Burton v. Juzwik

• Decision Date: 25 June 1974
• Docket Number: No. 45753,45753
• Parties: T. N. BURTON, Petitioner, v. E. A. JUZWIK, Respondent.
• Court: Oklahoma Supreme Court

Page 16

524 P.2d 16

T. N. BURTON, Petitioner, v. E. A. JUZWIK, Respondent.

No. 45753.

Supreme Court of Oklahoma.

June 25, 1974.

David H. Loeffler, Jr., Loeffler & Allen, Bristow, for petitioner.

Harry M. McMillan, Blackstock & McMillan, Bristow, for respondent.

IRWIN, Justice:

Petitioner (plaintiff), commenced proceedings against respondent (defendant), to recover actual and punitive damages allegedly sustained because defendant breached an oral trust agreement. Plaintiff's action was based on an alleged oral contract whereby defendant, as trustee, acquired title to an oil and gas lease and in breach of the trust, conveyed the oil and gas lease to an innocent third party.

The trial court sustained defendant's motion to strike plaintiff's allegations relating to punitive damages and struck plaintiff's action from the jury docket.

Presented for review is a Certified Interlocutory Order which places in issue plaintiff's right to assert a claim for punitive damages and right to a jury trial. In resolving the issue relating to pounitive damages we must determine whether plaintiff's action comes within the purview of 23 O.S.1971, § 9, which provides:

'In any action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud or malice, actually or presumed, the jury, in addition to the actual damages, may give damages for the sake of example, and by way of punishing the defendant.'

Briefly summarized, plaintiff alleged that: The owners of an oil and gas lease orally agreed to sell the lease to plaintiff's agent and plaintiff paid his agent $2,000.00 for an undivided 1/32nd interest in the lease. Thereafter, the owners of the lease, plaintiff's agent, and defendant orally agreed that defendant would pay the balance of the purchase price of the lease the lease would be transferred to defendant; and defendant would hold the lease in trust for plaintiff and the other rightful owners. The lease was transferred to defendant but defendant transferred the lease to a third party.

In plaintiff's allegation for actual damages, plaintiff alleged that in breach of the trust and oral agreement to convey to plaintiff his undivided 1/32nd interest, defendant assigned the entire lease to a third party and the assignee took the same without notice. Plaintiff alleged that the value of his interest in the lease was $2,000.00, and that he had been damaged $2,000.00 for the wrongful acts of defendant in breaching his oral agreement to convey plaintiff his undivided 1/32nd interest in the lease which defendant held in trust for him.

Plaintiff's allegations relating to punitive damages, which were stricken by the trial court, were: The assignment by defendant of plaintiff's undivided 1/32nd interest in the lease to a third party, which defendant held in trust for plaintiff, was done falsely, fraudulently, willfully and maliciously with the intent to defraud plaintiff of his interest, and in addition to his actual damages, he was entitled to punitive damages in the sum of $6,000.00.

Plaintiff contends that the relationship between defendant and himself was that of trustee/beneficiary and a suit upon breach of a fiduciary duty is not an action based upon contract and § 9 supra, authorizes an award for punitive damages.

In Powell v. Chastain (1957), Okl., 318 P.2d 859, we said that the classic example of a resulting trust is a situation wherein a transfer of real property is made to one person and the consideration therefor is paid by another person; and under such circumstances a trust is presumed to result in favor of the person by or for whom such payment is made.

According to plaintiff's petition, the oil and gas lease was transferred to defendant, and plaintiff paid $2,000.00, through his agent, for an undivided 1/32nd interest in the lease. Whatever might have been the relationship between plaintiff and defendant after the lease was transferred to defendant, the transfer was made pursuant to an oral agreement between the prior owners, plaintiff's agent, and defendant. It is for the breach of this alleged oral agreement that plaintiff seeks damages because the trust was created pursuant to the alleged oral agreement and the rights and obligations of the parties must be measured by the alleged oral agreement.

Plaintiff contends that the gravamen of his action sounds in tort regardless of the nature of the original relationship between the parties and in such instances punitive damages may be awarded.

Plaintiff cites Fort Smith & W.R. Co. v. Ford, 34 Okl. 575, 126 P. 745, wherein we held:

'A petition stating a contract of carriage and charging an injury consequent upon a violation of a duty owing plaintiff, in an action against a common carrier, states a cause of action sounding in tort rather than contract, although it alleges an express contract as an inducement; the gist of the action being defendant's breach of a public duty.'

