author: ADAMS, Justice.

text:
    ALABAMA FARM BUREAU MUTUAL CASUALTY INSURANCE COMPANY, INC., a Corporation v. CITY OF HARTSELLE, Alabama, a Municipal Corporation.
    No. 82-1286.
    Supreme Court of Alabama.
    July 20, 1984.
    Rehearing Denied Nov. 30, 1984.

      Norman W. Harris of Harris, Shinn, Phillips & Perry, Decatur, and J. Thaddeus Salmon and Gordon T. Carter, Montgomery, for appellant.
    A.J. Coleman, Decatur, for appellee.
    Richard B. Emerson, Anniston, for ami-cus curiae City of Anniston.
   ADAMS, Justice.

This appeal arises from a suit filed by the City of Hartselle, Alabama (Hartselle) against Alabama Farm Bureau Mutual Casualty Insurance Company, Inc. (Farm Bureau), in which Hartselle sought to collect an amount of money representing a municipal license tax allegedly owed the plaintiff by Farm Bureau for the years 1972 through 1983. Farm Bureau appeals from a judgment in favor of Hartselle which ordered the insurance company to pay $19,839.97 in tax, interest, and penalties.

The case arose out of the following facts:

Hartselle is, and was during the years in question, a municipal corporation existing in the State of Alabama. Pursuant to state law and its own ordinance, Hartselle imposed a license tax on insurance companies for the privilege of doing business within the city limits.

Farm Bureau is an insurance company having its home office in Montgomery, Alabama, but it sells insurance policies to citizens of Hartselle and insures property located in Hartselle. There is no dispute that during the years in question Farm Bureau did business in Hartselle so as to fall within the ambit of the license tax ordinance.

What is in dispute, however, is the method by which the amount of license tax is determined. Both the Hartselle ordinance and the state statute authorizing municipal license taxes require that the tax be based on the premiums the insurance company received on policies issued during the preceding year. During each of the years in question, Farm Bureau reported to Hart-selle, and paid tax on, the total amount of premiums on new policies actually issued during the preceding year. These totals did not include premiums on policies which were simply renewed during the preceding year.

Hartselle filed suit against Farm Bureau on December 30, 1976, alleging that the insurance company had failed to comply with the city license ordinance by inaccurately reporting premiums received and incorrectly computing the license tax payable to the city. Hartselle claimed that the tax should have been based on premiums received not only from new policies issued during the preceding year, but also from existing policies which were renewed during the preceding year.

Farm Bureau argued in defense that it had correctly computed the taxes due because existing policies, which were simply continued in force by payment of renewal premiums, were not policies “issued in the preceding year” within the meaning of both the Hartselle ordinance and the applicable state statutes. Further, Farm Bureau claimed that Hartselle did not require life insurance companies to include such renewal premiums in the total receipts for tax purposes, but, nevertheless, this requirement was imposed on Farm Bureau. This double standard, the defendant argued, was a denial of equal protection of the laws and, therefore, unconstitutional.

On August 27, 1982, the trial court denied Farm Bureau’s motion for summary judgment and granted a motion for summary judgment in favor of Hartselle. With liability having been determined against Farm Bureau and without waiving the right to appeal, the parties stipulated that Farm Bureau owed $19,839.97 in tax, interest, and penalties, and that of this amount, $18,498.34 was attributable to the inclusion of renewal premiums in the tax computation. The trial court entered final judgment against Farm Bureau on August 29, 1983, and defendant herein appeals.

Farm Bureau asserts on appeal that the trial judge erred as a matter of law in granting summary judgment in favor of Hartselle and allowing the city to tax renewal premiums. Additionally, Farm Bureau claims that the trial judge erred in granting summary judgment in favor of Hartselle on the issue of unequal and unconstitutional application of the license tax ordinance.

The issues to be decided in this case are 1) whether Farm Bureau’s renewal of an existing policy constitutes “issuing” the policy, thus subjecting the renewal premiums to the municipal license tax, and 2) whether Hartselle has administered its municipal license tax ordinance in such an unequal manner as to constitute a violation of the equal protection guaranty of the fourteenth amendment to the United States Constitution.

I.

Municipalities have no inherent power of taxation. The state, however, having the power to tax, may delegate this power to a municipality. Town of Hackleburg v. Northwest Alabama Gas District, 277 Ala. 355,170 So.2d 792 (1964). The authority of municipalities in Alabama to place a license tax on businesses and professions is found in Code 1975, § 11-51-90. This section reads in part as follows:

(a) All municipalities shall have the power: (1) To license any exhibition, trade, business, vocation, occupation or profession not prohibited by the Constitution or laws of the state which may be engaged in or carried on in the city or town.

Code 1975, § 11-51-90.

In addition to this general grant of licensing power to municipalities, the legislature has enacted specific provisions regulating municipal taxation of insurance companies. This case turns on the interpretation given to language used in both of these state provisions and in the provision in Hartselle’s ordinance authorizing the licensing of insurance companies.

Code 1975, § 11-51-120, establishes the maximum amount of tax which a municipality may put on an insurance company which issues fire or marine insurance. The statute reads in relevant part as follows:

No license or privilege tax or other charge for the privilege of doing business shall be imposed by any municipal corporation upon any fire or marine insurance company doing business in such municipality except upon a percentage of each $100.00 of gross premiums, less return premiums, on policies issued during the preceding year on property located in such municipality. [Emphasis added.]

Code 1975, § 11-51-120.

Similar language is used in the succeeding provision, which sets the maximum amount of tax which a municipality may place on an insurance company which issues insurance other than fire or marine insurance. This section reads in part as follows:

(a) No license or privilege tax or other charge for the privilege of doing business shall be imposed by any municipal corporation upon any insurance company, other than fire and marine insurance companies, doing business therein or its agents which shall exceed for the company and its agents the following amounts:
(1) Each insurance company, in cities and towns having a population of 5,000 or less, $10.00 and $1.00 on each $100.00 and major fraction thereof of the gross premiums, less return premiums, received during the preceding year on policies issued during said year to citizens of said cities and towns. [Emphasis added.]

Code 1975, § 11-51-121.

While these provisions distinguish, for purposes of the actual amount of tax imposed, between insurance companies marketing fire and marine insurance on the one hand, and those marketing other types of insurance on the other hand, both provisions require a determination of the gross premiums received by the insurance company on policies which were issued during the preceding year.

Under the authority granted by these statutes, Hartselle enacted a similar ordinance imposing the maximum allowable license tax on insurance companies. Hart-selle’s ordinance uses substantially the same language as its state counterparts, stating in pertinent part as follows:

Each person engaged in the insurance business, except fire and marine, and fraternal benefit organizations, shall pay as a license tax $10.00 and also $1.00 on each $100.00 or major fraction thereof, of the gross premiums less the return premiums, received during the preceding year, on policies issued during such year, to citizens of this city.... Each person engaged in the business of fire or marine insurance shall pay four percent (4%) of the gross premiums, less the return premiums on policies issued during the preceding year on property located in the city. [Emphasis added.]

§ 9-1-118, Hartselle Municipal License Code (1970).

Therefore, in order to pay the required license tax in Hartselle, an insurance company must first determine its gross premiums less return premiums on policies which were issued during the preceding year to citizens of Hartselle or on property located in Hartselle, depending on the type of insurance marketed. The company then computes the tax due on those gross premiums, the amount again depending on the type of insurance involved.

The issue arising in this case involves the interpretation of the word “issued” as used in the Alabama statutes and the Hartselle ordinance. Is a policy of insurance “issued” within the meaning of the state statutes and Hartselle’s ordinance when a policy is renewed by payment of a renewal premium? If such a renewal does not constitute the issuance of a policy of insurance, then those renewal premiums must not be included in the amount of gross premiums upon which the municipal license is based, and, if that is the case, the trial court incorrectly granted Hartselle’s motion for summary judgment.

II.

Although Farm Bureau was taxed pursuant to Hartselle’s ordinance, that ordinance is authorized by and uses the same language as the state statutes pertaining to the licensing of insurance companies. Thus, the resolution of this case requires the court to determine whether the state legislature intended the renewal of insurance policies to be equated with the issuance of insurance policies, so as to subject renewal premiums to the municipal license tax. In making this determination, we must ascertain and effectuate legislative intent as expressed in the statute. League of Women Voters v. Renfro, 292 Ala. 128, 290 So.2d 167 (1974).

Furthermore, the intention of the legislature must primarily be determined from the language of the statute itself if it is unambiguous, and clearly expressed intent must be given effect without room for interpretation. Kimbrell v. State, 272 Ala. 419, 132 So.2d 132 (1961). Words used in the statute must be given their natural, plain, ordinary, and commonly understood meaning. McKnett v. St. Louis & S.F.Ry. Co., 227 Ala. 349, 149 So. 822 (1933).

In addition to these general rules of construction, it is established that taxing statutes should be strictly construed against the taxing power. State v. Seals Piano Co., 209 Ala. 93, 95 So. 451 (1923). Where the language of a taxing statute is reasonably capable of two constructions, the interpretation most favorable to the taxpayer must be adopted. Williams v. Pugh, 24 Ala.App. 57, 129 So. 792 (1930).

