
    JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY v. Lois Annette PIERCE. Curtis BULLOCK v. Lois Annette PIERCE.
    85-722, 85-745.
    Supreme Court of Alabama.
    Sept. 25, 1987.
    Rehearing Denied Dee. 11, 1987.
    On Return After Remand May 27, 1988.
    Rehearing Denied July 29, 1988.
    William H. Hardie, Jr., and Robin Brigham Thetford of Johnstone, Adams, Howard, Bailey & Gordon, Mobile, for John Hancock Var. Life Ins. Co.
    Philip H. Partridge of Brown, Hudgens, Richardson, Mobile, for Curtis Bullock.
    
      Billy C. Bedsole of Stockman & Bedsole, Mobile, for appellee.
   PER CURIAM.

These are consolidated appeals by the defendants, John Hancock Variable Life Insurance Company (“John Hancock”) and Curtis Bullock, from a judgment for the plaintiff, Lois Annette Pierce, in plaintiffs action based upon breach of contract and fraud.

The action arose out of the issuance of a $200,000 policy of life insurance by John Hancock to Glen D. Pierce, naming his wife, Lois Annette Pierce, as beneficiary.

The policy was solicited by Curtis Bullock, a sales representative for John Hancock. In 1981, prior to the transaction in question, Bullock had sold the Pierces a contract providing group health insurance. In connection with the application for the health insurance, Mr. Pierce represented that he was in good health, had not experienced an illness or been attended by a physician within the preceding five years, and had not suffered from heart trouble, high blood pressure, or a number of other diseases or illnesses.

In April 1983, Bullock met with the Pierces in connection with a policy of life insurance. The testimony concerning the content of the discussion that took place at that time is conflicting. According to Bullock, Pierce denied having had any major health problems except diverticulosis, with related chest pains, and childhood asthma. On the other hand, Mrs. Pierce and her daughter testified that Mr. Pierce told Bullock of various health problems and past periods of hospitalization and of his treatment for alcoholism. According to Mrs. Pierce, Bullock’s response was that if the problems were all cleared up, Mr. Pierce did not have to mention it to anyone else, that “what John Hancock didn’t know wouldn’t hurt them.”

During the course of a medical examination of Mr. Pierce, he was asked a number of questions by the examining physician regarding his health and medical history. Specifically, he was asked whether he had been treated for alcoholism, heart trouble, arthritis, or had had any checkups, consultation, illness, injury, surgery, etc. Mr. Pierce answered these inquiries in the negative; however, it was established at trial that Pierce had had a prior history of bad health. He suffered from arthritis; he had been hospitalized in 1980 for chest pains; he had been diagnosed as having cervical and lumbar osteoarthritis; he suffered from high blood pressure; and he had been treated for alcoholism.

Four months after the issuance of John Hancock’s life insurance policy to him, Mr. Pierce died of a heart attack. When John Hancock refused to pay the policy amount, Mrs. Pierce brought this action. John Hancock answered with a general denial, averred that the complaint failed to state a proper claim in fraud, and sought a rescission of the policy for misrepresentations or incorrect statements contained in the application. Curtis Bullock defended with a general denial.

The case was tried to a jury on the contract and fraud counts. At the close of plaintiff’s case and at the close of all the evidence, both defendants moved for directed verdicts on each count. These motions were denied, and the case was submitted to the jury on both counts. The jury returned a verdict against both Bullock and John Hancock on the fraud count and assessed damages in the amount of $350,000. The defendants’ post-trial motions for judgment notwithstanding the verdict or new trial were denied, and this appeal followed.

The defendants have presented the following contentions on this appeal:

"The award of punitive damages in civil proceedings in Alabama violates the constitution of Alabama and the constitution of the United States.
“The trial court applied the wrong standard of proof in submitting the fraud claim to the jury.
“There was insufficient evidence of reasonable reliance by Mrs. Pierce on the alleged fraud.
“There was insufficient evidence to impute Mr. Bullock’s alleged misrepresentation to John Hancock Variable Life Insurance Company.
“There was insufficient evidence to support an award of punitive damages.”

