Delta Health Group, Inc. v. Stafford

• Citation: 887 So.2d 887
• Parties: DELTA HEALTH GROUP, INC. v. Tim STAFFORD and Lana Stafford.
• Decision Date: 05 March 2004
• Court: Supreme Court of Alabama

887 So.2d 887

DELTA HEALTH GROUP, INC. v. Tim STAFFORD and Lana Stafford.

1021675.

Supreme Court of Alabama.

March 5, 2004.

F. Lane Finch, Jr., Michael C. Skotnicki, and Laura Ellen Lewis of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellant.

David M. Cowan of Mann, Cowan & Potter, P.C., Birmingham, for appellees.

On Application for Rehearing

STUART, Justice.

The opinion of December 19, 2003, is withdrawn and the following opinion is substituted therefor.

Tim Stafford sued Delta Health Group, Inc. ("Delta Health"), in the Choctaw Circuit Court alleging, among other things, defamation and fraud; his wife Lana Stafford asserted a derivative claim alleging loss of consortium. A jury returned a verdict in favor of the Staffords, awarding Tim Stafford $200,000 in compensatory damages and $200,000 in punitive damages, and awarding Lana Stafford $100,000 on her loss-of-consortium claim. The trial court entered a judgment on the jury's verdict.

Delta Health filed a motion for a judgment as a matter of law and a motion for remittitur or, in the alternative, a motion for a new trial. The trial court denied those motions. Delta Health appealed. We reverse and remand for a new trial.

Facts and Procedural History

Delta Health operates approximately 45 nursing homes in the Southeastern states; Willow Trace Nursing Home, located in Butler, Alabama, is one of those nursing homes. Beginning in 1994 until August 1997, Tim Stafford worked as the maintenance supervisor for Willow Trace. He resigned in August 1997 to take a higher paying position with another employer.

During an internal study conducted in 1999, Delta Health could not account for certain building materials purchased on Willow Trace's account during the period from December 1996 through August 1997. Anthony Perotta, director of maintenance for Delta Health, reviewed a number of the purchase invoices for the materials in question and determined that Tim Stafford had signed the invoices. Perotta also indicated that some of the wiring purchased during that period, "Romex" brand wire, was a residential-grade wire inappropriate for use at the nursing home¹ and that the amount of materials purchased during that period was greater than the amount of materials normally used at Willow Trace during that time frame.

Perotta requested that James Dew, the director of maintenance at Willow Trace, inspect the nursing home to determine if the building materials purchased on Willow Trace's account had been used at Willow Trace. Dew reported that the materials purchased included a residential-grade wire that was inappropriate for use as a permanent fixture in a commercial building such as a nursing home. He indicated that he had inspected Willow Trace but had not found any evidence indicating that the wire in question had been used there.

Based on this information, Delta Health concluded that someone had stolen the building materials — i.e., purchased the materials on Willow Trace's account and not used the materials at Willow Trace. Susan Fox, the administrator for Willow Trace, requested that the Choctaw County sheriff's office pursue a criminal investigation. However, the sheriff told Fox that the evidence Delta Health had compiled was insufficient to support a criminal charge because no one had been seen taking the materials and no one had been seen with the materials off the premises of Willow Trace.

In July 1999, Tod Ioakim, the director of risk management for Delta Health, notified Lumbermens Mutual Casualty Company, the fidelity insurer for Delta Health, that it had suffered a loss of approximately $10,600 in building materials. Ioakim telephoned the Lumbermens agent who worked with Delta Health and, based on their conversation, the agent completed a property-loss notice. That loss notice described the loss as follows: "Employee, over a period of several months, purchased building supplies from Ace Hardware, Surplus & Salvage & Southern Electric (total of $10,600) to be used in the construction of his home and charged them to the insured." Under the section entitled "kind of loss" the insurance agent wrote "crime." Ioakim named Tim Stafford as the employee responsible for the loss.

Lumbermens compiled and maintained a file on the claim filed by Delta Health. A summary of the insurance adjuster's conversations with the "insured" is included in this file. According to the notes relating to those conversations, the adjuster spoke with the "insured" on August 4, 1999. The file includes the following summary of that conversation:

"Spoke to [insured] on 8/4. Advised claim filing process. He did not [have] name of [employee] but will provide. Advised they own loss [location], [which] is a nursing home. [Employee] was the maintenance supervisor at location. Director of maintenance noticed charges being made on [company] accounts at various locations ... Ace Hardware, Southern Electric etc., that were for residential grade or type items. Began investigating and [employee] was building home and believe he was purchasing goods for home on [company] accounts. Loss is approx. 10,600. [Employee] quit around time they discovered the loss. Not confronted. [Company] notified police but small rural community and [insured] says they are doing nothing. [Employee] was related to police chief. [Insured] does not think criminal case will result."