Hartselle seeks to escape the harshness of these rules of construction by asserting that the statutes at issue, § 11 — 51— 120 and § 11-51-121 of the Code of Alabama, are provisions which grant exemption from taxation, rather than provisions which impose a tax. This approach is favorable to the city, because exemptions are construed against the taxpayer. In Anniston City Land Co. v. State, 160 Ala. 253, 48 So. 659 (1909), this court discussed the rule of construction applicable to exemption provisions as follows:

The “universal rule of construction is that exemptions from taxation, whether statutory or constitutional, are to be strictly construed, against the exemption and in favor of the right to tax, and that no person or property is to be exempted unless the intention to exempt such person or property clearly appears in some statute or constitutional provision.”

160 Ala. at 254, 48 So. at 660. Thus, if the statutes at issue herein are exemptions, their language will be construed in favor of Hartselle.

Hartselle’s contention that § 11-51-120 and § 11-51-121 are exemption statutes is predicated on the legislative history of those statutes. As mentioned earlier, the legislature gave municipalities broad licensing powers in what is now Code 1975, § 11-51-90. The original provision was enacted as § 1339, Code of Alabama (1907). The legislature thereafter limited that broad power by imposing restrictions on the amount of license tax which could be placed on insurance companies. These restrictions are now found in the statutes at issue, § 11-51-120 and § 11-51-121.

Hartselle asserts that by narrowing the scope of what was originally a very broad municipal tax power, the legislature in effect “exempted” the insurance companies from the city’s general power of licensing. We reject this analysis. The legislature, having authorized the licensing of businesses, merely imposed a maximum rate of tax which could be applied to insurance companies, and provided the means by which that tax would be measured.

Farm Bureau suggests that if § 11-51-120 and § 11-51-121 were regarded as exemption laws, as Hartselle contends they should be, then all statutes which set maximum tax rates would be considered exemption statutes. We agree with that conclusion. Therefore, we find that § 11-51-120 and § 11-51-121, Code of Alabama (1975), do not grant exemptions from licensing. If the language of these statutes is reasonably capable of two constructions, the interpretation most favorable to Farm Bureau must be adopted. Williams v. Pugh, supra.

As stated above, the rules of statutory construction require that words used in a statute be given their plain, natural, ordinary, and commonly understood meaning. McKnett v. St. Louis & S.F.Ry. Co., supra. This court must determine what the legislature intended when it used the phrase “policies issued during the preceding year” by determining the ordinary and commonly understood meaning of the words.

Farm Bureau and Hartselle offer their own interpretations of what an insurance policy is and how an insurance policy is issued. Farm Bureau’s general assertion is that the receipt of a renewal premium does not have the effect of issuing a policy, but it merely continues in force a policy which has been issued previously. Hart-selle counters this argument with a “substance over form” analysis. It contends that regardless of the fact that Farm Bureau calls the process a policy renewal, the original policy actually expires and a new policy comes into effect with new terms and a new consideration. Each party suggests that its approach represents the legislature’s intention.

Farm Bureau correctly states that an insurance policy is a formal written contract containing all of the agreements pertaining to the insurance. This court held to that effect in Prudential Casualty Company v. Kerr, 202 Ala. 259, 80 So. 97 (1919). Similarly, the word “policy” is defined in the Code of Alabama as follows:

(1) POLICY. A written contract of, or written agreement for, or effecting, insurance, by whatever name called, and includes all clauses, riders, endorsements and papers attached, or issued, and delivered for attachment thereto and made a part thereof.

Code 1975, § 27-14-1. Farm Bureau states that the original policy issued to its insured is the only policy ever issued and that it represents the written contract of insurance between the parties. The policy by its terms provides for its continuation in force by payment of the renewal premium. Nothing is added to the policy because of the renewal process.

By taxing the premiums on insurance policies “issued during the preceding year,” the legislature seeks to allow a tax on the premiums paid on these policies during the first year they are in effect. Farm Bureau asserts that its policies are first put into effect when the written policy is issued, and that subsequent renewals do not alter that written policy. Therefore, it says, the premiums paid on the policy during the year it is issued are taxable, but the renewal premiums paid subsequent to that year are not taxable.

Hartselle bases its argument on the fact that an insurance policy is a contract for insurance. Under this contract analysis, a policy is issued when “it is delivered and accepted in such manner that it becomes a binding and effective contract between the parties.” 1 Couch on Insurance 2d, § 10:2 (rev. ed. 1984). Hartselle asserts that Farm Bureau policies are no longer binding contracts when the term of the policy has expired; that a new contract is entered into at the time of payment of the renewal premium by the insured and acceptance of such payment by Farm Bureau; that neither the insurance company nor the insured is bound by the terms of the original policy to renew the insurance; and that such a renewal is a separate contract freely entered into by the parties.

Using Hartselle’s approach, the phrase “policies issued during the preceding year” would refer to contracts for insurance which become binding during the preceding year. Hartselle asserts that since Farm Bureau’s policies become binding contracts when the renewal premium is paid by the insured, the legislature intended these renewal premiums to be taxable along with the premiums on policies issued for the first time.

Farm Bureau and Hartselle each provides a rational construction of the language the legislature used. The statutes are clearly capable of either interpretation. In such a case, a construction of the language in favor of the taxpayer leads to the conclusion that the legislature did not intend policy renewals to be taxable.

There are no Alabama cases which have construed the language in issue. The United States Supreme Court, however, has dealt with a related issue in Provident Savings Life Assurance Society v. Kentucky, 239 U.S. 103, 36 S.Ct. 34, 60 L.Ed. 167 (1915). In that case, an insurance company withdrew its agents and offices from the State of Kentucky and no longer offered insurance policies to the citizens of that state. The company, however, continued to receive renewal premiums from Kentucky residents, maintaining in force policies which had been previously issued. The state sued to recover license taxes on those renewal premiums. The Court held that the receipt of renewal premiums alone was insufficient to constitute doing business within the State of Kentucky so as to subject the insurance company to a state license tax.

Admittedly, Provident Savings decided whether the insurance company was doing business in the state, an issue not in dispute presently. Here, we are concerned with the measure of the tax involved, not its basis. Nevertheless, Provident Savings provides an important insight. If the renewal of an existing policy cannot be the basis of doing business within a state for license tax purposes, can the renewal of an existing policy be the subject of that license tax? Arguably, the answer is no.

In construing § 11-51-120 and § 11-51-121, it is necessary to examine the entire taxing scheme applicable to insurance companies. The court must look at the entire statutory scheme instead of isolated phrases or clauses. Opinion of the Justices, 264 Ala. 176, 85 So.2d 391 (1956). Two important parts of this taxing scheme are § 27-4-4 and § 27-4-5, Code of Alabama (1975). These provisions require insurance companies to pay to the state an annual tax based on “premiums and annuity considerations received by such insurer for business done in this state during the preceding calendar year.” Code 1975, § 27-4-5(a). The state does not base its tax on premiums from policies issued during the preceding year, but on all premiums received. Therefore, this statute would include renewal premiums in the computation of the tax.

The difference in the language used in § 27-4-5, in comparison with § 11-51-120 and § 11-51-121, demonstrates the intent of the legislature to differentiate between the tax which an insurance company pays to the state for revenue purposes, and the tax which the insurance company pays to a municipality for the privilege of doing business. The state tax is based on all premiums received during the year. The municipal license is based on business done within that city during the year, that is, policies issued on property located in that municipality during the year and policies issued to citizens of that municipality during the year. When a policy is issued on such property or to such a person, the first year’s premiums are taxed for the privilege of doing business within the municipality. The subsequent renewal of that policy does not cause the insurance company to engage in any further business within the municipality, so the policy should not be taxed again.

A different result is reached, however, if a policy is renewed with additional provisions or endorsements. Where payment of a renewal premium causes additional property within the municipality to be insured, then that renewal premium is subject to the tax. Similarly, where a policy renewal causes an additional person within the municipality to be insured, then that renewal premium is subject to the license. In other words, a policy which is amended to add additional property or persons within its coverage at the time it is renewed becomes in the next year a policy “issued during the preceding year” within the meaning of the statutes. The premiums received from such a policy would be subject to the license tax.

We, therefore, hold that a renewal premium which simply continues in effect an existing policy of insurance with no change in coverage is not subject to Hart-selle’s municipal license tax. Where a policy is renewed, however, and additional property or persons are insured, then the renewal premium received from such a policy is subject to this tax.

III.

Farm Bureau asserts that if Hartselle is allowed to place a license tax on renewal premiums, then Farm Bureau will be denied equal protection of the law, because Hartselle does not require life insurance companies to pay the tax on such premiums. This court, having ruled that renewal premiums are generally not subject to the municipal license tax, has rendered Farm Bureau’s argument somewhat academic. Since some policy renewals will constitute new coverage, however, and, therefore, subject the premium received to the municipal tax, we must address the issue.

