Sade v. Northern Natural Gas Company

• Decision Date: 14 August 1973
• Docket Number: No. 72-1833.,72-1833.
• Citation: 483 F.2d 230
• Parties: Aubrey Tinsley SADE, Plaintiff-Appellee, v. NORTHERN NATURAL GAS COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

483 F.2d 230 (1973)

Aubrey Tinsley SADE, Plaintiff-Appellee, v. NORTHERN NATURAL GAS COMPANY, Defendant-Appellant.

No. 72-1833.

United States Court of Appeals, Tenth Circuit.

Argued and Submitted May 25, 1973.

Decided August 14, 1973.

COPYRIGHT MATERIAL OMITTED

John W. Norman, Oklahoma City, Okl. (H. Lee Turner, Great Bend, Kan., Gene H. Sharp, Liberal, Kan., and Lampkin, Wolfe, Abel, McCaffrey & Norman, Oklahoma City, Okl., on the brief), for plaintiff-appellee.

Robert P. Hall, Oklahoma City, Okl. (Richard W. Fowler, McAfee, Taft, Cates, Mark, Bond & Rucks, Oklahoma City, Okl., and Floyd E. Jensen, Adams, Jones, Robinson & Malone, Wichita, Kan., on the brief), for defendant-appellant.

Before BREITENSTEIN, McWILLIAMS and DOYLE, Circuit Judges.

McWILLIAMS, Circuit Judge.

Aubrey Tinsley Sade brought an action sounding in fraud against Northern Natural Gas Company. Upon trial of the matter, a jury returned a verdict in Sade's favor in the sum of $200,000 and Northern now appeals the judgment entered thereon.

This is the second time this case has been before us. For a detailed recitation of the factual background out of which the present controversy arises, see Sade v. Northern Natural Gas Company, 458 F.2d 210 (10th Cir. 1972). The facts will be set forth here only to the extent necessary to an understanding of the issues raised in the present appeal. In this regard we would note that the issues raised in the present appeal are not related to the issues raised in the first appeal and our prior opinion in nowise disposes of the questions now posed.

Sade was a heavy equipment operator employed by the Dresser Engineering Company, an Oklahoma corporation. Dresser entered into a contract with Northern to perform some construction work on Northern's pumping station near Tescott, Kansas. On July 24, 1965, while working for Dresser on the job site near Tescott, Kansas, Sade was very seriously injured in an explosion which occurred as he was assisting in the installation of a T-connection between two existing pipelines. The explosion was catastrophic in proportions, with three persons being killed and nearly a score of workmen being injured, some, such as Sade, suffering severe injuries. This unfortunate event was admittedly caused by one of Northern's employees, who mistakenly and negligently pressed a switch which permitted gas to be transmitted to the area where Sade and the others were working.

On December 8, 1965, in Oklahoma City, Oklahoma, Sade signed a "Compromise and Settlement Agreement" with Northern, whereby, in return for the sum of $17,500, he released Northern from any liability for his injuries. In this regard, it was Sade's testimony upon trial that in signing the release it was his intent to release only Northern, and that he did not intend to release Northern's employees from possible liability for his injuries. Sade further testified that Northern's attorneys had repeatedly assured him that the agreement had been specially drawn so that it would release only Northern, and not its employees, and that he would be free to thereafter bring suit against Northern's employees. The release mentioned only Northern and did not mention its employees.

Based on his understanding of the scope of the settlement agreement, Sade next brought a personal injury action in Kansas against certain of Northern's employees. The answer set up the release theretofore given Northern, and the Kansas trial court granted summary judgment in favor of Northern's employees on the grounds that the aforesaid release operated as a release of Northern's employees, as well as Northern. On appeal, this ruling was upheld. Sade v. Hemstrom, 205 Kan. 514, 471 P.2d 340 (1970).

It was in this setting that Sade instituted the present proceeding against Northern in the United States District Court for the Western District of Oklahoma. The gravamen of the complaint was that Northern had fraudulently procured the release in question by assuring him that he was not releasing Northern's employees from possible liability for his injuries, when in fact he was releasing any claim he had against Northern's employees, and that as the result of such fraud he was deprived of his claim against Northern's employees.

The trial court initially granted Northern's motion for summary judgment on the ground that the fact that Sade had received workmen's compensation benefits under Oklahoma law precluded him from maintaining the present fraud action against Northern. On appeal, we reversed. See Sade v. Northern, supra.

