Ligon Furniture Co., Inc. v. O.M. Hughes Ins., Inc.

• Decision Date: 01 September 1989
• Citation: 551 So.2d 283
• Court: Alabama Supreme Court
• Parties: LIGON FURNITURE COMPANY, INC. v. O.M. HUGHES INSURANCE, INC., et al. GAY & TAYLOR, INC., and John R. Routledge v. COMPASS INSURANCE COMPANY, INC., et al. 88-166, 88-237.

Page 283

551 So.2d 283

LIGON FURNITURE COMPANY, INC. v. O.M. HUGHES INSURANCE, INC., et al.

GAY & TAYLOR, INC., and John R. Routledge v. COMPASS INSURANCE COMPANY, INC., et al.

88-166, 88-237.

Supreme Court of Alabama.

Sept. 1, 1989.

William E. Hereford of Hereford, Blair, Holladay & Parsons, Pell City, for appellant, Ligon Furniture Co.

J. Allen Sydnor, Jr. of Huie, Fernambucq & Stewart, Birmingham, for appellants, Gay & Taylor, Inc. and John Routledge.

G. Steven Henry of Clark & Scott, Birmingham, for appellee, O.M. Hughes Ins., Inc.

HOUSTON, Justice.

Plaintiff, Ligon Furniture Company, Inc. ("Ligon"), appeals from a summary judgment in favor of defendants, O.M. Hughes Insurance, Inc. ("Hughes"), Gay & Taylor, Inc., and John A. Routledge, in an action to recover damages for breach of contract, bad faith refusal to pay an insurance claim, conversion, and fraudulent misrepresentation.

Ligon contacted Hughes to secure insurance on its furniture store in Birmingham, Alabama. Hughes arranged for Compass Insurance Company ("Compass") to provide insurance for Ligon. Thereafter, the contents of Ligon's furniture store were damaged by fire. Ligon reported this loss to Hughes, who, at the request of Compass, assigned the job of adjusting Ligon's claim to Gay & Taylor. Routledge, an employee of Gay & Taylor, inspected the premises and arranged for M.F. Bank & Company, Inc. ("M.F. Bank"), a salvage company from Atlanta, Georgia, to take possession of and to sell the damaged property.

Ligon, M.F. Bank, and Routledge entered into the following written agreement, which was signed by Ligon, M.F. Bank, and Routledge:

"THIS MEMORANDUM WITNESSETH: That whereas, the stock described as insured by policies issued by Ligon Furniture has been damaged by fire, water or other casualty occurring on or about the 4th day of February, 1985.

"WHEREAS, It is to the benefit of all who may have an interest in the stock contained in building located at 1545 B Carter Hill Rd., Birmingham, Alabama that same be handled with as little delay as possible without waiting to determine the respective ownership or interests or liabilities under policies purporting to insure same.

"IT IS HEREBY MUTUALLY UNDERSTOOD AND AGREED that all the remains of said stock be turned over to the M.F. Bank & Company, Inc., to be by them put in best possible order and sold in the interest of whom it may concern. The proceeds of such sale, less the Salvage Company's expenses (which shall include necessary traveling expense and maintenance of the officers or agents of the Company) of handling the same, plus 10% commission on gross sales shall be held by them until loss is adjusted and then turned over by them to the parties to whom said proceeds belong.

"IN WITNESS WHEREOF, we have hereunto attached our hands and seals on 2 copies and one original at: same as above this day of February 11, 1985."

Pursuant to this agreement, M.F. Bank took possession of and sold the damaged property, and delivered a check to Gay & Taylor, payable to Compass, in the amount of $6,349.04.

Subsequently, a dispute arose over Compass's failure to pay Ligon's claim, and Ligon filed suit against Compass, Dattrell Duncan (a general agent of Compass), Hughes, Gay & Taylor, and Routledge. Ligon alleged four causes of action: (1) breach of contract; (2) bad faith refusal to pay or, alternatively, a failure to investigate a claim, and a conspiracy to refuse to pay Ligon's claim; (3) conversion; and (4) fraudulent misrepresentation at the time Ligon entered into the insurance agreement.

Ligon entered into a pro tanto settlement with Compass and Duncan, and the claims against them were dismissed with prejudice.

Thereafter, Gay & Taylor and Routledge filed a third-party complaint against Compass, alleging that if Gay & Taylor and Routledge were liable to Ligon, then Compass was liable to Gay & Taylor and Routledge. The trial court entered summary judgment for Hughes, Gay & Taylor, and Routledge on all counts and then dismissed the third-party complaint as moot. Ligon appealed. Gay & Taylor and Routledge cross-appealed to preserve their third-party claim should Ligon prevail on its appeal.

Breach of Contract: The undisputed evidence reveals that Hughes was not a party to Ligon's insurance contract with Compass and that Gay & Taylor and Routledge were not parties to it either. Thus, the trial court properly entered summary judgment on the claim alleging a breach of the insurance contract.

Bad Faith: The tort of "bad faith" is not a cognizable cause of action in Alabama, except in the context of a...