Hartselle’s ordinance and § 11-51-120 and § 11-51-121 of the Code of Alabama (1975) require all insurance companies to be taxed on the premiums received from “policies issued during the preceding year." Hartselle must apply this law as we have herein construed it in equal manner to all insurance companies doing business in that municipality. City of Birmingham v. Stegall Company, Inc., 439 So.2d 91 (Ala.1983). Hartselle cannot exempt life insurance companies from the taxation of renewal premiums because of the city’s understanding that all life insurance policies are without exception entire, binding contracts. The test we have herein adopted is to be applied to life insurance companies and all other insurance companies. If a renewal premium payment brings about additional coverage as to property or persons insured, then that renewal premium is subject to the municipal license tax.

For all of the above reasons, the judgment of the trial court is reversed and the cause remanded for a determination consistent with this opinion.

REVERSED AND REMANDED.

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


source: Caselaw Access Project

author: EMBRY, Justice.

license: Public Domain

text:
    Myra F. HOOD v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, et al.
    No. 82-628.
    Supreme Court of Alabama.
    Aug. 31, 1984.
    Rehearing Denied Nov. 30, 1984.

      Douglas Inge Johnstone, Mobile, for appellant.
    J. Edward Thornton, Mobile, for appel-lees.
   EMBRY, Justice.

This appeal by Myra Hood is from a summary judgment entered in behalf of the Prudential Insurance Company of America and an entity created under an Act of Congress known as the Employee Retirement Income Security Act (“ERISA”) called the “Plan.” We reverse.

The Case

Myra Hood was an employee of Cour-taulds North America Inc. from 1964 until the day she was discharged, 30 November 1979. Subsequent to her discharge, Hood initiated suit against her former employer for workman’s compensation benefits. Thereafter, she amended her complaint to include the appellees, the Prudential Insurance Company of America and an entity of the Employee Retirement Income Security Act (“ERISA”) called the “Plan,” a suable entity under federal law. Hood also amended to add Provident Life and Accident Insurance Company.

Courtaulds moved for, and the trial court granted, dismissal of Courtaulds on the grounds there was no genuine issue as to any material fact regarding the claims against it. Provident was dismissed on a settlement stipulation among the interested parties. These dismissals left Prudential and the Plan as the only defendants. They are the appellees here.

Hood’s complaint sounds both in contract and in tort. Hood’s contract claim against Prudential is based on a group long term disability policy issued by Prudential to Courtaulds for the benefit of its employees. Hood asserted a similar cause of action against the Plan, pursuant to ERISA, which includes and governs any disability benefit program maintained by an employer in interstate commerce for the benefit of its employees and funded by a group insurance policy.

The trial court struck Hood’s claims for punitive damages against Prudential and against the Plan. Appellant’s motion to reconsider the order striking punitive damages against Prudential, filed after the decision in Chavers v. National Security Fire and Casualty Co., 405 So.2d 1 (Ala.1981), was denied. Similarly, the trial court struck Mrs. Hood’s claim for punitive damages against the Plan.

In January of 1983, the trial court entered summary judgment in favor of both the Plan and Prudential on the remaining contract claims. In March of 1983, the court denied Hood’s motions challenging the entry of summary judgments.

The Facts

Myra Hood was first employed by Cour-taulds North America Inc. in 1964. Hood was discharged from Courtaulds in November of 1979. The personnel records of Courtaulds show that she was discharged because of a longstanding problem with job performance and continued unexplained absences due to various progressive physical and mental disabilities dating from 1970, and that she was physically completely unable to do her job. Hood’s complaints included an undersized kidney, sphincter laxity, distended bladder, chronic diarrhea, chronic pyelonephritis, spinal defects, arthritis, bilateral sacroiliac strain, musculoli-gamentous back strain syndrome, together with a highly nervous condition.

In 1968, while Hood was still an employee, Courtaulds established the employee welfare benefit plan to which we previously alluded, and of which Courtaulds is the administrator. ERISA requires that a summary description of the plan be given to plan participants. That document as provided to Courtauld’s employees provides, in part, as follows:

“ERISA imposes duties upon the people who are responsible for the operation of the plan. The people who operate your plan, called ‘fiduciaries’ of the plan, have a duty to do so prudently and in the interest of you and the other plan participants and beneficiaries.”

Under a section entitled “Rights and Protections,” the summary of the plan provides:

“If you have a claim for benefits which is denied or ignored in whole or in part, you may file suit in a state or federal court.”

Hood proceeds against the Plan under the terms of ERISA.

The Issues

Hood appeals from the summary judgments and orders striking her claim for punitive damages.

Hood states the issues on appeal to be:

“1. The Plaintiff’s discharge from employment did not invalidate her claim thereafter submitted for benefits for physical disability developing before her discharge. Therefore her claim is valid and the summary judgment is erroneous.
“2. The Plaintiff timely submitted her claim for benefits in accordance with the policy and the Plan. Therefore the summary judgment is erroneous.
“3. The Plaintiff did not fail to exhaust any administrative remedy. Therefore the summary judgment is erroneous.
“4. The Plaintiff’s actions against Prudential and the Plan for bad faith failure or refusal to honor her claim for benefits are validly stated, are not barred by the statute of limitations, and are supported by at least a scintilla of evidence. Therefore the summary judgment and the orders striking the claims for punitive damages are erroneous.
“5. ERISA does not preempt Alabama jurisprudence recognizing the tort of bad faith as it applies to Prudential. Therefore the summary judgment in favor of Prudential and the orders striking the claims for punitive damages against Prudential are erroneous.”

These propositions, stated as issues, are Hood’s replications to the defenses offered by appellees upon which they prevailed. The issues for review determinative of the outcome of this appeal are:

(A) Whether ERISA preempts or supersedes Alabama law, which recognizes the tort of bad faith refusal to pay a valid insurance claim, as it applies to Prudential.

(B) Whether ERISA permits the recovery of punitive damages against the Plan for its bad faith failure or refusal to honor Hood’s claim.

(C) Whether the trial court erred by entry of summary judgment.

We now turn to the resolution of the above.

I

Both parties agree that the preemptive provisions of ERISA bar a state claim for bad faith refusal to pay against the Plan. Their conclusions are properly based on the language within 29 U.S.C. § 1144(a), which reads in pertinent part:

“(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan

This sweeping provision is modified, however, by the saving clause found in subpar-agraph § 1144(b)(2)(A), which reads:

“(2)(A) Except as provided in subpara-graph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.”

Hood argues that under the above saving clause, Alabama law continues to govern and regulate insurance companies, including Prudential. We agree.

It is evident that through federal legislation Congress sought to protect ERISA styled pension plans from the intrusion of state regulation. See Alessi v. Raybestos-Manhattan, 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). Nevertheless, as evidenced by the saving clause, Congress intended for the regulation of the insurance industry to remain within the province of state law. (There is no federal regulation of that industry.)

Prudential relies heavily upon Alessi v. Raybestos-Manhattan, 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981), to support its argument that a state claim for bad faith refusal to pay is preempted by federal law. In Alessi, the Supreme Court held that a New Jersey statute concerning workmen’s compensation disability benefits “related to” ERISA pension plans and was therefore preempted by federal law insofar as the statute eliminated one method for calculating pension benefits under ERISA pension plans. Id., 451 U.S. at 524, 101 S.Ct. at 1906. The New Jersey statute purported to prohibit offsetting workmen’s compensation disability benefits against employees’ retirement pension benefits or payments. In application, this statute effectually eliminated one method of calculating pension benefits specifically provided for under ERISA.

In contrast to the situation in Ales-si, a bad faith refusal to pay action brought against Prudential, an insurance company, neither directly nor indirectly affects the terms or conditions of employee benefit plans governed by ERISA. See 29 U.S.C. § 1144(c)(2).

Title 29 U.S.C., § 1144(b)(2)(B), restricts the application of the saving clause in § 1144(b)(2)(A) for the purpose of directly or indirectly regulating ERISA pension plans. It reads in part:

“(B) Neither an employee benefit plan described in section 1003(a) of this title, ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.”

This provision further prohibits the state regulation of ERISA plans, under the authority of the saving clause, simply because the plan may act as self-insurer on all of its benefits. Wadsworth v. Whaland, 562 F.2d 70 (1st Cir.1977); see also Hewlett-Packard Co. v. Barnes, 425 F.Supp. 1294 (N.D.Cal.1977). However, in the instant case, the plan is not acting as a self-insurer, but rather has obtained a group benefit policy from Prudential. Clearly, Prudential is the insurer and the plan is the insured. Accordingly, 29 U.S.C. § 1144(b)(2)(B) in nowise prohibits the regulation of Prudential merely because the plan is one of its policyholders. Wayne Chemical, Inc. v. Columbus Agency Service Corporation, 567 F.2d 692 (7th Cir. 1977); Cate v. Blue Cross-Blue Shield of Alabama, 434 F.Supp. 1187 (E.D.Tenn. 1977).

Based upon the foregoing, we must conclude that Hood’s bad faith refusal to pay claim against Prudential does not affect the terms and conditions of ERISA pension plans and is authorized by 29 U.S.C. § 1144(b)(2)(A). We hold that Hood’s claim against Prudential does not “relate to” ERISA pension plans as contemplated by 29 U.S.C. § 1144(a) and therefore is not preempted by federal law.

