Morris v. Laster

• Decision Date: 06 April 2001
• Citation: 821 So.2d 923
• Parties: Kenneth M. MORRIS, d/b/a Morris Pest Control v. Roger A. LASTER and Lola Laster. S.E.C.U.R.E. Underwriters Risk Retention Group v. Roger A. Laster et al.
• Court: Alabama Supreme Court

821 So.2d 923

Kenneth M. MORRIS, d/b/a Morris Pest Control¹ v. Roger A. LASTER and Lola Laster.

S.E.C.U.R.E. Underwriters Risk Retention Group v. Roger A. Laster et al.

1901.

Supreme Court of Alabama.

April 6, 2001.

Robert V. Wood, Jr., and Jonathan B. Medlock of Spurrier, Rice, Wood & Hall, Huntsville; and Rebecca A. Walker of Torbert, Torbert & Walker, L.L.C., Gadsden, for appellant Morris Pest Control.

L. Tennent Lee III of Burr & Forman, L.L.P., Huntsville, for appellant S.E.C.U.R.E. Underwriters Risk Retention Group.

David H. Marsh, Nat Bryan, and Thomas M. Powell of Marsh, Rickard & Bryan, P.C., Birmingham, for appellees.

Michael L. Roberts of Cusimano, Keener, Roberts, Kimberley & Miles, P.C., Gadsden, for amicus curiae Alabama Trial Lawyers Ass'n, in support of application for rehearing.

On Application for Rehearing

PER CURIAM.

The opinion of December 29, 2000, is withdrawn and the following is substituted therefor.

Kenneth M. Morris, doing business as Morris Pest Control (a sole proprietorship owned and operated by Kenneth M. Morris) appeals from a judgment entered on a jury verdict against him in the Marshall Circuit Court (appeal no. 1990386). We reverse and remand. S.E.C.U.R.E.² Underwriters Risk Retention Group is the liability-insurance carrier for Morris; it also appeals, complaining of certain provisions of that judgment as they relate to its coverage obligations (appeal no. 1990401). Because we reverse the judgment against Morris, we dismiss S.E.C.U.R.E.'s appeal as moot.

I. Factual Background

This case resulted from the sale of a home to Roger A. Laster and his wife Lola Laster. The contract of sale provided that at the closing of the purchase of the home, the Lasters would receive an "Official Alabama Wood Infestation Inspection Report," commonly referred to as a "termite letter," from the sellers, Barry Aaron and Paula Aaron. The listing agent for the sale of the Aarons' home was Bud Moore, of the Graben Real Estate company. Graben Real Estate is a franchisee of a nationwide real-estate firm, Coldwell Banker.

Apparently Moore, or one of his employees, contacted Morris Pest Control a few days before the closing and asked Morris to inspect the home and to provide a termite letter to document what the inspection revealed.³ Morris conducted the inspection. He noted on the Official Alabama Wood Infestation Inspection Report the presence of both previous and active wood-decaying fungus, and he noted on it that he had subsequently treated the home. According to Morris's own testimony, the fungus he discovered was "devastating" and "severe."

However, Morris failed to note on the report the presence of either powder-post-beetle holes or termite trails, two signs of different kinds of wood infestation. Another pest-control company had inspected the Aarons' home two days before Morris inspected it, and that company had discovered extensive evidence of prior termite and powder-post-beetle infestation, as well as rot damage from the wood-decaying fungus. However, only the Morris report was shown to the Lasters on the day of the closing.

After the Lasters discovered the damage to the home they had recently purchased, they contacted, among others, the Alabama Department of Agriculture and Industries. The Department sent an employee to inspect the Lasters' home. The state inspector discovered significant damage to the home from wood-decaying fungus, powder-post beetles, and subterranean termites. Approximately two months later, the Lasters filed a lawsuit in the Marshall Circuit Court against Coldwell Banker; Coldwell Banker Residential Affiliates; Graben Real Estate; Bud Moore and Jan Miller, acting as agents and employees of Coldwell Banker and Graben; Barry Aaron and Paula Aaron; and Morris, doing business as Morris Pest Control. The Lasters later amended the complaint to name Cook's Pest Control company as an additional defendant. The Lasters alleged that the defendants were liable for misrepresentation and/or suppression of material facts; fraud in the inducement of a contract to purchase the home; breach of an express or implied warranty of habitability; negligence and/or wantonness; and deceit.

The trial court entered a summary judgment in favor of Cook's Pest Control, and the Lasters agreed to a pro tanto settlement of $510,000 with all of the other defendants except Morris; the Lasters reserved their claims against Morris, who was not a party to the settlement. The claims against Morris proceeded to trial, with the jury ultimately returning a verdict for $19,000 in compensatory damages and $400,000 in punitive damages. The court entered a judgment on the verdict. Morris filed a series of postjudgment motions, including a motion for a new trial. S.E.C.U.R.E. was allowed to intervene to resolve a question of liability-insurance coverage arising from the circumstances of this case.

