Southern Life and Health Ins. Co. v. Turner

• Decision Date: 21 September 1990
• Court: Alabama Supreme Court
• Parties: SOUTHERN LIFE AND HEALTH INSURANCE COMPANY and Richard Perry v. Lucy R. TURNER. 88-1289.

Page 1015

571 So.2d 1015

SOUTHERN LIFE AND HEALTH INSURANCE COMPANY and Richard Perry v. Lucy R. TURNER.

88-1289.

Supreme Court of Alabama.

Sept. 21, 1990.

Rehearing Denied Dec. 7, 1990.

Ollie L. Blan, Jr. of Spain, Gillon, Grooms, Blan & Nettles, Birmingham, and Ernestine S. Sapp of Gray, Langford, Sapp & McGowan, Tuskegee, for appellants.

Delores R. Boyd of Mandell & Boyd, Montgomery, and Jock M. Smith, Tuskegee, for appellee.

HORNSBY, Chief Justice.

This appeal is from a judgment entered in favor of Lucy R. Turner and against Southern Life and Health Insurance Company ("Southern") and Richard Perry for $500,000 in a fraud action. Southern and Perry argue that the judgment should be reversed because, they say, Turner failed to present sufficient evidence of fraud, and Southern argues that Turner failed to present evidence that it ratified the actions of Perry.

In January 1986, Perry was hired by Southern as a salesman. His duties included servicing a "debit route," wherein he traveled from house to house on a weekly basis to collect premiums from Southern's policyholders. Turner was one of the policyholders on Perry's route. In 1985 she had purchased a $1,500 life insurance policy on her aunt, Lucy Barrow, who was living with her at that time, naming herself as the beneficiary. We will refer to that policy as the Turner/Barrow policy. Southern had previously issued a policy on Barrow's life with a face value of $1,000, with Grace Banks, Barrow's daughter, as the beneficiary. That policy will be referred to as the Banks/Barrow policy. Turner paid the premiums on both of those policies at all times relevant to this action.

The testimony of Turner and that of Perry were in sharp conflict on almost every material fact regarding the course of their dealings. According to Turner's version of the facts, she paid the premiums that were due on both the Turner/Barrow policy and the Banks/Barrow policy on time up until the month that Barrow died, October 1986. She stated that, as far as she knew, those policies were in force at that time and had never lapsed. Turner stated that Perry never told her that the premium payments were behind or indicated that her policy was in danger of lapsing. That testimony was substantially corroborated by Turner's son, Alvin. Jonas Bowen, the Southern agent in charge of the debit route before Perry, testified that Turner had always made her payments on time when he was servicing the debit route. Bowen also testified that it was Southern's practice to assign to the debit agent the responsibility of notifying the owners of policies with face values of less than $10,000 when their policies lapsed.

Perry testified that Turner was frequently late with premium payments and sometimes skipped them altogether. He stated that, eventually, both the Turner/Barrow policy and the Banks/Barrow policy had lapsed and were in danger of being terminated. Perry stated that he made Turner aware of the status of those policies and recommended that she apply all of the overage ¹ that had accumulated on both of the policies to the Banks/Barrow policy. According to Perry, he did not know that Turner was not the beneficiary of the Banks/Barrow policy. Perry testified that Turner agreed to his suggestion. Perry then applied the overage to the Banks/Barrow policy, but continued to collect premiums on both it and the Turner/Barrow policy.

After Barrow died, Turner told Perry that she wished to file a claim on the Turner/Barrow policy. According to Turner's testimony, Perry came by her home in November 1986 and gathered all of the documents in Turner's possession that related to that policy. She said that those documents included a premium receipt card, the only evidence held by Turner that showed that she had made her premium payments. Perry testified that he did not take any documents relating to the Turner/Barrow policy from Turner's home and that he told Turner that he could not file a claim on the policy because it had lapsed.