II

The second issue on appeal concerns whether ERISA allows the recovery of punitive damages against the Plan based on a theory of bad faith refusal to honor a claim.

As we have indicated above, ERI-SA preempts all state laws which “relate to” the covered employee benefit plans. In contrast to state claims brought against insurance companies which fund pension plans, such as Prudential, see Wadsworth v. Whaland, 562 F.2d 70, 78 (1st Cir.1977); Lederman v. Pacific Mutual Life Ins. Co., 494 F.Supp. 1020, 1022 (C.D.Cal.1980); a state claim for bad faith refusal to honor a claim brought against the Plan clearly “relates to” the Plan and is thereby preempted by ERISA. 29 U.S.C. § 1144; Whitaker v. Texaco, Inc., 566 F.Supp. 745, 748 (N.D.Ga. 1983); Lederman v. Pacific Mutual Life Ins. Co., 494 F.Supp. at 1022.

It follows that any state claim brought against the Plan must arise under 29 U.S.C. § 1132 which authorizes participants or beneficiaries of the Plan to bring a-eivil action to recover benefits, enforce rights, or clarify rights, under the terms of the Plan.

Insofar as Hood’s fifth cause of action against the Plan presents a state claim for bad faith refusal to honor a claim, it is preempted. See Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520, 524 (E.D.Mich.1983). However, we consider the fifth cause of action to similarly state a federal claim under 29 U.S.C. § 1132, when read in a liberal manner, because the claim seeks compensatory damages for sums due under the terms of the Plan. See Whitaker v. Texaco, Inc., 566 F.Supp. at 748.

Whether 29 U.S.C. § 1132 authorizes the recovery of punitive damages is a question which remains unsettled amongst federal appellate courts. Cf. Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th Cir.1981); Russell v. Massachusetts Mutual Life Ins. Co., 722 F.2d 482 (9th Cir.1983). In our view, both the statutory language and the policy considerations of ERISA warrant the conclusion that an action for punitive damages may not be brought against the Plan.

Title 29 U.S.C. § 1132, mentions neither punitive nor exemplary damages although Congress could have done so. The section’s consistent reference to the terms of the plan suggest that only claims sounding in contract are authorized. Punitive damages are rarely allowed in ex con-tractu actions, are not the norm, and should not be implied. Dependahl v. Falstaff Brewing Corp., supra, Diano v. Central States, 551 F.Supp. 861, 863 (N.D.Ohio 1982).

The policy considerations militating against punitive damages were persuasively set out recently in Whitaker v. Texaco, Inc., 566 F.Supp. 745 (N.D.Ga.1983). Under circumstances closely analagous to those at bar, Judge Hall, of that court, commented:

“[T]he legislative history of ERISA indicates that Congress did not want to burden employers with additional costs and requirements in order to insure the future of the voluntary pension and benefit plans. Congress also indicated its preference for criminal sanctions, rather than punitive damages, as a deterrent to willful violations of ERISA by adopting 29 U.S.C. § 1131.” (Footnotes omitted.)

Id., 566 F.Supp. at 751.

Additionally, Whitaker correctly points out that courts have declined to allow suits for punitive damages under federal acts similar to ERISA. Id., at 752.

For the foregoing reasons, we hold that 29 U.S.C. § 1132 does not authorize claims for punitive damages against the Plan. Accordingly, the trial court’s order striking Hood’s claim for punitive damages against the Plan is due to be, and is hereby, affirmed.

Ill

The final issue this court must address in this case is whether the facts presented by Hood in opposition to defendants’ motions for summary judgment support the remaining claims against Prudential and against the Plan. Our careful review of the record reveals evidence supportive of each of the remaining claims sufficient to weather these motions.

Hood has presented evidence that she was physically disabled prior to her dismissal by Courtaulds and that her dismissal was directly related to her physical disabilities. There is further evidence Hood’s disabilities are of the type covered by the group long term disability policy issued by Prudential to Courtaulds for the benefit of Hood and other employees. She has presented affidavits which indicate she submitted her claims for coverage properly and that the defendants were aware there was no debatable reason for a failure or refusal to pay her claim. Lastly, Hood has presented evidence which indicates defendants failed to pay her claim within a reasonable period of time. Because of this, and other evidence, there are genuine issues of material fact remaining. Summary judgment is inappropriate when there is, as here, evidence supporting the party against whom the motion is made. Savage v. Wright, 439 So.2d 120 (Ala.1983).

Therefore, for the above stated reasons, we reverse the judgment of the circuit court as to all issues, except the issue regarding the recovery of punitive damages against the Plan, and this cause is remanded to that court for further proceedings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.

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

      . Federal claims against fiduciaries may also arise under 29 U.S.C. § 1109.


text:
    COOSA VALLEY YOUTH SERVICES CORPORATION, a Corporation v. ETOWAH COUNTY, et al.
    No. 82-956.
    Supreme Court of Alabama.
    Aug. 31, 1984.
    Rehearing Denied Nov. 30, 1984.

      Herbert D. Jones, Jr. of Burnham, Kline-felter, Halsey & Love, Anniston, for appellant.
    Michael L. Roberts of Floyd, Keener & Cusimano, Gadsden, for appellees.
   EMBRY, Justice.

This appeal is from a trial court’s judgment for defendant, Etowah County, in an action filed by Coosa Valley Youth Services Corporation (Coosa Valley).

The creation of Coosa Valley, and other child detention centers licensed by the Department of Youth Services (DYS), was authorized by § 44-3-1, Code 1975. These centers are public corporations. They are the responsibility of a county, or, as in this case, several cooperating, or “member,” counties.

The relationships between the member counties and Coosa Valley are defined, in part, by resolutions and policies formally adopted by both. They are further defined by statute. Section 12-15-10, Code 1975, provides that the counties are responsible for paying charges for the lodging of juveniles at the center; section 11-1-10, Code 1975, authorizes and empowers counties to enter contracts with agencies or institutions of the State. Coosa Valley is such an institution. See Carter v. Coosa Valley Youth Services, 378 So.2d 1145 (Ala.Civ. App.1979).

DYS is empowered by § 44-1-28, Code 1975, to act together with the counties and grant funds to provide and maintain detention facilities. On 8 November 1978, DYS and Coosa Valley entered into a subsidy agreement whereby DYS was to provide funds for the lodging of juveniles under the control and custody of DYS. That contract also provided that Coosa Valley was to give certain “free” days and “reduced rate” days to the counties. A similar contract was executed for the fiscal year 1979-1980. The controversy between Coosa Valley and Etowah County arises from those two contracts and their effect on Etowah County’s liability to Coosa Valley.

During the fiscal year 1978-1979, Coosa Valley’s assessment for Etowah County was $34,599.29. In its billings for that fiscal year, Coosa Valley did not credit Etowah County with any “free” days or “reduced rate” days. During that year, Etowah County paid Coosa Valley a total of $20,261.19, leaving a balance of $14,-338.10 on the amount Coosa Valley contended was due.

In the fiscal year 1979-1980, Coosa Valley’s charges to Etowah County were $29,-654. During that year the county was not billed for the “free” days or the “reduced rate” days until 17 July 1980, the date the DYS subsidy contract was cancelled. That year, Etowah County paid Coosa Valley $24,898.10, leaving an alleged balance due of $4,755.90.

Coosa Valley sued Etowah County for non-payment on those amounts. Its complaint claims unpaid charges of $14,338.10 for the lodging of juveniles during the fiscal year of 1978-1979. It further claims for unpaid charges of $4,755.90 for the lodging of juveniles during the fiscal year 1979-1980. The trial court entered judgment for the defendant on plaintiff’s complaint.

It appears, from the record, that the defendant’s counterclaim was not formally adjudicated. Therefore, we deem that claim denied. Hingle v. Gann, 368 So.2d 22 (Ala.1979).

Coosa Valley appealed the trial court’s judgment for the defendant.

I

Three issues are presented for this court’s review. The first is whether § 12-15-10, Code 1975, imposes liability on Eto-wah County for the amounts charged by Coosa Valley despite the terms of the contracts entered into between DYS and Coosa Valley. That statute provides as follows:

“All expenses necessary or appropriate to the carrying out of the purposes and intent of this chapter and all expenses of maintenance and care of children that may be incurred by order of the court in carrying out the provisions and intent of this chapter, except costs paid by parents, guardians or trustees, court costs as provided by law and attorney fees shall be valid charges and preferred claims against the county and shall be paid by the county treasurer when itemized and sworn to by the creditor or other persons knowing the facts in the case and approved by the court.”

Coosa Valley contends the trial court erred in determining the DYS-Coosa Valley contracts valid and enforceable because the above statute provides that the county is financially responsible for all expenses incurred during the time the juvenile is held in its facility, and does not provide an exception where contractual provisions vary that responsibility. We find that argument untenable.

