Taylor v. Liberty Nat. Life Ins. Co.

• Decision Date: 21 November 1984
• Citation: 462 So.2d 907
• Parties: James L. TAYLOR, as the Administrator of the Estates of James Jackson Taylor & Laura F. Taylor, Deceased; James L. Taylor, Frances Louise Taylor Spence, Deborah Taylor, Diane Taylor Staff, Phillip Taylor and Gretta Taylor v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, a Corp.; Aubrey Carr, d/b/a Carr- McConnell Funeral Home; Carr-McConnell Funeral Home, Inc., a Corp.; and Carr Service Enterprises, Inc., a Corporation. 83-172.
• Court: Alabama Supreme Court

Page 907

462 So.2d 907

James L. TAYLOR, as the Administrator of the Estates of James Jackson Taylor & Laura F. Taylor, Deceased; James L. Taylor, Frances Louise Taylor Spence, Deborah Taylor, Diane Taylor Staff, Phillip Taylor and Gretta Taylor v. LIBERTY NATIONAL LIFE INSURANCE COMPANY, a Corp.; Aubrey Carr, d/b/a Carr- McConnell Funeral Home; Carr-McConnell Funeral Home, Inc., a Corp.; and Carr Service Enterprises, Inc., a Corporation.

83-172.

Supreme Court of Alabama.

Nov. 21, 1984.

Rehearing Denied Jan. 11, 1985.

Jimmy E. Alexander, Alexander, Corder & Plunk, Athens, for appellant.

Ira L. Burleson and Ralph B. Tate, Spain, Gillon, Riley, Tate & Etheredge, Birmingham, for appellee Liberty Nat. Life Ins. Co.

Andrew P. Campbell, Leitman, Siegal & Payne, Birmingham, for appellees Aubrey Carr and Carr Service Enterprises, Inc.

PER CURIAM. ^*

This is a due process of law case. We must resolve this constitutional issue to determine the res judicata effect of a prior judgment, which included a finding that the requisites of due process had been met. Plaintiffs contend that they were denied due process in a class action suit in federal district court. Defendants respond that Plaintiffs are precluded from raising the due process question by virtue of the federal court's prior determination. The trial court granted Defendants' summary judgment motions based on their res judicata argument.

We conclude that this Court may review the due process determination of the federal court. Further, we find that the instant Plaintiffs' deceased insureds did not receive the process that was their due. Accordingly, we reverse the trial court's summary judgment as to the contract claims. We affirm as to the remaining claims.

HISTORY OF THE CASE

I. The Prior Federal Court Action

The United States District Court for the Northern District of Alabama on January 6, 1978, entered a final judgment in Battle v. Liberty National Life Ins. Co., Civil Action No. 70-H-752-S. Battle was a consolidated case, filed against Liberty National and Brown Service Funeral Homes Co., Inc., ¹ on behalf of certain funeral directors in Alabama and certain insureds under burial and vault policies of those companies. The consolidated actions asserted, in essence, claims against Liberty National and Brown Service for violations of federal anti-trust laws and the McCarran-Ferguson Act and for fraud and deceit. ²

II. The Instant Case

The controversy in this case involves the funerals of James Jackson Taylor and his "(A) [A] a casket of the retail value of $250.00...;

wife, Laura F. Taylor. In 1938, Mrs. Taylor purchased a Liberty National burial policy, which provided the following benefits:

"(B) A place where funeral, memorial, or other services may be held and such assistance as is proper in conducting the funeral; such services to be conducted either at the church, funeral parlor, home of the deceased, or other place designated by the beneficiary or other person having the authority;

"(C) Embalming of body, suit or dress and hearse service for the body to the cemetery ...."

In 1955, Mrs. Taylor purchased a supplemental burial policy to provide a $500 metal casket for her funeral, in lieu of the casket furnished by the first policy.

Mr. Taylor purchased his burial policy in 1946 and a supplemental burial policy in 1955. The terms of his policies were the same as those of his wife's policies. Mr. Taylor died on February 24, 1982, and Mrs. Taylor died on February 3, 1983.

The trial court's order included the following:

"... Mr. and Mrs. Taylor at the times of their respective deaths were insured under burial insurance policies issued or assumed by Liberty National. Representatives of their family called Carr-McConnell Funeral Home of Athens, an authorized funeral director of Liberty National-Brown-Service, to pick up the bodies and turned over to Carr-McConnell the funeral policies in effect on the life of the deceased and made funeral arrangements with Carr-McConnell. The family on each occasion decided not to use the casket furnished under the burial policies and selected and bought from Carr-McConnell a 'better' or more expensive casket. When this occurs this is what is known in the funeral director industry as an 'oversale.' Carr-McConnell, in the case of each funeral, made a charge for the more expensive casket and also made a charge in Mr. Taylor's funeral for 'Services: Including facilities, equipment, all personal, professional and staff services....' "

The charges for Mr. Taylor's funeral totaled $1,898, while the charges for Mrs. Taylor's funeral were:

"Embalming the body, $809.00.

