Case Title: Smith v. Edward M. Thompson Agency, Inc.

Citation: 430 So. 2d 859

Docket Number: 

State: alabama

Court: Alabama Supreme Court

Date: 1983-04-01T00:00:00Z

Document:
430 So. 2d 859 (1983)
Hugh V. SMITH
v.
EDWARD M. THOMPSON AGENCY, INC.
81-204.

Supreme Court of Alabama.
April 1, 1983.
E. Terry Brown of Copeland, Franco, Screws & Gill, Montgomery, for appellant.
Jack Crenshaw, Montgomery, for appellee.
ALMON, Justice.
This appeal involves a contract action brought by Edward M. Thompson Agency, Inc., against Hugh V. Smith, to recover unpaid insurance premiums.
Smith promoted a large real estate development known as Rolling Hills. Smith asked the Thompson Agency to prepare a survey of the insurance needs of Rolling Hills and to write the necessary insurance. The Thompson Agency complied with Smith's request and issued a one-year "Commercial Package Policy." This coverage took effect on June 1, 1976, and was renewed for annual periods to June 1, 1981.
The initial policy (1976-1977) and the first two renewals (1977-1978 and 1978-1979) were issued while Smith individually owned the Rolling Hills business. Interestingly enough, however, each of these policies designated not only Smith and his wife Sybil as insureds, but also a corporate name, Rolling Hills Golf and Racquet Club, Inc.
It was only after the coverage was renewed for 1978-1979 that Smith's business was actually incorporated, as "Rolling Hills, Inc." Thereafter, at Smith's request, the Thompson Agency substituted the name of Rolling Hills, Inc., for Rolling Hills Golf and Racquet Club, Inc., as an insured on the policies for 1979-1980 and 1980-1981.
The Thompson Agency brought suit when a portion of the premiums on the 1979-1980 and 1980-1981 policies was not paid. The defendants in the action were the named insureds, Hugh Smith, Sybil Smith, and Rolling Hills, Inc. The trial court, sitting without a jury, found in favor of the Thompson Agency against Hugh Smith only. A judgment was entered in the amount of $13,513.36 and Smith appealed.
The issue presented is whether there is sufficient evidence to hold Smith personally liable for the premiums owed on the 1979-1980 and 1980-1981 policies. We answer yes and accordingly affirm.
It is uncontroverted that the Thompson Agency issued the initial policy with Smith personally assuming the responsibility of paying the premiums. In addition, the record offers sufficient credible evidence, consistent with the tenets of the ore tenus rule, *860 to support the trial court's conclusion that this initial arrangement continued unaltered throughout all the subsequent policy renewals.
Cherokee Insurance Co. v. Frazier, 406 So. 2d 881 (Ala.1981).
There is evidence that during the three years of coverage prior to the actual incorporation of Smith's business, a course of dealing evolved between Smith and the Thompson Agency whereby Smith personally paid the premiums on policies which, pursuant to Smith's request, listed a corporate name as an insured.
Smith testified:
Thompson testified:
Course of dealing has long been recognized in this jurisdiction to resolve disputes between insurer and insured. Specifically, in Home Protection of North Alabama v. *861 Avery, 85 Ala. 348, 5 So. 143 (1888), an insurance company was held bound by its prior course of dealing with a policyholder concerning the forfeiture of a policy for non-payment of premiums. This Court held:
As such, we see no reason why course of dealing cannot under certain circumstances be applied conversely so as to bind a policyholder.
In dealing with Smith for three consecutive years, the Thompson Agency had come to rely upon Smith's personal credit for premium payments despite the fact that a corporate name, Rolling Hills Golf and Racquet Club, Inc., appeared on the policies. As a result, when Rolling Hills, Inc., was formed it was incumbent upon Smith, in order to change the existing course of dealing and shift premium liability to the corporation, to do more than tell Thompson to change the previously listed corporate name.
Thompson testified:
As this Court stated in Inter-Ocean Ins. Co. v. Banks, 268 Ala. 25, 104 So. 2d 836 (1958):
We find that the Thompson Agency was entitled to look to the individual credit of Hugh Smith until notified of Smith's intention *862 to abandon the established course of dealing. Smith's request that the corporate name be changed did not constitute sufficient notice because it was customary for the Thompson Agency to look to Smith personally for premium payments even though for the first three years the policies listed a non-existent corporation as a named insured.
Smith states in brief, "An affirmance of this case would bode ill for corporate and business officers across this State." This statement is based upon Smith's contention that as a corporate officer he should not be held personally responsible for premium payments incurred strictly on behalf of the corporation.
Citing Whitehead v. Davison Oil Co., Inc., 352 So. 2d 1339 (Ala.1977), as instructive, Smith asserts there is no statute, charter provision, or personal agreement by which personal liability can be assessed.
Whitehead, supra.
Our holding here does nothing to alter this well established rule. Smith incurred the responsibility of paying premiums before Rolling Hills, Inc., or any other corporation, was ever formed. Because of the course of dealing which subsequently developed, Smith was never relieved of this personal obligation. Consequently, the personal liability now assessed to Smith arose apart from any statute, the provisions of the corporate charter, or personal agreement made by Smith on behalf of the corporation.
While we acknowledge Smith's personal liability, we do not agree with the trial court that Smith alone was liable. By accepting the coverage offered by the 1979-1980 and 1980-1981 policies, Rolling Hills, Inc., also become obligated to pay the premiums.
Smith, as president of Rolling Hills, Inc., caused the corporation to be placed on the policies as a named insured. Clearly the corporation received the benefit of coverage under the policies. A party who accepts the benefits of a contract cannot escape its burdens. Mobil Oil Corporation v. Tennessee Valley Authority, 387 F. Supp. 498 (N.D.Ala.1974).
Based upon the foregoing, the judgment of the circuit court is affirmed in part, reversed in part, and the case remanded.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
TORBERT, C.J., and FAULKNER, EMBRY and ADAMS, JJ., concur.