Gay v. Akin

• Citation: 1988 OK 150,766 P.2d 985
• Decision Date: 20 December 1988
• Docket Number: 65933,Nos. 64777,s. 64777
• Parties: Rubye R. GAY, Appellant-Plaintiff, v. Brown J. AKIN, Jr., Ansil Ludwick, Jr., Paul W. Anderson, Jr., Hal W. Oswalt, G. Richard Degen, Richard G. Bell, Charles G. Wray; Bob C. Lamirand, Bill Ramsey and Altus E. Wilder, III, Appellees-Defendants, Wesley R. McKinney, Douglas W. Dixon, and Rodney Miller, Defendants.
• Court: Supreme Court of Oklahoma

Page 985

766 P.2d 985

1988 OK 150

Rubye R. GAY, Appellant-Plaintiff, v. Brown J. AKIN, Jr., Ansil Ludwick, Jr., Paul W. Anderson Jr., Hal W. Oswalt, G. Richard Degen, Richard G. Bell Charles G. Wray; Bob C. Lamirand, Bill Ramsey and Altus E Wilder, III, Appellees-Defendants Wesley R. McKinney, Douglas W. Dixon, and Rodney Miller, Defendants.

Nos. 64777, 65933.

Supreme Court of Oklahoma.

Dec. 20, 1988.

On Certiorari to the Court of Appeals, Div. 4.

In an action by a depositor against certain directors and stockholders of Republic Financial Corporation, the District Court, Tulsa County, Robert F. Martin, Judge, gave summary judgment to three defendants and dismissed plaintiff's claim against four other defendants for failure to allege fraud with sufficient particularity. The initial appeal from this decision was dismissed against all but one defendant. On remand the plaintiff stood on her amended petition and that petition was again dismissed. She then lodged another appeal from this dismissal. The Court of Appeals consolidated the two appeals and affirmed the trial court's orders dismissing plaintiff's amended petition. Certiorari is granted and

THE COURT OF APPEALS' OPINION IS VACATED; THE TRIAL COURT'S ORDERS DISMISSING THE AMENDED PETITION ARE REVERSED AND THE CAUSE IS REMANDED.

Frank R. Hickman, Hickman & Hickman, Tulsa, for appellant-plaintiff.

Fred S. Nelson, Claire V. Eagan, Hall, Estill, Hardwick, Gable, Collingsworth & Nelson, Inc., Tulsa, for appellee-defendant Brown J. Akin, Jr.

Paul E. Quigley, G. Calvin Sharpe, Derryberry, Quigley, Parrish, Gooding & Nance, Oklahoma City, for appellees-defendants Paul W. Anderson, Jr., Ansil Ludwick, Jr., Bob C. Lamirand.

Jon R. Running, Noble Sokolosky, Jon R. Running & Associates, Tulsa, for appellee-defendant Hal W. Oswalt.

Timothy J. Sullivan, Thomas M. Klenda, Sullivan & Klenda, Tulsa, for appellee-defendant Richard G. Bell.

James K. Secrest, II, Secrest & Hill, Tulsa, for appellee-defendant Charles G. Wray.

Stephen C. Stapleton, Feldman, Hall, Franden, Woodard & Farris, Tulsa, for appellees-defendants Altus E. Wilder III, G. Richard Degen.

Tom L. Armstrong, Gregory S. Sherman, Marsh & Armstrong, Tulsa, for appellee-defendant Bill Ramsey.

OPALA, Justice.

The dispositive first impression question presented on certiorari is whether the plaintiff's amended petition meets the "particularity" requirement of the Oklahoma Pleading Code, 12 O.S.Supp.1984 § 2009(B), ¹ in alleging fraud against multiple defendants. We answer in the affirmative and hold that the trial court erred when it (1) dismissed the plaintiff's action for failure to allege fraud with sufficient particularity and (2) issued certain defendants protective orders that relieved them of their obligation to answer interrogatories.

FACTS

Commencing in 1982 and continuing through September 1984, petitioner-plaintiff, Rubye R. Gay [Gay or Depositor], made several deposits in the Republic Financial Corporation [Institution], which represented her life savings ($38,951.19). In September 1984 the Institution was declared insolvent and Gay lost all her savings.

On October 25, 1985 Gay filed suit against thirteen individuals ² whom she alleged to be members of the Board of Directors and Stockholders of the Institution [Directors]. Depositor averred that the Institution had represented itself as a public banking corporation and a member of the Federal Deposit Insurance Corporation [FDIC]; that the Institution had, by its advertisements, lured her into depositing her savings into it; and that she continued to transact business with the Institution and left her funds on deposit in reliance on Four of the Directors filed motions to dismiss ⁴ for failure to state a claim, citing the 12 O.S.Supp.1984 § 2009(B) requirement that all averments of fraud be stated with particularity. ⁵ Depositor subsequently amended her petition reiterating prior allegations and additionally asserting that the Directors, within several months prior to September, 1984, had caused "various assets, securities and deposits, to be transferred to other persons, firms or corporations;" that such transfer "resulted in a diminution in the worth" of the Institution and eventually caused its bankruptcy; and that the Directors had authorized defendant McKinney to transfer assets when they knew or should have known such transfers were improper. Depositor further alleged that more than sixty percent of the Directors (a) had an interest in the Institution in violation of federal commerce and trade laws, (b) permitted "unlawful withdrawals" just prior to the bankruptcy, and (c) voted for and received dividends in violation of federal commerce and trade laws.

