author: MAUS, Judge.

text:
    George PHELPS, Movant-Appellant, v. STATE of Missouri, Respondent.
    No. 13562.
    Missouri Court of Appeals, Southern District, Division Two.
    Jan. 3, 1985.

      David Robards, Joplin, for movant-appel-lant.
    John Ashcroft, Atty. Gen., Mark A. Richardson, Asst. Atty. Gen., Jefferson City, for respondent.
   MAUS, Judge.

As a result of a plea bargain, the movant entered pleas of guilty to two counts of kidnapping as a Class B felony, and a separate charge of escaping custody. He was sentenced to imprisonment for ten years on each count of kidnapping and for five years on the charge of escape. The sentences were declared to run concurrently. By this proceeding under Rule 27.26, he seeks to set aside those pleas and sentences. Following an evidentiary hearing, the motion court denied the relief sought.

By his amended motion, movant alleged that the relief sought should be granted upon two grounds. First, that he had ineffective assistance of counsel because he was not provided any information about the cases and the investigation thereof. Second, his pleas were entered as a result of fear. In each instance he added that as a consequence, his pleas were involuntarily and unintelligently entered.

The movant received ineffective assistance of counsel within the meaning of Rule 27.26 if his attorney’s performance did not conform to the degree of skill, care and diligence required of a reasonably competent attorney under similar circumstances. In addition, the appellant was required to show that he was thereby prejudiced. Strickland v. Washington, — U.S. —, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984); Witham v. Mabry, 596 F.2d 293 (8th Cir.1979); Seales v. State, 580 S.W.2d 733 (Mo. banc 1979). The burden was upon the movant to produce evidence to establish his counsel’s assistance did not measure up to that standard. Miller v. State, 615 S.W.2d 624 (Mo.App.1981). The resolution of conflicts in the evidence was for the motion court. Andrews v. State, 607 S.W.2d 762 (Mo.App. 1980).

Movant’s point relevant to his first allegation is an impermissible general statement that he did not receive effective assistance of counsel in that counsel failed to keep movant informed of the cases. To consider this point it is necessary to look to his argument. One of his arguments is that he was not kept informed of the possible utilization of intoxication “as a means to reduce the severity of the charges and the punishment.” Contrary to movant’s testimony, his trial counsel testified he did discuss with movant the use of evidence of his intoxication and the possible reaction of the jury to that evidence. The resolution of this conflict in evidence was clearly encompassed in the motion court’s finding that movant’s trial counsel had kept him informed.

Further, irrespective of that resolution, the movant’s argument has no substance. Intoxication was available only to negate the existence of a mental state of purpose or knowledge when such mental state was an element of the offense. § 562.076.1(1), amended 1983 Mo.Laws p. 924. It is not necessary to consider the elements of the offenses with which the movant was charged. The only evidence of the movant’s state of mind when the offenses were committed was his testimony that he was “pretty far gone.” This falls far short of proof of the degree of intoxication cognizable under the repealed subsection. See State v. Lee, 647 S.W.2d 817 (Mo.App.1983); State v. Bienkowski, 624 S.W.2d 107 (Mo.App.1981).

The movant further argues he was not apprised of the progress of the defense as it related to the impeachment of witnesses and showing that movant had not committed some of the acts attributed to him. In no way has the movant even suggested what witnesses were subject to impeachment or in what manner. Nor has he in anyway specified any of the acts attributed to him that he did not commit nor how proof thereof would aid his defense.

There was evidence his trial counsel held 12 to 15 conferences with the movant. He discussed with him his possible defenses and developments in the cases as they occurred. Trial counsel represented the movant at the preliminary hearing on the kidnapping charges. Trial counsel deposed four witnesses in the presence of the mov-ant. He employed an investigator to aid in the preparation of the case. When the movant decided to plead guilty, his trial counsel had prepared for trial to the extent that he had drafted some instructions on behalf of the defendant and was reviewing the list of prospective jurors. The trial court found movant “was well represented” and kept informed. The record contains an abundance of evidence to support that determination.

The movant also contends the motion court erred because the evidence establishes his pleas were induced by fear that if he did not plead guilty, he would get more time. Considering the record, it appears that had the movant submitted the charges against him to a jury or the court, it is indeed likely he would have been sentenced to imprisonment for a substantially longer time. The fear related in evidence by the movant is not the type of coercion that will vitiate a plea of guilty. Miller v. State, supra. “[Confronting a defendant with the risk of more severe punishment clearly may have a ‘discouraging effect on the defendant’s assertion of his trial rights, [yet] the imposition of these difficult choices [is] an inevitable’—and permissible —‘attribute of any legitimate system which tolerates and encourages the negotiation of pleas.’ ” Johnson v. State, 579 S.W.2d 132, 135 (Mo.App.1979). Also see Johnson v. State, 607 S.W.2d 185 (Mo.App.1980).

The movant’s remaining point is that the motion court did not make specific findings of fact and conclusions of law on all issues as required by Rule 27.26(i). He argues “the issue on which the trial court should have addressed in its findings and conclusions was whether Movant’s pleas of guilty were made knowingly and voluntarily.”

As noted, the movant alleged his pleas were involuntarily and unintelligently made because he had ineffective assistance of counsel in that he was not kept informed. He further alleged his pleas were involuntarily and unintelligently entered because they were induced by fear. He alleged he would support the latter grounds by evidence that his trial attorney told him he would get more time if his case went to trial and that additional charges could be filed against movant and his girl friend. The trial court specifically found the mov-ant was well represented and that movant did not sustain his burden of proof as delineated in Seales v. State, supra. This finding is a clear disposition of the movant’s second assertion.

Further, also as noted, the movant did not present evidence of the type of fear or coercion that will vitiate a plea. In addition, the record made at the time of the acceptance of the movant’s plea was sufficient to refute his assertion of fear and showed that he was not entitled to post conviction relief on that ground. Miller v. State, supra. “There is no need to remand for further findings and conclusions if those that appear in the record are sufficient for this court to make a determination as to the correctness of the trial court’s action.” Jones v. State, 604 S.W.2d 607, 609 (Mo.App.1980). The record is sufficient for this court to determine the action of the trial court was correct. Greenhaw v. State, 627 S.W.2d 103 (Mo.App.1982). The judgment is affirmed.

HOGAN, P.J., PREWITT, C.J., and CROW, J., concur.


source: Caselaw Access Project

author: HARBISON, Justice. DROWOTA, Justice,

license: Public Domain

text:
    Linda Sharon MULLINS, Plaintiff-Appellant, v. Wendell MILLER, Defendant, and Insurance Company of North American, Defendant-Appellee.
    Supreme Court of Tennessee, at Knoxville.
    Dec. 17, 1984.
    Glenn R. Copeland, Chattanooga, for plaintiff-appellant.
    John D. Barry, Chattanooga, for defendant-appellee.
   OPINION

HARBISON, Justice.

This case involves the question of whether punitive damages may be recovered from an uninsured motorist insurance carrier under the provisions of the applicable statutes, T.C.A. §§ 56-7-1201 to 1206 or under the provisions of the policy issued to the claimant, who is appellant here.

Appellant sustained personal injuries when her automobile was struck by a vehicle operated by Wendell Miller in Dalton, Georgia. Miller was intoxicated and was driving recklessly. He was not covered by any policy of liability insurance. Appellant had a liability policy issued by appellee Insurance Company of North America with uninsured motorist coverage.

In a suit against Miller for personal injury, property damage and punitive damages, appellant also brought in her uninsured motorist carrier pursuant to T.C.A. § 56-7-1206, and in a subsequent trial she received an award for personal injury, property damage, and $2000 in punitive damages. In post-trial proceedings the trial judge set aside the award of punitive damages, and this action was affirmed by the Court of Appeals.

T.C.A. § 56-7-1201(a) requires that any automobile liability insurance policy issued in this state must also provide coverage with limits no less than those required under the Financial Responsibility Law, T.C.A. § 55-12-107,

“... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom.”

Subsequent amendments to the statutes also require that the policy holder be given an opportunity to purchase property damage coverage. T.C.A. § 56-7-1201(c).

Originally the coverage required under these statutes was basically geared to the limits of coverage provided under the financial responsibility law, supra. Over a decade ago, however, the General Assembly amended the statutes so as to require underwriters to offer an insured limits equal to those for bodily injury liability in the insured's motor vehicle liability policy, and the same is now true with respect to property damage coverage. Subsequent amendments required that policies automatically provide such additional coverage, unless the insured rejects it in writing. Present statutes also require that if the insured carries any “umbrella insurance policy” which includes automobile liability insurance, the underwriter must offer uninsured motorist coverage with limits equal to those provided in the umbrella policy. T.C.A. § 56-7-1201(a)(3).

As pointed out in the dissenting opinion, records of the legislative debates and such other history as is available contain no express reference to the coverage of awards for punitive damages. Originally the statutes made no provisions whatever for property damage and simply covered awards for personal injuries. As pointed out above, however, subsequent amendments required broadened coverage for property damage and a mandatory offer to the policyholder of bodily injury coverage equivalent to that contained in the policyholder’s own liability coverage.

In our opinion, these amendments indicate a legislative intent to equate uninsured motorist coverage with liability insurance coverage in many respects. There is no evidence in the record before us as to premium structures, costs of underwriting, and the like. Nevertheless, it is clear that, basically, an uninsured motorist policy is to be treated generally as a motor vehicle liability policy in many essential respects. The General Assembly at no point has expressed any intention that coverage be limited to compensatory damages only. In requiring property damage coverage and in requiring limits equivalent to those purchased in liability policies, it seems to us that the General Assembly has expressed its intention that all damages which can legally be recovered under a liability policy shall also be recoverable under an uninsured motorist policy.

It seems illogical to us, for example, that an insured, motorist could recover $10,000 in compensatory damages and $40,000 in punitive damages if he were struck by an insured drunken driver with $50,000 limits, but that he could only recover $10,000 if he were struck by an uninsured drunken driver, even though the insured’s own policy provided limits of $50,000 for damages caused by an uninsured motorist. We do not believe that this result was envisioned or intended by the General Assembly in requiring underwriters to offer increased limits equivalent to those carried in liability insurance policies.

