
    Rehearing Denied Jan. 12, 1983.
    Motion for Reconsideration Overruled Jan. 26, 1983.
    Robert R. Marshall, Jackson, for appellant.
    Jones, Maples & Lomax, Lowry M. Lo-max, F. Gerald Maples, Pascagoula, for ap-pellee.
   Appeal from Circuit Court, Jackson County; Robert T. Mills, Judge.

Before WALKER, P.J., and HAWKINS and DAN M. LEE, JJ.

AFFIRMED.


text:
    Nathaniel COUSINS v. STATE of Mississippi.
    No. 53601.
    Supreme Court of Mississippi.
    Jan. 12, 1983.
    Owens & Byrd, Isaac K. Byrd, Jr., Jackson, for appellant.
    Bill Allain, Atty. Gen. by Billy L. Gore, Asst. Atty. Gen., Jackson, for appellee.
   Appeal from Circuit Court, Hinds County; L. Breland Hilburn, Acting Judge.

Before PATTERSON, C.J., and ROY NOBLE LEE and PRATHER, JJ.

AFFIRMED.


text:
    W.L. PITTMAN, et al. v. Charles L. PITTMAN.
    No. 53551.
    Supreme Court of Mississippi.
    Jan. 12, 1983.
    Al D. Eatmon, Jackson, for appellants.
    McDavid, Edmonson & Noblin, Robert A. Biggs, III, Jackson, for. appellee.
   Appeal from Chancery Court, Hinds County; Joe G. Moss, Chancellor.

Before WALKER, P.J., and BROOM and HAWKINS, JJ.

AFFIRMED.


text:
    Georgia Ruth Massey ROWELL v. Robert Bruce MASSEY.
    No. 53526.
    Supreme Court of Mississippi.
    Jan. 12, 1983.
    Thomas Tucker Buchanan, Billie Jean Graham, Laurel, for appellant.
    R.K. Houston, Jr., Bay Springs, for appel-lee.
   Appeal from Chancery Court, Jasper County; Osborn Guyton Idom, Chancellor.

Before WALKER, P.J., and BROOM and HAWKINS, JJ.

AFFIRMED.


text:
    Dan Terry GRIFFIN v. STATE of Mississippi.
    No. 53579.
    Supreme Court of Mississippi.
    Jan. 14, 1983.
    Johnson & Johnson, Forrest A. Johnson, Natchez, for appellant.
    Bill Allain, Atty. Gen. by Billy L. Gore, Asst. Atty. Gen., Jackson, for appellee.
   Appeal from Circuit Court, Adams County; Edwin E. Benoist, Jr., Judge.

Before WALKER, P.J., and BOWLING and HAWKINS, JJ.

AFFIRMED.


author: TORBERT, Chief Justice.

text:
    GENERAL TELEPHONE COMPANY OF the SOUTHEAST v. ALABAMA PUBLIC SERVICE COMMISSION, et al.
    79-865.
    Supreme Court of Alabama.
    Aug. 6, 1982.
    Rehearing Denied Jan. 7, 1983.

      Robert C. Black, Montgomery, and William C. Fleming and Michael W. Tye, Durham, N.C., for appellant.
    Euel A. Screws, Jr. and James M. Edwards of Copeland, Franco, Screws & Gill, Montgomery, for appellee Alabama Public Service Com’n.
    Charles A. Graddick, Atty. Gem, and Wendell Cauley, Charles A. Guyton, Thomas F. Parker IV, and William A. North, Asst. Attys. Gen., for State of Ala. and Affected Customers of General Telephone Co. of the Southeast.
   TORBERT, Chief Justice.

This is an appeal by General Telephone Company of the Southeast (GTSE) pursuant to the provisions of Code 1975, § 37-1-140, from a utility rate order of the Alabama Public Service Commission (APSC) dated June 21, 1980.

On November 21,1979, GTSE filed a petition for an increase in its rates and charges for intrastate telephone service, seeking an increase of $3,884,207 to allegedly enable GTSE to earn a fair net return on the reasonable value of its property devoted to public service in Alabama, enlarge plants and facilities, and continue to provide adequate service. GTSE’s petition was based upon a “test period” comprised of the twelve months ending June 30, 1979. At the time of the hearings, this “test period” was updated to the year ending December 31, 1979.

Notice of intervention was filed by the Attorney General of Alabama on behalf of affected citizens of Alabama who are customers of the company.

