M20 pilot experiences alternator failure at 5;000 FT on an IFR flight plan in VMC. The battery was depleted before the fault was noted and the reporter elected to remain VMC and return to a VFR airport.

Narrative

I took off with a private pilot; who was working on his instrument rating; on an IFR flight in a Mooney M20C. While cruising just above the top of an overcast stratus layer at 5;000 FT we noticed a loss of quality in our intercom. After changing headsets to troubleshoot the problem we noticed that the alternator fail light (barely visible in bright daylight shining on the panel) was illuminated. We tried to call ATC but by that time we had lost enough battery voltage that the voltage was too low for the transmitter to work. The last thing we heard from ATC was '...do you hear Center'. We were not getting a reply light on the transponder. The VOR indicator To-From flags disappeared. I turned the battery master off; switched all other equipment off and turned the master back on hoping to reset the voltage regulator. I checked the alternator output and alternator field circuit breakers and found they were not tripped. I pulled them out and reset them. I turned on the Emergency Bus Switch and the Avionics Master switch but there was no improvement so I turned off the battery master. The weather at the destination was last reported as 700 FT overcast and 2 miles visibility. We did not have an approved approach guidance system. We were in visual meteorological conditions. I decided to climb from the top of the clouds to a VFR altitude and return to our departure point. I knew from my preflight planning that VFR conditions would exist there. We were operating in accordance with 91.185 'IFR operations: Two-way radio communications failure. (b) VFR conditions. If the failure occurs in VFR conditions; or if VFR conditions are encountered after the failure; each pilot shall continue the flight under VFR and land as soon as practicable.' The only way for us to continue the flight and hope to remain VFR was to fly in the direction of better weather which was the opposite direction from our destination. I was hoping that Center would be able to track our primary return on radar but had no way to know. We navigated direct with the hand held GPS. We tried to use our cell phones which displayed signal strength but we were not able to hear anything. I sent a text message to the only pilot I knew was on the ground and could receive text messages telling him that we had lost our alternator and were returning to VFR conditions. At about 10 miles out we could see the ground beyond the cloud layer below us that terminated along a northeast-southwest line. During descent I turned on the battery master emergency bus and avionics master and was able to communicate with Approach and tell them to cancel our IFR flight plan. Apparently the battery was able to recover during our return and allowed only about 15 to 20 seconds of sufficient voltage to transmit and receive. I was able to cancel IFR and that eliminated the emergency condition and the need to conform to 91.185.The design of failure annunciators should allow for bright daylight conditions and include an auditory alerting signal. Scanning all panel indications more frequently would have enabled us to detect the failure sooner and allowed us to conserve battery power. If I had been aware of the loss of power sooner I could have let ATC know our plan of action.