Title: State Farm Fire and Cas. Co. v. Williams

State: alabama

Issuer: Alabama Supreme Court

Document:

926 So. 2d 1008 (2005)
STATE FARM FIRE AND CASUALTY COMPANY
v.
Larry WILLIAMS and Melissa Williams.
1030665.

Supreme Court of Alabama.
August 19, 2005.
Rehearing Denied November 10, 2005.
*1009 Michael B. Beers and Constance T. Buckalew of Beers, Anderson, Jackson, Patty & Van Heest, P.C., Montgomery; and Charles P. Gaines of Gaines, Gaines & Rasco, P.C., Talladega, for appellant.
Betty C. Love of Love, Love & Love, P.C., Talladega, for appellees.
*1010 BOLIN, Justice.[1]
Larry Williams and his wife Melissa Williams sued State Farm Fire and Casualty Company ("State Farm") and its employees, Brandon LaBresh, Tim Ryan, and Bill Lovell, on July 10, 2001, alleging breach of an insurance contract, bad-faith refusal to pay an insurance claim, negligent handling of claims, and negligent training and supervision. The Williamses sought both compensatory and punitive damages, as well as damages for mental anguish.
State Farm answered the complaint on August 8, 2001, denying the allegations in the complaint, and it moved the trial court to dismiss the counts alleging negligent handling of claims and negligent training and supervision. The defendant employees LaBresh, Ryan, and Lovell also moved the trial court on August 8, 2001, to dismiss the complaint against them in its entirety. Following a hearing, the trial court, on October 10, 2001, entered an order dismissing the count alleging negligent handling of claims as to all of the defendants; dismissing the counts alleging breach of contract and bad faith as to the defendant employees LaBresh, Ryan, and Lovell; and deferring ruling on the count alleging negligent supervision and training as to all of the defendants.
On September 30, 2002, State Farm moved for a summary judgment as to all of the remaining claims against it. On February 4, 2003, the Williamses filed a response in opposition to State Farm's motion for a summary judgment. The Williamses amended their complaint on April 2, 2003, to more fully allege their breach-of-contract claim.
Following a hearing, the trial court, on July 25, 2003, entered a summary judgment in favor of State Farm, LaBresh, Ryan, and Lovell on all of the remaining counts of the complaint except the breach-of-contract claim asserted against State Farm.[2]
The case proceeded to trial on August 27, 2003, on the Williamses' breach-of-contract claim against State Farm. At the close of the Williamses' case and again at the close of all of the evidence, State Farm moved the court for a preverdict judgment as a matter of law ("JML"). The motions were denied and the case was presented to the jury. The jury returned a verdict in favor of the Williamses and awarded them compensatory damages on the breach-of-contract claim in the amount of $72,000 and also awarded the Williamses damages for mental anguish in the amount of $10,000, for a total award of $82,000. The trial court assessed interest in the amount of $12,600 on the jury's award of damages on the breach-of-contract claim and, on September 9, 2003, entered a final judgment in favor of the Williamses for $94,600.
State Farm, on September 26, 2003, moved the trial court for a postverdict JML, or, in the alternative, to alter, amend, or vacate the judgment or to remit the compensatory-damages award, arguing that the award on the breach-of-contract claim was greater than the limits contractually agreed to by the parties under the terms of the policy and, further, that the *1011 evidence presented was insufficient to support the jury's award of damages for the Williamses' mental-anguish claim.
On December 29, 2003, the trial court entered an amended order remitting the damages award for the breach-of-contract claim to the policy limit of $49,047, and reassessing interest on that award in the amount of $8,583.23. The trial court left intact the jury's award of $10,000 on the mental-anguish claim. The trial court entered a judgment in favor of the Williamses for $67,630.23. State Farm appeals.
The Williamses' house is a one-story, wood-frame house which consists of six rooms and one bathroom. The foundation of the house consists of concrete block walls surrounding a crawl space. The house was insured by a policy of insurance issued by State Farm. The insurance policy in "Section ILosses Insured" provides that "[w]e insure for accidental direct physical loss to the property described in COVERAGE A [Dwelling], except as provided in SECTION ILOSSES NOT INSURED." (Capitalization in original.) The insurance policy provides in "Section ILosses Not Insured" the following:
(Capitalization in original.)
The insurance policy provides in "Section IAdditional Coverages" the following:
The insurance policy further provided that State Farm would pay the cost to "repair or replace with similar construction ... the damaged part of the property covered."
The Williamses contend that on September 28, 2000, two small explosions occurred inside their house. Larry Williams testified that he was asleep in the master bedroom when he heard a "big bang." Larry went to investigate the sound and found his wife Melissa, and his son's girlfriend, Chrystal Trevino, "screaming and hollering." Larry stated that he asked what had happened and Trevino responded that she had turned on the light switch and an explosion had occurred. Larry testified that he then turned on the light switch and a loud "combustion" type explosion occurred. Larry stated that reddish and blue flames were visible from the base of the floor and walls at the moment of the *1012 explosion. The main floor beam that ran through the center of the Williamses' kitchen had collapsed, which caused the kitchen floor to collapse. The City of Talladega Fire Department responded to the scene, but no fire was detected. However, a gas leak was found under the kitchen floor and Alagasco was called to the scene to disconnect the gas supply to the house. The electricity to the house was also disconnected.