It is true that uninsured motorist insurance is written on a somewhat different basis from liability insurance. See Hill v. Nationwide Mutual Insurance Co., 535 S.W.2d 327, 330 (Tenn.1976). Strictly speaking, uninsured motorist coverage is neither first-party nor third-party insurance. It has aspects of both. The insured pays the premiums, and to that extent it is somewhat like first-party insurance. Unlike that type of insurance, however, the uninsured motorist policy does not pay benefits unless and until liability of a third party — the uninsured motorist — is established. The insurance carrier may avail itself of all defenses available to that third party — such as lack of negligence, lack of causation, extent of damages, contributory fault, and the like. It thus has available to it numerous defenses other than regular policy exclusions and conditions as approved by the Commissioner. It is, therefore, basically liability insurance for a third party — the uninsured motorist — as was recognized by this Court in one of the early cases dealing with the first versions of the statutes. See Glover v. Tennessee Farmers Mutual Insurance Co., 225 Tenn. 306, 313, 468 S.W.2d 727, 730 (1971) (intent and purpose of statutes is to provide protection “by making the insurance carrier stand as the insurer of the uninsured motorist

It is well settled in this state that a policy of liability insurance covers punitive damages as well as compensatory damages. Lazenby v. Universal Underwriters Insurance Co., 214 Tenn. 639, 383 S.W.2d 1 (1964). In that case policy language almost identical to that contained in the uninsured motorist statutes and to the policy in the present case was held to cover punitive damages.

As pointed out in the dissenting opinion, courts in other states which have considered this issue have reached divergent results. The matter is primarily one of legislative intent, and the General Assembly clearly could exclude punitive damages from coverage, and limit awards to compensatory damages only, if it saw fit to do so. We do not believe that the language contained in the statutes at the time of the accident involved in this case or in the present statutes is restrictive, and we do not construe it as requiring coverage for compensatory awards alone. If the General Assembly desires to make this change, the result can be achieved by a very brief amendment to the statutes.

Further, even if the statute should be construed not to require coverage for punitive damages, still it seems to us that the policy in question did cover them. It provided coverage to its insured for all sums which the insured

“... shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury sustained by the insured

Punitive damages surely are sums which can be recovered as damages from the owner or operator of a motor vehicle because of bodily injury inflicted upon a plaintiff. Punitive damages are clearly covered under policies of liability insurance obligating the insured to pay all sums for which the insured is legally liable. See Lazenby v. Universal Underwriters Insurance Co., supra. Unless the holding of the Lazenby case or its interpretation of the policy language is to be altered or overruled, then, in our opinion, punitive damages are as clearly included in all sums which the insured is entitled to recover as they are in all sums for which an insured is legally liable.

Again, if the uninsured motorist statutes themselves should be construed as not to require coverage for punitive damages as a matter of law, it would be a very simple matter for insurance carriers to so write their policies as to limit insurance coverage to compensatory damages only, if permitted by the Commissioner. The present policy contains no such limitations but obligates the insurance carrier to pay all sums which the insured is legally entitled to recover from an uninsured motorist. In our opinion this coverage includes awards of punitive damages up to the policy limits.

For these reasons, the judgments of the courts below are reversed. The jury verdict awarding punitive damages is reinstated. The cause is remanded to the trial court for any further proceedings which may be necessary. All costs are taxed to appellee.

COOPER, C.J., and BROCK, JJ., concur.

DROWOTA, J., files dissent in which FONES, J., joins.

DROWOTA, Justice,

dissenting.

As stated in the majority opinion, the primary issue in this case is whether punitive damages may be awarded under (1) the Tennessee Uninsured Motorist Statute, T.C.A. § 56-7-1201 et seq. or (2) the language of the policy affording uninsured motorist coverage. I file this dissent because I feel this issue is one of great importance in the area of tort litigation, and because I feel the majority has failed to deal in its opinion with the theory and purpose of punitive damages. Punitive damages are not designed to compensate the Plaintiff, but to punish and deter the wrongdoer. The majority opinion assesses an innocent party, INA, with punitive damages while the wrongdoer, Miller, goes unpunished.

Plaintiff-Appellant, Linda Sharon Mullins, filed suit against the Defendant-uninsured motorist Miller for personal injury, property damage and punitive damages. She also directed process to INA as her uninsured motorist carrier. Plaintiff was unable to obtain service upon the Defendant Miller through the ordinary process of law and service was obtained on him by publication. Plaintiff moved the trial court, pursuant to T.C.A. § 56-7-1206, to force INA to proceed as if it were the only Defendant. INA responded to Plaintiff’s demand by filing an answer in its own name. INA then filed a motion for judgment on the pleadings or partial summary judgment as to the Plaintiffs claim of punitive damages against it. The trial court denied INA’s motion, granting INA leave to renew its motion upon the trial of the case.

The case proceeded to trial in the absence of the Defendant Miller. At the close of the proof, the Plaintiff moved for a directed verdict against Miller on the issue of liability, which motion was granted. The jury returned a verdict in favor of Plaintiff against Miller and INA. In addition to compensatory damages for personal injury, lost wages, medical expense and property damage, the jury awarded Plaintiff punitive damages. INA then moved for an order reducing the verdict as to it, which motion challenged Plaintiff’s right to recover punitive damages from her own carrier. The trial court sustained INA’s motion and set aside the punitive award as to INA, finding that “the Defendant INA is not legally responsible to Plaintiff to satisfy the award of punitive damages.” The court then confirmed the award against the Defendant Miller in all respects.

Plaintiff appealed the trial court’s action in setting aside the punitive damage award against INA. The Court of Appeals affirmed the action of the trial court holding that the insurer was not required to pay punitive damages on an uninsured motorist claim under either Tennessee’s Uninsured Motorist Statute or the policy.

The Uninsured Motorist Endorsement in this case reads, in pertinent part, as follows:

DAMAGES FOR BODILY INJURY AND PROPERTY DAMAGE

The company will pay all sums which the insured ... shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury sustained by the insured....

The Uninsured Motorist Endorsement defines bodily injury:

Bodily injury means bodily injury, sickness or disease, including death resulting therefrom.

The policy language used in this case, and that contained in the statute are quite similar. The Tennessee Uninsured Motorist Statute provides in pertinent 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 ... unless coverage is provided therein or supplemental thereto, and not less than limits for bodily injury or death described in Section 55-12-107, ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; ... (Emphasis added)

T.C.A. § 56-7-1201 (previously T.C.A. § 56-1148).

In Thaxton v. Travelers Indem. Co., 555 S.W.2d 718, 720 (Tenn.1977), after citing the above emphasized portion of the statute, the Court stated: “The insurance required by the statute is for the loss suffered by the insured, not the liability incurred by the uninsured motorist.” It would appear that the language of the statute, “damages ... because of bodily injury, sickness or disease, including death, resulting therefrom,” more properly describes compensatory than punitive damages since “because of” means “by reason of” or “on account of.” Punitive damages are not strictly speaking damages awarded “because of bodily injury” but because of intentional, willful or grossly negligent acts of the tortfeasor.

The theory of punitive damages in Tennessee was described by Justice Harbison in Huckeby v. Spangler, 563 S.W.2d 555, 558-559 (Tenn.1978): “In this state, the theory of punitive' damages is not to compensate an injured plaintiff for personal injury or property damage, but to punish a defendant, to deter him from committing acts of a similar nature, and to make a public example of him.” Punitive damages relate to the nature of the defendant’s actions in inflicting or causing the injury rather than to the extent of the injury that results. Breault v. Friedli, 610 S.W.2d 134, 136 (Tenn.App.1980); Hutchison v. Pyburn, 567 S.W.2d 762, 764 (Tenn.App. 1977). Thus it can be seen that the theory and purpose of punitive damages is contrary to the theory and purpose of the uninsured motorist statute. To allow a recovery from the uninsured motorist carrier would not provide a deterrent effect as to the Defendant tortfeasor Miller.

I envision several problems if punitive damages are allowed in this type of case as the majority holds. As pointed out in Breault v. Friedli, supra at 136, Evidence concerning the financial condition of the defendant is essential in determining the amount of punitive damages.

... The damages which would operate as a proper punishment to one man might be inadequate to that effect upon another, by reason of their difference in pecuniary condition; and on the contrary, a verdict that would be scarcely regarded by a wealthy man, might be ruinous to a poor man.
Odum v. Gray, 508 S.W.2d 526, 534 (Tenn.1974).

If the uninsured motorist is never found, as in this case, the jury cannot make an enlightened decision for they would have no knowledge of the defendant’s financial condition. Any award would necessarily be speculative. Furthermore, the wrongdoer would neither be punished nor deterred. A finding that the INA policy provides coverage for punitive damages would thwart the jury’s reason for imposing punitive damages — to punish the Defendant tortfeasor. The Maine Supreme Judicial Court, in Braley v. Berkshire Mut. Ins. Co., 440 A.2d 359 (Me.1982), adopted similar rationale as I shall discuss later in this dissenting opinion.

The legislative history of the statute gives us no explicit answer to the question of whether the statute entitles the insured to recover from his insurer punitive damages awarded against an uninsured motorist. However, the tone of the comments during the debates on the original act in 1967 do indicate that- the sponsors of the bill were probably thinking primarily of compensatory damages.

Plaintiff avers and the majority opinion appears to hold that Lazenby v. Universal Underwriters Insurance Co., 214 Tenn. 639, 383 S.W.2d 1 (1964) is controlling. In Lazenby this Court held that under the language of the policy an automobile liability insurance carrier is required to pay punitive damages assessed against its insured as the result of an automobile accident. The reasons which motivated this Court to hold that punitive damages are recoverable of a liability carrier do not apply in the uninsured motorist situation. I feel the holding in Lazenby is limited to liability insurance cases and is neither dispositive nor controlling in the uninsured motorist context.