Coosa Valley chose, for valuable consideration, to enter into written contracts with the Department of Youth Services for the housing of youth. The benefit of those contracts was to run, in part, to Etowah County to relieve it of financial responsibility imposed by § 12-15-10, Code 1975. When read in light of § 44-1-28, which empowers DYS to provide subsidies for youth detention facilities, such as Coosa Valley, it is clear the Legislature intended that the State subsidize these facilities, but that the counties continue to have control of, and the ultimate financial responsibility for, their operation. The contracts between Coosa Valley and DYS, from which benefits run, in part, to Etowah County, certainly do not deviate from, or conflict, with, the Legislature’s intent in that regard. Therefore, we agree with the trial court that these contracts are in harmony with the purposes of the above statute and are enforceable against Coosa Valley.

Next, we consider whether the trial court erred by refusing to admit extrinsic evidence regarding the intent of the parties to the DYS-Coosa Valley contracts. Coosa Valley contends that, because the contracts are ambiguous, such evidence should be admissible.

Extrinsic evidence may be admitted to interpret a contract only if the trial judge finds, as a matter of law, that the contract is ambiguous. Wigington v. Hill-Soberg Company, 396 So.2d 97, 98 (Ala.1981).

Coosa Valley alleges an ambiguity arises from contract clauses which require that Coosa Valley raise local funds from member counties. It argues there is a conflict between those clauses and others which provide for “free and reduced rate” days for the counties. The crux of Coosa Valley’s argument is that the effect of giving “free” days to the counties is to reduce the ability of Coosa Valley to raise local funds from member counties. Thus, it contends, an ambiguity exists. We agree with the trial court that Coosa Valley has not proved the contracts in question are ambiguous and hold that court was correct to exclude extrinsic evidence regarding the intent of the parties to the contracts.

Ill

Last, Coosa Valley contends the trial court’s judgment was against the great weight of the evidence. It alleges the evidence established Etowah County was billed only for the amounts it had agreed to pay. The trial court found as follows:

“THE COURT FINDS that youth lodged at Coosa Valley from Etowah County were there either in Pre-Disposition Status or in Post-Commitment Status. Those in Post-Commitment Status had been committed by order of the Juvenile Court to the Custody of the Department of Youth Services of the State of Alabama, and were under the jurisdiction and control of the Department of Youth Services.
“THE COURT FURTHER FINDS that for both years in question Coosa Valley, for valuable consideration, entered into written contracts with the Department of Youth Services for the housing of youth in Post-Commitment Status. The contracts also contained provisions for accepting and housing of youth by Coosa Valley regardless of status at certain reduced daily rates or free days for limited periods of time. The participating counties, including the defendant Etowah County, were third party beneficiaries of said contracts.
“THE COURT FURTHER FINDS that the money claimed by the plaintiff includes daily per diem charges at the regular daily rate for days which the Department of Youth Services contracts provide for free or reduced rates for limited periods, for all youth, regardless of status.
“IT FURTHER APPEARS to the Court after consideration of the briefs of the parties and the applicable law, after consideration of the contracts with the Department of Youth Services, and after consideration of all the evidence offered orally, the Defendants are not indebted to the Plaintiff and that the issues should be found in favor of the Defendants.”

When a case is heard by the trial court without a jury, its conclusions will not be disturbed unless they are palpably erroneous or manifestly unjust. Cotton v. McMurtry, 440 So.2d 1039 (Ala.1983). The record substantiates the factual findings by the trial court. We find that court correctly concluded, by virtue of the relationships established by the applicable statutes, regulations, policies, and contract documents, that Etowah County was not liable for certain portions of the charges upon which Coosa Valley’s suit was based.

Therefore, for the above stated reasons, the trial court’s judgment is due to be, and is hereby, affirmed.

AFFIRMED.

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


author: ALMON, Justice.

text:
    CAMPBELL CONSTRUCTION ENGINEERS, INC. v. John E. COVINGTON and Marcia E. Covington.
    No. 82-1297.
    Supreme Court of Alabama.
    Aug. 31, 1984.
    Rehearing Denied Nov. 30, 1984.
    Alton R. Brown, Jr., E.J. Saad, and Michael S. McGlothren of Brown, Hudgens, Richardson, Whitfield & Gillion, Mobile, for appellant.
    D. Richard Bounds and John T. Crowder, Jr., of Cunningham, Bounds, Yance, Crow-der & Brown, Mobile, for appellees.
   ALMON, Justice.

This is an appeal from the denial of a Rule 60(b), A.R.Civ.P., motion to set aside a default judgment. Defendant/appellant Campbell Construction Engineers, Inc. (Campbell), argues that the judgment was void for lack of service of process, that the entry of default was improper, that it did not default intentionally and that it has a meritorious defense. The trial court, after holding an evidentiary hearing and receiving briefs from the attorneys, entered a detailed order denying the motion to set aside the judgment.

The underlying action was a suit by John and Marcia Covington for personal injuries they sustained when their pickup truck was struck by a truck driven by Brannon Weaver in the course of his employment with F.L. Jackson Trucking Company (Jackson Trucking). The Covingtons’ original complaint named Weaver and Jackson Trucking as defendants, but they soon filed an amended complaint adding Campbell as a defendant. Campbell had a contract with Scott Paper Company pursuant to which Weaver was transporting waste at the time of the accident. After Campbell did not answer the amended complaint within 30 days, the Covingtons moved for a default judgment. The trial court entered a default judgment against Campbell and made the judgment final, pursuant to Rule 54(b), A.R.Civ.P., while the action remained pending against Weaver and Jackson Trucking.

Campbell insists that it never received service of the amended complaint and summons. The sheriffs return, however, recites that the summons and complaint were served on “Mr. Doan” at Campbell on April 12, 1982. Gene Dorn, the office manager of Campbell at that time, denies having received the summons and complaint and states that he was not authorized to receive service on Campbell. The trial court found that the amended complaint was served on Campbell and stated that it was “not reasonably satisfied from the evidence that the Default entered in this ease was the result of excusable neglect, inadvertence or that the service on the Defendant, Campbell Construction Engineers, Inc. was improper.”

Rule 60(b) allows a court to relieve a party from judgment for reasons enumerated therein. A party must file a motion raising the reasons numbered (1) through (3) within four months of entry of judgment. The court entered default on July 30, 1982, and Campbell filed its motion to set aside the judgment on January 14, 1983. Campbell asserts that it had no knowledge of the suit or the default judgment until the Covingtons’ attorney sent a letter requesting payment of the judgment in December of 1982, more than four months after the entry of judgment.

Campbell cites Code 1975, § 6-9-21, which requires a clerk or register to issue execution within 90 days from entry of judgment, and argues that because this procedure was not followed, it lost the opportunity to file a motion based on Rule 60(b)(1). We agree with the Court of Civil Appeals’ holding in Charles Townsend Ford, Inc. v. Edwards, 374 So.2d 900 (Ala.Civ.App.1979), that this code section does not require a judgment holder to execute within ninety days, but merely protects judgment holders from delays by clerks in issuing executions. Under § 6-9-1, a judgment holder can execute at any time within ten years.

Campbell does have an arguable claim for relief under Rule 60(b)(4), which allows relief from a void judgment. Campbell claims that the judgment is void for lack of jurisdiction because Campbell never received service of process. We do not find that the trial court is due to be reversed on this ground, however, because the question of whether Campbell received proper service hinged on disputed facts.

The summons directed to Campbell includes a sheriff’s return which recites that it was served on “Mr. Doan” and which is signed “J. Jackson.” Deputy Jackson testified that the signature was not his, but that it was ordinary procedure in the sheriff’s department for office personnel to sign the sheriff’s returns after service was perfected. Deputy Jackson had no independent recollection of serving this summons and complaint, but he testified that he had served summonses and complaints at Campbell’s office on numerous occasions. He recognized Gene Dorn in the courtroom as one of the persons on whom he had served papers.

“A strong presumption of correctness attends a sheriff’s return, and the party challenging it has the burden of establishing lack of service by clear and convincing proof.” AAA Sewing Machine Co. v. Shelby Finance Co., 384 So.2d 126, 128 (Ala.Civ.App.1980), citing Howard v. Drinkard, 261 Ala. 555, 74 So.2d 704 (1954). The sheriffs return is somewhat irregular here, both for the misspelling of Mr. Dorn’s name and for the procedure of letting someone other than the serving deputy sign it. The fact of service is indicated by evidence other than just Deputy Jackson’s testimony, however.

Dorn’s own testimony was equivocal as to whether he actually received the papers. At his deposition, he testified that he remembered receiving the amended complaint and summons, but thought they were directed to Mr. Jackson of F.L. Jackson Trucking Co., who had an office in Campbell’s building. A cursory examination of the amended complaint would show that plaintiffs filed it for the purpose of adding Campbell as a defendant; that Mr. Jackson was to be served not at Campbell’s office but at Jackson Trucking’s address in Prichard, Alabama; and that the summons was directed to Campbell.

Dorn testified that prior to 1978 he was authorized to receive service of process for Campbell, but that since that time he was not so authorized but could receive service on individual employees. The president and vice-president of Campbell also testified that Campbell instituted a policy around 1978 that only officers could receive service of process. Rule 4(c)(6), A.R.Civ.P., provides that service of process shall be made

“Upon a corporation either domestic or foreign by serving the agent authorized by appointment or by law to receive service of process or by serving the corporation by certified mail at any of its usual places of business or by serving an officer or an agent of the corporation.”

