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Corner Stone Funeral Chapel, Inc. v. MVMG, LLC

Supreme Court of Alabama

December 5, 2014

Corner Stone Funeral Chapel, Inc.

Appeal from DeKalb Circuit Court. (CV-09-900101).


For Appellant: Nikki Parrish Scott, Wilson & Scott, LLC, Fort Payne.

For Appellee: L. Jayson Carroll, Rainville, (Brief filed by J. Fairley McDonald III, chief counsel, legal division, Alabama Department of Insurance for Jim L. Ridling, as Commissioner of Insurance.).

Moore, C.J., and Parker, Shaw, Main, and Wise, JJ., concur.


Page 627

BRYAN, Justice.

Corner Stone Funeral Chapel, Inc. (" Corner Stone" ), appeals from a judgment ordering a receiver to transfer the assets of a cemetery business to MVMG, LLC, a competitor of Corner Stone's. We affirm.

Mountain View Memory Gardens & Mausoleum, Inc. (" the corporation" ), owned a cemetery in Rainsville known as Mountain View Memory Gardens and Mausoleum (" the cemetery" ). The corporation sold " preneed contracts" to people planning to be interred at the cemetery or planning to have loved ones interred there. A purchaser of a preneed contract pays for funeral merchandise, funeral services, cemetery merchandise, or cemetery services that will be provided upon a person's death. § 27-17A-2(57), Ala. Code 1975. Preneed contracts in Alabama are regulated by the Preneed Funeral and Cemetery Act, § 27-17A-1 et seq., Ala. Code 1975 (" the Preneed Act" ), which was enacted in 2002.

Jeanette Mince was the sole owner and officer of the corporation, and she apparently ran the corporation and the cemetery. Mince died in 2008, leaving the corporation to her two daughters. However, her daughters were not interested in operating the corporation, and they expressed an intention to disclaim any interest in it. After Mince's death, the corporation failed to renew its certificate permitting it to sell preneed contracts under the Preneed Act. In 2009, the Alabama Department of Insurance (" the Department" ) investigated the corporation's records and discovered that the corporation was in poor shape. The Department found that the corporation had underfunded certain trust funds required to be established by the Preneed Act, that the corporation was insolvent, that the corporation had ceased doing business, and that the cemetery had effectively been abandoned. The Department found that the continued control of the cemetery by the corporation would be hazardous to preneed-contract purchasers and beneficiaries in particular and to the people of Alabama in general.

Based on the Department's findings, Jim Ridling, in his official capacity as the commissioner of the Department, filed a complaint against the corporation, seeking preliminary and permanent injunctions. Relying on provisions in the Preneed Act, Ridling asked the trial court to enjoin the corporation from conducting business or disposing of its assets. At the time of the trial, those assets consisted of the cemetery, a mausoleum at the cemetery, some property next to the cemetery, a building

Page 628

and storage structure at the cemetery, and less than $26,000 in cash. Ridling also asked the trial court to appoint a receiver to take control of the corporation and eventually to liquidate and dissolve the corporation, subject to the trial court's supervision.[1]

In June 2009, the trial court entered a preliminary injunction, essentially enjoining the corporation from operating; the order also appointed Denise Azar, an employee with the Department, as receiver for the corporation. The trial court directed Azar to take possession of the corporation's assets and to attempt to liquidate those assets, subject to the trial court's approval. The trial court also authorized Azar to enter into agreements for the management and maintenance of the cemetery until the cemetery could be sold or otherwise liquidated. Shortly after she was appointed receiver, Azar arranged for Rainsville Funeral Home, Inc., a local funeral business, to mow, trim, and clean the cemetery; to locate grave spaces; to open and close graves for burials at the cemetery; and to place markers and monuments during the receivership period. Rainsville Funeral Home has performed those services since sometime in 2009.

