Indiana Nat. Bank v. State Dept. of Human Services

• Decision Date: 19 July 1994
• Docket Number: No. 74771,74771
• Citation: 880 P.2d 371,1994 OK 98
• Parties: Fed. Sec. L. Rep. P 98,729, 1994 OK 98 The INDIANA NATIONAL BANK, a National Banking Association, Appellant, v. STATE of Oklahoma DEPARTMENT OF HUMAN SERVICES; Robert Fulton, Director, State of Oklahoma, Department of Human Services; Office of State Finance, State of Oklahoma; Victor Thompson, Director of State Finance, State of Oklahoma; Office of Public Affairs, State of Oklahoma; Delmas Ford, Director, Office of Public Affairs, State of Oklahoma and Oklahoma Development Authority, Defendants, and Prudential-Bache Securities, Inc., Appellee.
• Court: Oklahoma Supreme Court

Page 371

880 P.2d 371

Fed. Sec. L. Rep. P 98,729, 1994 OK 98

The INDIANA NATIONAL BANK, a National Banking Association, Appellant, v. STATE of Oklahoma DEPARTMENT OF HUMAN SERVICES; Robert

Fulton, Director, State of Oklahoma, Department of Human

Services; Office of State Finance, State of Oklahoma;

Victor Thompson, Director of State Finance, State of

Oklahoma; Office of Public Affairs, State of Oklahoma;

Delmas Ford, Director, Office of Public Affairs, State of

Oklahoma and Oklahoma Development Authority, Defendants,

and

Prudential-Bache Securities, Inc., Appellee.

No. 74771.

Supreme Court of Oklahoma.

July 19, 1994.

As Corrected Aug. 18, 1994.

Rehearing Denied Sept. 22, 1994.

Appeal from the District Court of Oklahoma County, State of Oklahoma, Leamon Freeman, Trial Judge.

Prudential-Bache Securities, Inc. (Prudential-Bache) assigned a modified lease/purchase agreement (Agreement) for computer equipment made between the Oklahoma Department of Human Services (DHS) and Public Leasing Corporation (PLC) to Indiana National Bank (INB). When DHS did not renew the Agreement at the end of a fiscal year INB sued DHS for breach of contract and, alternatively, Prudential-Bache, based on theories of implied warranty, federal securities violations and negligent misrepresentation. It asked for both damages and rescission of the assignment from Prudential-Bache. In a separate appeal we upheld a grant of summary judgment in favor of DHS and against INB. This appeal challenges the trial court's dismissal of INB's petition against Prudential-Bache for failure to state a claim upon which relief can be granted. We hold the trial court erred in dismissing INB's action against Prudential-Bache.

Trial Court Judgment Reversed and Matter Remanded.

C.S. Lewis, III, William C. Connor, Marilyn M. Wagner, Marc F. Conley, Robinson, Lewis, Orbison, Smith & Coyle, Tulsa, for appellant.

Roy J. Davis, Douglas C. McBee, Anne M. Moore, Paul E. Hamilton, Murrah & Davis, Heather L. Hintz, Phillips McFall McCaffrey McVay & Murrah, Oklahoma City, for appellee.

LAVENDER, Vice Chief Justice.

We decide whether the trial court correctly granted the motion to dismiss of appellee, Prudential-Bache Securities, Inc. (Prudential-Bache) for failure of appellant, Indiana National Bank (INB) to state a claim upon which relief could be granted made pursuant to 12 O.S.1991, § 2012(B)(6). We hold the trial court erred because, at a minimum, INB stated claims under the theories of implied warranty and federal securities violation. ¹

STANDARD FOR REVIEWING MOTION TO DISMISS

Our review of a trial court's dismissal for failure to state a claim upon which relief can be granted involves a de novo consideration on our part as to whether the petition is legally sufficient. Gay v. Akin, 766 P.2d 985, 989 n. 13 (Okla.1988). In reviewing a motion brought pursuant to § 2012(B)(6) we, of course, initially look to the petition, but the petition should also be construed in connection with exhibits attached to it and it is proper to consider such exhibits when ruling on a § 2012(B)(6) motion. Great Plains Federal S & L v. Dabney, 846 P.2d 1088, 1090 n. 3 (Okla.1993). In our review, we must keep in mind, "[a] pleading ... shall contain ... [a] short and plain statement of the claim showing that the pleader is entitled to relief; and ... [a] demand for judgment for the relief to which he deems himself entitled." 12 O.S.1991, § 2008(A)(1)(2). This requirement is not onerous, but is merely to give an opposing party fair notice of the claim and the grounds upon which it rests. Gunn v. Consolidated Rural Water & Sewer District, No. 1, Jefferson County, Oklahoma, 839 P.2d 1345, 1351 (Okla.1992). Further, a petition may set forth a claim alternatively or hypothetically [§ 2008(E)(2) ] and the Oklahoma Pleading Code [12 O.S.1991, §§ 2001-2027, as amended] permits the assertion of inconsistent facts or theories in recognition that inconsistency in pleadings does not necessarily mean dishonesty, but that frequently, in good faith, a pleader must assert contradictory statements where he is legitimately in doubt about the factual background of his case or the legal basis for his recovery. Howell v. James, 818 P.2d 444, 447 (Okla.1991).