Dorn’s insistence that he was not authorized and would not have accepted service upon Campbell is contradicted by: 1) evidence that he did in fact accept the papers directed to Campbell; 2) the deputy’s testimony that he remembered having served Dorn at Campbell; 3) the fact that Dorn was office manager at Campbell and, as such, would normally be expected to receive papers for the corporation; and 4) the final provision of the above-quoted rule that service may be perfected “by serving an officer or an agent of the corporation.”

The testimony of Campbell’s insurance agent provided further evidence supporting the trial court’s finding that service was properly made on Campbell. The insurance agency handles insurance for both Jackson Trucking and Campbell, but the two companies are insured by different carriers. A claims agent for the agency testified that she received the amended complaint and summons from the secretary to whom Dorn or anyone else at Campbell would have delivered papers. She testified, however, that although she saw the name “Campbell Construction Engineers, Inc.,” she assumed the papers had been served on Jackson Trucking in care of Campbell and therefore delivered the papers to Jackson Trucking’s insurance carrier.

Campbell argues that procedural irregularities in the default judgment require that it be set aside, citing Weaver v. Travel Inn, Inc., 350 So.2d 444 (Ala.1977); and Welch v. G.F.C. Credit Corporation, 336 So.2d 1346 (Ala.Civ.App.1976). Suffice it to say that this case is distinguishable, because the trial court entered judgment by default against a defendant which had not entered an appearance.

Finally, Campbell contends that the court should have set aside the default judgment because Campbell had pleaded and proved a meritorious defense, there was no indication that Weaver or Jackson Trucking was Campbell’s agent, and Mr. Covington was guilty of contributory negligence. The trial court entered findings of fact against Campbell on all of these allegations. Even assuming these matters might constitute grounds for relief, for example under Rule 60(b)(6), the record supports the trial court’s finding that the allegations are not supported by the evidence.

Finding no error in the trial court’s order and judgment denying the motion to set aside the default judgment, we affirm.

AFFIRMED.

TORBERT, C.J., and FAULKNER, EM-BRY, and ADAMS, JJ., concur.


author: FAULKNER, Justice.

text:
    Jenkins LOGAN v. CITIZENS NATIONAL BANK OF OPP.
    No. 83-455.
    Supreme Court of Alabama.
    Sept. 7, 1984.
    Rehearing Denied Nov. 30, 1984.
    Allen Edward Cook, Andalusia, and Frank McGill, Opp, for appellant.
    Ab Powell III of Powell, Powell, Pearson & McKathan, Andalusia, for appellee.
   FAULKNER, Justice.

Jenkins Logan (Jenkins) appeals from a final judgment in favor of the plaintiff, Citizens National Bank of Opp, entered after an ore terms hearing in an action to recover money paid to Jenkins pursuant to a certificate of deposit. We reverse and remand.

The issue presented by this appeal is whether the designation of a beneficiary to receive the proceeds of a payable-on-death certificate of deposit is a testamentary act which is void for failure to comply with the Probate Code, Code of Alabama (1975), § 43-8-131.

Ed Logan (Ed) made an original deposit of $7,951.95 on September 3, 1976, in the Citizens National Bank. Citizens Bank issued its certificate of deposit No. 2272 at that time.

On February 11,1981, Ed reported to the Bank that the certificate was lost, stolen, or destroyed. Citizens Bank prepared an agreement (“Hold Harmless Agreement”) signed by Ed stating that he would hold the Bank harmless from loss under certificate of deposit No. 2272, by reason of the issuance of a new certificate of deposit. However, Citizens Bank did not issue a new certificate.

On June 17, 1981, Ed and his son, Jenkins, went to Citizens Bank where Ed requested that the Bank change the name of the depositor to “Ed Logan P.O.D. Jenkins Logan.” Citizens Bank changed its copy of the original certificate to reflect the requested change. In addition, Ed signed the Bank’s copy and two Bank officers initialed it.

Ed died testate on March 15, 1982. On April 28, 1982, Citizens Bank paid the sum of $9,803.04 to Jenkins by cashier’s check. That amount represented the principal and accrued interest due on the certificate of deposit purchased by Ed. At the time the proceeds were paid, Jenkins was asked to sign the “Hold Harmless Agreement” previously executed between Citizens Bank and Ed. Jenkins was told that his signature was an acknowledgment that he had received the money.

Lillie Logan, as executrix of the estate of Ed Logan, sought to recover from Citizens Bank the principal and accrued interest due on the certificate of deposit, claiming it to be an asset of the estate. Citizens Bank filed a third-party complaint against Jenkins, asserting its right to recover money paid out to Jenkins should it have to pay the executrix. The third-party complaint, the subject of this appeal, was severed from the original complaint. The lower court, in the original action, rendered a judgment in favor of the executrix and against Citizens Bank for $10,563.24. In the third-party action, the lower court rendered a judgment in favor of Citizens Bank and against Jenkins for $10,563.24, the amount recovered by the executrix.

This Court has not specifically dealt with ownership rights of payable-on-death certificates of deposits. However, title to funds held in joint savings accounts with right of survivorship has been dealt with by this Court and statutorily. Alabama Code (1975), § 5-16-45; Street v. Hilburn, 295 Ala. 232, 326 So.2d 724 (1976); Hines v. Carr, 372 So.2d 13 (Ala.1979). “This Court determined that Code § 5-16-45 was ‘clear in its meaning and intent that the survivor of a joint bank account is entitled to the proceeds.’ ” Hines, 372 So.2d at 14. This statute extends to situations where a deposit is made in the names of more than two persons, if there is a provision for survivorship; and post-death inquiries into the ownership of the funds in a joint savings and loan account are foreclosed, unless fraud, duress, or undue influence is alleged. Id.

In 1980, § 5-5A-41 was enacted, which provides:

“(a) Any deposit heretofore or hereafter made in any bank in the names of two or more persons payable to any of such persons, upon the death of either of said persons, may be paid by the bank to the survivors jointly, irrespective of whether or not:
“(1) The form of the deposit or deposit contract contains any provision for survivorship;
“(2) The funds deposited were the property of only one said person;
“(3) There was at the time of making such deposit any intention on the part of the person making such deposit to vest the other with a present interest therein;
“(4) Only one of said persons during their joint lives had the right to withdraw such deposit;
“(5) There was delivery of any bank book, account book, savings account book, certificate of deposit or other writing by the person making such deposit to the other of such persons; or
“(6) Any other circumstances.

“The bank in which such deposit is made may pay such deposit, or any part thereof or interest thereon,, to either of said persons, or if one is dead, to the surviving of them, and such payment shall fully release and discharge the bank from all liability for any payment so made.

“(b) The provisions of this section shall apply to savings accounts, checking accounts and certificates of deposit and shall also apply to any deposit made in the names of more than two persons where there is an express written provision for survivorship in the deposit contract.
“(c) Nothing contained in this section shall be construed to prohibit the person making such deposit from withdrawing or collecting the same during his lifetime; nor shall anything contained in this section prohibit any person or persons making a deposit in the names of more than one person from providing for disposition of such deposit and interest thereon in a manner different from that provided above in this section, provided such different manner of disposition is expressly provided for in writing in the deposit contract.”

This section concerns the right of a bank to pay the balance of such an account to the surviving designee and does not govern ownership of the funds. The fact that the bank may properly pay the balance to a designee demonstrates the validity of such an account even though the account is not created with the formality required by the Probate Code.

The Supreme Court of Virginia has held that title to funds in a bank account payable on death to a named survivor is to be determined by the rules pertaining to the interpretation of contracts, in which the depositor’s intention is the important consideration. Virginia National Bank v. Harris, 220 Va. 336, 257 S.E.2d 867 (1979). The Virginia court also noted that the right to receive such payment may be defeated upon a showing of such things as fraud, mistake, undue influence, or incapacity to form intent at the time the account was created. Id., 257 S.E.2d at 870. A statute, very similar to our Code § 5-5A-41, was in effect at the time the Virginia court rendered its decision in Harris. Furthermore, the 1979 Virginia General Assembly enacted a statute providing that “transfers resulting from the use of a P.O.D. account are effective by reason of the account contracts involved, and are not considered as testamentary acts or subject to the Statute of Wills.” Id. 257 N.E.2d at 871, n. 3.

There is considerable variance among the states concerning the theory upon which title to funds in bank accounts in the name of two or more persons will be determined. 10 Am.Jur.2d Banks § 369-389 (1963). Several states have relied on the theory that under the contract between the depositor and the bank, the codepositor is entitled to the deposit on the death of the original owner of the funds deposited. Id. at § 386.

The Tennessee Court of Appeals in Peoples Bank v. Baxter, 41 Tenn.App. 710, 298 S.W.2d 732 (1956), relied on the theory of a donee third-party beneficiary. That theory has been consistently followed by the Tennessee courts. Melhorn v. Melhorn, 208 Tenn. 678, 348 S.W.2d 319 (1961); Buntin v. Meriwether, 56 Tenn.App. 492, 408 S.W.2d 667 (1966); Merchants & Planters Bank v. Myers, 644 S.W.2d 683 (Tenn.App. 1982).