Providing a place where the funeral was held, $515.00.

Furnish transportation for the body to the cemetery, $280.00.

Casket, $782.00.

Burial vault, $525.00.

Opening and closing grave, $80.00.

Hair Dresser, $20.00.

TOTAL, $3011.00"

The Taylor family alleged that the caskets provided Mr. and Mrs. Taylor by the funeral home were of the same quality and price; that Mr. and Mrs. Taylor were embalmed in the same manner and location; and that the same hearse was used to carry the bodies of Mr. and Mrs. Taylor to the same cemetery.

The funeral home allowed a total credit of $600 for both of Mr. Taylor's burial policies, but only offered a total credit of $500 for both of Mrs. Taylor's policies, which the family refused to accept.

The administrator and heirs of Mr. Taylor's estate brought suit against Liberty National and Aubrey Carr, the operator of Carr-McConnell Funeral Home in Athens. Count one of the complaint sought recovery for monies due and owing on the burial policies, while count two sought recovery for misrepresentations as to the amount due and owing on the policies, and count three sought recovery from the insurer for a bad faith refusal to pay. Likewise, the administrator and heirs of Mrs. Taylor's estate brought suit against Defendants on similar grounds. The cases were consolidated for trial. Plaintiffs appeal the summary judgment granted on behalf of Defendants by the trial court.

OPINION

Plaintiffs acknowledge at the outset that if the Taylors were not denied due process in the prior proceedings, the federal class action decree rewrote the subject policies of insurance to the effect that Defendants' res judicata claim is valid and the trial court's summary judgments are due to be affirmed. That is to say, absent a due process question, Plaintiffs do not dispute the consequences which would follow from the application of the federal class action decree.

A due process question, however, is raised. Plaintiffs assert that because the Taylors received no notice--actual or constructive--of any of the Battle proceedings, they were denied due process and are not bound in the instant case by the prior judgment.

I. Standard of Review

Crucial to our consideration of the due process issue is the applicable standard of review. If, as the instant Defendants contend, the federal decree's holding is not subject to collateral attack, and thus must be given res judicata effect, our inquiry ends before it begins. Admittedly, the district court's final decree, approving the settlement agreement, explicitly found:

"The adequacy of representation of the classes, the notice, the opportunity to participate and to be heard, meet the requirements of due process and satisfy the notice requirements of Rule 23."

If, on the other hand, as the instant Plaintiffs contend, this Court is legally authorized to review the adequacy vel non of the notice afforded these insureds, then the propriety of the federal judgment on which the trial court based its order is subject to our independent determination.

Under the settled law applicable to these circumstances, there is no question that this Court is empowered to review a judgment collaterally attacked on due process grounds. See, generally, 3 Newberg on Class Actions, § 2755b (1977); Note, Collateral Attack on the Binding Effect of Class Action Judgments, 87 Harv.L.Rev. 889 (1974). Indeed, the Federal Rules Advisory Committee itself states that "the court conducting the [class action] cannot predetermine the 'res judicata' effect of the judgment; this can only be tested in a subsequent action." Fed.R.Civ.P. 23, Advisory Committee's Note, 39 F.R.D. 98, 106 (1966).

The United States Supreme Court squarely addressed this issue in Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1940). The Hansberry Court held that, if the res judicata effect of the prior judgment is collaterally attacked on due process grounds, it is the duty of the reviewing court to examine the prior litigation and determine if the complainant was given constitutional notice and opportunity to be heard. Id. at 40, 61 S.Ct. at 117. See, also, Gonzales v. Cassidy, 474 F.2d 67 (5th Cir.1973). As one federal judge turned commentator noted, "Omniscience [on the part of the court that first hears the class action] is not expected or necessary." M. Frankel, Some Preliminary Observations Concerning Civil Rule 23, 43 F.R.D. 39, 46 (1968). Thus, we find ourselves duty bound to review the federal court's determination of the notice issue.

II. Class Certification

As our discussion will demonstrate, compliance with Rule 23's notice requirements does not, of itself, satisfy constitutional due process, unless the court also correctly certifies the class. Therefore, to determine if the insureds were given due process, we must first examine the federal court's certification of the policyholder class. Generally, what type notice, if any, is due in a class action depends on how the class is certified.

Fed.R.Civ.P. 23 sets forth three types of class actions: 1) A 23(b)(1) action is proper in cases where the rights of individual class members would be prejudiced if the suit were brought individually or in cases in which inconsistent adjudication among the parties might result if the suit were individual rather than class; 2) a 23(b)(2) suit is limited to those...