Turner further testified that for months she heard nothing regarding the status of her claim. In March 1987, Turner went to Southern's district office in Opelika and inquired about her claim. At that meeting she was told that Southern had no record of the Turner/Barrow policy or of her claim. According to Turner, Perry came to her home the following month and explained the reason for the delay. She testified that Perry told her that Southern did not have $1,500 to pay her claim, but that he and his "boss man" had agreed to pay Turner $500 a month for three months to satisfy her claim. The following month, according to Turner, Perry came to her home and gave her an envelope containing $500 in $20 bills and asked her if she was "satisfied." Turner's testimony concerning that visit by Perry, and the payment of $500, was corroborated by Alvin Turner and by Miller Ephraim, a family friend. Both men testified that they were present when Perry paid the $500, and both testified that they counted the money. ²

Turner testified that the following day she and Ephraim went to the office of the Alabama Insurance Department in Montgomery. At that office, Turner said, she told Michael DeBellis of the Consumer Protection Division about her problems with Perry and Southern and showed him the envelope containing $500. She said that DeBellis told her he would look into her complaint, but that his investigation was dropped when DeBellis learned that Turner had retained a lawyer and filed an action against Perry and Southern. ³ This testimony was corroborated by DeBellis and Ephraim.

Perry denied offering to pay Turner $1,500 in installments and denied giving her $500 in May 1987.

Southern and Perry argue that they were entitled to a judgment notwithstanding the verdict on the grounds that Turner did not present sufficient evidence of each of the elements of fraud. Turner's complaint was filed on June 8, 1987, and was therefore subject to the "scintilla rule." Ala.Code 1975, § 12-21-12 (Supp.1989).

The elements of fraud are: (1) a misrepresentation (2) of a material fact (3) that was relied upon by the plaintiff, (4) who was damaged as a proximate result of the misrepresentation. Earnest v. Pritchett-Moore, Inc., 401 So.2d 752, 754 (Ala.1981). The elements of fraud based on the suppression of material facts are: (1) a duty to disclose facts; (2) concealment or non-disclosure of material facts by the defendant; (3) inducement of the plaintiff to act; and (4) action by the plaintiff to his injury. Gary v. Kirkland, 514 So.2d 970, 972 (Ala.1987).

The trial judge presented Turner's claim to the jury with the following instruction:

"[I]n order to make the defendant, Southern Life and Health Insurance Company liable for any misconduct of Richard Perry, the plaintiff has to reasonably satisfy you from the evidence ... that Southern Life and Health, either authorized the wrongful conduct of Richard Perry, constituting the fraud, or if they didn't authorize it in advance, they must have ratified it after he did it. Ratification consisting of, number one, having knowledge of what he did, and with knowledge of what he did, they must have approved it, adopted it as their own, and accepted the benefits of it. And, without proving those things, Southern Life and Health Insurance Company cannot be held liable for the wrongful conduct of Richard Perry, even if you find he acted wrongly and committed the legal fraud."

Under that instruction, the jury could have properly returned a verdict against Southern only if it found that Perry's conduct was either authorized or ratified by Southern. There was evidence to support such findings. Under the instructions given to the jury, the trial court's denial of Southern's motion for J.N.O.V. was not error.

However, the instruction did not allow the jury to consider the theory of respondeat superior, which Turner requested the court to present to the jury. Under respondeat superior, a principal can be liable in tort for its agent's acts that are done within the scope of employment, either real or apparent, even though the principal did not authorize such acts or even expressly forbade them. No evidence of authorization or ratification is needed. That theory has been extended to cases where the fraud was committed for the agent's own benefit and to the principal's detriment. Pacific Mutual Life Ins. Co. v. Haslip, 553 So.2d 537 (Ala.1989), cert. granted, 494 U.S. 1065, 110 S.Ct. 1780, 108 L.Ed.2d 782 (1990); Lawler Mobile Homes, Inc. v. Tarver, 492 So.2d 297, 305 (Ala.1986); Joyner v. AAA Cooper Transportation, 477 So.2d 364, 365 (Ala.1985).

Pursuant to Rule 50(d), A.R.Civ.P., the plaintiff has properly raised the issue of whether she was entitled to an instruction on the law of respondeat superior. We agree that such an instruction should have been given to the jury in this case. We note that had the jury returned a verdict on respondeat superior based on the evidence before us, that verdict would have been amply supported by the evidence.

In light of the fact that the relationship between agency and respondeat superior is often confused, we do believe that a comment on that relationship is appropriate. The distinction between the law of agency and the law of respondeat superior is subtle.

"The general rule that a principal is liable for the torts of his agent is not grounded on agency principles. This is evident from the holdings that a principal may be held for his agent's tort committed in the course and scope of the agent's employment even though the principal does not authorize, ratify, participate in, or know of, such misconduct, or even if he forbade or disapproved of the act complained of. Fundamentally, there is no distinction to be drawn between the liability of a principal for the tortious act of his agent and the liability of an employer or master for the tortious act of his employee or servant. In both cases, the tort liability is based on the...