Hearings were held before the APSC on March 4, 5, and 6,1980, and were continued on April 21 and 22, 1980.

On June 21, 1980, the APSC entered its order, together with a separate opinion denying GTSE's proposed rates and directing the utility to file new schedules of rates and charges designed to produce additional revenues of $2.51 million annually (as opposed to $3,884,207 annually as originally sought by GTSE). Such rates (based on the test year ending December 31, 1979) were filed by GTSE on June 26,1980, and approved by an order of the APSC dated July 2, 1980.

On July 18,1980, GTSE filed its notice of appeal.

An appellate expert was appointed to aid and assist the Court in this case. See Code 1975, § 37-1-143; Rule 33(A), Rules of Appellate Procedure.

Essentially the Company raised five issues on appeal:

I. Whether the return on equity of 13.5% is unjust and unreasonably low, resulting in confiscation of the Company’s property.

II. Whether the Commission erred in determining the Company’s revenue requirement on the basis of the allocation of the total capital of the Company to its Alabama intrastate operations rather than the Company’s intrastate rate base, the effect of which would result in a return on equity of less than 13.5%.

III. Whether the reduction of the Company’s “Working Capital” allowance is supported by the evidence.

IV. Whether the reduction of the Company’s maintenance expenses is supported by the evidence.

V. Whether the Commission erred by disallowing the Company’s deduction for “Interest During Construction” (IDC).

I. Whether the return on equity of 13.5% is unjust and unreasonably low, resulting in confiscation of the Company’s property.

The Court’s inquiry into APSC decisions ordinarily goes no further than to ascertain whether there is evidence to support the findings of the APSC. An order of the Commission will not be overturned if supported by legal evidence of substantial weight and probative force. North Alabama Motor Express v. Rookis, 244 Ala. 137, 12 So.2d 183 (1943). Section 37-1-124 prescribes that the Commission’s order shall be taken as prima facie just and reasonable and that this Court shall set aside the order only if it finds: (1) The Commission erred to the prejudice of the appellant’s substantial rights in its application of law; or (2) the order, decision, or award was procured by fraud or based on facts contrary to the substantial weight of the evidence.

However, when confiscation is alleged, and properly presented on appeal, the Court must exercise a broad review to determine upon its independent judgment of both law and facts whether the rates fixed by the Commission fall within these constitutional limits. Alabama Public Serv. Comm’n v. South Central Bell Telephone Co., 348 So.2d 443 (Ala.1977) (hereinafter referred to as Bell 1977). This for the reason that the Legislature is powerless to confer upon its own agency the authority to decide constitutional issues. Alabama Public Serv. Comm’n v. Southern Bell Telephone & Telegraph Co., 253 Ala. 1, 42 So.2d 655 (1949) (hereinafter referred to as Bell 1949).

Several legal principles control the determination of a fair rate of return in order to avoid confiscation.

“I. The reasonable rate of return depends upon many circumstances. It cannot be developed by a rule of thumb calculation. It must be determined in the exercise of a fair, enlightened and independent judgment of all relevant facts.
“II. The rate of return must be equal to that generally being earned by others in the same general locality in business undertakings attended by corresponding risks and uncertainties....
“HI. The return must be sufficient to assure the investor’s confidence in the financial soundness of the utility enterprise and enough to maintain and support its credit so that it will be able to raise the money necessary to improve and expand its service to the discharge of its public duties....
“IV. In determining the reasonableness of rates it is necessary to consider the effect of the rates imposed in the light of the utility’s present situation and in light of its requirements and opportunities. ...
“When considering confiscation, ‘... we should remember the principle that the property of a public utility, although devoted to the public service and impressed with a public interest, is still private property....” [Citation omitted.] “Alabama Public Serv. Com’n v. South Central Bell, 348 So.2d 443, 446 (Ala.1977). See, Alabama Public Serv. Com’n v. Southern Bell T. & T. Co., 253 Ala. 1, 42 So.2d 655 (1949).
“Moreover, we have noted that the effect of the applicable state statutes is to have the Public Service Commission determine utility rates under the theory of a fair rate of return based upon a fair and adequate rate base as distinguished from the cost of capital theory. South Central Bell, supra, [348 So.2d] at 446. State v. Southern Bell T. & T. Co., 274 Ala. 288, 148 So.2d 229 (1962).”