Several jurisdictions which have been confronted with this same issue have reached differing results. Texas and Virginia have held that a state’s uninsured motorists statute and the policy provisions afforded coverage of punitive damages: Home Indemnity Co. v. Tyler, 522 S.W.2d 594, 596-597 (Tex.Civ.App.1975); Lipscombe v. Security Insurance Co. of Hartford, 213 Va. 81, 189 S.E.2d 320, 323 (1972). Three decisions from other jurisdictions have reached a contrary result holding that punitive damages are not payable to an insurance company under the state statute and the policy: Braley v. Berkshire Mut. Ins. Co., 440 A.2d 359, 361-362 (Me.1982); Suarez v. Aguiar, 351 So.2d 1086 (Fla. 3d DCA 1977); Laird v. Nationwide Insurance Company, 243 S.C. 388, 134 S.E.2d 206, 210 (1964).

The Florida Uninsured Motorist Statute, in pertinent part, reads:

“[uninsured motorist coverage] ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom.”

West’s Florida Statutes Annotated, 18B § 627.727. This language is identical to that emphasized in the Tennessee statute cited earlier. The District Court of Appeal of Florida, in Suarez v. Aguiar, supra, at 1088, in construing their statute, held that “the uninsured motorist coverage in the State of Florida does not include liability for punitive damages.” The court based its decision, in part, on the fact that “[p]unitive damages are distinguished from compensatory damages in that punitive damages do not have as their primary purpose the making of a plaintiff whole after a bodily injury, sickness or disease [citations omitted].”

The South Carolina Supreme Court, in Laird v. Nationwide Insurance Company, supra, (followed in Hanna v. State Farm Mutual Automobile Insurance Co., 233 F.Supp. 510, 515 [E.D.S.C.1964]), denied punitive damages under their statute and the policies. First, it seated that the purpose of uninsured motorist insurance was to provide recompense to innocent persons. Because both the statutes and the insuring clause in the policy referred to bodily injury and only compensatory damages satisfy bodily injury, punitive damages could not be awarded. No provision of the act required the uninsured motorist endorsement to insure against any and all liability. The court then noted that “[t]here is nothing said or implied that the insurer would be liable for punitive or exemplary damages. If such damages had been in contemplation of the Legislature, it could have easily provided therefor in said statutes.”

In Braley v. Berkshire Mut. Ins. Co., supra, the Maine Supreme Judicial Court, in a unanimous decision, vacated an award of punitive damages under the uninsured motorist provisions of an insurance contract almost identical to that in the present case and emphasized that the damages covered were awarded “because of bodily injury” under the policy and “for bodily injury” under the statute. Punitive damages, it noted, were not “for bodily injury” but “for the protection of society.” The Court reiterated that the legislature’s intent in passing the act was to assure a person injured by an uninsured motorist protection “to the extent of his actual loss.” Because the wrongdoer does not pay the damages, the proper justification for punitive damages— deterrence — is not achieved. The court then distinguished the case where punitive damages were covered under liability provisions by noting that at least with liability insurance the possibility of raising the insured’s premiums achieves some deterrence. Also, although the insurance company theoretically has a right of recovery via subrogation, the probability of recovery is negligible and yields no deterrent effect. The court also noted that one of the traditional measures of punitive damages, their deterrent effect based upon the actual wealth of the defendant, would also be lacking in the case of uninsured coverage.

I agree with the reasoning and logic of the Maine Supreme Judicial Court. Neither the statute nor the policy in this case requires the payment of punitive damages. The tenor of the legislative debates and the language of the statute itself indicates that the damages required to be covered by the bill were compensatory and not punitive.

The Plaintiff, Mullins, should have been fully compensated for her injury by the award of compensatory damages. It should be remembered that the purpose of punitive damages is not to compensate the Plaintiff, and any benefit the Plaintiff receives from such an award is only incidental. From Plaintiffs point of view, punitive damages are merely a windfall. To grant Plaintiff punitive damages against IN A would require one not guilty of any misconduct to pay while the Defendant Miller, who was guilty of willful and wanton misconduct, would go unpunished. This, I feel, would be against public policy, and if such damages are to be assessed against an innocent party and the wrongdoer go free, then such a decision should be made by the legislature. I feel that the trial court and the Court of Appeals properly denied Plaintiff recovery of punitive damages from her own carrier and that the judgment of the courts below should be affirmed. I am authorized to state that Justice Fones concurs in this dissenting opinion.

      . Representative Carter stated that the bill “does not provide for any property damage but simply provides for bodily injury damage.” (Record H-239, H.B. 479, March 9, 1967). It is difficult to imagine that the legislators contemplated this differentiation between two types of compensatory damages and yet meant to include punitive damages, which were never mentioned, within the coverage of the Act.

      . Since the decision in Laird, the South Carolina legislature amended its statutes to require coverage of punitive damages under uninsured motorist insurance. See S.C.Code Ann. §§ 56-9-810(4), 56-9-830 (1977).

      . In this case, INA points out that in liability policies, whether they issue upon application or are meted out under the assigned risk plan, the insurer has some means by which to formulate its premium. If the proposed insured is a good risk he will pay less in liability premium. If he is a poor risk, he will pay more for his liability coverage. Therefore, those who by past performance indicate a propensity toward exposure pay and bear an equitably greater premium and a greater share of the exposure. However, in the uninsured motorist context neither the company nor the insured has any means whatsoever by which to control or predict the conduct of an uninsured motorist.


author: NEARN, Presiding Judge, W.S.

text:
    Patricia Jane Rhodes LAUCK, Petitioner-Appellee, v. James Phillip LAUCK, Respondent-Appellant.
    Court of Appeals of Tennessee, Western Section, at Jackson.
    July 13, 1984.
    Application for Permission to Appeal Denied by Supreme Court Oct. 1, 1984.

      Blanchard E. Tual, Memphis, for petitioner-appellee.
    Arnold Goldin and Lee J. Bloomfield, Memphis, for respondent-appellant.
   NEARN, Presiding Judge, W.S.

This is an appeal from the Chancellor’s decree that determined the husband’s liability under an orally amended settlement agreement.

In 1978 the parties in this matter were divorced. By agreement of the parties, which agreement was incorporated into the final decree, the husband was to pay to the wife as alimony in solido the sum of $480,-000.00. Said sum was to be paid in monthly payments of $2,000.00 each for a period of twenty years. Also, Mr. Lauck was to pay all income taxes incurred by Mrs. Lauck because of the $24,000.00 annual income. In short, the $480,000.00 was to be tax free to Mrs. Lauck.

At the time of the divorce and at the present, Mr. Lauck owned and operated an office equipment business known as Rhodes, Lauck & Associates, Inc. Prior to the divorce, Mrs. Lauck had worked in the business, as well as two of the parties’ children who are yet there employed.

The facts that gave rise to this controversy are in 1978 the business owned by Mr. Lauck began to suffer financial difficulties. From this business Mr. Lauck received his principal income with which he retired the alimony in solido obligation. In an effort to obtain additional financing for the business, application was made for a Small Business Administration loan. One of the conditions placed on the loan by the Small Business Administration was that Mr. Lauck’s annual salary taken out of the business be reduced from $60,000.00 to $40,000.00. Realizing the obvious, that is, he could not pay Mrs. Lauck $24,000.00 per year plus her income tax liability plus child support payments (at that time he was also liable for child support as all children had not reached their majority) and live above poverty level on the net received from an annual gross salary of $40,000.00, Mr. Lauck, Mrs. Lauck and an officer from a lending institution met to see what could be done in the situation. Mrs. Lauck, to her credit, was not uncompromising in the matter. She no doubt realized that if the business failed, so did Mr. Lauck’s income and it was beneficial to all concerned that a loan be obtained and the business continue in its operation, otherwise, the fable regarding the goose that laid the golden egg might, in principle, be applied to real life. Therefore, at that meeting, the parties orally agreed to amend the terms of payment of the alimony award. But, what was that agreement? That is the question. At least it was the first question to be determined by the Trial Court and we think by this Court.

In encapsulated form, Mrs. Lauck’s version was that she would come back to work for the business, for which she would be paid a salary and the difference between that salary and the $2,000.00 per month and taxes due under the alimony agreement would be paid personally by Mr. Lauck. However, since, under the terms of the in solido award, Mrs. Lauck did not have to work to receive $2,000.00 per month, this arrangement left an unaccounted for difference. As to this difference, Mrs. Lauck testified:

I would receive the same amount of money but it would be for my services during this period of time until Mr. Lauck paid that loan off. I had to have X-number of dollars to live. And I was willing to work to help him until he could pay this loan off. But I did expect to receive the money that he owed me in the future. And I was told that I would be compensated in the future.
And
That if I would agree to do this for him, that in the future, he felt like he could see a lot of light and that he would not forget it.
Mr. Lauck’s version of the agreement was:
The original agreement was that she was going to come back to work, draw a salary, in lieu of the alimony payments, as long as she got the same amount she said she would be happy, and whether she did any work, little work, the intention was for her to do some work, and it didn’t work out that way.

As may now be seen the main dispute between the parties regarding their understanding is whether the funds she received under the new arrangements were entirely in lieu of the monthly alimony payments or was Mrs. Lauck to be later compensated for the resulting short fall in alimony payments, if she was not to be considered as working gratis.

In 1980 the auditors of the business questioned the propriety of paying a salary to a person, who at that time, did not appear to be actually working for the company. The up shot of that inquiry was that Mrs. Lauck was terminated from the payroll and Mr. Lauck commenced to pay her under the terms of the alimony agreement. Then, this suit was filed by Mrs. Lauck seeking judgment for $86,075.57, which she alleged had accumulated during the period 1978 to 1981 that she worked and was due under the alimony agreement after giving him credit for the “difference” he had paid personally during that period.

Mr. Lauck denied anything was due and that the agreement between the parties was to the effect that it all was entirely in lieu of alimony.