In the Ford case, plaintiff had purchased a railway ticket from Spiro to Skullyville and the train did not stop at Skullyville and plaintiff was carred beyond his destination. An examination of the case discloses that punitive damages were allowed on the theory that plaintiff's action was not based upon breach of contract of carriage but the gravamen or gist of plaintiff's action was for breach of a duty owing to the public imposed by law.

In Hobbs v. Smith, 27 Okl. 830, 115 P. 347, plaintiffs purchased some hogs from defendant and the hogs had cholera. The hog cholera was communicated to plaintiffs' other hogs and a number of plaintiffs' hogs died. Plaintiffs sought damages in the nature of expenses incurred by them for caring for the diseased hogs, renovating their premises to stop the cholera from spreading and the death of their hogs. Therein we held:

'Where the relation between the parties to an action has been established by contract, express or implied, if the law imposes certain duties because of the existence of the relationship created, a violation of the contract obligations may be waived and an action in tort maintained for any violation of such imposed dut(y).'

The court said that it is manifest that the defendant owed plaintiffs the duty, if he knew the hogs were infected with cholera, not to sell them to plaintiffs so they would come in contact with plaintiffs' hogs, and thus infect them with cholera. Defendant not only breached the contract, i.e., failing to deliver healthy hogs, but also breached his common law duty in delivering to plaintiffs the diseased hogs. Punitive damages were allowed because defendant breached his common law duty in knowingly delivering the diseased hogs to plaintiffs and part of plaintiffs' actual damages resulted from the diseased hogs contaminating plaintiffs' healthy hogs and premises.

The issue in Oklahoma Natural Gas Co. v. Pack, 186 Okl. 330, 97 P.2d 768, did not involve the right to assert a claim for punitive damages but the measure of actual damages. Therein we quoted with approval I R.C.L. 321, wherein it is stated:

'* * * a duty or obligation, the violation of which gives rise to a cause of action, may be created by contract or by positive law independent of contract. There is a broad distinction between causes of action arising ex contractu and ex delicto, and a mere matter of contract cannot be converted into a tort. But there may be a duty imposed by law, by reason of the relation of the parties, although the relation was created by contract, and when this is so, a neglect to perform this duty gives the injured person a right of action, and he may elect to sue upon the contract, or treat the wrong as a tort, and bring an action ex delicto.'

An analysis of the decisions which in effect hold that the 'injured party may elect to sue upon the contract or treat the wrong as a tort and bring an action ex delicto' discloses the gravamen of the action was not for breach of contract, but for the tortious conduct of the defendant in the performance or non-performance of a duty imposed by law, by reason of the relationship of the parties, although the relationship may have been created by contract.

In Sinclair Refining Co. v. Shaffer, 177 Okl. 610, 61 P.2d 571, we quoted with approval from the case of Trustees of Horton's Estate v. Sherwin, 63 Okl. 259, 164 P. 469, the following:

'As to plaintiff's right to recover exemplary damages, it is only for the breach of an obligation not arising from contract where such right exists, not here, where a breach of an obligation arising from contract is counted on. * * *. In such an action exemplary damages cannot be recovered in the absence of statute. * * *.'

In the case at bar the relationship between plaintiff and defendant was created by virtue of the alleged oral agreement. Defendant allegedly breached the alleged oral agreement by conveying the entire oil and gas to a third party instead of conveying to plaintiff his undivided 1/32nd interest. The gravamen of plaintiff's actions was based upon breach of the alleged oral agreement to convey to plaintiff his undivided 1/32nd interest in the lease, and the rights and obligations of both plaintiff and defendant must be measured by this alleged oral agreement. There is no statutory authorization allowing punitive damage in the case at bar.

If, as contended by petitioner, he is entitled to assert a claim for punitive damages, 23 O.S.1971, § 9, has no force or effect, if in a cause of action for punitive damages arising out of breach of contract, plaintiff merely alleges that the breach 'was done falsely, fraudulently, willfully, and maliciously with the intent to defraud * * *.'

We hold that the gravamen of plaintiff's action is for breach of an obligation arising from contract and the trial court correctly sustained defendant's motion to strike from plaintiff's pleadings his allegations relating to punitive damages.

The issues to be adjudicated are not sufficiently framed as the case now...