Estrada v. Dennis Kriz, Hodges Transp., Mid-America Pallett, LLC
| Decision Date | 29 January 2015 |
| Docket Number | No. 112,453. ,112,453. |
| Citation | 345 P.3d 403 |
| Parties | Phillip ESTRADA, Plaintiff/Appellant, v. Dennis KRIZ, Hodges Transport, Mid–America Pallett, LLC, et al., Defendants/Appellees. |
| Court | United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma |
OPINION TEXT STARTS HERE
Reversed and remanded.
Recognized as Unconstitutional
12 Okl.St.Ann. § 2009(B) Appeal from the District Court of Okmulgee County, Oklahoma; Honorable H. Michael Claver, Trial Judge
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.
Robert V. Seacat, Seacat Law, Tulsa, Oklahoma, for Plaintiff/Appellant.
Kenneth L. Brune, Brune Law Firm, Tulsa, Oklahoma, for Defendants/Appellees.
¶ 1 Plaintiff/Appellant Phillip Estrada (Estrada) appeals the trial court's Order granting the motion to dismiss of Defendants/Appellees Dennis Kriz, Hodges Transport, Mid–America Pallet, LLC, et al. (collectively, Defendants). Defendants moved for dismissal “based upon [Estrada's] failure to plead [fraud] with particularity, the Doctrine of Laches and the Doctrine of Equitable Estoppel.” Based on our review, we conclude Estrada's veil-piercing theory is not subject to dismissal on the basis of any failure to plead fraud with particularity; Estrada has successfully stated a claim which would entitle him to relief under the Uniform Fraudulent Transfer Act, 24 O.S.2011 §§ 112–123; and the equitable doctrines asserted in the motion to dismiss are inappropriate bases upon which to dismiss the petition. Consequently, we reverse the trial court's Order granting the motion to dismiss, and we remand for further proceedings.
¶ 12 Title 12 O.S.2011 § 2009(B) provides that 2 The Oklahoma Supreme Court has explained that A–Plus Janitorial & Carpet Cleaning v. Employers' Workers' Comp. Ass'n, 1997 OK 37, ¶ 35, 936 P.2d 916 (citation omitted) (footnotes omitted). Section 2009(B) “requires specification of the time, place and content of an alleged false representation, but not the circumstances or evidence from which fraudulent intent could be inferred.” Gianfillippo v. Northland Cas. Co., 1993 OK 125, ¶ 11, 861 P.2d 308 (citation omitted).
¶ 13 “[T]he particularity requirement extends to all averments of fraud, regardless of the theory of legal duty—statutory, tort, contract or fiduciary.” Gay v. Akin, 1988 OK 150, ¶ 8, 766 P.2d 985 (footnote omitted). For example, in Akin the plaintiff filed suit against members of a board of directors of a financial institution. She alleged they misrepresented the financial institution as a public banking corporation (with, inter alia, deposit insurance) and that, through advertisements, they lured her into depositing her savings at the bank. Plaintiff sought recovery for these misrepresentations based on theories of common-law fraud, and also based on a statutory provision authorizing an action for fraud and deceit upon the public. Although one of her theories was derived from the common law, and the other from statutory law, because both theories were based on fraud or contained fraud as a necessary element, the requirements of 2009(B) applied to each theory.
¶ 14 However, an averment of fraud does not exist merely because the modifier “fraudulent” is used. Black's Law Dictionary (9th ed.2009), defines fraud, in pertinent part, as
[a] knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment.... 2. A misrepresentation made recklessly without belief in its truth to induce another person to act. 3. A tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment.
In Oklahoma,
[t]he elements of fraud are: 1) a false material misrepresentation, 2) made as a positive assertion which is either known to be false or is made recklessly without knowledge of the truth, 3) with the intention that it be acted upon, and 4) which is relied on by the other party to his or her own detriment.
Lopez v. Rollins, 2013 OK CIV APP 43, ¶ 12, 303 P.3d 911 (citation omitted).
