Title: Casualty Indem. Exchange v. Yother

State: alabama

Issuer: Alabama Supreme Court

Document:

439 So. 2d 77 (1983)
CASUALTY INDEMNITY EXCHANGE, a corporation
v.
Jack YOTHER d/b/a Mickey Motors.
82-949.

Supreme Court of Alabama.
September 23, 1983.
*78 William C. Gullahorn, Jr., Albertville, and William A. Scott, Jr. and William G. Gantt of McDaniel, Hall, Parsons, Conerly, Scott & Lusk, Birmingham, for appellant.
T.J. Carnes of Carnes & Carnes, Albertville, for appellee.
SHORES, Justice.
This case grew out of the following facts:
In May 1982, Jack Yother, d/b/a Mickey Motors, purchased an automobile policy of insurance from Casualty Indemnity Exchange (CIE), covering Yother's 1979 International Harvester tractor-truck. During the pre-dawn hours of August 1, 1982, while this policy was in full force and effect, the tractor was stolen from the insured's place of business. The tractor was never recovered. It is undisputed that there was a loss, and that it was covered by the aforesaid policy.
Yother submitted proof of loss for the stolen tractor to his insurance agent, claiming a loss of $40,000, the policy limit. In response, he received the following letter:
The provision of the insurance policy referred to in Carroll's letter states:
The insured notified CIE by letter that he had elected to invoke the arbitration clause to settle the dispute over the actual cash value of his tractor. The insured and CIE subsequently executed a "Memorandum of Appraisal," in which the insured appointed Elmer Mann as his appraiser, and CIE named Buddy O'Neal as its appraiser.
Mann, a local International Harvester truck and tractor dealer, had sold the insured the 1979 International Harvester tractor-truck. Mann was familiar with both the features and condition of the tractor at the time it was stolen. O'Neal, owner of a truck lot, had never seen the tractor and had no personal knowledge of its condition. After a telephone conversation and a personal meeting, the two men failed to agree on the value of the tractor.
Pursuant to the policy provision, Mann and O'Neal selected and appointed Leon Lucas, an employee of International Harvester Company, as umpire. Prior to submitting the matter to Lucas, however, Mann and O'Neal executed an instrument divided into the following sections: "(1) Declaration of Appraisers"; (2) "Selection of Umpire"; (3) "Qualification of Umpire"; *79 and (4) "Award." The first three sections relate to acknowledgement by the appraisers and the umpire of their respective duties. The fourth section, entitled "Award," states that the undersigned appraisers and umpire "have appraised and determined and do hereby award as the actual value" of the stolen property, and provides a space for the amount of the award to be inserted. Although the two appraisers were still not in agreement as to the value to be awarded, both signed the form in blank and forwarded it to Lucas. Lucas, without consulting either appraiser or the insured, entered a figure of $36,500 and signed the form, dated December 16, 1982. The insured received notice of the award on January 10, 1983.
The insured appealed from the Award of Arbitration, as provided by § 6-6-15, Code 1975, and asked the circuit court to set it aside. He alleged that the award was void because it was not made in substantial compliance with applicable provisions of the Alabama Code, and because the insured was not given notice of the hearing and was not allowed to present any evidence of the value of the tractor. The award was entered as a judgment in the records of the Circuit Court of Marshall County, pursuant to § 6-6-15, Code.
Following a hearing, the trial court set aside the award, stating in part:
CIE appeals, and we affirm.
CIE argues that the procedure employed in determining the actual cash value of Yother's tractor was an appraisal, not an arbitration. As such, CIE contends that the trial court, by relying on § 6-6-1, et seq., to vacate the award, erred because those Code provisions do not apply to an "appraisal award" made pursuant to an insurance contract. We agree that an appraisal is distinguishable from arbitration and is not subject to the various procedural requirements imposed upon the arbitration process. But whether the procedures required are those of an arbitration or of an appraisal must be determined from the intent of the disputants or from the character of the questions and issues to be answered, or both. 5 Am.Jur.2d Arbitration and Award, § 3 (1962).
CIE claims that Yother knowingly entered into an appraisal agreement to resolve the dispute over the actual cash value of his tractor, and that neither party intended for that determination to be subjected to the various procedural requirements under the arbitration article of the Code; in support of that agreement, CIE points out that neither the policy provision nor the "Memorandum of Appraisal," signed by the insured, uses the word "arbitration." However, we note that the letter from CIE's adjuster, rejecting the insured's original loss claim, advises him that he is entitled to "call upon that provision of [his] policy which provides for arbitration." And the insured responded that he desired to exercise his right "as per policy agreements of arbitration."
Arbitration and appraisal are generally distinguished in the following manner:
6 C.J.S. Arbitration, § 3 (1975).
5 Am.Jur.2d Arbitration and Award, § 3 (1962).
Conceding, as CIE argues, that the two proceedings are different, we hold that the trial court did not err in setting aside the award in this case, whether it is labeled arbitration or appraisal.
First, because the insured was given no notice of the hearing, he was denied the opportunity to offer testimony or other evidence of the condition and value of his tractor at the time of loss. He testified that he requested, on two separate occasions, that he be permitted to appear before the hearing. The insured stated that he made one request to Mann, his appraiser, and another request to his insurance agent, Gerald Martin. He further testified that Martin told him that his request would be forwarded to CIE. This evidence was not challenged. The fact that neither the policy provision nor the agreement expressly provides for notice to the parties is not determinative.
Annot., 25 A.L.R.3d 711 (1969).
Secondly, a hearing was never conducted. It is undisputed that the two appraisers signed a blank award form without having agreed upon a value for the tractor-truck, and that Lucas, the umpire, entered the amount of the award without having consulted the appraisers or having received evidence from the insured as to the tractor's condition. Thus, the policy provision was not complied with. It requires concurrences of two of the three, i.e., the two appraisers and the umpire, and it is not controverted that Lucas alone made the award without notice to the insured, without a hearing, and without any evidence. Mann's testimony in this regard was undisputed:
In Dufresne v. Marine Ins. Co., 157 Minn. 390, 196 N.W. 560, 562 (1923), a case involving facts similar to those of the present case, the Supreme Court of Minnesota stated:
It is fundamental that one is entitled to notice and an opportunity to be heard where property rights are affected. The insured asserted that right, and it was denied. CIE argues only that the policy provision is silent with respect to notice and, because it is, that the insured was entitled to none. We cannot agree, where the evidence is undisputed that he demanded notice and an opportunity to produce evidence. The foregoing statement by the Minnesota court is applicable under the facts of this case, whether it is considered a hearing held by "appraisers" or an arbitration hearing.
The judgment of the trial court is affirmed.
AFFIRMED.
TORBERT, C.J., and MADDOX, JONES and BEATTY, JJ., concur.