                those representations.  Depositor further alleged that the Directors "permitted, allowed, enticed and conspired ... to mislead the public for the purpose of acquiring funds for deposit" even though the Institution had been declared insolvent.  Additionally, Depositor alleged that "one or more" of the Directors had been afforded the "right of withdrawal, as well as dividends and redemptive privileges" in violation of 18 O.S.1981 §§ 1.146 and 1.149. 3  Depositor sought recovery of her savings as well as punitive damages
                

Several Directors filed motions for summary judgment, dismissal of the action and protective orders relieving them from answering interrogatories the Depositor had served upon them. ⁶ The Depositor resisted the motions and supplemented her fraud allegations by an affidavit, attaching photocopies of two monthly statements she had received from the Institution during the months of June and July 1984. Each printed statement identified the Institution as a "Bank" and included the phrase "MEMBER Federal Deposit Insurance Corporation." In her affidavit Depositor stated the Institution was represented as a "Bank" on all the monthly statements she received. The trial court again sustained the motions to dismiss, gave summary judgment on the Directors' motions and issued the requested protective orders. ⁷ The trial court also granted Depositor leave to amend her petition. She filed an amended petition restating and further elaborating on her prior fraud allegations. Depositor also included The Depositor appealed from these various rulings in favor of certain Directors. ⁹ This court dismissed the appeal as to all but one of the Directors. ¹⁰ The Depositor then stood on her last amended petition. The Directors then reasserted their motions to dismiss, which were again sustained. ¹¹ Depositor brought another appeal from this ruling. ¹² The Court of Appeals consolidated the two appeals for disposition by a single opinion and affirmed the trial court's orders dismissing the Depositor's amended petition. ¹³ Certiorari is granted to address the first-impression question about the quantum of allegations required to satisfy the "particularity" standard in 12 O.S.Supp.1984 § 2009(B) when fraud is pressed against multiple defendants.

broad allegations of mismanagement, negligence, conspiracy, deceit and violations of common-law and statutory duties. The Directors then reurged their motions to dismiss, which were sustained. ⁸

I

THE ELEMENTS OF FRAUD

All averments of fraud must be pled in accordance with 12 O.S.Supp.1984 § 2009(B). While § 2009(B) governs how such allegations must be made; what must be pled is determined by Oklahoma substantive law. ¹⁴ The elements of common-law fraud are: 1) a false material misrepresentation; 2) made as a positive assertion which is either known to be false, or made recklessly without knowledge of the truth; 3) with the intention that it be acted upon; and 4) which is relied upon by a party to one's detriment. ¹⁵ Additionally, 76 O.S.1981 § 4 authorizes an action for fraud and deceit upon the public. ¹⁶ In her amended petition Depositor alleged the Institution held itself out as a Bank insured by the FDIC, when in fact it was not. Depositor further alleged this representation was made to her and other members of the public in a number of ways. Its printed monthly statements, for example, included

                the notations "Bank" and "MEMBER FDIC." 17  Depositor alleged the Directors made these false representations to mislead the public for the purpose of acquiring funds for deposit, and that she relied on the representations in making her deposits.  Each of the essential elements of fraud has been averred.  The question remains whether the circumstances relied on to establish fraud were pled with sufficient particularity
                

II

PLEADING FRAUD AGAINST MULTIPLE DEFENDANTS

In construing the Oklahoma Pleading Code's provisions which govern fraud allegations, and in determining the detail necessary to satisfy the "particularity" requirement, we are obliged to look to the Federal Rules of Civil Procedure--the progenitor of our pleading code. Since the text of Federal Rule 9(b) is incorporated verbatim in the Oklahoma pleading code, federal and state jurisprudence is instructive. ¹⁸ We note initially that the particularity requirement extends to all averments of fraud, regardless of the theory of legal duty--statutory, tort, contract or fiduciary. ¹⁹ To satisfy the requirements of § 2009(B), it is unnecessary to plead each element of fraud in detail if the circumstances constituting fraud are stated with particularity. ²⁰ In actions involving multiple defendants, a plaintiff must plead facts from which fraud may be reasonably inferred as to each defendant. ²¹ This is the crux of the Directors' contentions. While they challenge the pleadings' sufficiency generally, each Director specifically contends that fraud has not been clearly averred against him individually. The Directors assert that in multiple defendants cases, where fraud allegations are not addressed to each defendant individually, the particularity requirement has not been satisfied.

The Depositor's amended petition does not make specific averments against each individual Director about the...