122 F.3d 854 (10th Cir. 1997), 96-6104, F.D.I.C. v. Hamilton
|Citation:||122 F.3d 854|
|Party Name:||FEDERAL DEPOSIT INSURANCE CORPORATION, acting in its corporate capacity, Plaintiff, v. Sandra B. HAMILTON and L.G. Hamilton, individuals, Defendants-Appellees, v. NCNB TEXAS NATIONAL BANK, and NationsBank, Successor in Interest to NCNB Texas National Bank, Defendant-Third Party Defendant-Appellant.|
|Case Date:||July 28, 1997|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
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Drew Neville of Linn & Neville, P.C. (Russell A. Cook and Brinda K. White of Linn & Neville, P.C., and Connor L. Helms of Woska, Hasbrook, Dowd, Underwood & Helms, with him on the briefs), Oklahoma City, OK, for Defendants-Appellees.
Kirk D. Fredrickson of Bright & Barnes, P.C. (Douglas N. Gould of Thomas, Gould & Nix, with him on the brief), Oklahoma City, OK, for Defendant-Third Party Defendant-Appellant.
Before ANDERSON, BALDOCK, and EBEL, Circuit Judges.
BALDOCK, Circuit Judge, delivering the Opinion of the Court as to Parts I and II, in which ANDERSON, Circuit Judge, concurs, and as to Part III, in which ANDERSON and EBEL, Circuit Judges, concur.
EBEL, Circuit Judge, delivering the Opinion of the Court as to Part IV, in which ANDERSON, Circuit Judge, concurs.
This case is before us a second time. In Federal Deposit Insurance Corp. v. Hamilton, 58 F.3d 1523 (10th Cir.1995), we, inter alia, reversed the district court's award of $44,000 actual damages and $1,200,000 punitive damages on Defendant Hamiltons' Oklahoma state fraud claim against Third-Party Defendant NationsBank. The facts of this case are set forth in that opinion and need not be restated here except to the extent necessary to our discussion of the issues. Suffice it to say that in Hamilton we remanded the case to the district court to reconsider its finding of fraud against NationsBank in light of facts which the district court apparently overlooked. We explained:
Here, the district court found that NationsBank committed fraud through its
agent, Warren, by knowingly making materially false representations regarding repairs between March and October 1991. However, the record reflects that NationsBank spent in excess of $20,000 on repairs to the property during the period in which the district court found fraudulent conduct.
Unfortunately, we cannot discern from the record whether the district court considered the effect, if any, of the $20,000 in expenditures on the Hamiltons' fraud claim under the law of Oklahoma ... even though the issue as to whether the Hamiltons are entitled to recover on their fraud claim was clearly presented.
Hamilton, 58 F.3d at 1529. We rejected, however, NationsBank's claim that Oklahoma law prohibits an award of punitive damages in any case arising out of contract. We concluded that the Hamiltons might recover punitive damages if, "on remand, the district court again finds that NationsBank committed the independent willful tort of fraud" under Oklahoma law. Id. at 1530. On remand, the district court again found just that, and reinstated its award of $44,000 actual damages and $1,200,000 punitive damages against NationsBank. The district court found that the $20,000 in expenditures to which we referred in our prior opinion were not "part of a good faith ongoing effort to fulfill Mr. Warren's false promises to the Hamiltons and the Bank's total repair obligations under the Lease, but instead as part of Mr. Warren's deceptive scheme." Aplt.Supp.App. at 897. 1
NationsBank again appeals claiming that (1) Oklahoma law does not recognize a cause of action in fraud for entering into a contract with no intention to perform where acts in furtherance of performance occur; (2) the evidence was insufficient to support the district court's finding of fraud; (3) the district court imposed punitive damages for an improper purpose; and (4) the punitive damage award is grossly excessive. NationsBank requests reversal of the fraud judgment or, in the alternative, a remittitur on the punitive damage award. Our jurisdiction arises under 28 U.S.C. § 1291. We review a district court's determination of state law de novo. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991). Similarly, we review the propriety of a punitive damage award de novo. Patton v. TIC United Corp., 77 F.3d 1235, 1243 (10th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 2525, 135 L.Ed.2d 1049 (1996). We will not disturb a district court's findings of fact, however, unless those findings are clearly erroneous giving due regard to the district court's opportunity to determine the witnesses' credibility. Fed.R.Civ.P. 52(a). Applying these standards, we affirm in part and reverse in part.