During the receivership period, the mausoleum located at the cemetery continued to fall into disrepair. The roof was rotten and leaking, and parts of the mausoleum's interior had been badly damaged by leaking water, including the ceiling, flooring, and furniture. Vandals had broken into the mausoleum and further damaged it. Elsewhere in the cemetery, graves had been driven over and there was some other evidence indicating that the cemetery was in a generally run-down condition. In response, individuals owning plots and vaults in the cemetery formed the MVMG Mausoleum Association (" the Association" ) during the receivership period to preserve the cemetery. The Association collected donations from the community and, with Azar's permission, made substantial repairs to the mausoleum. The Association eventually intervened in the underlying case.

Azar unsuccessfully attempted to find a buyer for the cemetery, and she eventually concluded that the cemetery was unmarketable. Azar recommended that the cemetery and the corporation's other assets be transferred to an entity that would both operate the cemetery and honor, either in whole or in part, the corporation's approximately 1,155 outstanding preneed contracts. The extent of outstanding services and merchandise purchased in those preneed contracts is unknown; typically a preneed contract covers only a portion of the services and merchandise available. Two entities presented proposals to Azar seeking the transfer of the assets, of which the cemetery is the main asset: Corner Stone and MVMG, LLC (" the LLC" ); both of those entities were allowed to intervene below.

The LLC was formed in 2011 by Keary Chandler, the owner of Rainsville Funeral Home, which, as noted, provided maintenance and services at the cemetery during the receivership period. At times, the trial court treated the LLC as synonymous with Rainsville Funeral Home and Chandler, which appears to be a useful observation for purposes of this Court's review. The differences between the two proposals

Page 629

was fleshed out at trial and will be discussed in more detail below. One primary difference is that Corner Stone, unlike the LLC, agreed to provide, at no extra cost, markers and monuments that had already been purchased in outstanding preneed contracts. Azar recommended that the trial court accept Corner Stone's proposal. Following an ore tenus trial on the issue held in 2013, the trial court disagreed with Azar and decided to accept the LLC's proposal. Thus, the trial court entered a permanent injunction that, among other things, ordered Azar to transfer the corporation's assets to the LLC.

The trial court's order did not completely dispose of the case; the order noted that the trial court would schedule a final hearing to resolve issues concerning any claims of creditors against the corporation and any other pending issues. Corner Stone subsequently moved the trial court to certify its order transferring the assets to the LLC as a final judgment under Rule 54(b), Ala. R. Civ. P. The trial court certified the order as final under Rule 54(b), and Corner Stone appealed.[2]

The parties disagree as to the proper standard of review. The trial court received ore tenus evidence at trial. The LLC argues that the ore tenus standard of review applies; conversely, Corner Stone argues that the evidence before the trial court was undisputed and that therefore our review is de novo.

The ore tenus standard applies. Corner Stone's assertion that the evidence is undisputed is contradicted by the record. As noted, one difference between the two proposals is that Corner Stone, unlike the LLC, agreed to provide, at no extra cost, markers and monuments (collectively " markers" ) that had already been purchased in outstanding preneed contracts. William Dalton, Corner Stone's owner, estimated at trial that assuming liability for the markers would cost Corner Stone about $60,000. However, Chandler, the owner of the LLC and of Rainsville Funeral Home, estimated that providing the markers would cost Corner Stone " more like $150,000." Chandler also questioned the economic feasibility of Corner Stone's proposal; when asked about the LLC's proposal, Chandler indicated that to " do otherwise," i.e., to provide the markers as Corner Stone proposed, would be unwise and economically unfeasible. However, Dalton obviously did not think that Corner Stone's proposal was unfeasible. It is unclear how many markers had already been paid for in the outstanding preneed contracts. Both Dalton and Chandler could only estimate the total cost of the markers -- however many there are -- and they disagreed on the economic feasibility of providing the markers at no cost to the preneed-contract holders. Of course, evidence pertaining to the markers is relevant in evaluating the two proposals. The evidence regarding the markers was disputed, thus defeating Corner Stone's argument that the ore tenus standard does not apply because, it says, the evidence is undisputed.

" [A] judgment based on findings of fact based on [ore tenus] testimony will be presumed correct and will not be disturbed on appeal except for a plain and palpable error." Allstate Ins. Co. v. ...

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