¶ 15 Accordingly, an averment of fraud only exists where there is some “false suggestion or suppression of the truth”—some false representation—by which one “can get advantage over another,” Croslin v. Enerlex, Inc., 2013 OK 34, ¶ 11, 308 P.3d 1041, made with the intention that it be acted upon. More exactly, fraud is “a generic term” that “is divided into actual fraud and constructive fraud.” Patel v. OMH Med. Ctr., Inc., 1999 OK 33, ¶ 34, 987 P.2d 1185 (footnotes omitted). “To be actionable, both actual fraud and constructive fraud require detrimental reliance by the person complaining,” Howell v. Texaco Inc., 2004 OK 92, ¶ 32, 112 P.3d 1154 (citation omitted), and even constructive fraud—although it “does not necessarily involve any moral guilt, intent to deceive, or actual dishonesty of purpose”—requires a misrepresentation (although the misrepresentation may consist of remaining silent when one has the duty to speak) that “gains an advantage for the actor by misleading another to his prejudice,” Patel, ¶ 34 (footnote omitted).3
¶ 16 Estrada seeks to pierce the corporate veil based on allegations that, inter alia, Dennis Kriz operated other corporate entities as the alter ego of Port City Properties, d/b/a Hodges Warehouse, in order to avoid the judgment. The particularity requirement does not apply to a theory seeking to pierce the corporate veil unless it rests on an averment of fraud (or mistake). In Fanning, 2004 OK 7, 85 P.3d 841, the plaintiff asserted a theory seeking to pierce the corporate veil and hold the shareholders of a corporate entity individually liable for the obligations and conduct of that entity. The plaintiff alleged
the shareholders used the corporate entity to defeat the public policy of protecting a resident [of a nursing home] from neglect and abuse, that they failed to secure and maintain liability insurance, and that they allowed [the corporate entity] to become suspended from doing business within the state. She also argued that the public policy of protecting elderly residents is a compelling or overriding reason to disregard the corporate entity and pierce the corporate veil.
¶ 17 The Fanning Court first explained as follows:
Generally, a corporation is regarded as a legal entity, separate and distinct from the individuals comprising it. However, the notion of a corporation's legal entity, apart from the persons composing it, is introduced for convenience and to serve the ends of justice. Accordingly, Oklahoma has long recognized the doctrine of disregarding the corporate entity in certain circumstances. Courts may disregard the corporate entity and hold stockholders personally liable for corporate obligations or corporate conduct under the legal doctrines of fraud, alter ego and when necessary to protect the rights of third persons and accomplish justice.... Frazier v. Bryan Memorial Hosp. Authority, 1989 OK 73, ¶ 16, 775 P.2d 281, 288 ().
Id. ¶ 16 (citations omitted). The Fanning Court then stated that, “[s]ince this case does not involve fraud or mistake, [the plaintiff] was only required to set forth a short and plain statement of her claims so that the defendants would have fair notice of what [the plaintiff's] claims were and the grounds upon which they rest.” Id. ¶ 21 (emphasis added).
¶ 18 As quoted above, the Fanning Court specifically listed “the legal doctrines of fraud [and] alter ego” as distinct theories. As stated by a separate division of this Court, “[a]lthough several cases have discussed fraud as a potential basis for ignoring formal corporate identity, it is not necessary for fraudulent intent to be present for the alter ego theory to be applied to pierce the corporate veil.” Pennmark Res. Co. v. Okla. Corp. Comm'n, 2000 OK CIV APP 63, ¶ 17, 6 P.3d 1076 (citations omitted).
¶ 19 A brief review of federal jurisprudence is also instructive in this regard.4 “The tendency under the Federal Rules is to discourage motions to compel more definite complaints and to encourage the use of discovery procedures to apprise the parties of the basis for the claims made in the pleadings”—the “requirement of particularized pleading” set forth in Rule 9(b) “is reserved for averments of fraud or mistake.” In re O.P.M. Leasing Servs., Inc., 21 B.R. 986, 993 (Bankr.S.D.N.Y.1982). In In re Suprema Specialties, Inc. Securities Litigation, 438 F.3d 256 (3d Cir.2006), the United States Court of Appeals for the Third Circuit stated that, as to averments of fraud,
Rule 9(b) requires a plaintiff to plead (1) a specific false representation of material fact; (2) knowledge by the person who made it of its falsity; (3) ignorance of its falsity by the person to whom it was made; (4) the intention that it should be acted upon; and (5) that the plaintiff acted upon it to his [or her] damage.
Id. at 270. The Suprema Specialties Court indicated that a determination of whether a theory is subject to the particularity requirement necessitates an assessment of the theory to determine whether acts of fraud on the part of the defendants form the basis for the theory against them. Id. (...
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