In part, the Chancellor found:

The proof established that plaintiff performed most of the services and work during the early part of the period in controversy. In 1980 she suffered from an illness and was not able to work to a great extent. She had bed rest for a period of time, and limited activity for approximately five months. Also in 1980, the defendant indicated to her that it was emotionally upsetting for her to be around him, and she attempted to not be at the business when he was there. The plaintiff indicated she was seldom at the business during the period of January, February and March of 1981. In addition, she was paid by RLA, Inc. during 1980 and 1981 for services in addition to the salary paid her by Rhodes-Lauck.

In essence, he further found that, in effect, the parties had agreed that Mrs. Lauck would actually work and perform valuable services for Rhodes, Lauck & Associates, Inc., for a salary, in order that she would have necessary funds on which to live when supplemented by personal funds of Mr. Lauck for the difference between the salary and the $2,000.00 alimony award. Further, that Mrs. Lauck was to be later compensated by Mr. Lauck for the short fall on alimony payments represented by that which she received as salary. The Chancellor computed that which was due under the alimony agreement during the period in question and in effect deducted from that amount a portion of the salary she received for which he found that Mrs. Lauck had done no work. In short, money paid by the corporation for which she did nothing, he treated as applicable to alimony and money paid by the corporation for services rendered, he considered it as such and as earned by her; therefore, not attributable to alimony. Accordingly, judgment was entered against Mr. Lauck for $46,-863.26.

Mr. Lauck appeals from this judgment and gives as the issues:

1. Did the court err in finding the Petitioner-Appellee performed services during the years 1978 and 1979 for a corporation owned by Respondent-Appellant sufficient enough to entitle her to consider the payments made to her by said corporation as salary rather than alimony, when the court found that Petitioner-Appellee had agreed to accept the payments from said corporation in lieu of payments directly from Respondent-Appellant toward his alimony in solido obligation, and granted Respondent-Appellant a complete set-off for the identical payments made during the years 1980 and 1981.
2. Assuming Petitioner performed some services for this corporation, did the court err in determining the value that it placed on the services.
3. Did the court err in not granting Respondent-Appellant an additional set-off for monies paid in lieu of alimony to Petitioner-Appellee during the years 1980 and 1981 by another of Respondent’s corporations.

The validity of the first issue hangs upon the allegation therein that the Court found that plaintiff “had agreed to accept the payments from said corporation in lieu of —alimony.” Black’s Law Dictionary, 708 (rev. 5th ed. 1979) appropriately defines the meaning of the phrase “in lieu of” as “Instead of; in place of; in substitution of.” Therefore, if the Chancellor found as a fact that Mrs. Lauck agreed to accept the new arrangement “in lieu of” (within its strict meaning) alimony payments, she agreed to accept the new payment arrangement as a complete substitution for alimony payments as originally agreed upon and she could not at a later date seek payment for that which she agreed would be replaced by the salary. In the Chancellor’s finding of fact, at the point where he discusses the circumstances of her termination, it is stated “Plaintiff was satisfied with the employment relationship and receiving a salary in lieu of alimony.” As to the first issue, it is upon this statement in the record that appellant’s argument regarding the “in lieu of” finding pends.

The pendant statement will not hold all the weight that counsel for appellant seeks to attach to it. Counsel seeks to hang and throttle the entire judgment of the Trial Court on that statement, but a reading of the entire findings, coupled with the judgment of the Court, shows that the “in lieu of” phrase was meant to attach to the conditions as existed at the time of her termination. When such is understood, the statement is in perfect harmony with the Court’s judgment.

As before noted in our brief summary of the Chancellor’s findings, he found that when the new arrangement was made, both parties understood that Mrs. Lauck would work and perform valuable services for the salary paid. Even Mr. Lauck stated such was the agreement, but he also stated “it didn’t work out that way.” The Chancellor also found that later on “it didn’t work out that way”, meaning that by the time of her termination, for various reasons, including her protracted illness, Mrs. Lauck performed little or no services for the salary she drew. Therefore, at the time of her termination, the Chancellor found that salary received at that time must be considered in lieu of alimony; because even under Mrs. Lauck’s theory of the case she was supposed to work for the salary received. Therefore, the Chancellor found that part of her salary (that for which she worked) was not in lieu of alimony and part (that for which she did not work) had to have been received in lieu of alimony. There is no inconsistency in the Chancellor’s finding.

We have reviewed this record de novo as required. 13(d) T.R.A.P. After having made such review, we concur in the Chancellor’s findings of fact regarding the new agreement made between the parties as actually made, and as necessarily amended by the conduct of the parties when Mrs. Lauck accepted salary for work not performed. The first issue is found against appellant.

The remaining two issues relate to the amount of the judgment if one is to be entered against appellant.

We do not perceive the second “issue” to be one that was tried below. As stated by the Chancellor, the issue tried was “whether this salary received by plaintiff is alimony as set out within the terms of the property settlement agreement.” As stated in appellant’s answer to Mrs. Lauck’s petition, his main affirmative defense was “that the acceptance of said monies by Petitioner on said terms is an accord and satisfaction of any sums due to Petitioner by Respondent.” To determine that issue proof was adduced to determine whether Mrs. Lauck performed services for the salary, not the value of those services. Of course, if the alleged services were a sham they would constitute no services, but the actual value of the services per se we see as an issue raised on appeal for the first time and accordingly will not be considered. See Tops Bar-B-Q, Inc. v. Stringer, (1977 Tenn.App.W.S.) 582 S.W.2d 756.

We believe there is merit in the third issue. Mr. Lauck claimed a credit against accruing alimony for funds paid to Mrs. Lauck during 1980 and 1981 by another of the corporations owned by Mr. Lauck. The Chancellor denied the set off without giving his reasons. The Chancellor found that during 1980 and 1981 Mrs. Lauck was not actively working for Rhodes, Lauck & Associates, Inc., and the money received during that period as salary was in lieu of alimony. During that same period Mrs. Lauck received a “salary” from another of Mr. Lauck’s corporations known as R.L.A., in the total amount of $10,010.22. Mrs. Lauck neither asserted nor proved that she performed any services whatsoever for R.L.A. during this period. Such being the case, we find the credit should have been allowed under Mrs. Lauck’s theory of the matter, i.e., she was entitled to receive alimony without doing any work for anyone and payment for services rendered cannot be considered as alimony payment. It seems Mr. Lauck would be entitled to credit; for if he is entitled to no credit for salary paid for work performed, he would be entitled to credit for salary paid through his alter ego, for work not performed. Accordingly, we find the third issue in favor of the appellant.

The result is that the judgment below shall be reduced by the sum of $10,010.22 and as reduced, affirmed.

Costs below are as there adjudged and costs of appeal are adjudged equally against the parties.

Done at Jackson in the two hundred and eighth year of our Independence and in the one hundred and eighty-ninth year of our Statehood.

TOMLIN and CRAWFORD, JJ., concur.


text:
    FIRST SOUTHERN TRUST COMPANY, Administrator, C.T.A., David E. Caywood, Louis R. Lucas, and Estate of John Ford Canale, Deceased, Complainants-Appellants, v. Estate of Howard Davis SOWELL, Deceased, Defendant-Appellee.
    Court of Appeals of Tennessee, Western Section, at Jackson.
    July 26, 1984.
    Application for Permission to Appeal Denied by Supreme Court October 29,1984.
    Louis R. Lucas and David E. Caywood, Memphis, for complainants-appellants.
    Carl R. Olsen, Memphis, for defendant-appellee.
   NEARN, Presiding Judge, Western Section.

This is an appeal by First Southern Trust, former Administrator, C.T.A. of the estate of Howard Davis Sowell and its attorneys from an order of the Probate Court of Shelby County fixing the amount of fees due the former Administrator and attorneys in the handling of the estate during their stewardship.

Howard Davis Sowell died testate on April 12, 1981, and the appellant First Southern Trust was appointed Administrator, C.T.A. on May 5,1981. The estate was extensive and included several businesses and real estate holdings. Its administration has proven to be somewhat complicated. The beneficiaries of the estate became dissatisfied with the manner in which the estate was being administered, which dissatisfaction ultimately resulted in the appointment of other administrators, namely, Carl D. Olsen and Fred Yaccuro. Subsequent to the appointment of the new administrators, the former Administrator and attorneys petitioned the Court for the allowance of fees for services rendered. The beneficiaries, the new administrators and the former administrator and attorneys, David E. Caywood, Louis R. Lucas and John Ford Canale (now deceased) could not agree as to the amount of the fee that should be awarded and in fact there was a wide disparity between the views of the parties as to the value of the services rendered. In order to keep acrimony at a minimum and to avoid a protracted hearing at the trial level, the parties entered into a stipulation and agreement. That stipulation provided:

The fee to be paid to the former Administrator C.T.A. will be 3.48 percent (3.48%) of a base sum to be decided by the Court and the fee to be paid to the former attorney’s for the Estate will be an additional 2.52% percent (2.52%) of the same base sum.
The parties agree that there is a dispute as to what base sum should be the basis for calculating the fees which shall be submitted to this Court for its determination, but the percentages set forth above shall be applied to the base sum established as proper by this Court.

Based upon the foregoing stipulation the Trial Judge determined the base sum to be $5,007,941.19 and accordingly ordered and fixed the former administrator’s fee at 3.48% of that sum or $174,276.35 and awarded attorney fees at 2.52% of that sum or $126,200.12. The Trial Judge arrived at his base sum figure of $5,007,941.19 by adding together the value of all personal property in the estate, the net proceeds from the sale of real estate and income from the estate that came into the estate during the former administrator’s term as such.

The former administrator and attorneys have propounded four issues on appeal. The issues as propounded are both prolix and redundant. Simply put, the appellants insist that the Trial Judge erred in failing to include in the “base sum” the gross value of all real estate of the deceased, whether sold or unsold by the administrator. We hold he did not.