The claims file also contains a note dated May 23, 2000, indicating that "[a]ll items in order and has been confirmed that the [insured] does not use any of the items purchased for his business." Lumbermens determined the loss suffered by Delta Health was $8,418.26. After subtracting the $1,000 deductible, Lumbermens paid Delta Health $7,418.26 on its claim. In exchange, Delta Health signed a release and assigned its rights to Lumbermens.

In October 2000, Kemper Insurance Companies, on behalf of Lumbermens, notified Stafford that he owed Lumbermens and Delta Health a total of $8,418.26 because, it alleged, he had converted the building materials from Willow Trace to his own use. Lana Stafford began communicating with Kemper; she denied that her husband had stolen any building materials from Willow Trace. She indicated that their house was completed before the time period in question. Kemper asked Tim Stafford to provide proof that he was not responsible for Delta Health's loss, but Stafford refused. On December 3, 2000, Stafford sent a letter to Willow Trace asserting that he had taken nothing from Willow Trace, that he owed no money to Willow Trace, and that Delta Health's claim that he had stolen building materials was completely false. Delta Health, Lumbermens, and Kemper conducted no further investigation to determine the validity of the claim asserted against Stafford.

In May 2001, Lumbermens sued Stafford in the Choctaw District Court alleging conversion. The complaint was filed in the name of Delta Health Group, Inc., d/b/a Willow Trace Nursing Home, and Lumbermens Mutual Casualty Co., as subrogee. Lumbermens sought to recover from Stafford $8,447.44,² plus interest and costs.

In June 2001, Tim Stafford and Lana Stafford sued Delta Health, Lumbermens, and various fictitiously named parties. In the complaint, Tim Stafford alleged slander, slander per se, libel, the tort of outrage, malicious prosecution and/or abuse of process, and fraud. Lana Stafford asserted a claim alleging loss of consortium. Delta Health and Lumbermens filed separate motions seeking summary judgments. Tim Stafford's tort-of-outrage claim was dismissed by agreement of the parties, and the trial court dismissed without prejudice his claim of malicious prosecution and/or abuse of process on the ground that it was prematurely asserted. Because the only claims asserted against Lumbermens by Tim Stafford were the tort-of-outrage and the malicious-prosecution and/or abuse-of-prosecution claims, and because the only claim asserted by Lana Stafford against Lumbermens was a derivative one — loss of consortium — the trial court granted Lumbermens' motion for a summary judgment. Lumbermens was dismissed as a party from the action.

The claim of malicious prosecution and/or abuse of process against Delta Health was dismissed without prejudice as premature; the tort-of-outrage claim against Delta Health was dismissed by agreement of the parties. The trial court denied Delta Health's motion for a summary judgment on the remaining claims of slander, slander per se, libel, fraud, and loss of consortium.

The Staffords' claims alleging slander, slander per se, libel (those claims are hereinafter referred to collectively as "defamation claims"), fraud, and loss of consortium against Delta Health went to trial on February 24, 2002. At trial, Stafford presented evidence indicating that the construction of the Staffords' house was completed in August 1996 and that he and Lana were living in the house on August 30, 1996. Stafford also testified that he had used Romex wiring extensively at Willow Trace, particularly in the 200 Hall and 700 Hall residences. Stafford also presented the testimony of Timothy Glosson, the former director of maintenance for Willow Trace, who testified that, immediately after Stafford resigned, Glosson saw new Romex wiring "all over" the Willow Trace facility.

At trial, Stafford read excerpts from the deposition of Anthony Perotta. Perotta testified that he was told that excessive amounts of building materials had been purchased under Tim Stafford's signature. He stated that he prepared a list of excessive building materials by simply going through the invoices presented to him and picking out, to the best of his ability, what he thought would be used and what he thought would not be used at Willow Trace. Perotta admitted that the invoices were not specific and that he made assumptions and guesses in this process as to the specific materials purchased and the exact amounts purchased.³ Perotta also admitted that he had heard ...