Continental Telephone Co. of the South v. Alabama Public Serv. Comm’n, 376 So.2d 1358, 1361 (Ala.1979). See, Bell 1977, 348 So.2d at 446; Bell 1949, 253 Ala. at 12-14, 42 So.2d 655.

The order of the Commission stated:

“Two witnesses in this proceeding have made recommendations of the Company’s cost of equity. Mr. Jerry N. Austin, Treasurer of the Company, testified on behalf of the Company that its cost of equity was in the range of 15.5% to 16.5%. Dr. Legler, witness for the Attorney General, found the Company’s cost of equity to be in the range of 13% to 14% (Tr. p. 629). Of the two witnesses testifying, we find Dr. Legler’s analysis more convincing. Before addressing Dr. Legler’s analysis and our finding of the Company’s cost of equity, we deem it appropriate to state why we find Dr. Austin’s testimony unconvincing.
“Mr. Austin’s cost of equity recommendation was based on his assessment of current economic conditions, a DCF or discounted cash flow analysis, a risk premium analysis and two ‘reasonableness tests.’
“As pointed out during his cross-examination, there are several inconsistencies in Mr. Austin’s assessment of current economic conditions. Mr. Austin’s DCF analysis was similarly flawed. The DCF approach is a market based approach, but the Company was not traded on the market, so Mr. Austin used a composite or index of several companies as a surrogate. Testimony shows that if Mr. Austin had performed a DCF calculation for each of his “comparable companies” there would be a wide range in the costs of equity, a result one should not get if the companies were truly comparable. The Commission is of the opinion that Mr. Austin did not sufficiently establish the comparability of these companies.
“Mr. Austin’s application of the bond yield-risk premium method purported to be based on a study he had performed between realized returns on utility stocks versus utility bonds over a thirty-five year period; a study of utility stocks and bonds over an alleged period of economic stability; and a study of expected returns for the S & P 400 Index over a period of years less an appropriate bond yield. However, Mr. Austin’s range of risk premium was based not on his studies but the studies of others. The Commission questions the appropriateness of risk premium developed on the basis of date from a time period when interest rates were substantially different from current rates.
“Mr. Austin’s final two procedures, involved (1) examining the realized rate of return of 865 industrial and utility companies with bond ratings similar to the Company’s and (2) a DCF calculation of the expected return for the S & P 400 Industrial Index. We question the comparability of each group, and there has been no showing that they are comparable to the Company. As to the first sample, we note that utilities are ranked by a different method than industrials. In regard to the latter method, there has been no showing of the appropriateness of comparing one company, General Telephone Company of the Southeast, to an index or portfolio of companies, particularly industrial firms.
“Dr. Legler’s analysis used the DCF and risk premium methods in developing his cost of equity estimate. In addition, he offered a comparable earnings approach that supported his other methods. In using his market based approaches, Dr. Legler initially developed cost of equity estimates for GTE and then developed an overall cost of capital for GTE to be used as the fair rate of return on the Company’s equity. In developing his comparable earnings approach, Dr. Legler did not directly consider the double leverage of the GTE system but did identify a group of comparable risk companies, some of which are part of similar holding company arrangements. Using the market-based techniques considering double leverage, Dr. Legler developed a cost of equity estimate of 13.76%. Using the comparable earnings method, Dr. Legler developed a cost of equity range of 13% to 14%.
“Having considered the evidence summarized above ... the Commission finds the Company’s cost of equity to be 13.5%. This finding is within the range of Dr. Legler’s comparable earnings approach and within the range of Dr. Legler’s cost of equity of GTSE, and we feel this is just and reasonable in light of the record and current economic conditions.”

In this case, the Commission had before it the testimony of two expert witnesses: one on behalf of the Company (Austin) and one on behalf of the Attorney General (Legler). The Commission found the testimony of Legler to be more convincing and found a fair rate of return on equity to be 13.5%.

In his testimony Legler expressed that his intention was to “provid[e] the Commission with a range of reasonableness with respect to the cost of equity capital [in order to permit] the Commission the flexibility of weighing other factors such as the rate base and capital structure in its decision, with the assurance that the estimate of the cost of capital is within a reasonable range.” Legler presented a range of 13% to 14% as being a reasonable rate of return on equity. The Commission’s decision of 13.5% was within the reasonable range of 13% to 14%.