The greater part of appellant’s brief is consumed by details of all the work allegedly done by the Administrator in guiding, preserving and handling of the estate. As we view this matter, such details have some, but not much, application to this case on appeal. The parties did not stipulate that the Administrator and attorneys would be compensated on a quantum meruit basis. On the contrary, they stipulated that compensation would be made by an agreed mathematical formula based upon a base sum valuation of the estate and not on the value of services rendered. Such stipulations are binding and may not be altered on appeal. See Bearman v. Camatsos, (1964) 215 Tenn. 231, 385 S.W.2d 91.

Unless an estate is declared insolvent, real estate is not subject to administration by the estate’s representatives, but title passes by operation of law to the devisees or heirs upon the death of the owner. See H. Phillips & J. Robinson, Pritchard on Wills, § 614 (1983); Crook v. Crook, (1961) 208 Tenn. 262, 345 S.W.2d 679. Of course, by will a deceased may authorize the Executor to dispose of real property in the estate. See Pritchard on Wills, supra, § 614. The Sowell will did authorize the Executor to dispose of real property. In order to keep the estate in a financially fluid condition, with agreement of all parties, numerous parcels of land were sold by the Administrator and the funds therefrom were handled by the Administrator. Accordingly, under the circumstances of this case, we find no error nor abuse of discretion in the action of the Trial Judge in including the value of property sold in the base sum, but excluding therefrom, the unsold property. See Estate of Griffith v. Griffith, (1969 M.S.) 61 TenmApp. 72, 452 S.W.2d 895. However, approximately $275,000.00 from the gross received from those sales was used to pay real estate commissions and attorney fees to attorneys other than appellants for services rendered in closing the sales. Appellants insist that these sums ought be included in the base sum. Neither the real estate commissions nor the attorney fees actually come into the hands of the Administrator. They were deducted from the proceeds of the sale by the closing attorney and distributed by him. We see no abuse of discretion in the Trial Judge’s failure to include in the “base sum” funds that were handled by other than the Administrator and its attorneys.

The result is that the judgment below is in all things affirmed with costs of appeal adjudged against the appellants.

Done at Jackson in the two hundred and ninth year of our Independence and in the one hundred and eighty-ninth year of our Statehood.

HIGHERS, J., and MeLEMORE, Special Judge, concur.


author: TOMLIN, Judge.

text:
    A.W. WILLIS, Jr., Successor Executor of the Estate of Chew Cornelius Sawyer, et al., Plaintiff-Appellee, v. Mary SMITH, Defendant-Appellant, and Universal Life Insurance Company, Successor in Interest to Union Protective Life Insurance Company, Appellee.
    Court of Appeals of Tennessee, Western Section, at Jackson.
    Nov. 2, 1984.
    Application for Permission to Appeal Denied by Supreme Court Jan. 22, 1985.

      Prince C. Chambliss, Jr. and Teresa J. Sigmon of Armstrong, Allen, Braden, Goodman, McBride & Prewitt, Memphis, for defendant-appellant.
    Ray A. Bratcher of Pierce, Rice, Bratcher, Nichols & Stone, Memphis, for plaintiff-appellee.
    Walter L. Evans and Rita L. Stotts, Memphis, for Universal Life.
    Herman Morris, Jr., Memphis, for TriState Bank.
   TOMLIN, Judge.

A.W. Willis, Jr., as executor of the estate of C.C. Sawyer, deceased, filed this action against Universal Life Insurance Company, Tri-State Bank, and Mary Smith, the mother of C.C. Sawyer’s widow, to recover the value of certain corporate stock and dividends that had been wrongfully converted to the detriment of the estate he was administering. Universal filed a cross-claim against Mary Smith for indemnification. The Chancery Court of Shelby County awarded plaintiff a judgment against both Mary Smith and Universal for the value of the stock plus certain dividends paid thereon. Universal was awarded a judgment for the value of the stock on its cross-claim against Mary Smith. Mary Smith is the only defendant appealing. Plaintiff has appealed only as to the failure of the chancellor to award prejudgment interest. Universal has not appealed. Therefore, we will at times use the term “defendant” in its singular form to refer to Mary Smith only.

Defendant, by her appeal, presents a bushel basket of issues for this Court to consider, some eight in number. Defendant contends that the chancellor erred (1) in holding that the plaintiff’s claim was not barred by the statute of limitations, Tennessee Code Annotated § 28-3-105; (2) in holding that plaintiff’s claim was not barred by laches and estoppel; (3) in not holding that plaintiff’s decedent owned the stock as tenants by the entirety with his late wife; (4) in admitting stock certificates and related affidavits without a proper foundation; (5) in failing to give defendant credit for one-third of the amount of the recovery in accordance with a prior settlement pertaining to estate assets; (6) in giving plaintiff a judgment for the amount of dividends paid on the stock; (7) in giving judgment for Universal on its cross-complaint against defendant; and (8) in dismissing the bank from the lawsuit.

C.C. Sawyer died testate in September, 1978. The beneficiaries under his will were certain brothers and sisters along with his widow Helen Sawyer, who was named executrix. Several months elapsed before Helen Sawyer could be persuaded to open her husband’s lockbox, take inventory of same and enter his will for probate. His lockbox was opened and inventoried in her presence in March, 1974. The inventory was signed by her as one of the witnesses. Among the assets included therein was Certificate No. 181 for 20 shares of stock in Union Protective, issued to C.C. Sawyer in 1958. In 1970, the Union Protective stock split five to one. Thus, the certificate represented 100 shares.

The largest beneficiary under Sawyer’s will was his sister, Othella Sawyer Shannon. That there was substantial open hostility between Othella and Helen is well documented in the record. It appeared at that time that Sawyer’s estate might be insolvent. For this reason, and perhaps others, Helen Sawyer elected to dissent from the will and withdrew in her capacity as executrix in September, 1974. Shortly thereafter plaintiff was appointed as successor executor. When plaintiff assumed his responsibilities as executor Mrs. Sawyer turned over to him the contents of her late husband’s lockbox, which included Certificate No. 181 for 20 shares of Union Protective stock. In connection with the settlement of Sawyer’s estate, first Mrs. Sawyer and then the plaintiff were represented by The Honorable H.T. Lockard, now a circuit judge in Shelby County.

At the time of his death C.C. Sawyer owned stock in several companies, as well as owning considerable real estate. Several of his heirs conveyed to the plaintiff their opinion that Sawyer owned substantially more assets than those revealed by the inventory of his lockbox. However, because of the resistance and attitude of Sawyer’s widow, plaintiff was unable to determine the existence of any additional assets. Plaintiff testified that Mrs. Sawyer advised him that the assets from the deceased’s lockbox that were turned over to him were “all that there was” and that she knew nothing about additional assets.

In October, 1976, after substantial negotiations between the parties, a settlement agreement was reached by all of the beneficiaries of Sawyer’s estate. At that time Mrs. Sawyer was represented by independent counsel. Prior to execution of the agreement its contents were discussed in detail in Mrs. Sawyer’s presence and in the presence of her counsel. The agreement was ultimately approved by her when she signed the document. Among other things it provided that the shares of Union Protective stock represented by Certificate No. 181, the only stock in that company known by the plaintiff to be in existence, would ultimately belong to the deceased’s sister, Othella Shannon. Furthermore, this settlement agreement provided that should other assets of C.C. Sawyer be discovered subsequent to the date of execution of the agreement they were to be divided in such a way that Mrs. Sawyer would receive one-third of the “subsequently discovered assets.” At this point it should be noted that the defendant, Helen Sawyer’s mother, had moved into the Sawyer residence shortly after the death of C.C. Sawyer in 1973 and was aware of the agreement. Sawyer’s widow proceeded to take those assets assigned to her under the agreement.

In January, 1977, Helen Sawyer died intestate, leaving the defendant, her mother, as her sole heir. A friend of Mrs. Sawyer’s, Martha House, was appointed administratrix of her estate. The Honorable George Brown represented Mrs. House in her administrative capacity. Mrs. House received only such assets as Mary Smith turned over to her. She made no active search for any assets. The estate was duly administered by Mrs. House and was closed in September, 1979. There were no shares of Union Protective stock listed as assets of Mrs. Sawyer’s estate.

In October, 1980, pursuant to a merger arrangement, Universal agreed to purchase all of the outstanding capital stock of Union Protective for $48 per share. At that time the estate of C.C. Sawyer was still open due to the inability of plaintiff to obtain waivers and receipts from some of the beneficiaries and other problems. Among the assets then remaining in plaintiff’s possession was Certificate No. 181 of Union Protective, representing 100 shares of stock due to the stock split heretofore mentioned. Plaintiff tendered this certificate to the escrow agent, the Tri-State Bank, for redemption. It was at this time that plaintiff discovered that the name C.C. Sawyer did not appear as an owner of capital stock in Union Protective on the stockholder list submitted to Universal by Union Protective in connection with the merger and acquisition. Upon making this startling discovery, plaintiff contacted Universal and upon investigation at plaintiff’s request discovered the following facts that form the basis of this litigation, for up to the present time one might truly ask, “where’s the beef”?

Much to plaintiff’s surprise and shock it appears that on January 7, 1975, only four months after surrendering her deceased’s husband’s assets to the plaintiff, Helen Sawyer filed an affidavit with Union Protective which stated in substance that she was the legal owner of Certificate Nos. 181 and 174, for 20 and 60 shares respectively, that had been issued to her deceased husband, C.C. Sawyer. The affidavit further stated that she had been unable to locate the two certificates, and that to the best of her knowledge they had either been lost or misplaced. This was the first time that plaintiff had ever heard of the existence of Certificate No. 174 for 60 shares (worth at that time 300 shares by virtue of the split). It was news to plaintiff’s counsel as well.

At the time the affidavit was made and submitted to Union Protective, Helen Sawyer was well aware that only nine months before she had participated in the inventory of her deceased husband’s lockbox in which Certificate No. 181 was found and that in September, 1974, she had surrendered that certificate to the plaintiff as the successor executor of her deceased husband’s estate. By the same token, she had to be aware that under the will she was not entitled to possession or ownership of either certificate.