The elements of an action in fraud, as required under the provisions of Code of 1975, § 6-5-101, are stated in Bowman v. McElrath Poultry Co., 468 So.2d 879, 880 (Ala.1985):

“(1) misrepresentation of a material fact; (2) made willfully to deceive, or recklessly without knowledge; (3) acted upon by the opposite party; and (4) reliance by the complaining party which was justifiable under the circumstances.”

Mrs. Pierce did not bring this action in a representative capacity; thus, she was not proceeding to recover damages for her late husband or his estate, and there is no evidence of any action, based upon fraud in the ‘procurement of the policy, having been filed by Mr. Pierce before he died. See Myers v. Geneva Life Ins. Co., 495 So.2d 532 (Ala.1986). A tort claim by him, therefore, would not have survived in favor of his personal representative. Code of 1975, § 6-5-462; Gillilan v. Federated Guaranty Life Ins. Co., 447 So.2d 668 (Ala.1984).

Mrs. Pierce did bring this action in her individual capacity to recover for a fraud practiced upon her. Accordingly, it was incumbent upon her to prove the elements of a cause of action in fraud as set out above. In Ames v. Pardue, 389 So.2d 927, 931 (Ala.1980), this Court stated:

“It is fundamental that the represen-tee who relied on the defendant’s misstatement and the plaintiff who was injured must be one and the same. The representee must have relied on and have been deceived and damaged by the statement. Ansley v. Bank of Piedmont, 113 Ala. 467, 21 So. 59 (1896). Recovery cannot be had unless plaintiff relied on the fraudulent representations of defendant. Jordan v. Pickett, 78 Ala.331 (1884).”

The alleged misrepresentations made to Mrs. Pierce were those of Bullock, who, upon learning of Mr. Pierce’s various medical conditions, is alleged to have stated that if these conditions were all cleared up, Mr. Pierce did not have to mention it to anyone else, and that “what [John Hancock] didn’t know wouldn’t hurt them.” The facts in North Carolina Mutual Life Ins. Co. v. Holley, [MS. 84-1211 & 84-1223, September 18, 1987] (Ala.1987), are similar to the facts in this case, and the principle of law applied in that case is controlling here. In North Carolina Mutual, Watts, the agent, told the plaintiff in her presence and in the presence of the insured that he had an insurance policy for the insured with “No medical questions asked” and also told the plaintiff Holley “Mattie, you’ll be the beneficiary of this policy if anything happens to Pat to help with funeral expenses.” (Emphasis added.) Watts did not tell the insured or the plaintiff that good health was necessary in order for one to be insured under the policy, because, he said, the company assumed she was in good health. This Court held in North Carolina Mutual that the statement made by Watts constituted a misrepresentation on which an action for fraud could be based.

Likewise, on the authority of North Carolina Mutual, we affirm the judgment in regard to liability and remand the case for a determination of the question whether the verdict of the jury was excessive.

See North Carolina Mutual Life Ins. Co. v. Holley, slip op. at pp. 9 and 10, where we said:

“The last issue we address is North Carolina Mutual’s claim that the verdict was excessive.
“We do not, at this time, decide this issue, but we remand the cause to the trial court to review its judgment in accordance with the guidelines set out in our recent decisions in Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986); Harmon v. Motors Insurance Corp., 493 So.2d 1370 (Ala.1986); and Alabama Farm Bureau Mut. Cas. Ins. Co. v. Griffin, 493 So.2d 1379 (Ala.1986).
“The trial court, in its discretion, may or may not order a further hearing to reconsider the claim that the verdict is excessive. In any event, the trial court is directed to report its findings and conclusions within 28 days of this opinion.”

AFFIRMED, IN PART; REMANDED WITH DIRECTIONS.

JONES, ALMON, SHORES and ADAMS, JJ., concur.

MADDOX, J., concurs specially.

TORBERT, C.J., and BEATTY, HOUSTON and STEAGALL, JJ., dissent.