‘In State of Alabama et al. v. Southern Bell Telephone and Telegraph Co., 274 Ala. 288, 148 So.2d 229, we quoted the following from the book “A Telephone Rate Case” by E.D. Smith:
“What will constitute a fair return in a given case is not capable of exact mathematical demonstration. It is a matter more or less of approximation about which conclusions may differ....”

General Telephone Company of the Southeast v. Alabama Public Serv. Comm’n, 335 So.2d 151, 156-57 (Ala.1976).

Appellant, in its brief, proposes that this Court hold as a matter of law that, because the appellant’s recent cost of long-term debt exceeds the rate of return fixed on its common equity by the Commission, confiscation results. We cannot agree. Appellant cites McCardle v. Indianapolis Water Co., 272 U.S. 400, 418-419, 47 S.Ct. 144, 151, 71 L.Ed. 316 (1926), for the proposition that: “It is well settled that an equity investor will require a higher rate of return than he could achieve by investing in long-term or short-term debt.” A reading of McCardle shows that the Commission found 7% to be a reasonable rate of return even though the Company through expert witnesses introduced evidence supporting higher rates of return of 7.5% to 8% and a six-month average of the rates of yield to investors on certain public utility bonds to be 7.33 percent. The Court stated: “Obviously, the cost of money to finance the whole enterprise is not measured by interest rates plus brokerage on bonds floated for only a part of the investment.” 272 U.S. at 419, 47 S.Ct. at 151.

In Denver v. Denver Union Water Co., 246 U.S. 178, 38 S.Ct. 278, 62 L.Ed. 649 (1918), the Court did hold that a 4.2812 percent net return was confiscatory. However, in our study of the case it appears that the Court did not grant the Company 6% on the basis that was the prevailing rate of interest for secured loans on business and residential properties in Denver. The Court only noted that the finding of the master that 6% was the prevailing rate of interest was not challenged; that the question of the rate of compensation that may be regarded as sufficient depends greatly upon circumstances and locality; and that the return yielded by the ordinance (4.2812%) was inadequate.

Even if we did interpret these cases as appellant proposes, in the exercise of “fair, enlightened judgment of all relevant factors” we cannot conclude that as a matter of law confiscation results when a company’s cost of long-term debt exceeds the rate of return fixed by the Commission, because (1) economic conditions in those early days were obviously more stable than present economic conditions; (2) current inflationary trends cause prevailing rates of interest to widely fluctuate; and (3) investors place their funds for varying reasons not always related to the highest rate of return they could receive.

It is common knowledge that investors purchase debt securities to produce fixed income and purchase equity securities for the purposes of producing income and getting appreciation in value. Moreover, it is common knowledge that investors purchase equity securities that in fact produce less income than debt securities of the same business because of the prospects of enhancement of value in the future.

Considering the evidence in the record and the rules with respect to our standard of review where the issue of confiscation is presented, we are unable to find that a rate of return on common equity for this Company as determined by the Commission at 13.5% is confiscatory. This determination is not only based upon the evidence of record, but this Court also makes its finding based upon its exercise of “fair, enlightened judgment of all relevant factors.”

II. Whether the Commission erred in determining the Company’s revenue requirement on the basis of the allocation of the total capital of the Company to its Alabama intrastate operations rather than the Company’s intrastate rate base, the effect of which would result in a return on equity of less than 13.5%.

The Company claims that the Commission erred by not determining the revenue requirement on the basis of a fair rate of return on the statutory rate base, but instead using the “cost of capital” theory in disregard of the mandate of our statute. The counter argument advanced by the Attorney General is simply that the Commission is not required to use any particular methods in establishing revenue requirements. Both the Company and the Attorney General cite to us the Bell 1977 case and Continental Telephone Company of the South v. Alabama Public Serv. Comm’n, 376 So.2d 1358 (Ala.1979). However, at the time these cases were decided, the Alabama statute provided for the addition to the rate base of “new investment to be added” in the year following the text period. Under the law at that time, it was obvious that the statutory rate base would likely exceed capital structure. Prior to the statute authorizing the “new investment adder” in 1971, this Court in State v. Southern Bell Telephone and Telegraph Co., 274 Ala. 288, 148 So.2d 229 (1962), clearly held that:

“As we interpret the above statutes, their effect is to have our Public Service Commission determine utility rates under the theory of a fair rate of return based upon a fair and adequate rate base, as distinguished from the so-called ‘cost of capital’ theory for determining the rate of return.”