Notwithstanding that Union Protective knew that C.C. Sawyer was deceased, on the strength of Helen’s affidavit alone, with no inheritance tax waivers or copies of letters testamentary being filed with the company, it issued Certificate No. 443 for 400 shares in the company to Helen Sawyer to replace the 400 shares represented by the two “lost or misplaced” certificates.

Helen continued her fraud when some 20 months after she acquired the stock in her name she participated in the settlement of the estate by being a signator to the settlement agreement. The agreement called for the stock represented by Certificate No. 181 to be transferred to Othella Sawyer Shannon. Helen also knew that she was in possession of 300 more shares represented by Certificate No. 174, unknown to the other beneficiaries. She obviously made no revelation of this fact to anyone except her mother, the defendant, who, following Helen Sawyer’s death, discovered that this certificate was in a chest of drawers in the Sawyer home.

Defendant made this discovery sometime prior to August, 1979, at which time she submitted the certificate to Union Protective, accompanied by an affidavit stating that she was the sole heir-at-law of Helen Sawyer, deceased, who died intestate. Again, based solely on this affidavit, on August 18, 1979, Union Protective issued Certificate No. 462 to the defendant for 400 shares of its stock. This transfer occurred prior to the closing of Helen Sawyer’s estate by Mrs. House, the administratrix. Mrs. House testified unequivocally that she was never informed about the Union Protective stock and that it was not shown as an asset on the inheritance tax return filed by her as administratrix. The climax of this drama occurred when defendant, as a listed stockholder of Union Protective stock, was notified, along with all of the other stockholders of Union Protective, that she should surrender her certificates to the bank for compensation pursuant to the merger agreement between Union Protective and Universal. Defendant did so and received a check in the amount of $19,200.

After these facts became known to plaintiff and defendant refused to pay over the $19,200 to plaintiff on behalf of C.C. Sawyer’s estate, this suit was brought in December, 1980.

The chancellor made the following findings of fact:

1. Mr. Chew Cornelius Sawyer died intestate (sic) in September of 1973. The decedent’s safety deposit box was inventoried shortly thereafter in the presence of his widow, Helen A. Sawyer who witnessed the inventory. In addition to other items, the safety deposit box included twenty shares of Union Protective Life Insurance Company stock issued in 1958, but subsequently split five-for-one, making this old certificate worth 100 shares of Universal Life Insurance Company, the successor to Union Protective Life Insurance Company.
2. In March of 1974 Chew C. Sawyer’s will was admitted to probate and Helen A. Sawyer was appointed executor (sic) of the estate in cause number 101082 in probate court of Shelby County, Tennessee. In 1974 A.W. Willis was appointed successor executor of the estate, the estate is still active and has never been closed, and A.W. Willis, Jr. is still the successor executor of the estate.
3. On January 7, 1975 Helen A. Sawyer executed and filed affidavits with Union Protective, stating that the twenty share stock certificate, found in the deposit box and known to be in the possession of the executor, and another certificate of sixty shares also in the name of C.C. Sawyer, had been lost or misplaced and that she was entitled to them. She was then issued a new certificate of 400 shares representing the current value of the eighty old shares without any proof of her right to those shares except her own affidavit.
4. On October 25, 1976 Helen A. Sawyer and other beneficiaries of C.C. Sawyer concluded a settlement of the estate which was incorporated in an order filed in the cause. Even though Helen A. Sawyer knew that she had already improperly transferred the twenty (one hundred) shares the executor had in his possession and another sixty (three hundred) shares belonging to the estate that she had concealed from the executor, to herself, she nevertheless concluded the agreement conveying one hundred shares, all that the executor and the other parties knew anything about to Othel-la Shannon.
The court finds that her action constituted conversion and fraud.
Helen A. Sawyer lived with her daughter (sic) Mary Smith for a time before her death on January 13, 1977 and the four hundred share stock certificate was kept in their possession in their home.
5. On August 25,1979 Union Protective Life Insurance Company transferred the four hundred share certificate of stock from Helen A. Sawyer to her daughter (sic) Mary Smith.
6. On October 2, 1980 Mary Smith “cashed-in” the four hundred shares for $19,200.00.
7. In October, 1980 A.W. Willis, successor executor, attempted to “cash-in” the twenty (one hundred) share certificate he held and learned that Helen A. Sawyer had converted that stock and also had converted sixty (three hundred) other shares belonging to the estate that he had not known about.
8. Between 1972 and 1980 Union Protective had paid $720.00 in stock dividends on the subject stock.

Since this case was tried by the chancellor sitting without a jury, our review is de novo upon the record of the trial court accompanied by a presumption of correctness of the findings of the chancellor.

Absent an error of law, unless the proof preponderates against his findings, we must affirm. Tenn.R.App.P. Rule 13(d). With this in mind, we will now consider the principal issues presented by this appeal.

I. STATUTE OF LIMITATIONS, LACHES AND ESTOPPEL.

We have chosen to consider these' three issues together because of their close relationship. We consider first the defense of the statute of limitations. The principal thrust of plaintiff’s complaint is a suit for conversion. The applicable statute of limitations is T.C.A. § 28-3-105(2), which provides that an action for conversion must be brought within three years from the accrual of the cause of action. The principal issue faced by the chancellor and by this Court as well is, under the facts and circumstances of this case, when did plaintiff’s cause of action “accrue”? In Prescott v. Adams, 627 S.W.2d 134 (Tenn.Ct. App.1981) cert, denied (1982), the Middle Section of this Court stated:

It seems clear, then, that in a suit for property damages under T.C.A. § 28-3-105, the cause of action accrues at the time the injury occurs, or when it is discovered, or when in the exercise of reasonable care and diligence the injury should have been discovered. The question in the instant case is when should the plaintiffs have reasonably known that their cause of action existed.

Id. at 138.

Capsulating the facts that pertain to this issue, the record, in the opinion of this Court, clearly supports the finding that Helen Sawyer fraudulently and intentionally concealed from the plaintiff the existence of Certificate No. 174 of Union Protective stock and obtained the stock represented by Certificate No. 181 by her fraudulent actions. She represented to plaintiff that Certificate No. 181 was all that she had in her possession. She compounded the fraud when she signed the settlement agreement in September, 1976, knowing that she already had “title” to the stock and had secreted the certificate away in her bureau drawer.

The fraudulent misconduct of Helen Sawyer in this regard provided the foundation for her mother, Mary Smith, to prolong the concealment of these facts from plaintiff. While Mary Smith’s conduct is not quite so tainted as that of her daughter, it nonetheless was willful and prevented discovery by plaintiff. The proof shows that defendant was aware of the agreement that her daughter signed settling the estate in 1976. Further, the proof reveals that after her daughter’s death, but before the estate was settled, defendant had become aware of the Union Protective stock certificate that was kept in the dresser drawer in her home. However, she did not advise her daughter’s administratrix of the existence of this stock certificate so that it might be included in her daughter’s estate. Rather, when called upon to do so by Universal, she surrendered it for redemption, pocketing the cash.

We think the Supreme Court in Vance v. Shulder, 547 S.W.2d 927 (Tenn. 1977) clearly sets forth the law applicable to the case at bar:

“Mere ignorance and failure of the plaintiff to discover the existence of a cause of action is not sufficient to toll the running of the statute of limitations. Hall v. DeSaussure, [41 Tenn.App. 572, 297 S.W.2d 81 (1956)], and numerous cases. There is an exception to this rule. Fraudulent concealment of the cause of action by the defendant tolls the statute of limitations. It begins to run as of the time of the discovery of the fraud by the plaintiff. Boro v. Hidell, 122 Tenn. 80, 120 S.W. 961 (1909); Bodne v. Austin, [156 Tenn. 353, 2 S.W.2d 100 (1928)]; Howell v. Davis, [43 Tenn.App. 52, 306 S.W.2d 9 (1957)]; and numerous cases. To come within this exception, the plaintiff must prove that the defendant took affirmative action to conceal his cause of action and that he, the plaintiff, could not have discovered his cause of action despite exercising reasonable diligence. Redwood v. Raskind, 49 Tenn.App. 69, 350 S.W.2d 414 (1961); Hudson v. Shoul ders, 164 Tenn. 70, 45 S.W.2d 1072 (1932); Woodfolk v. Marley, 39 S.W. 747 (Tenn.Ch.App.1896), aff 98 Tenn. 467, 40 S.W. 479 (1897); Patten v. Standard Oil Co. of Louisiana, 165 Tenn. 438, 55 S.W.2d 759 (1933); Ray v. Scheibert, 224 Tenn. 99, 450 S.W.2d 578 (1959); see 51 Am.Jur.2d, Limitations of Actions, § 148 pp. 719-720.”

Id. at 930-31.

In our opinion, plaintiff clearly falls within the exception noted above. He has proven that the defendant and those in privy with her took affirmative action to conceal plaintiffs cause of action, and further that through the exercise of reasonable diligence, plaintiff could not have discovered the existence of circumstances that would have or should have alerted him to the fact that he had a cause of action.

In the due course of events the only time plaintiff could have reasonably discovered the fact that C.C. Sawyer’s estate had been defrauded by Mrs. Sawyer would have been following notification by Universal of the redemption of Union Protective stock, when he attempted to cash in Certificate No. 181. While it might be said that the better course of conduct for an executor would be to correspond with all the companies in which the deceased was known to have owned stock, we cannot say that plaintiffs failure to do so constituted lack of due diligence on his part. Under the facts we hold that the plaintiffs cause of action “accrued” in October, 1980. Inasmuch as this action was filed two months later, it was well within the statute of limitations.

As for laches and estoppel, we are of the opinion that these defenses are less meritorious than the statute of limitations defense. This Court described the defense of laches in Clark v. American National Bank & Trust Co., 531 S.W.2d 563 (Tenn. Ct.App.1974) cert. denied (1975).