When reviewing a motion to dismiss, the court must take as true all of the challenged pleading's allegations together with all reasonable inferences which may be drawn from them. Great Plains, 846 P.2d at 1090 n. 3. "A pleading must not be dismissed for failure to state a legally cognizable claim unless the allegations indicate beyond any doubt that the litigant can prove no set of facts which would entitle him to relief." Frazier v. Bryan Memorial Hosp. Auth., 775 P.2d 281, 287 (Okla.1989) (emphasis in original). Further, the burden to show the legal insufficiency of the petition is on the party moving for dismissal and a motion made under § 2012(B)(6) must separately state each omission or defect in the petition; if it does not, the motion shall be denied without a hearing. See Curlee v. Norman, 774 P.2d 481, 482 (Okla.Ct.App.Div. 1, 1989).

Motions to dismiss are generally viewed with disfavor under this liberal standard [Kentucky Central Life Insurance Company v. LeDuc, 814 F.Supp. 832, 835 (N.D.Cal.1992) ] and to withstand a motion to dismiss it is not necessary for a plaintiff to either identify a specific theory of recovery or set out the correct remedy or relief to which he/she may be entitled. Great Plains, 846 P.2d at 1096 (Opala, J., concurring opinion); Illinois Constructors Corporation v. Morency & Associates, Inc., 802 F.Supp. 185, 187 (N.D.Ill.E.D.1992). Generally, a petition may be dismissed as a matter of law for two reasons: (1) lack of any cognizable legal theory, or (2) insufficient facts under a cognizable legal theory. Kentucky Central Life Insurance Company v. LeDuc, supra, 814 F.Supp. at 835. When a trial court is considering his ruling on a § 2012(B)(6) motion he should not ask whether the petition points to

                an appropriate statute or legal theory, but whether relief is possible under any set of facts that could be established consistent with the allegations.  Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir.1992).  As said in Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957), a leading case espousing the purpose of the Federal Rules of Civil Procedure, upon which our Oklahoma Pleading Code was patterned, "[t]he ... Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits."   The above standards guide our review in this case
                

FACTS AND PROCEDURAL HISTORY

The instant matter is a related appeal to Indiana National Bank v. Department of Human Services, 857 P.2d 53 (Okla.1993). Part of the factual underpinnings of this case will therefore be taken from Indiana National Bank as indicated.

The Oklahoma Office of Public Affairs (OPA), at the request of the Oklahoma Department of Human Services (DHS), sought bids for the lease/purchase of computer equipment to be used by DHS. Indiana National Bank, 857 P.2d at 57. OPA issued a Notice of Award of Contract to Public Leasing Corporation (PLC), which provided a sixty (60) month lease term, but which was subject to annual approval of renewals by the State and continued fiscal year legislative appropriations. Id. at 57-58. Shortly after OPA awarded the contract, PLC added a nonsubstitution clause which was not part of the bid accepted by OPA and, consequently, not part of the original contract awarded by OPA. Id. at 63. The clause prevented DHS from terminating the contract for the purpose of acquiring other computer equipment that performed essentially the same functions as the leased equipment. DHS executed only this modified Agreement (hereafter Agreement).

In addition to executing the modified Agreement, DHS executed an Addendum thereto and issued an opinion from its legal counsel as to the validity and enforceability of the Agreement, i.e. DHS stated the Agreement as executed was valid and enforceable without authorization from any other government entity. PLC then sold the Agreement to Prudential-Bache. Prudential-Bache marketed the Agreement via a Prospectus as a tax-exempt lease/purchase transaction worth approximately $2,687,509.23. The Prospectus contained a summary of proposed terms and included a copy of the Agreement signed by DHS, an essential use letter from DHS, the Addendum signed by DHS stating it intended to continue the lease for the full term, a second Addendum, the legal opinion of DHS, and the Notice of Award of Contract from OPA.

Prudential-Bache sold INB an assignment of the Agreement (i.e. the modified one) it had purchased from PLC. DHS made payments to INB for about two years, but then informed INB it was not renewing the contract for the next fiscal year. INB sued DHS for breach of contract and, alternatively, Prudential-Bache for breach of implied warranty, violation of the Securities Act of 1933, 15 U.S.C. § 77a et seq. and negligent misrepresentation. It requested both damages and rescission of the assignment. ²

In Indiana National Bank DHS partially defended on the breach of contract claim by asserting it was without authority to agree to the nonsubstitution clause, without OPA approval and OPA had not approved the modification. In Indiana National Bank we upheld a trial court grant of summary judgment in favor of DHS partly based on the determination the reviewable record contained no evidence the modified Agreement, with its nonsubstitution clause, was approved or authorized by OPA. Indiana National Bank, 857 P.2d at 63-64. We also held DHS lacked authority to agree to the nonsubstitution clause, which we determined to be a material modification, without OPA approval, that DHS had acted beyond its authority in doing so and it was not estopped to...