274 Ala. at 290, 148 So.2d 229.

We hold that, as a general proposition, under our statute (Code 1975, § 37-1-80) Alabama follows the “rate base theory” in its legislative determination of revenue requirements to entitle a utility to “just and reasonable rates.” The application of this principle of law is made difficult in situations where, as here, the Company does not maintain its books and records separately for computation to establish an intrastate

rate base for Alabama. However, the Commission in its order found the Alabama Intrastate Rate Base to be $64,950,465. Using the methodology in dispute, the Commission allowed a rate of return on only $64,255,473, thereby reducing the amount upon which the Company is entitled to a return by $694,992. We agree with the contentions of the Company that the Commission should have determined the Company’s revenue requirements based on its intrastate rate base, including its component parts.

Many of the additional arguments of the parties relate to whether these disputed methods of computations of capital structure, rate base and the determination of revenue requirements constitute confiscation as a matter of law. Because we have decided in this case that a 13.5% rate of return on equity does not result in confiscation, we see no necessity to further consider that issue here. Suffice it to say that there must be much broader considerations and a much broader judicial scope of review where the issue of confiscation is properly presented. As this Court held in Alabama Power Co. v. Alabama Public Serv. Comm’n, 390 So.2d 1017 (1980):

“The rate of return on the common equity portion of the statutory rate base is an essential and helpful computation in determining a fair rate of return on the rate base; however, the ultimate question of a fair rate of return cannot be determined by a strict adherence to a combination of the results given by such mechanical computations.”
“As stated earlier, the determination of a fair rate of return is not limited to the composite results of strict mathematical formulae. Furthermore, an examination of an order of the Commission to determine whether the rate of return is confiscatory must include an examination of all the elements of which it is composed."

390 So.2d 1024, 1025.

III. Whether the reduction of the Company’s “Working Capital” allowance is supported by the evidence.

The order of the APSC stated:

“RATE BASE
“As with operating results, the Company offered the testimony of Mr. Pertler in support of its rate base. The Company claimed that the reasonable value of its property devoted to public service as of December 31, 1979, was $68,122,536 (Ex. 25). The rate base offered by Mr. Pertler included $64,677,072 of net telephone plant and $3,445,464 of working capital allowance.
“In brief, the Attorney General has argued that the Company’s rate base was overstated and should be rejected. As an alternative the Attorney General suggested a rate base of $65,757,810 composed of $64,751,647 net telephone plant and $1,006,163 working capital allowance.
“Most of the contentions between the parties concerning rate base were associated with the allowance for working capital. The Company proposed that the Commission allow $1,276,774 of materials and supplies and $2,168,690 of cash working capital as the working capital allowance. The $1,276,744 of materials and the supplies was the intrastate portion of the December balance of the Company’s combined Alabama operations. The $2,168,690 of cash working capital was one-eighth of the Company’s proposed operating expenses for the test year. That one-eighth or forty-five day factor was based on a lead-lag study done for the Company’s total operations in 1972 (Tr. p. 305, Ex. 44).
“The Office of the Attorney General argued that the materials and supplies balance for December 1979 was highly overstated, that it peaked far above the average for the year, and that the balance has since dropped appreciably. Suggesting that the use of the December balance would result in an overstatement of rate base, the Attorney General urged the Commission to adopt a thirteen month average for materials and supplies.
“The intrastate portion of that average was $1,006,163 versus the Company proposal of $1,276,774.
“In regard to cash working capital, the Office of the Attorney General urged the Commission to disallow the entire allowance proposed by the Company. Several reasons were offered in support of their contention. It was argued that since the record showed that rate base for the Company as a whole would exceed capitalization, a prima facie showing was made that rate base was excessive and that the excess lay in cash working capital. Indeed, Mr. Pertler admitted during cross-examination that rate base and capitalization should be equal. (Tr. p. 313). Upon the demonstration by Commission staff that such a situation would not exist for the Company as a whole, Mr. Pertler suggested that capitalization would not equal rate base at a given point in time because of the dynamic nature of current liabilities (Tr. p. 861), and because of good financial management (Tr. p. 505). Those responses formed the basis for another of the Attorney General’s arguments against allowing a cash working capital allowance; namely, that if indeed via the Company’s financial management, the Company’s cash flows were so good that non-investor supplied funds were supporting rate base, then the need for any cash working capital was a moot issue and the justification for said allowance was null and void.
“The Attorney General offered several other reasons for disallowing the proposed allowance. It was argued that the lead-lag study on which the allowance purported to be based was deficient in two serious respects. First, that the study was dated and obsolete. Second, and more important, that the study was based on the Company’s entire operations throughout the southeast and not on Alabama intrastate operations. It was also argued that the one-eighth or formula method has recently been questioned as arbitrary and inaccurate.
“Having reviewed the positions of both of the parties, the Commission adopts the working capital allowance advocated by the Office of the Attorney General. A review of the Company’s monthly bal-anees of materials and supplies during the test year and the available months thereafter does in fact demonstrate and confirm the Attorney General’s premise that the use of the December balance for materials and supplies is atypical of the test year and the months thereafter. The December balance exceeds the thirteen month average of December 1978 through December 1979 by $377,579 (Alabama Combined Operations), and is well over $100,000 higher than any balance in the first quarter of 1980 predicated on the operating reports as filed with this Commission. In adopting year end figures we must be careful not to distort the revenue-expense-investment-capital relationship. Adoption of the Company’s allowance for materials and supplies would distort the investment part of that relationship.
“As to the cash working capital, we are determined to disallow it primarily based on the arguments advanced by the Attorney General; namely, (1) the empirical data (lead-lag study) purporting to support it is dated and obsolete, having been performed in 1972 for the total Company’s operations; and (2) the formulistic, Vs methodology is currently undergoing question by the very agency which authored it, thereby causing us to ponder whether said methodology has retained appropriateness and propriety within the present dynamics of utility rate-making. Moreover, we are impressed by the scenario wherein the Attorney General discusses the apparent inequity between rate base and capital, and attributes said difference most probably to cash working capital. We, too, are convinced that no allowance should be made for rate base which is supported by non-investor supplied funds and shall elaborate on that position in this opinion under the caption of ‘Capital Structure.’ ”