Laches is actually based on equitable estoppel and is dependent upon the facts and the equities of each individual situation. State ex rel. v. Abernathy, supra and Hamilton Nat. Bank v. Woods (1948 E.S.), 34 Tenn.App. 360, 238 S.W.2d 109....
Long delay alone in the prosecution of a claim is insufficient for the application of the doctrine of laches. The present circumstances of the parties must be considered. There must be actual acquiescence or that implied from the circumstances of the case, in the conduct of the defendant. Whether or not such exists is dependent upon the facts. And whether the facts are sufficient is dependent upon the Court applying those facts. One Court may reach a different conclusion than another. Initially, we could find no factual condition in the record, as we reviewed ⅛, that would put the complainant-beneficiaries on reasonable inquiry or notice of the complained of exchange which, therefore, “tolled the running” of the doctrine of laches.

Id. at 573.

Defendant’s contention that laches or es-toppel should bar plaintiff’s claim because of his failure to discover the fraud sooner is totally without merit. Under the facts as established in this case we have already held that plaintiff, as an executor, exercised due diligence. Defendant seeks to present herself as an innocent victim. While her conduct does not reach the depths reached by her daughter, we cannot and do not conclude that she is an innocent party in these events.

II. ADMISSIBILITY OF THE AFFIDAVITS AND STOCK CERTIFICATES.

Defendant contends that the chancellor committed error in admitting into evidence the various stock certificates reissued by Union Protective, as well as the affidavits of defendant and Helen Sawyer filed with Union Protective in connection with the reissuance of the stock. Objections were made on the grounds that a proper foundation for a business record had not been laid and that the affidavits were not properly authenticated.

The Uniform Business Records As Evidence Act provides that:

A record of an act, condition or event, shall, insofar as relevant, be competent evidence if the custodian or other qualified witness, testifies to its identity and the mode of its preparation, and if it was made in the regular course of business, at or near the time of the act, condition or event, and if, in the opinion of the court, the sources of information, method and time of preparation were such as to justify its admission.

T.C.A. § 24-7-lll(c) (emphasis added).

In Van Zandt v. State, 218 Tenn. 187, 402 S.W.2d 130, cert. denied, 385 U.S. 884, 87 S.Ct. 175, 17 L.Ed.2d 111 (1966), a case involving the interpretation of this code section, the court stated: “The ruling of the trial judge admitting or excluding such records [business records] is given much weight and will not be reversed unless there has been a manifest abuse of discretion.” Id. 402 S.W.2d at 137 (quoting Cantrill v. American Mail Line, Inc., 42 Wash.2d 590, 257 P.2d 179 (1953)).

Mr. Payne, an executive vice-president of Union Protective at the time the transaction took place, testified that he knew of the preparation of these records of Union Protective and that he had day-today control over the business activities of this aspect of the company. He further testified that the affidavits were attached as part of the business records to the stock transfer books of Union Protective. We hold that the chancellor did not abuse his discretion in admitting these documents in the light of this testimony. We also note that the issue of the admissibility of these documents was made irrelevant by the testimony of the defendant who admitted in her answer that Helen Sawyer, in January, 1975, signed the affidavit concerning the two certificates of Union Protective stock that was used as a basis for the reissuance of the stock by Union Protective to her. Defendant also admitted that she acquired and took possession of the stock after her daughter died, and that she was paid $19,-200 when she surrendered the stock to Universal after the merger.

III. DIVIDENDS.

Being consistent to the end, defendant challenges the action of the trial court awarding plaintiff judgment for $720 in dividends paid on the Union Protective stock for the years 1971-1979. This action of the chancellor was entirely appropriate. The stock belonged to C.C. Sawyer and should have been distributed through his estate. Whatever dividends were paid on that stock during those years rightfully belong to the estate of C.C. Sawyer.

IV. MISCELLANEOUS ISSUES.

Defendant also contends that because C.C. Sawyer and his wife attended shareholders’ meetings of Union Protective together in the 1950’s, they owned the stock as tenants by the entirety, notwithstanding the fact that the certificate was issued to C.C. Sawyer alone. This is a concept unheard of in the law.

The C.C. Sawyer estate settlement agreement provided that Helen Sawyer was to receive one-third of any assets “discovered” after the settlement agreement, and thus defendant contends that she should be given credit for one-third of the value of the Union Protective stock pursuant to that agreement. To accept this contention would be to do honor to Helen Sawyer’s fraud. This issue has no merit.

V. THE CROSS-CLAIM OF UNIVERSAL.

Universal has not appealed the judgment of the plaintiff against it. It is the position of defendant that since Universal committed affirmative wrongs, it should not be entitled to a judgment over against her, as she was guilty of no wrongdoing. Clearly, the basis for the chancellor’s finding for the plaintiff against Universal was the fact that the proof showed that Union Protective was negligent in transferring the stock first to Helen Sawyer and then to the defendant solely on the basis of the affidavits submitted to it. Furthermore, Universal concedes that by virtue of T.C.A. § 48-905(2)(e) it is liable as the successor or surviving corporation for any and all of the liabilities of Union Protective.

Universal did in fact pay fair market value for Union Protective stock. It would clearly be unjust enrichment to allow defendant to profit from the wrongdoings of her predecessor in interest. We cannot say that the evidence preponderates against the decree of the chancellor to place the responsibility upon the defendant, as she was the person who ultimately benefited.

VI. DISMISSAL OF THE BANK.

The chancellor found that there was no evidence from which to find the bank liable for the plaintiff’s loss. It merely acted as an escrow agent for Universal in connection with the merger with Union Protective. Furthermore, defendant filed no cross-action against the bank, and she was, therefore, not prejudiced by their dismissal from this suit. As a matter of fact, in her answer defendant admitted that the bank was guilty of no negligence in paying her for the stock that she surrendered subsequent to the merger.

VII. PREJUDGMENT INTEREST.

“[I]n Tennessee the granting or withholding of interest prior to judgment in cases not falling under the statute is within the discretion of the trial judge.” Johnson v. Tennessee Farmers Mutual Insurance Co., 556 S.W.2d 750 (Tenn.1977) (quoting Farmers Chemical Association v. Maryland Casualty Co., 421 F.2d 319, 323 (6th Cir.1970)).

Had plaintiff not been deprived of possession of the stock certificates through the fraud and wrongdoing of defendant and her predecessor in title, the $19,200 could have and would have been paid over to him as executor of C.C. Sawyer’s estate in October, 1980. Under these circumstances we think that the failure of the chancellor to allow prejudgment interest from October, 1980, to the date of the judgment amounted to an abuse of discretion.

The decree of the chancellor is affirmed in all respects except as to prejudgment interest. As to this issue the decree of the chancellor is reversed and plaintiff is awarded prejudgment interest from October, 1980, until the date of the judgment. Costs in this cause are taxed to the defendant, for which execution may issue, if necessary.

NEARN, P.J., W.S., and HIGHERS, J., concur.

      . A.W. Willis, Jr. will be referred to as "plaintiff”; defendant Mary Smith as "Mary Smith" or “defendant"; Universal Life Insurance Company as "Universal”; and Tri-State Bank as "Bank.” Though not a defendant, the Union Protective Life Insurance Company is involved in this litigation and will be referred to as “Union Protective.”


author: POPE, Chief Justice.

text:
    The STATE of Texas, Petitioner, v. CORPUS CHRISTI PEOPLE’S BAPTIST CHURCH, INC. et al., Respondents.
    No. C-3265.
    Supreme Court of Texas.
    Dec. 19, 1984.
    Rehearing Denied Feb. 13, 1985.

      Jim Mattox, Atty. Gen., Mary F. Keller, Asst. Atty. Gen., Austin, for petitioner.
    Coover & Coover, Ann E. Coover, Corpus Christi, Ball & Skelly, William B. Ball, Harrisburg, Pa., for respondents.
   POPE, Chief Justice.

The State of Texas sued Corpus Christi People’s Baptist Church (People’s Baptist) seeking to enjoin it from operating the Rebekah Home for Girls, the Anchor Home for Boys, and the Lighthouse Home for Boys, unless and until People’s Baptist obtains a license for that purpose from the Department of Human Resources (DHR). Some members of the staff of the homes, some children and parents have intervened as defendants. The questions presented for review are whether the state licensing procedure for child-care facilities violates the Religion Clauses of the United States Constitution’s First Amendment, the Ninth Amendment, 42 U.S.C. 1983, and various articles of the Texas Constitution when applied to church-operated facilities. The trial court, in a non-jury trial, denied the State’s prayer for injunction, concluding that the licensing scheme, as applied to People’s Baptist, violated both the United States and Texas Constitutions. The court of appeals, with one justice dissenting, affirmed the judgment in an unpublished opinion. We reverse the judgments of the courts below and remand the cause to the trial court with instructions.

The issue is not whether People’s Baptist is performing a service that falls beneath licensing standards. The three homes have a good record of high quality service. People’s Baptist, from this record, could no doubt easily satisfy licensing requirements, but has chosen not to do so. It reasons that licensing interferes with religious freedom. People’s Baptist does not, however, resist all licensing to do business in Texas. In fact, it does its business and service as a corporation under the corporate name of Corpus Christi People’s Baptist Church, Inc., and it complies with all business licensing requirements.

The issue, therefore, is a narrow one. It is one that Texas courts have twice before decided adversely to People’s Baptist or its predecessor in title. Roloff Evangelistic Enterprises, Inc. v. State, 556 S.W.2d 856 (Tex.Civ.App. — Austin 1977, writ ref’d n.r. e.), appeal dismissed, 439 U.S. 803, 99 S.Ct. 58, 58 L.Ed.2d 96 (1978); Oxford v. Hill, 558 S.W.2d 557 (Tex.Civ.App. — Austin 1977, writ ref’d). In Roloff, the court rejected the argument that the licensing act impinged on the corporation’s free exercise of religion. In Oxford, the court refused to sustain an employee’s contention that the Act violated his First Amendment rights. This third effort to achieve a different result was occasioned by a transfer of ownership of the homes to Corpus Christi People’s Baptist Church, Inc. by the former owner, Roloff Evangelistic Enterprises, Inc. Reverend Lester Roloff forthrightly explained the reason for the transfer to the corporate church: “Instead of (the State) jumping on the (Evangelistic) Enterprises, you will be fighting with the church from here on_” We have substantially the same cause before us again, prompted only by a change of ownership.