State Farm hired two experts to investigate the cause of the damage to the Williamses' house. Jeff Crain, a certified fire and explosion investigator employed by Pyrtech, Inc., inspected the Williamses' house on October 4, 2000. He found no evidence of any fire damage within or beneath the flooring system of the house and no evidence of a flammable gas or vapor explosion. Crain concluded that the collapse of the flooring system was caused by the failure of an extremely rotted main support beam underneath the house.
Joel D. Wehrman, a senior engineer with Jade Engineering & Inspection, Inc., inspected the Williamses' house on October 11, 2000, to determine what caused the flooring system to collapse and also to provide recommendations on how to proceed with repairs. Wehrman concluded that no fire or explosion had occurred; rather, he determined that the flooring system failed because of long-term wood rot of the flooring support joists caused by an infestation of termites and a fungus. Wehrman stated that when the flooring system finally collapsed, it probably made a very loud noise and generated a dust cloud, causing the Williamses to believe an explosion had occurred. Wehrman concluded that it would not be feasible to repair the rot-related damage the house sustained. He determined that half of the wood-framed floor in the house would have to be replaced in its entirety and that the rotted floor support beams and joists would have to be replaced.
The collapse of the kitchen floor rendered the Williamses' house uninhabitable, and they moved into a local motel room. During the period the Williamses resided in the motel room, State Farm paid them benefits under the "Loss of Use" provision of their homeowners' insurance policy. However, on December 6, 2000, State Farm notified the Williamses by letter that there was no coverage for their loss under the insurance policy, and it discontinued the "Loss of Use" benefits. The Williamses then sued State Farm and its employees, LaBresh, Ryan, and Lovell.
State Farm argues on appeal that the trial court erred in denying its preverdict JML because, it says, the Williamses failed to prove their damages, which is an essential element of their breach-of-contract claim. The standard of review for a ruling on a motion for a JML is as follows:
Delchamps, Inc. v. Bryant, 738 So. 2d 824, 830-31 (Ala.1999). In order to prevail on a breach-of-contract claim, a plaintiff must establish: (1) the existence of a valid contract binding the parties, (2) his own performance under the contract, (3) the defendant's nonperformance under the contract, and (4) resulting damages. State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala.1999).
On direct examination, counsel for the Williamses attempted to elicit from Larry his estimation as to what it would cost to replace the house. Counsel for the Williamses asked Larry if he knew the reasonable value of his house before the "explosion" on September 28, 2000. State Farm objected to the question stating that the difference between the value of the house before the floor collapsed and the cost to replace "[was] not proper damages [in] this case." The trial court permitted Larry to testify as to the value of his house before the "explosion." Larry valued the house at $49,000 before the "explosion" and stated that it was worthless after the "explosion." No additional evidence was presented relative to the costs to repair the house.
State Farm then moved the trial court for a preverdict JML at the close of the Williamses' case, arguing, among other things, that the Williamses had failed to submit any evidence as to the proper measure of damages in the case. Counsel for State Farm stated:
The following colloquy then occurred:
Following the exchange quoted above, the trial court permitted the Williamses to reopen their case-in-chief for the limited purpose of presenting evidence as to the costs to repair or replace the damaged portion of their house. The following exchange occurred:
Larry testified on cross-examination that the testimony he gave regarding the estimated costs to repair his damaged property were based solely on what someone else had told him and that he did not possess the expertise to estimate the cost to repair his damaged property. We note the following exchange:
State Farm contends that the Williamses failed to carry their burden of proving the element of damages because the only evidence as to the proper measure of damages was presented after the trial court allowed the Williamses to reopen their case-in-chief and after State Farm had moved for a preverdict JML. As mentioned above, the insurance policy provides that the proper measure of damages in this case is the cost to repair or replace the damaged part of the dwelling. See Reliance Ins. Co. v. Substation Prods. Corp., 404 So. 2d 598 (Ala.1981). Counsel for the Williamses elicited in their case-in-chief, and over the objection of State Farm, the cost of replacing the Williamses' house by ascertaining from Larry the difference in the value of the *1017 house before the "explosion" and the value of the house after the "explosion."[3] The Williamses presented no evidence in their case-in-chief relating to the cost to repair the damaged portion of their house. Thus, when State Farm moved for its preverdict JML, the Williamses had failed to present any evidence as to the proper measure of damages in this case, i.e., the cost to repair or replace the damaged portion of their house. However, the trial court allowed the Williamses to reopen their case-in-chief for the limited purpose of presenting evidence relative to the cost of repairing the damaged portion of their house. We note that the decision to reopen a case for additional evidence lies within the sound discretion of the trial court. Green Tree Acceptance, Inc. v. Standridge, 565 So. 2d 38 (Ala.1990). We find no error in the trial court's allowing the Williamses to reopen their case-in-chief for the limited purpose of presenting additional evidence relative to the issue of damages.
We must next determine whether the evidence as to the issue of damages in this case was competent. State Farm argues that the trial court erred in overruling its hearsay objection to Larry's testimony regarding the estimated costs to repair his damaged property. Rule 801, Ala. R. Evid., defines hearsay as "a statement, other than one made by the declarent while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Larry's testimony regarding the cost of repairing his damaged house was clearly based on a conversation with someone else and on what someone else had told him. The testimony was offered for the truth of the matter asserted, i.e., to establish damages, an essential element of a breach-of-contract claim, by proving the costs necessary to repair the Williamses' damaged house. Therefore, Larry's testimony as to damages constituted classic hearsay and was inadmissible. See Welch v. Montgomery Eye Physicians, P.C., 891 So. 2d 837 (Ala.2004) (holding that wife and son's testimony that deceased optometrist told them an agreement existed for the sale of his practice was hearsay); Atmore Farm & Power Equip. Co. v. Glover, 440 So. 2d 1042 (Ala.1983) (holding that purchaser's testimony establishing model year of a tractor in fraud action based on what manufacturer told purchaser would be inadmissible hearsay).
Citing Mississippi Valley Title Insurance Co. v. Malkove, 540 So. 2d 674 (Ala.1988), the Williamses argue that Larry's testimony regarding the estimated cost to repair the house constituted opinion evidence from a lay person and, as the owner of the property, he was competent to give an opinion relative to the cost to repair the house. Malkove states that "`[i]t is the rule in Alabama that any person, including a layman, is competent to testify as to his opinion concerning the value of land if he has had an opportunity for forming a correct opinion and testifies in substance that he has done so.'" 540 So. 2d  at 679 (quoting Calvin Reid Constr. Co. v. Coleman, 397 So. 2d 145 (Ala.Civ. App.1981)). However, the facts of Malkove are easily distinguishable from the facts of this case. First, Larry was not *1018 testifying as to the market value of his house, rather he was testifying to the estimated cost of repairing the damaged portion of the house. Secondly, the Court in Malkove found the proponents of the opinion testimony regarding the value of the land to be experienced real-estate brokers familiar with the land in question. Larry, on the other hand, admitted that he did not have the training or expertise necessary to allow him to form an independent estimate of the costs necessary to repair his house.
Accordingly, we conclude that the Williamses failed to present substantial evidence of an essential element of their breach-of-contract claimdamagesand that the trial court erred in denying State Farm's motion for a preverdict JML. Because we find that the Williamses failed to prove an essential element of their claim, we pretermit discussion of the remaining issues raised on appeal by State Farm. We reverse the trial court's judgment and remand the case for the entry of a JML for State Farm.
REVERSED AND REMANDED WITH INSTRUCTIONS.
NABERS, C.J., and SEE, HARWOOD, and STUART, JJ., concur.
[1]  This case was originally assigned to another Justice; it was reassigned to Justice Bolin on January 17, 2005.
[2]  The record does not indicate that the defendant employees LaBresh, Ryan, and Lovell moved for a summary judgment. However, the trial court stated in its order that it considered matters outside the pleadings; thus the trial court apparently treated the defendant employees' motion to dismiss as a summary-judgment motion. See Boles v. Blackstock, 484 So. 2d 1077 (Ala.1986).
[3]  Nothing in the record indicates that the Williamses' house was a total loss. In fact, the report prepared by Wehrman of Jade Engineering and relied on by the Williamses in support of their contention that the house cannot be repaired clearly indicates only that the damaged portion of the flooring system not the entire housecannot be repaired and must be replaced. See Padgett v. State Farm Fire & Cas. Co., 714 So. 2d 302 (Ala.Civ.App.1997)(holding that "replacement cost" provision in a policy similar to the Williamses' policy required the insurer to pay only for the damaged portion of a roof and not for the replacement of the entire roof).