From the evidence presented, we cannot agree with the lower court’s determination that Citizens Bank should recover the money paid to Jenkins pursuant to the P.O.D. certificate of deposit. “Furthermore, we are not bound by that Court’s findings because our ore tenus rule of review does not obtain where, as here, the lower court misapplied the law to undisputed facts.” Security Insurance Co. of Hartford v. Smith, 360 So.2d 280, 283 (Ala.1978); Steel City Erection Co. v. Johnson-Rast & Hays, Inc., 402 So.2d 1014 (Ala.Civ. App.1981).

“A certificate of deposit is construed by applying the same rules of construction which are used in the construction of other written instruments.” Michie on Banks and Banking, Volume 5B, Section 317, quoted in Peoples Bank v. Baxter, 41 Tenn.App. 710, 298 S.W.2d 732, 738 (1956).

The intention of the parties controls in construing a written contract, and the intention of the parties is to be derived from the contract itself, where the language is plain and unambiguous. Food Service Distributors, Inc. v. Barber, 429 So.2d 1025 (Ala.1983).

We conclude that a beneficiary’s title to a payable on death certificate of deposit is to be determined by the law of contracts rather than by the law relating to wills.

REVERSED AND REMANDED.

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

      . “Section 43-8-131. Execution and Signature of Will; witnesses.
      “Except as provided within section 43-8-135, every will shall be in writing signed by the testator or in the testator's name by some other person in the testator’s presence and by his direction, and shall be signed by at least two persons each of whom witnessed either the signing or the testator’s acknowledgment of the signature or of the will.”

      . "Section 5-16-45.
      "When a deposit has been made or shall hereafter be made in any savings and loan association in this state in the names of two persons, payable to either of such persons, or payable to the survivor of them, the said deposit shall, upon the death of either of said persons, become the property of and be paid in accordance with its terms to the survivor, irrespective of whether or not the funds deposited were the property of only one of said persons, irrespective of whether or not at the time of the making of such deposit there was any intention on the part of the persons making such deposit to vest the other with a present interest therein, irrespective of whether or not only one of said persons, during their joint lives, had the right to withdraw such deposit and irrespective of whether or not there was any delivery of any account book or savings account book by the person making such deposit to the other of such persons. This section will also apply where a deposit is made in the names of more than two persons where there is a provision for survivorship. Nothing in this section shall be construed to prohibit the person making such deposits from withdrawing or collecting the same during his lifetime, nor shall the fact that such person had the right to withdraw or collect said deposit during his lifetime operate to defeat the rights herein provided for the person or persons surviving such depositor.”

      . ‘Virginia Code (1950), § 6.1-77:
      “A deposit in the name of a depositor payable on his death to a named survivor or survivors may be paid to the named depositor during his lifetime and the receipt of the named depositor shall be a complete release of the bank or trust company for such payment. Upon the death of the depositor, the bank or trust company may pay the deposit to the survivor or survivors, whether any such survivors be a minor at the time or not, and the receipt of the survivor or survivors shall be a complete release of the bank or trust company. If the survivor be the spouse of the named depositor at the time of the death of the named depositor, such deposit shall vest in such surviving spouse. No bank or trust company paying to such survivor or survivors shall become liable for any estate or inheritance taxes. The term ‘deposit’ shall include certificate of deposit.”


text:
    John W. ATCHISON v. Hattie GOODWIN, et al.
    No. 83-459.
    Supreme Court of Alabama.
    Sept. 7, 1984.
    Rehearing Denied Nov. 30, 1984.
    Henry L. Thompson, Birmingham, for appellant.
    Lawrence F. Gerald, Jr., and John Hollis Jackson, Jr., Clanton, for appellees.
   ALMON, Justice.

This is an appeal from a judgment confirming a sale of real property in an action originally filed as a suit for sale for division. Two of the heirs objected to the sale for division, but they have not appealed from the trial court’s decree. The appellant is the original plaintiff who requested the sale for division.

John W. Atchison filed this action as an heir of Steve and Mattie Atchison, who died intestate owning 239 acres of land, more or less. John’s complaint named as defendants Hattie Goodwin, “the other unknown heirs at law, or devisees of Steve and Mattie Atchison,” and all other persons claiming any interest in the lands. Hattie Goodwin was the only one of Steve and Mattie Atchison’s ten children then living. John is one of thirteen children born to Steve and Mattie’s son Curlee Atchison, deceased.

John’s brother Allen Atchison filed a motion to dismiss John’s complaint and a pleading denominated a “cross complaint,” which also requested a sale for division. The trial court granted the motion to dismiss and the case proceeded on Allen’s cross complaint.

During the course of proceedings, Mel-balene North Atchison and Wilbur Atchi-son were discovered as heirs of Steve and Mattie Atchison. Shortly after receiving service of process, Melbalene and Wilbur filed a “cross/cross complaint” which sought relief under Code 1975, § 35-6-100, et seq. (1983 Supp.). Under the provisions of this Code section, Melbalene and Wilbur sought to purchase the interests of the plaintiff and cross-plaintiff.

The court initially ruled that Melbalene and Wilbur would be allowed to purchase the interests of those seeking relief and any of the other owners who wished to sell. Approximately thirty-six days later, the court ordered a sale for division, noting that Melbalene and Wilbur had not paid the purchase price into court. Melbalene and Wilbur filed a motion to stay the public sale, which the trial court denied.

At the sale, two individuals who were not heirs purchased the land for $110,000; the land had been appraised at $138,000. Mel-balene and Wilbur filed a motion asking the court not to confirm the sale. In denying this motion, the court found, inter alia, that Melbalene and Wilbur “had ample and sufficient opportunity to pay to the Clerk of the Circuit Court the value of the interest of the co-tenants who desired to sell.”

Notice of appeal to this Court was filed which reads as follows: “Notice is hereby given that John W. Atchison appeals to the above-named court from the final decree and confirmation of Sale of Real property entered in this cause.” Various motions have since been filed in this Court, including a motion to dismiss the appeal on the following grounds:

“That, the ‘Notice of Appeal to the Supreme Court of Alabama’ filed in this cause states that the appeal is made by John W. Atchison; that the attorney filing the appeal represents Wilbur Atchi-son and Melbalene North Atchison; that the other appellate pleadings filed herein by said attorney indicate thereon that Wilbur Atchison and Melbalene North Atchison are the appellants; that John W. Atchison has testified that he is not the appellant; that Wilbur Atchison and Melbalene North Atchison have not given notice of appeal as required by Rule 4(a)(1) of the Alabama Rules of Appellate Procedure.”

This Court continued the motions to dismiss the appeal until submission on the merits, but the “appellants” have since filed a motion for a stay, asserting that the purchasers of the property are cutting timber and requesting this Court to order them to stop. In considering this motion, we have decided the judgment is due to be affirmed.

The only relief which John Atchison requested in the court below was a sale for division, whereas the issues raised by Mel-balene and Wilbur in the trial court and in the appellant’s brief challenge the sale for division for failure to comply with the provisions of Code 1975, § 35-6-100, et seq. John made no attempt in the trial court to purchase anyone’s interest under the terms of this Code section.

A party cannot raise on appeal issues affecting only parties who have not appealed. Johnson v. Brown, 437 So.2d 1273 (Ala.1983); Otts v. Gray, 287 Ala. 685, 255 So.2d 26 (1971); Coastal States Life Ins. Co. v. Gass, 278 Ala. 656, 180 So.2d 255 (1965). John W. Atchison is the only party who has perfected a timely appeal, and the record contains no indication that he raised any issues or arguments in the trial court which are raised on appeal. The judgment is therefore due to be, and it is hereby, affirmed.

AFFIRMED.

TORBERT, C.J., and FAULKNER, EM-BRY and ADAMS, JJ., concur.


author: PER CURIAM. SHORES, Justice

text:
    CIE SERVICE CORPORATION v. Donna SMITH.
    No. 83-470.
    Supreme Court of Alabama.
    Sept. 14, 1984.
    Rehearing Denied Dec. 21, 1984.

      Alton R. Brown, Jr. and Michael S. McGlothren of Brown, Hudgens, Richardson, Whitfield & Gillion, Mobile, for appellant.
    C. MacLeod Fuller and Thomas M. Taul III, Mobile, for appellee.
   PER CURIAM.

The sole issue in this case is whether a security service, an insured, gave timely notice to its insurer concerning a rape which occurred on premises the security service was guarding.

The facts were not disputed. On October 25, 1980, between the hours of 12:30 a.m. and 2:00 a.m., Donna Smith was assaulted and raped in her apartment in Mobile, Alabama. At that time, Night and Day Security, Inc. (Night and Day), was under contract to provide guard service for the apartment complex where Smith’s apartment was located. CIE Service Corporation was the insurance carrier providing liability insurance coverage for Night and Day.

At the time of the attack, the Night and Day security guard on duty was in his car near Smith’s apartment. He heard a scream, but did not investigate. The Mobile police department was called to the scene following the attack, and it handled the criminal investigation. The guard was present when the police made their investigation. Night and Day did not notify CIE of the incident at that time.