The licensing of child-care facilities operating in Texas is required as a part of the state program to protect the health, safety and well-being of children residing in those facilities. The declared purpose of the licensing requirement is to establish statewide minimum standards through a licensing program. TEX.HUM.RES.CODE ANN. § 42.001. The licensing act includes this statement:

It is also the intent of the legislature that freedom of religion of all citizens is inviolate, and nothing in this chapter gives a governmental agency authority to regulate, control, supervise, or in any way be involved in the form, manner, or content of religious instruction or the curriculum of a school sponsored by a religious organization.

Id.

People’s Baptist contends that the Texas licensing scheme violates the Establishment Clause of the United States Constitution’s First Amendment because it creates “excessive entanglement” between church and state. The Clause provides: “Congress shall make no law respecting an establishment of religion ...”

The U.S. Supreme Court has enunciated a three-pronged test to determine whether governmental action violates the Establishment Clause: (1) the statute must have a secular legislative purpose; (2) the statute’s principal or primary effect must be one that neither advances nor inhibits religion; and (3) the statute must not foster excessive governmental entanglement with religion. Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745 (1971). The purpose of the Establishment Clause is to protect against state “sponsorship, financial support, and active involvement” in religious activity. Walz v. Tax Commission, 397 U.S. 664, 668, 90 S.Ct. 1409, 1411, 25 L.Ed.2d 697 (1970).

People’s Baptist’s reliance on the Establishment Clause is misplaced. The Establishment Clause cases address the issue of whether some form of government aid, either direct or indirect, to a religious institution violates the Establishment Clause. See e.g., Mueller v. Allen, 463 U.S. 388, 103 S.Ct. 3062, 77 L.Ed.2d 721 (1983) (statute allowing parents tax deduction for expenses incurred in sending their children to parochial schools); Lemon (statute providing state aid in form of salary supplements, textbooks and instructional material for nonsectarian subjects); Walz (statute granting property tax exemptions to religious organizations for religious properties).

Unlike the traditional Establishment Clause cases, this case involves government regulation of a child-care institution which is part of the church ministry. This distinction is important for two reasons. First, to accept People’s Baptist’s argument and invalidate the licensing and regulatory scheme because of “excessive entanglements” would create a dilemma in applying the three-pronged Establishment Clause test; the second prong would be at odds with the third. Requiring nonreligious childcare facilities to comply with the state licensing and regulatory scheme while exempting religious facilities would result in unequal state treatment of the two classes of institutions. This unequal treatment could, arguably, be impermissible under the second-prong of the Establishment Clause test because the primary effect would be to advance religion.

Second, state licensing and regulation is a type of entanglement that differs from the entanglement discussed in the traditional Establishment Clause cases. In those cases, the State must examine and determine what programs are religious and what programs are secular to ensure that government aid reaches only the nonreligious ones. In our case, the state regulatory scheme prohibits inquiry into the religious content of the homes’ curriculum. The purpose of these regulations is to assure that all child-care facilities, secular and nonsecular, meet certain minimum standards in areas such as financial solvency, staff-child ratio, nutrition and medical care.

We hold that the licensing requirement does not offend the Establishment Clause. A more appropriate and direct means of questioning the constitutionality of this government regulation is through the First Amendment’s other religion clause, the Free Exercise Clause. See Forest Hills Early Learning Center, Inc. v. Lukhard, 728 F.2d 230, 238 n. 6 (1984). The Free Exercise test contains all of the safeguards required to protect People’s Baptist’s interest without the inherent traps found in an Establishment Clause review of a case like this where the government imposes regulations without conferring corresponding benefits. Under a Free Exercise Clause analysis, the problem of “excessive entanglement” between church and state will, in effect, be addressed. If government regulation is proper because the State has a compelling interest, the regulatory scheme will nevertheless be invalid unless the State uses the least restrictive means. Anything more than the least restrictive means will result in an “excessive entanglement.”

The First Amendment’s Free Exercise Clause provides that Congress shall make no law “prohibiting the free exercise” of religion. The State contends that licensing of the child-care facilities does not violate People’s Baptist’s right to the free exercise of its religion. We agree.

While there is an unqualified prohibition against government interference with beliefs, governmental regulation may lawfully impose an incidental burden on otherwise protected religious conduct. Wisconsin v. Yoder, 406 U.S. 205, 220, 92 S.Ct. 1526, 1535, 32 L.Ed.2d 15 (1972); Sherbert v. Verner, 374 U.S. 398, 403, 83 S.Ct. 1790, 1793, 10 L.Ed.2d 965 (1963); Cantwell v. Connecticut, 310 U.S. 296, 303-04, 60 S.Ct. 900, 903, 84 L.Ed. 1213 (1940). A balancing test is employed by the courts to determine when government may regulate certain conduct prompted by religious beliefs or principles. Yoder, 406 U.S. at 221, 92 S.Ct. at 1536; Sherbert, 374 U.S. at 403, 406, 83 S.Ct. at 1793, 1795. First, the party complaining of a Free Exercise Clause violation must show that the regulations under review impose a substantial burden on the exercise of his religion. Second, if the complaining party demonstrates that it is burdened by the regulations, then the State must have a compelling state purpose for the laws. Relevant to this prong of the test is an inquiry into whether there exists a less restrictive alternative to the regulation.

The trial court based its judgment, in part, on the State’s failure to prove a compelling interest. We hold that, as a matter of law, the State has a compelling interest of the highest order in protecting the children in child-care facilities from physical and mental harm. This compelling State interest outweighs the burden imposed upon People’s Baptist by the licensing requirements.

The State has a right and a duty to protect and nurture its minor children. Prince v. Massachusetts, 321 U.S. 158, 64 S.Ct. 438, 88 L.Ed. 645 (1944); Jones v. Alexander, 122 Tex. 328, 59 S.W.2d 1080 (1933). The State must be especially concerned with the welfare of children residing in child-care facilities. The parents of these children are absent. The children who reside in these homes are entirely dependent upon the operators and employees for their food, shelter and care. Communication with those outside the facility is wholly controlled by the institution. The staff at the homes exercise total supervision over the children’s health, safety and well-being. They direct even the smallest details of the children’s daily lives.

The State’s special concern for the welfare of these children is reflected in the Human Resources Code. The State’s interest in assuring that these children’s basic needs are met and that their basic rights are protected is paramount. Oxford v. Hill, 558 S.W.2d 557 (Tex.Civ.App.—Austin 1977, writ ref’d); Kansas ex rel. O’Sullivan v. Heart Ministries, Inc., 227 Kan. 244, 607 P.2d 1102 (1980), appeal dismissed, 449 U.S. 802, 101 S.Ct. 47, 66 L.Ed.2d 6 (1980).

The record reveals that People’s Baptist has provided excellent physical facilities, a dedicated staff and a list of many children who have been successfully treated by its programs. These facts show how readily the homes can be approved for licensing. If the State is prohibited from licensing these child-care facilities on religious grounds, it will be prohibited from licensing other facilities claiming the same religious exemption. Children in the homes of some institutions may become the victims of neglect, injury, cruelty, or degradation in the name of spiritual regeneration. The State would, under People’s Baptist’s theory, be powerless to intervene.

Licensing and regulation of child-care facilities are the least restrictive of the alternatives that the State could provide for the protection of children. Without these procedures the State could not gather vital information about a child-care facility that it must have to fulfill its duty to protect the health and well-being of the children residing there. No entity other than the State can carry out these responsibilities for the public.

The Human Resources Code protects religious child-care facilities from State intrusion into protected areas. Section 42.001 expresses the intent of the legislature that freedom of religion is inviolate. Section 42.042(k) prohibits the DHR from regulating or attempting to regulate or control “the content or method of any instruction or curriculum of a school sponsored by a religious organization.” The regulations provide the least restrictive means of achieving the State’s compelling interest in promoting the health, safety and

welfare of the children residing in childcare facilities.

We have considered all of People’s Baptist’s remaining arguments: that state licensing and regulation of these homes would violate the Ninth Amendment of the U.S. Constitution; 42 U.S.C. 1983; article I, sections 3a, 6 and 19; article II, section 1; and article III, section 1 of the Texas Constitution. We conclude that the State’s regulatory scheme does not violate these provisions. Based on the foregoing holdings, we need not reach the State’s third point of error.

These cases have been debated and litigated for a number of years upon the claim that the State seeks to regulate religion. This record and those of the two prior cases show that the issue is a spurious one. The State has manifested complete disinterest in the religious doctrines that People’s Baptist has in the past or may in the future expound. The homes can comply with the law’s modest requirements that are mandatory for all other homes. A decision to close the homes will be that of People’s Baptist, not the State.

We reverse the judgments of the courts below and remand the cause to the trial court with instructions to enjoin People’s Baptist from operating these homes unless and until such time as it procures a license from the State.


author: PER CURIAM.

text:
    Ruby BRADFORD and A.L. Bradford, Petitioners, v. George H. SULLIVAN and Harris Hospital, Respondents.
    No. C-2830.
    Supreme Court of Texas.
    Jan. 23, 1985.
    Willie E. Phillips, Jr., Irvins, John E. Collins, Dallas, for petitioners.
    Cantey, Hanger, Gooch, Munn & Collins, Stephen L. Tatum and Rod Patterson, Wynn, Brown, Mack, Renfro & Thompson, Tom Renfro and John F. Gillespie, Fort Worth, for respondents.
   PER CURIAM.

This is a medical malpractice suit. On November 1, 1980, Mrs. Bradford discovered a sponge apparently left during surgery in 1975. Suit was filed on October 5, 1981. The trial court rendered summary judgment for defendants, based on art. 5.82, sec. 4 of the Insurance Code. The court of appeals affirmed in an unpublished opinion. Pursuant to Rule 483, we grant the application for writ of error and without hearing oral argument, and in accordance with this court’s decision in Nelson v. Krusen, 678 S.W.2d 918 (Tex.1984), we reverse and remand this cause to the trial court.