MADDOX, Justice

(concurring specially).

I concur in the opinion insofar as the liability aspect of the opinion is concerned. I concur in the result to remand the case, but I call attention to my special concurrence that I filed in North Carolina Mutual Ins. Co. v. Holley, supra.

BEATTY, Justice

(dissenting).

I respectfully dissent. I would reverse the judgment on the merits, because I do not feel that the plaintiff proved the element of reliance.

Mrs. Pierce conceded that she paid no attention to the statements Bullock made at the time the application was executed and that Mr. Pierce knew that questions would be asked of him in a medical examination. In fact, during cross-examination, Mrs. Pierce answered in this way:

“Q. Did Curtis [Bullock] tell you that if anybody asked Mr. Pierce whether he had any dizziness, fainting, convulsions, headaches, speech defect, paralysis or stroke, mental or nervous disorder on behalf of John Hancock that he could say no?

“A. Well, he didn’t say that. He said if — he didn’t say—

“Q. Did he say no?

“A. No, he didn’t say that.

“Q. Did Curtis say that if anybody on behalf of John Hancock asked Mr. Pierce about soundness [sic] of breath, asthma, he could say no?

“A. He never — he never said anybody would even ask from John Hancock cause he said he was John Hancock.

“Q. You having trouble answering my questions? Maybe let me repeat it again., Did Curtis say to you—

“A. I’m sorry.

“Q. —or to Glen Pierce in your presence, Glen, if anybody on behalf of John Hancock, anybody else besides me asks you about shortness of breath, persistent hoarseness, cough, blood spitting, even though a truthful answer would be yes, you can say no?

“A. Well, he didn’t — I didn’t hear him tell Glen that.

“Q. You didn’t hear him tell him that. Did Curtis Bullock ever say to you or to Glen Pierce in your presence that if anybody on behalf of John Hancock asks Mr. Pierce about chest pain, that he could say no even though it was truthful to [say] yes?

“A. Well, I didn’t hear him ask Glen. I wasn’t with Glen every time he talked to Curtis, so I don’t know.

“Q. Did you ever hear—

“A. No.

“Q. I tell you what. I get confused sometimes in the middle of a trial. Let me ask you the question again. Maybe I said it wrong. Did Mr. Bullock in your presence, or, to Mr. Pierce or to you — see, I can see why you’re confused. Even I’m confused with my question. Let me start over. Did Mr. Bullock say to you or to Mr. Pierce in your presence that if somebody from John Hancock asks you about chest pain, you can say no, even though the answer is yes.

“A. I didn’t hear him say that.

“Q. Okay. Did Mr. Bullock say to you or to Mr. Pierce in your presence that if somebody from John Hancock asks him about prostate, he could say no, even though the truth was yes?

“A. I didn’t hear him say it.

“Q. Okay. Did anybody — did Mr. Bullock ever say to you or to Mr. Pierce in your presence that if somebody from John Hancock asks him about rheumatism, arthritis, disorder of the muscles or bones, that he could say no if a truthful answer was yes?

“A. I never heard him say that if anybody called from John Hancock. I don’t know.

“Q. Did Mr. Bullock ever say to your husband or to you — I’m sorry — to you or to your husband in your presence that if anybody from John Hancock asks him about tumors, that he could say no even though the truth was yes?

“A. I don’t — I never heard him say that if anybody called from John Hancock on any of the questions.

“Q. So, your understanding was when you finished talking to Mr. Bullock about all these applications that you and Mr. Pierce still had to tell the truth?

“A. Oh, sure, yes.

“Q. Now, let’s look at this up here. This is a copy of [an] application that Dr. McAtee will testify was filled out in his presence.

“MR. BEDSOLE: Dr. who?

“MR. HARDIE: Sorry. Dr. Allen.

“MR. BEDSOLE: You are confused. Go ahead.

“MR. HARDIE: I’m really young.