Almost a year later, on October 13, 1981, Smith filed suit against Night and Day and the owner of the apartment complex. The summons and the complaint were served on Night and Day on December 31, 1981, and, on January 6, 1982, Night and Day notified CIE of the suit. This was the first notice CIE had of the incident. Between January 6, 1982, and January 20, 1982, CIE investigated the matter, and, on January 20,1982, CIE informed Night and Day that it was denying coverage, specifically setting forth as the basis for the denial Night and Day’s failure to comply with the notice provisions of the policy.

On February 7, 1982, Smith made application to the clerk for the entry of a default judgment, and a default judgment was subsequently entered. On February-15, 1982, CIE cancelled the entire policy of insurance with Night and Day. Night and Day filed a motion to set aside the default judgment. Its motion was denied on September 17, 1982, at which time damages were assessed at $50,000 plus costs.

Smith then filed this garnishment action against CIE to recover the amount of the judgment. CIE answered the garnishment as “not indebted,” and a hearing was held on November 21, 1983, at which time the trial court entered the following order: “Judgment by Court for the Plaintiff and against the Garnishee for the sum of $50,-000.00 and Costs.”

CIE filed a motion for a new trial. That motion was denied on December 19, 1983. On January 20, 1984, the garnishee filed notice of appeal. On February 6, 1984, after the notice of appeal was filed, the trial court entered a written order and findings of fact in the ease.

A thorough reading of the evidence and argument produced at the hearing below convinces us that the trial court held for the plaintiff Smith because it believed that Night and Day had complied with a provision of the policy which required that the summons and complaint be forwarded immediately to the insurer. CIE does not claim that its insured failed to comply with this provision, but CIE does contend that Night and Day failed to comply with the following provision of the insurance policy:

“4. Insured’s Duties in the Event of Occurrence, Claim or Suit.
(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the insured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.”

An “occurrence” is defined by the policy as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

Proper notice is a prerequisite to coverage under the policy and this Court has previously addressed the sufficiency of notice, the issue here, where it was stated in the policy as being a condition precedent to coverage under the policy. In Pan American Fire & Cas. Co. v. DeKalb-Cherokee Counties Gas District, 289 Ala. 206, 266 So.2d 763 (1972), we held:

“A requirement in a policy for prompt or immediate notice, or that notice must be given, ‘immediately,’ ‘at once,’ ‘forthwith,’ ‘as soon as practicable,’ or ‘as soon as possible,’ generally means that the notice must be given within a reasonable time under the circumstances of the case. The exact phraseology used apparently makes very little, or any, difference, and it is well settled that none of these expressions require an instantaneous notice, but rather call for notice to be given within reasonable dispatch and within reasonable time in view of all the facts and, circumstances of each particular case. In determining the reasonableness of a delay in giving the required notice, the facts and circumstances of each particular case must be considered.” (Emphasis added.)

289 Ala. at 214, 266 So.2d at 771. See also, United States Fidelity and Guaranty Co. v. Bonitz Insulation Co., 424 So.2d 569 (Ala.1982); Pinson Truck Equipment Co. v. Gulf American Fire and Casualty Co., 388 So.2d 955 (Ala.1980).

In making this determination, the only factors to be taken into consideration are the length of the delay and the reasons therefor. United States Fidelity, supra, at 572. The question whether the delay is reasonable is a question of fact. The issue before us, therefore, is whether, under these uncontroverted facts, Night and Day complied with the provision of the policy, when its first notice to GIE of the incident was given over a year after it occurred, but within a few days after suit was filed.

It is clear that Night and Day was aware of the assault and rape of Smith and did not notify CIE of the occurrence until it was served with the complaint filed by Smith. Night and Day claimed that it did not notify CIE of the occurrence because of its belief that the occurrence would not give rise to a claim against it. In view of all the facts and circumstances of this case, we hold that' Night and Day’s delay in giving notice was reasonable. Even though Night and Day had been employed to provide security at the apartment complex, and the assault and rape occurred there, the crucial question is whether Night and Day’s delay in giving notice of the assault and rape was excusable.

In Pan American Fire & Cas. Co. v. DeKalb-Cherokee Counties Gas Dist., 289 Ala. 206, 266 So.2d 763 (1972), this Court held that “delay [in giving notice] is excusable in the case of an accident [occurrence] ... which furnishes no ground for insured, acting as a reasonable and prudent man, to believe at the time that a claim for damages will arise or that the injury is one insured against.” 289 Ala. at 214, 266 So.2d at 771, quoting 45 C.J.S. Insurance § 1056. This Court has held that the test is not a subjective one measured merely by the good faith of the insured, but an objective one. In view of the requirement of objectivity, we must decide whether the intentional criminal act was something Night and Day, as a matter of law, could have expected or anticipated would form the basis of a lawsuit against it. This we cannot do; therefore, we uphold the finding of the trial court that Night and Day complied with the provisions of the policy.

We believe some recent cases of this Court which ‘involve suits by victims of crime against providers of security are instructive. In Latham v. Aronov Realty Co., 435 So.2d 209 (Ala.1983), an employee of a shopping mall sued the owners of the mall, the rental agent, and the security service hired to guard the mall, for injuries he sustained when other persons assaulted him in the parking lot. In Latham, this Court held that the criminal assault upon the plaintiff under the facts of that case was not reasonably foreseeable, and thus that there was no liability to the plaintiff for the unlawful acts of the third parties who assaulted the plaintiff. In Latham, the plaintiff contended that “the act of hiring security personnel itself gave rise to an inference that the defendants [which included the security service] foresaw the possibility of activity on the part of third persons.” In Latham, this Court asked the specific question, which we believe must be answered here: “Was the criminal conduct foreseeable”? Under the facts of that case, this Court held it was not. Similarly, in City of Mobile v. Largay, 346 So.2d 393 (Ala.1977), this Court held that the use of an unlocked cellar for perpetration of a rape was not a reasonably foreseeable consequence of the city’s failure to maintain the building.

These two cases are illustrative of the fact that it is difficult to impose liability on one person for an intentional criminal act committed by a third person. Of course, we do not hold that an insured, in a case involving an intentional criminal act committed by a third person, is automatically excused from giving notice to the insurer until a suit is filed. For example, if the victim of the crime here had told the security service that she was considering filing a claim against it, or if the security service knew that a lawsuit was being contemplated, then, under those circumstances, it might have been unreasonable for the insured to await the filing of the suit to notify its carrier. Because there is disagreement on this Court in this case, we emphasize once again that the law states that notice must be given within a reasonable time in view of all the facts and circumstances of each particular case. The question to be asked is: Did the intentional criminal act by a third person furnish a ground for the insured, acting as a reasonable and prudent man would act, to believe at the time, that a claim for damages would arise or that the occurrence, with any subsequent imposition of liability, was one insured against?

Under the facts of this case, we hold that the trial judge did not err in finding that the insured gave reasonable notice to its insurer. His judgment, therefore, is due to be affirmed.

AFFIRMED.

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

JONES, SHORES, and BEATTY, JJ., dissent.

SHORES, Justice

(dissenting):

I cannot agree that the notice provision of the policy was complied with under these facts, and I would reverse. It is undisputed that Night and Day was aware of the assault and rape of Mrs. Smith and did not notify CIE of the incident until almost fourteen months later, following service on it of a complaint filed by Smith. The only reason given for the failure of Night and Day to notify CIE is its belief that no claim would be filed against it. This is not a reasonable position. Night and Day had been employed to provide security at the apartment complex, and it was a breach of security which resulted in the assault on Mrs. Smith, a tenant in the complex. It was an occurrence as defined in the policy and the very activity which Night and Day insured against.

I agree with CIE that the serious nature of the incident, the presence of the guard during the police investigation, and the failure of the guard to investigate the scream should have alerted Night and Day to the possibility of an action against it for failure to provide the security contracted for. Therefore, Night and Day should have informed the liability carrier of the occurrence, in keeping with the policy provisions. Because it did not, CIE was justified in denying coverage.

I would not hold, as a matter of law, that all incidents which may be insured against must be reported to the insurer to avoid violating the provisions of the policy. But where, as here, the very activity being performed and that to which the insurance related, i.e., providing security to the apartment complex, was breached, and the incident arose directly out of that activity, it is unreasonable to assume that no claim would be likely. Assume, for example, that a security service was sought at a bank. Surely it would be expected that a security guard witnessing a bank robbery would report it to his insurance company if he had a liability policy insuring him against negligence in the performance of those duties. The same reasoning applies in the case here.

It is also argued that since CIE was immediately notified when the suit was filed, in compliance with Section 4(b) of the policy “conditions,” it cannot complain of failure to notify under Section 4(a). Section 4(b) reads:

“(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.”

These are two separate requirements under the policy. Section 4(a), set out in the majority opinion, requires that notice be given at the time of the occurrence so that the insurance company may investigate the incident while it is fresh. Section 4(b) requires notice so that the insurer may have time to prepare for the defense of the suit. These two sections serve two different purposes and are not interchangeable.

Because, in my judgment, the trial court misapplied the applicable law to undisputed facts, I would reverse and remand.

JONES and BEATTY, JJ., concur.

      . The provision of the policy states:
      "(b) If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.”