Working capital is the net investment required in a business enterprise to maintain the day-to-day operations, as opposed to investment which is committed for a longer period. According to the 1972 year-end study offered by GTSE, working capital was computed by considering compensating balance requirements, lag in the payment of invoices, advance billings, billings in arrears and customer deposits. The working capital requirement was applied to operating expenses in order to determine a ratio, thus providing a “working capital allowance” for inclusion in the rate base. This allowance is supposed to compensate investors for the use of their money in the day-to-day operations of the utility.

The working capital allowance can be divided into two segments: (1) Materials and supplies and (2) cash working capital. The attorney general recommended $1,006,163 for the materials and supplies segment versus $1,276,774 claimed by the company. The attorney general recommended zero dollars for the cash working capital segment verses $2,168,690 claimed by the company. The APSC adopted both of the attorney general’s recommendations and allocated $1,006,163 for the working capital allowance. In reviewing the working capital allowance by the Commission we are faced with two questions: (1) Was the reduction of the materials and supplies segment justified and (2) can the Commission deny the company any dollar amount for the cash working capital segment? The Commission justifies its decision regarding the reduction of the material and supplies segment by declaring the amount requested by the company to be unusual and not representative of the test year. The Commission states that the monthly balance for the allowance claimed by the company exceeds the test year average monthly balance by $377,579 and is over $100,000 higher than any monthly balance in the first quarter of the year following the test year.

The justification offered by the Commission for its denial of any cash working capital is premised on the argument by the Attorney General that (1) the lead-lag study is obsolete; (2) the Vs formula is undergoing review; and (3) the company’s rate base is greater than its capital structure.

There are two principles concerning this allowance which have been recognized by this Court: (1) The working capital allowance is a proper item to include in determining the rate base, and (2) the amount of the working capital allowance to be included in the rate base is within the discretion of the APSC. See, State v. Alabama Public Serv. Comm’n, 293 Ala. 553, 572, 307 So.2d 521 (1975).

While the determination of a final amount for each segment of the working capital allowance lies within the discretion of the APSC, it cannot exercise this discretion in an arbitrary way. The Commission’s reduction of the materials and expense segment was justified because the actual requirements for the first quarter of 1980 show that the allowance requested was excessive. However, we find that the Commission acted arbitrarily and thus abused its discretion by denying the company any dollar amount for its cash working capital.