Morris raises 11 issues on appeal. These can be grouped into three main categories: 1) whether the trial court properly ruled on certain evidentiary matters; 2) whether the charges to the jury were properly stated; and 3) whether the trial court properly applied this Court's standards for reviewing punitive-damages awards. We conclude that the trial court erred by admitting improper "pattern-or-practice" testimony and in publishing information about the pro tanto settlement to the jury, over Morris's objection. Because of these errors in the trial court's evidentiary rulings, we reverse the judgment. We pretermit discussion of the other issues Morris raises on appeal. S.E.C.U.R.E. contends on appeal that it is not responsible for paying the punitive-damages award against Morris. Thus, because we remand the case for a new trial, S.E.C.U.R.E.'s appeal is moot; that appeal is dismissed.

II. Pattern-or-Practice Testimony

Morris argues that the trial court improperly admitted testimony from five particular witnesses, each of whom spoke about various aspects of Morris's past behavior. We review the admissibility of "pattern-or-practice" evidence on a fraud claim by an abuse-of-discretion standard. "[R]ulings on the admissibility of evidence are within the sound discretion of the trial judge and will not be disturbed on appeal absent an abuse of that discretion." Bama's Best Party Sales, Inc. v. Tupperware, U.S., Inc., 723 So.2d 29, 32 (Ala. 1998) (citing Preferred Risk Mut. Ins. Co. v. Ryan, 589 So.2d 165 (Ala.1991)).

Any analysis of "pattern-or-practice" evidence must begin with this controlling rule of evidence:

"Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident...."

Ala.R.Evid. 404(b).

The basic intent of Rule 404(b) is to exclude collateral character evidence, which ordinarily is likely to prejudice the jury and confuse the issues. However, this Court has long held that evidence of past unrelated acts, so-called pattern-or-practice evidence, may be admissible in certain circumstances when fraud is alleged. See Great American Ins. Co. v. Dover, 221 Ala. 612, 130 So. 335 (1930); Nelms v. Steiner Bros., 113 Ala. 562, 22 So. 435 (1897). In order for the pattern-or-practice evidence to be relevant and admissible, the collateral acts of fraud must be "substantially of the same character [and] contemporaneous in point of time, or nearly so." Life Ins. Co. of Georgia v. Smith, 719 So.2d 797, 808 (Ala.1998) (citing Great American Ins. Co. v. Dover, 221 Ala. at 614, 130 So. at 336). Given the potential for prejudice and the general policy of preclusion, we have required high levels of similarity between the past acts and the present behavior. See Massachusetts Mut. Life Ins. Co. v. Collins, 575 So.2d 1005 (Ala.1990),cert. denied, 499 U.S. 918, 111 S.Ct. 1306, 113 L.Ed.2d 240 (1991). The acts must be both similar in nature and of substantially the same character. See Bama's Best Party Sales, Inc., 723 So.2d at 33.

It is important to note that external factors have affected the standard for admitting pattern-or-practice testimony during the past two decades. Even though Alabama has long recognized an exception for fraud claims, that exception, which had been narrow, expanded in the late 1980s as a consequence of the Legislature's first attempt at placing a cap on punitive damages.

"Section 6-11-21 was enacted as part of a `package of bills' collectively called `the Alabama Tort Reform Act.' L. Nelson, Tort Reform in Alabama: Are Damages Restrictions Unconstitutional? 40 Ala.L.Rev. 533, 533 (1989); Act No. 87-185, § 2, 1987 Ala. Acts 251. The section provides:

"`An award of punitive damages shall not exceed $250,000.00, unless it is based upon one or more of the following:

"`(1) A pattern or practice of intentional wrongful conduct, even though the damage or injury was inflicted only on the plaintiff....'"

Henderson v. Alabama Power Co., 627 So.2d 878, 880 (Ala.1993).

Because the admission of pattern-or-practice evidence was critical to an order upholding an award of punitive damages in excess of the statutory cap, courts tended to allow a broader range of such evidence. However, with the repeal of the old statutory cap on punitive damages and the substitution of a new series of restrictions, see § 6-11-21, Ala.Code 1975, we no longer have a basis for a broad reading of the pattern-or-practice exception by which evidence of other "intentional wrongful conduct" is made admissible.

Morris objected, both by two motions in limine and at trial, to the testimony of five witnesses; those witnesses were allowed to testify about various bad experiences they claimed to have had with Morris Pest Control.

The Lasters' theory to which they claimed these witnesses' testimony was relevant was the theory that Morris falsified termite letters so as to...