As indicated, trial of this case culminated in a judgment in favor of Sade, and against Northern, in the sum of $200,000. Northern's various contentions as to why the judgment should be reversed are grouped as follows: (1) A claim sounding in fraud cannot be maintained, since the settlement agreement and release were never set aside; (2) the claim is barred under the election of remedies doctrine; (3) the claim is barred as a matter of law under the two-year Oklahoma statute of limitations, 12 O.S. § 95, as amended; (4) improper instruction as to the measure of damages; and (5) certain procedural irregularities occurring during the course of the trial proper. We shall examine these matters, seriatim.

I. No claim in fraud since settlement agreement has never been set aside.

Northern initially argues that though there be a split of authority on the matter, and though the Oklahoma courts have not spoken on the subject, the better rule is that one who releases a personal injury claim by executing a release which is fraudulently procured may not maintain an action in fraud against the one who obtained the release, and that his remedy is to have the release set aside, and then assert his original cause of action against the person or persons purportedly covered by the fraudulently procured release. In support of this proposition, see such cases as Shallenberger v. Motorists Mutual Ins. Co., 167 Ohio St. 494, 150 N.E.2d 295 (1958); Davis v. Hargett, 244 N.C. 157, 92 S.E.2d 782 (1956), and Taylor v. Hopper, 207 Cal. 102, 276 P. 990 (1929).

As indicated, other courts have reached a contrary result. See, for example, Ware v. State Farm Mutual Automobile Ins. Co., 181 Kan. 291, 311 P.2d 316 (1957); Rochester Bridge Co. v. McNeill, 188 Ind. 432, 122 N.E. 662 (1919), and Urtz v. New York Central & H. R. R. Co., 202 N.Y. 170, 95 N.E. 711 (1911). In Ware appears the following pertinent comment, 311 P.2d at 320:

"* * * It is a well-established rule that where a release of a cause of action is procured by fraud the defrauded party may choose any one of three remedies: (1) he may return the consideration paid for the release, thereby rescinding the transaction; (2) he may sue for a rescission and offer to return the consideration; or (3) he may waive his right to rescind and sue to recover any damages suffered by reason of the fraud perpetrated upon him * * *."

Counsel agree that the Oklahoma courts have never considered this particular point. We deem Evans v. Burson, 65 Okl. 114, 164 P. 471 (1917), cited by Northern as indicating Oklahoma would follow the rule set forth in Davis, Shallenberger and Taylor, supra, to be inapposite. That case did not involve a fraudulently procured release of a personal injury claim, which is at the heart of the present controversy. Of more help, although still not precisely on target, are such cases as Kennedy v. Raby, 174 Okl. 332, 50 P.2d 716 (1935), and Great American Life Ins. Co. of Hutchinson, Kan. v. Love, 169 Okl. 35, 35 P.2d 948 (1934). In those cases it was held that where a release of rights has been fraudulently procured, an action for damages may be maintained without first obtaining a decree cancelling the release.

In any event, in such circumstance we elect to defer to the judgment of the trial court as to what the Oklahoma law on this subject will be when the Oklahoma courts are confronted with the problem. The views of a resident district judge on the unsettled law of his state are persuasive and ordinarily accepted. Binkley v. Manufacturers Life Ins. Co., 471 F.2d 889 (10th Cir. 1973), petition for cert. filed, 41 U.S.L.W. 3637 (U.S., May 23, 1973) (No. 72-1572); Jorgensen v. Meade Johnson Laboratories, Inc., 483 F.2d 237 (10th Cir., filed July 25, 1973), and Vaughn v. Chrysler Corp., 442 F.2d 619 (10th Cir. 1971), cert denied, 404 U.S. 857, 92 S.Ct. 106, 30 L.Ed.2d 98 (1971). We accede to the trial court's determination that Sade has a claim upon which relief may be granted.

Before leaving this subject, we would note that the factual sequence in the instant case is somewhat different from those in the cases above cited. Here, Sade brought suit against Northern's employees, and only then found out that such was barred by the release he had given Northern. To thereafter set aside the release would not necessarily enable him to maintain a second action against Northern's employees. Such an action might well be faced with a plea of res judicata. In any event, when Sade discovered that the release covered Northern's employees, even though Northern had assured him it did not, his only remedy at that point would appear to be to proceed against Northern on its fraud. More will be said about this particular matter in the next section.

II. The fraud claim is barred by the election of remedies doctrine.

Northern next asserts that under the election of remedies doctrine any claim by Sade against Northern based on fraud is barred by the fact that he had previously instituted, and pursued on through to conclusion, an action in negligence against Northern's employees in the Kansas courts. In this regard, it is Northern's contention that in the Kansas proceeding Sade disaffirmed the settlement agreement, and in the present action he affirms the settlement agreement and seeks damages resulting from Northern's alleged fraud. This, Sade cannot do, avers Northern, under the election of remedies doctrine.

In...