Title: American Pioneer Life Ins. Co. v. Williamson

State: alabama

Issuer: Alabama Supreme Court

Document:

681 So. 2d 1040 (1995)
AMERICAN PIONEER LIFE INSURANCE COMPANY and Jerry Curtis, a Vice President of American Pioneer
v.
Freddy J. WILLIAMSON.
1921796.

Supreme Court of Alabama.
June 23, 1995.
Rehearing Overruled November 22, 1995.
*1041 Stanley A. Cash and Walter J. Price III of Huie, Fernambucq & Stewart, Birmingham, for Appellants.
W. Michael Atchison and Jeffrey E. Friedman of Starnes & Atchison, Birmingham, for Appellee.
Kenneth Wallis, Montgomery, for Amicus Curiae Association of Alabama Life Insurance Companies.
Jack Drake of Drake & Pierce, Tuscaloosa, and Bruce McKee of Hare, Wynn, Newell & Newton, Birmingham, for Amicus Curiae Alabama Trial Lawyers Association.
COOK, Justice.
The defendants appeal from a judgment based on a jury verdict awarding $250,000 in compensatory damages and $3,000,000 in punitive damages to Freddy J. Williamson on his breach of contract and fraud claims against American Pioneer Life Insurance Company and Jerry Curtis, a vice president of American Pioneer. We affirm conditionally.
Freddy Williamson contracted in 1984 with American Pioneer Life ("APL") to sell its life insurance products, and he did so until early 1988, when the managing general agent for Alabama, as well as Williamson, were terminated for "lack of production." Williamson contacted APL in April 1988, and began selling again for APL in May of that year. He was terminated on April 13, 1989, again for lack of production. On April 25, 1989, APL wrote Williamson a letter notifying him that APL was invoking the "forfeiture of commissions" provision of his contract and that, pursuant to that provision, Williamson would no longer be entitled to receive commissions on insurance policies already in place. APL stated in its letter to Williamson that it was invoking the forfeiture provision because Williamson had replaced a client's APL policy with an insurance product from another insurance carrier.
Williamson's contract with APL provided the following regarding vested commissions:
Plaintiff's Exhibit Number 3.
The insurance contract further provided for the forfeiture of commissions, as follows:
The client whose policy was replaced was Michael Carroll. Upon notification that Carroll's policy had been replaced, and without investigating the replacement, Karen Klein of APL wrote Williamson the following letter:
R. 593.
Williamson sued APL and Curtis, alleging breach of contract and fraud. The jury found in favor of Williamson and awarded compensatory damages of $250,000 and punitive damages of $3,000,000. The court entered a judgment based on that verdict. APL and Curtis appealed, contending that the trial court had erred in submitting the fraud count to the jury and, in the alternative, arguing that the judge should have ordered a remittitur of the $3,000,000 punitive damages award.[1]
In Southern Farm Bureau Life Insurance Co. v. Mitchell, 435 So. 2d 745 (Ala. Civ.App.1983), the Court of Civil Appeals stated:
435 So. 2d  at 747. This Court must look to the contract between Williamson and APL to determine under what conditions Williamson was entitled to receive renewal commissions and under what conditions those commissions would be forfeited.
Standard Furniture Mfg. Co. v. Reed, 572 So. 2d 389, 391 (Ala.1990). With regard to "promissory fraud" and the element of "present intent to deceive," we have written:
Standard Furniture Mfg. Co., 572 So. 2d  at 392.
The forfeiture provision in Williamson's contract stated that any attempt on Williamson's part to induce a policyholder to replace an existing APL policy would result in the forfeiture of commissions. In support of his fraud claim, Williamson offered evidence tending to show that Carroll had initiated the replacement of his policy and that Carroll's decision to replace it was not, in any way, influenced by Williamson. Williamson also offered the following testimony from Al Parent, APL's treasurer:
R.T. 412-17.
R.T. 472-73.
Williamson, therefore, offered evidence at trial tending to show that APL entered into a contract with Williamson knowing that if he replaced a policy, APL would consider him to have induced the replacement, without any investigation whatever. The contract clearly states that an agent will forfeit commissions only if the agent induces someone to change policies. No clause in the contract addresses replacement of policies in regard to which no inducement has occurred. Therefore, Williamson offered sufficient evidence of fraud to warrant the court's submitting Williamson's fraud claim to the jury.
APL contends that the trial court erred in refusing to order a remittitur of the $3,000,000 punitive damages award. We agree, and we condition our affirmance upon the plaintiff's accepting a $1,000,000 reduction of the punitive damages award.
Sears, Roebuck & Co. v. Harris, 630 So. 2d 1018, 1033-34 (Ala.1993).
We have carefully studied the record in this case. We have independently applied the following factors approved by the United States Supreme Court in Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1, 21-22, 111 S. Ct. 1032, 1044-45, 113 L. Ed. 2d 1 (1991):
(As quoted in Northwestern Mutual Life Insurance Co. v. Sheridan, 630 So. 2d 384, 394 (Ala.1993)). We note again the following comments regarding punitive damages:
Green Oil Co. v. Hornsby, 539 So. 2d 218, 222 (Ala.1989).
Although the plaintiff attempted at trial to offer evidence that 12 other agents had forfeited commissions under similar circumstances, the trial court directed a verdict for APL with regard to Williamson's "pattern and practice" allegations against APL.[2] Williamson offered no evidence regarding the individual circumstances of the 12 instances; particularly, he offered no evidence of the similarities and differences as compared to this case. Although it directed a verdict with regard to the pattern and practice allegations, the trial court stated the following in its order denying the motion for remittitur:
With these factors in mind, coupled with the fact there have been no other civil awards against APL for the same conduct and no criminal sanctions for its conduct, this Court concludes that the jury's verdict of $3,000,000 "exceeds the amount necessary... to accomplish society's goals of punishment and deterrence. Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala.1989)." Sears, Roebuck & Co. v. Harris, 630 So. 2d  at 1034. Thus, the judgment of the trial court is affirmed, conditioned on Williamson's filing in this Court, within 28 days of the release of this opinion, a remittitur of $1,000,000 of the punitive damages award, reducing that award to $2,000,000.
AFFIRMED CONDITIONALLY.
MADDOX, ALMON, SHORES, and INGRAM, JJ., concur.
BUTTS, J., concurs in the result.
COOK, Justice.
APPLICATION OVERRULED.
ALMON, SHORES, INGRAM, and BUTTS, JJ., concur.
MADDOX, J., dissents.
MADDOX, Justice (dissenting).
On original deliverance, I concurred in this Court's conditional affirmance of the trial court's judgment. On application for rehearing, the defendants raise several issues, most of which were raised and addressed in the opinion on original deliverance, with the exception of one issue that was raised for the first time in the application for rehearing. That issue is whether the provisions of § 8-8-10, Ala.Code 1975, dealing with the accrual of interest on a judgment for the payment of money damages, should be applied, and, if applied, whether its application would violate the defendants' constitutional rights.
In overruling the application for rehearing, the Court does not address this issue, apparently on the ground that the issue should have been raised in the appellant's initial brief on appeal. I believe that the Court errs in that regard.
In my opinion, the defendants have presented a meritorious argument on this issue. On the question whether the issue should have been raised earlier, it must be remembered that this Court only conditionally affirmed the lower court judgment. Second, the amount of post-judgment interest, which in this case could be as much as $500,000, was not considered by this Court, as I recall, in its Hammond-Green Oil[1] review, and I believe that it should be.
I first address whether interest should be allowed on the punitive damages award. Several courts have held that pre-judgment interest on punitive damages awards may not be recovered, and the rationale for that holding applies equally to post-judgment interest. The Supreme Court of Massachusetts has held:
McEvoy Travel Bureau, Inc. v. Norton Co., 408 Mass. 704, 717, 563 N.E.2d 188, 196 (1990) (citations omitted). The Supreme Court of Alaska has also stated:
Haskins v. Shelden, 558 P.2d 487, 494 (Alaska 1976).
*1047 In this case, while the plaintiff may be able to recover interest for the amount that he claims that the defendant did not pay him, i.e., interest on the compensatory award, the punitive damages award does not represent money owed to the plaintiff, and the amount of that penalty is not final until after this Court's review. The Texas Court of Appeals recognized the differing purposes of compensatory and punitive damages, as follows:
Granite Construction Co. v. Mendoza, 816 S.W.2d 756, 766 (Tex.App.1991) (citations omitted).
I also think that this Court should revisit the question of the excessiveness of the award. The plaintiff has filed a brief in opposition to the application for rehearing in which he states that "[f]ollowing the reduction of the punitive damages award, the [award] equalled approximately 4% of American Pioneer's 1992 total assets." (Emphasis added.) However, the record indicates that at the time of the Hammond-Green Oil hearing in the trial court in the spring of 1993, the defendant's net worth was $7,280,211. The reduced award, coupled with the interest that has accrued, is approximately $2.75 million, which represents approximately 38% of the defendant's net worth.
There is another reason for revisiting the question of excessiveness of the punitive damages awarded. Since the release of this Court's original opinion, I have read a transcript of the oral arguments made by the parties in the Supreme Court of the United States relating to BMW of North America, Inc. v. Gore, 646 So. 2d 619 (Ala.1994), cert. granted, ___ U.S. ___, 115 S. Ct. 932, 130 L. Ed. 2d 879 (1995), in which the Court is examining, once again, Alabama's practice regarding the award of punitive damages. See, Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991). Based on the nature of the questions asked by the Justices at oral argument in the BMW case, and based on my reading of the holdings in Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 109 S. Ct. 2909, 106 L. Ed. 2d 219 (1989), Haslip, supra, TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 113 S. Ct. 2711, 125 L. Ed. 2d 366 (1993), and the more recent case of Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 114 S. Ct. 2331, 129 L. Ed. 2d 336 (1994), I believe that the judgment of this Court results in an unconstitutional taking of Pioneer Life's property; therefore, I must respectfully dissent, unless the Court orders a remittitur of all but $250,000 of the punitive damages award.
The jury in this case, it appears to me, has compensated the plaintiff for the harm he suffered, and the maximum punitive damages award that I would permit would be $250,000, because there does not seem to be clear and convincing evidence that the defendants engaged in a pattern and practice of misconduct that would justify more than that amount.
[1]  APL and Curtis raised two other issues on appeal. This Court has considered the appellants' arguments in regard to those other issues and finds them to be without merit. Those issues will not be discussed in this opinion.
[2]  This case was tried before the release of Henderson v. Alabama Power Co., 627 So. 2d 878 (Ala.1993), wherein this Court held unconstitutional § 6-11-21, Ala.Code 1975, the statutory cap on punitive damages. Under § 6-11-21, claims supported by evidence of a "pattern and practice" with regard to fraudulent conduct provided an exception to the $250,000 cap on punitive damages and allowed a plaintiff to receive more that that amount.
[3]  Although the trial court directed a verdict with regard to the "pattern and practice" allegations, the court's order denying the remittitur motion suggests that the trial judge did consider Williamson's "pattern and practice" evidence in denying the remittitur.
[1]  See Hammond v. City of Gadsden, 493 So. 2d 1374 (Ala.1986); Green Oil Co. v. Hornsby, 539 So. 2d 218 (Ala.1989).