IV. Whether the reduction of the Company's maintenance expenses is supported by the evidence.

The Commission’s order stated:

“[W]e note with concern the atypical balance of the fourth quarter, used in most instances to annualize expenses. The an-nualization of maintenance expenses using this methodology appears to particularly skew the proposed maintenance expenses, based on a review of the average monthly maintenance expense via the Company’s monthly operating reports for the test period. (Said reports were identified as Exhibit 43 in this proceeding.) We have further taken administrative note of the monthly operating reports filed with this Commission subsequent to the test year and find that maintenance expenses incurred subsequent to the test period’s end, still do not parallel, on an annualized basis, the proposed maintenance expense level at test period end. As in the case of the Materials and Supplies account we are of the opinion that an average balance should be used for rate-making purposes if a month-end or quarter-end balance would be distortive or misrepresentative of the period on which we intend to predicate rates. Our review of the expense annualizations indicates that misrepresentative annualization of the maintenance expenses would tend to have the most impacting affect on the revenue-expense relationship of the test period, as they constitute a major expense item. Accordingly, we have deemed it proper to adjust for this overstatement by annualizing maintenance expenses using a thirteen month average as a base.”

The test year is supposed to be representative of the future period for which the rates being considered are likely to be in effect. Annualizations of expenses are made in order to properly reflect the expense levels actually incurred during the test year, including the fourth quarter. The company presented its expenses which were actually incurred during the test year. There was no evidence that these expenses resulted from inefficiency, waste, or bad-faith or were extraordinary items. The APSC simply looked at expenses incurred prior to the test year and concluded that the increase of the expenses in the test year was unjustified. This was not proper. “Only where affirmative evidence is offered challenging the reasonableness of the operating expenses incurred, on the ground that they are exorbitant, unnecessary, wasteful, extravagant, or incurred in the abuse of discretion or in bad faith, or are of a nonrecurring character not likely to recur in the future, has the Commission a reasonable discretion to disallow any part of the expenses actually incurred.” Bell 1949, 253 Ala. at 23-24, 42 So.2d 655. In this case GTSE presented its annualized expenses, the APSC did not affirmatively show any valid legal reason for their disallowance, and, therefore, the APSC erred.

V. Whether the Commission erred by disallowing the Company's deduction for “Interest During Construction” (IDC).

The Commission in its order stated:

“[W]e are not convinced that there are cogent reasons for departing with past precedent of this Commission relative to treatment of IDC. Said finding is consistent with the predicate we laid in Docket 17743, involving this jurisdiction’s largest telephone company. The effect of our decision, to maintain our previously approved accounting treatment for IDC, would be an additional $102,758 of IDC for Alabama operations (Tr. 471). The intrastate portion of that amount is $74,569 and should be added back to net telephone plant investment to insure that treatment of IDC is consistent with the past practice of this Commission.”

The APSC erred when it reversed GTSE’s accounting treatment of $74,569 of short-term “Interest During Construction” (IDC), which GTSE had expensed rather than capitalized. The purpose of IDC is to capitalize interest on funds used in construction because some economic benefit accrues to future ratepayers from these expenditures. The FCC Uniform System of Accounts was changed, effective January 1, 1979, whereby the capitalization of interest charged on short-term construction projects or on projects of less than $25,000 was discontinued. If the expenses are based upon data taken from its books and records kept in the regular and ordinary course of business, the accounts of the Company being kept in strict accordance with the Uniform System of Accounts prescribed by the Federal Communications Commission, these expenses should be accepted as correct. Bell 1949, 253 Ala. at 10-11, 42 So.2d 655. Code 1975, § 37-1-54, gives the APSC the authority to establish a uniform system of accounts. The APSC exercised this statutorily delegated power by the adoption of Section 3(c) of its rules and regulations, wherein it adopted the FCC Uniform System of Accounts. Thus, unless the APSC affirmatively modifies its rules regarding the FCC Uniform System of Accounts, it must allow utilities to use the rules, including amendments. The purpose of the rules is to provide uniformity and thus provide consistent accounting procedure. The APSC should respect the amendments or modify its rules accordingly. Since there is nothing in the record to indicate any action by the Commission allowing a modification of the FCC rules, GTSE properly expensed these IDC items.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION.

FAULKNER, ALMON, SHORES, EM-BRY, BEATTY and ADAMS, JJ., concur.