“Q. Dr. Allen, and here’s this question, Two, ever been treated for any known indication of Two C, shortness of breath, persistent hoarseness, cough, blood spitting, bronchitis, pleurisy, asthma, emphysema, tuberculosis, or chronic respiratory disorder. If that question were asked about your husband, the truthful answer would be yes, wouldn’t it?

“A. Yes.

“Q. But down here we have an ‘X’ in the no, don’t we?

“A. Yes, it shows it.

“Q. Ever been treated for any known indication of chest pain, palpitation, high blood pressure, rheumatic fever, heart murmur, heart attack, or other disorder of the heart or blood vessels, the truthful answer to that would have been yes; isn’t that correct?

“A. That’s right.

“Q. But this shows no; isn’t that correct?

“A. That’s correct.

“Q. To E, jaundice, intestinal bleeding, ulcer, hernia, appendicitis, colitis, diverticulitis, hemorrhoids, recurrent indigestion or other disorder of the stomach, intestines, liver, or gallbladder, and I understood you to say that a truthful answer to that would have been yes?

“A. Yes, but it looks like he’s got it marked twice.

“Q. Well, there’s an ‘X’ under yes and a line under no. Sure enough to put you on notice to ask about that; isn’t it?

“A. Yes, I can’t understand why John Hancock didn’t write to Dr. McAtee. He could have found out everything.

“Q. Well, be fair to me and you’ll answer my questions.

“A. Yeah.

“Q. All right. To H, have you ever been treated for any known indication of neuritis, sciatica, rheumatism, arthritis, gout, disorder of the muscles or bones, including the spine, back or joints, truthful answer to that would have been yes.

“A. That’s right.

“Q. And what seems to be no is marked here. And the same about J, disorder of the skin, lymph glands, cyst, tumor, or cancer, truthful answer to that would have been yes, but no seems to be marked here. Now, did you and Mr. Bullock and Mr. Pierce get together and work up some kind of scheme where you could go ahead and lie to John Hancock?

“A. Oh, no, no.

“Q. It as never your understanding after you talked to Mr. Bullock that if Dr. Allen asked those questions that Mr. Pierce could lie?

“A. He didn’t tell him — he told him that he had, if he was all cleared up these — if he was all cleared up, that was all that mattered; that he didn’t have any more of these problems, and that was all that mattered.

“Q. So, Mr. Bullock was assuring your husband that if everything was cleared up, he’d probably get the policy, wasn’t he?

“MR. PARTRIDGE: Object to the form of the question.

“THE COURT: Overrule.

“Q. But Mr. Bullock didn’t tell your husband or you that Mr. Pierce could lie when Dr. Allen asked him questions, did he?

“A. He said that, that if he was all cleared up, there was no point in discussing it.

“Q. Do you have trouble answering that question? He did or he didn’t tell you to lie?

“A. He didn’t, he didn’t tell — I didn’t hear him tell my husband one way or the other.

“Q. Did you hear him tell your husband to lie?

“A. I didn’t hear him tell him anything.

“Q. Did you understand — you, Mrs. Pierce — is there anything in any of your conversations with Mr. Bullock that led you, Mrs. Pierce, to believe that your husband should lie?

“A. No.” (Emphasis added.)

By her own testimony, Mrs. Pierce conceded that she paid no attention to those statements, that she knew her husband would undergo a medication examination before the policy was issued; that she knew that her husband would have to tell the truth in connection with his insurance application; and that there was nothing in their conversations with Bullock that led her to believe that Mr. Pierce should lie. Thus, there was no evidence that Mrs. Pierce either (1) believed Bullock’s alleged statements or (2) acted in reliance upon them.

HOUSTON, J., concurs.

ON APPLICATION FOR REHEARING

PER CURIAM.

John Hancock and Bullock apply for rehearing and argue again that the judgment of the trial court should be reversed on the same grounds argued on the original appeal. As to those issues argued on original appeal, and addressed by this Court in its opinion, the application for rehearing is due to be denied. Bullock also insists that this Court did not address in the original opinion the following question:

“Whether the trial court erred in excluding from evidence the physical examinations for life insurance completed by plaintiff's decedent with a different company which contained misrepresentations similar to those made by the plaintiff and her deceased husband on the policy at issue in the case before this Court?”