NationsBank asserts that Oklahoma law precludes a finding of fraud because the Bank took actions in furtherance of its contractual obligation to repair the rental property. NationsBank advanced this argument in its first appeal as well. Hamilton, 58 F.3d at 1528. We agree with NationsBank's interpretation of Oklahoma law. Indeed, in Furr v. Thomas, 817 P.2d 1268, 1272 (Okla.1991), the Oklahoma Supreme Court held that to avoid a claim for the independent tort of fraud in a case arising out of contract, subsequent actions of the promisor "must be toward the fulfillment of a promise." Because in Furr the promisor admitted that his subsequent actions were not in furtherance of his promise to perform under the contract, the court concluded that the question of fraud was properly submitted to the jury. Id.
Although NationsBank properly interprets Oklahoma law, the problem with NationsBank's argument is that the district court did not find that the Bank's undertaking of certain repairs was in furtherance of its promise to perform its contractual obligations to the Hamiltons. To the contrary, the district court expressly found on remand that--
The Bank undertook this work not as part of a good faith ongoing effort to fulfill Mr. Warren's false promises to the Hamiltons and the Bank's total repair obligations under the Lease, but instead as part of Mr. Warren's deceptive scheme. This gesture of "good faith," like the moratorium on rent payments Mr. Warren unilaterally imposed in April 1991, was designed to string the Hamiltons along until he could either convince them to buy the property or coerce them to sign a new lease.
Aplt.Supp.App. at 897-98 (emphasis in original).
In Oklahoma, the parties' purpose and intent to a disputed contract is a question of fact. See Continental Natural Gas, Inc. v. Midcoast Natural Gas, Inc., 935 P.2d 1185, 1188 (Okla.Civ.App.1996). In our prior opinion, we recognized that the question of whether part performance of a contract was "toward the fulfillment of a promise" under Oklahoma law was a question of fact which the district court must decide on remand. Hamilton 58 F.3d at 1529-30. If Oklahoma law absolutely barred the Hamiltons' fraud claim, a remand would have been unnecessary. Because our review of the record reveals that the district court's finding as to NationsBank's motive in undertaking certain repairs of the property is not clearly erroneous, but is a subject upon which reasonable minds might differ given the conflicting testimony of the parties, we will not disturb the court's finding. Accordingly, NationsBank's first argument must fail. 2
NationsBank next asserts that the evidence was insufficient to support the district court's finding of fraud. To establish fraud, Oklahoma law requires the proponent to show by clear and convincing evidence "a false material representation made as a positive assertion which is either known to be false, or made recklessly without knowledge of the truth, with the intention that it be acted upon by a party to his or her detriment." Rainbow Travel Serv. v. Hilton Hotels Corp., 896 F.2d 1233, 1240 (10th Cir.1990). In Tice v. Tice, 672 P.2d 1168, 1171 (Okla.1983), the Oklahoma Supreme Court set forth the basis for a fraud claim based on failure to fulfill a promise:
Fraud can be predicated upon a promise to do a thing in the future when the promisor's intent is otherwise. The basis of fraudulent misrepresentation is the creation of a false impression and damage sustained as a natural and probable consequence of the act charged. The fraudulent representation need not be the sole inducement which causes a party to take the action from which the injury ensued. The key is that without the representation the party would not have acted. The liability for misrepresentation depends upon whether the person relying thereon was in fact deceived.
In this case, the district court expressly found all the elements necessary to establish fraud under Oklahoma law. The district court found that NationsBank, through Warren, made representations that the Bank would make certain repairs which Warren knew to be false. The court also found that NationsBank did this with the intent that the Hamiltons would detrimentally rely on such representations. The court found:
Beginning in March 1991 and continuing until October 2, 1991, Mr. Warren repeatedly made false promises that all necessary repairs would be made and that they would be made in a timely fashion. He made these promises with the intent not to perform them, but with the knowledge
that nonperformance, and specifically failure to repair critical items or making untimely repairs, would be disastrous to the Hamiltons' business plan. Mr. Warren's true intent was to take care of only a few items immediately and to delay making repairs that he knew were necessary to preserve or restore the functional integrity of the property. By delay, Mr. Warren hoped to avoid incurring additional repair and maintenance costs until he succeeded in extricating the Bank from its onerous obligation under the Lease to repair and maintain "all functions of the property." He also...
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