Bullock is correct in stating that this Court did not address this specific question on original deliverance, but after examining the record and the briefs of the parties, we were of the opinion that the trial judge did not err in excluding these documents. Our examination of the record indicates that no proper foundation was laid for the introduction of the documents.

The original opinion in this case was released on September 25, 1987. On September 30,1987, the trial judge issued an order in response to the remand under Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986); Harmon v. Motors Insurance Corp., 493 So.2d 1370 (Ala.1986); and Alabama Farm Bureau Mut. Cas. Ins. Co. v. Griffin, 493 So.2d 1379 (Ala.1986). Both appellants filed applications for rehearing within the 14-day limit set by Rule 40, Ala.R.App.P., and after the entry of the September 30 order. We now also have a brief filed by counsel for the appellee, which argues the issues on rehearing as well as the merits of the trial judge’s order on remand. We do not, at this time, rule on the issue of excessiveness of the verdict, but we adopt the following procedure to eliminate any future confusion over the briefing schedule on cases remanded under Hammond.

Our clerk has advised us that attorneys have frequently inquired whether an application for rehearing is appropriate when a case has been only remanded, as this one was. Because there is some confusion among the bar on this point, we take this opportunity to announce the following procedure to be used in cases remanded under Hammond v. City of Gadsden. When this Court remands a case to the trial court for entry of an order pursuant to the dictates of Hammond, this Court retains jurisdiction of the case, and its order issued at the time of remand is not final, for purposes of Rule 40, Ala.R.App.P. After return to the remand, the parties will be given an opportunity to file briefs challenging or supporting the Hammond order, after which this Court will issue a final judgment in the case. That judgment will be final for the purposes of Rule 40, Ala.R. App.P. On application for rehearing, the parties may attack not only the original judgment of this Court, but the trial court’s ruling on the damages issue as well, which is presented on the return to the remand.

Based on the foregoing, we are of the opinion that the application for rehearing is due to be denied.

OPINION EXTENDED; APPLICATION OVERRULED.

MADDOX, JONES, ALMON, SHORES and ADAMS, JJ., concur.

TORBERT, C.J., and BEATTY, HOUSTON and STEAGALL, JJ., concur, in part; and dissent, in part.

TORBERT, Chief Justice

(concurring in part and dissenting in part).

I agree with the extension of the opinion on rehearing setting forth the procedure for filing applications for rehearing in future cases that are remanded in accordance with Hammond v. City of Gadsden, 493 So.2d 1374 (Ala.1986). However, I dissent as to the overruling of the application for rehearing.

BEATTY, HOUSTON and STEAGALL, JJ., concur.

ON RETURN AFTER REMAND

PER CURIAM.

After this case was remanded to the trial court for a consideration of appellants’ claims that the verdict was excessive, the trial judge entered an order in which he found:

“[T]he damages awarded in the amount of $350,000.00 were arrived at by the jury after careful and thorough deliberation and were not the result of any passion, bias, sympathy, prejudice, corruption or any other improper motive.”

He based his conclusion upon these findings:

“The Plaintiff and her deceased husband had other life insurance policies in effect on her husband with Travelers Insurance Company and Liberty National Insurance Company in the total amount of $110,000.00 for approximately seven to eight years prior to the time they were approached by Bullock. On April 5th, 1983, Bullock, representing John Hancock, convinced the Plaintiff and her husband that they should secure a policy with John Hancock for $200,000.00 even though the Plaintiff and her husband both told Bullock that Glen had had various medical problems as well as treatment in at least three hospitals and probably couldn’t pass a physical. In his zeal to convince them to cancel the Travelers and Liberty policies and take out the Hancock policy, Bullock represented to them that they didn’t need to tell anyone else about these medical problems, and particularly, they didn’t need to tell Dr. Allen, who was to perform the physical examination since they had already told Bullock and he was John Hancock and ‘what they don’t know won’t hurt them.’ Relying on these intentional misrepresentations by Bullock, the Plaintiff’s husband did not mention his past medical problems to Dr. Allen. Bullock even conceded at the trial that he picked up the completed application form by [from] Dr. Allen after the exam and he knew when he sent it in that some if not all of the information contained thereon was incorrect. The Travelers and Liberty policies were cancelled by the Plaintiff and her husband and they were left with a Hancock policy based on fraud and misrepresentation intentionally perpetrated upon her by Hancock’s agent, Curtis Bullock.
“By his deliberate and malicious fraud, Bullock not only caused the plaintiff to lose $110,000.00 worth of policies she could have collected but to have a $200,-000.00 policy that would be denied. His statement that ‘what they don’t know won’t hurt' them’ illustrates his callous disregard for the Plaintiff’s insurance needs and her rights in general.
“It is my opinion that after hearing the evidence and the law, the jury made the decision to award the plaintiff compensatory damages in the amount of $200,-000.00 based on the amount of the Hancock policy and punitive damages in the amount of $150,000.00 to punish Bullock and Hancock for the intentional and malicious fraud. Such punitive damages are certainly appropriate to deter insurance agents, who are placed in the position of accepting applications, from committing similar acts on other innocent parties in the future. It is my feeling that the award of $150,000.00 in addition to the amount which would be payable under the policy would certainly have a considerable impact upon all insurance agents in their dealings with prospective policyholders and would encourage them to reveal the complete truth to the prospective applicants for the policies. Insurance policies, and particularly life insurance policies, are sold on the basis that they will at least partially relieve the disastrous effect on a family of the death of the head of that family and if an agent is allowed to misrepresent the truth when he accepts the application, such a purpose would be for naught. There was no evidence whatsoever during the trial of this case that the jury was influenced by any bias, passion, corruption or other improper motive, in reaching their verdict on the damages and therefore the award is certainly not excessive. The verdict of $350,000.00 would serve to punish Bullock and Hancock for the fraud and misrepresentation perpetrated upon the Plaintiff by Bullock’s actions and would also serve to deter other insurance agents from making the same or similar misrepresentation in accepting applications for insurance policies on behalf of their companies.”

John Hancock and Bullock objected to the order, one of their principal objections being that the trial judge had made certain findings of fact in his order dated September 30, 1987, that were not supported by the evidence. The trial judge reconsidered his order of September 30, and entered the following supplemental order:

“On motion filed by the Defendants, the Court has reconsidered its previous Order on Remand With Directions, which was dated September 30, 1987, and would hereby direct and amend said Order to reflect that the issue of intentional or reckless misrepresentation was submitted to the jury and they were instructed that a judgment [sic] for the Plaintiff could be returned upon a finding that any misrepresentations were made, either intentional or reckless in nature. Therefore, the Order dated September 30, 1987, is amended to reflect that the jury could have made the finding that the misrepresentations perpetrated by Curtis Bullock and John Hancock on the Plaintiff, Lois Annette Pierce, and upon which she relied to her detriment, could have been either intentional or reckless in nature and the Court would therefore not substitute its opinion for the opinion of the jury in this regard.
“The Court would affirm any and all other of its findings with respect thereto and contained in its Order dated September 30, 1987, and would once again ORDER, ADJUDGE AND DECREE: That the Defendants’ Motions for New Trial, are still denied, based on the same factors in the Court’s Order since the Court once again concludes that the damages awarded were not excessive and were not the result of any bias, passion, corruption, sympathy, prejudice, or any other improper motive.”

We have previously affirmed the judgment insofar as it imposed liability. Upon consideration of the trial court’s order on remand, we are of the opinion that the award of damages, likewise, is due to be affirmed.

AFFIRMED.

TORBERT, C.J., and MADDOX, JONES, ALMON, SHORES and ADAMS, JJ., concur.

BEATTY, J., dissents.  