Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-07099/USCOURTS-ca10-94-07099-0/pdf.json

Parties Involved:
Alex Brown & Sons, Inc.
Appellee
Gary Freeman
Appellant

Document Text:

,, 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

GARY FREEMAN, Guardian of 

the Estate of Rocky Jess Stone 

Plaintiff - Appellant, 

FILED 

United States Court of Appeals Tenth Circuit 

JAW - 3 199G 

PATRICK FISHER 

Clerk 

v. No. 94-7099 

ALEX BROWN & SONS, INC., 

Defendant - Appellee. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF EASTERN DISTRICT OF OKLAHOMA 

(D.C. No. CV-94-303-8) 

George W. Dahnke, Hastie and Kirschner, Oklahoma City, Oklahoma, 

for Appellant. 

T.P. Howell (Bruce w. Day and Rodney J. Heggy with him on the 

brief) 1 Day, Edwards, Federman, Propester & Christerisen, Oklahoma 

City, Oklahoma, for Appellees. 

Before ANDERSON, TACHA, and KELI·Y, Circuit Judges. 

TACHA, Circuit Judge. 

Plaintiff Gary Freeman, guardian of the estate of Rocky Jess 

Stone, commenced this action in the District Court of Murray 

County, Oklahoma. He sued defendant Alex Brown & Sons, Inc. 

("Brown"), to recover funds lost when the company allegedly gave 

Freeman's predecessor poor investment advice. Brown removed the 

Appellate Case: 94-7099 Document: 01019279830 Date Filed: 01/03/1996 Page: 1 
action, pursuant to 28 u.s.c. § 1441, to the United States 

District Court for the Eastern District of Oklahoma, which 

exercised jurisdiction based upon diversity of citizenship. 28 

u.s.c. § 1332. on July 6, 1994, the district court granted 

defendant Brown's motion to dismiss on the grounds that the 

applicable statutes of limitation barred the plaintiff's claims. 

Freeman v. Alex Brown & Sons. Inc., 860 F. Supp. 780, 782 (E.D. 

Okla. 1994). Freeman now appeals the district court's order, 

arguing that the tolling provisions of Okla. Stat. Ann. tit. 12, § 

96 (West 1988) ("§ 96 11 ) for persons of legal disability suspend 

the applicable statutes of limitation in this case. We exercise 

jurisdiction pursuant to 28 U.S.C. § 1291. Concluding that the 

toll'ing provisions of § 96 must be construed to suspend the 

applicable statutes of limitation and that Stone is the holder of 

the causes of action, we reverse the order of the district court 

and remand this action to that court for further proceedings. 

I. Background 

On March 22, 1985, Rocky Jess Stone suffered debilitating 

physical injuries in a workplace accident. The injuries rendered. 

him unable to communicate with others, comprehend his 

surroundings, or make decisions on his own behalf. On May 9, 

1985, the District Court of Murray County, Oklahoma, appointed 

Billie Richards, Stone's mother, to serve as guardian and 

conservator of his property. In October 1986, on behalf of Stone, 

Richards received approximately $500,000 in settlement of Stone's 

claim for workers' compensation. 

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On October 8, 1986, Alex Brown & Sons agent Bruce Durso 

allegedly induced Richards to invest Stone's $500,000 estate in 

the Putnam High Income Government Trust, a speculative mutual 

fund. Brown allegedly encouraged this investment with full 

knowledge that the fund was subject to wide fluctuations in 

performance and was not an appropriate investment vehicle for 

estate assets, which require safety of principal and stability of 

income. Brown allegedly failed to inform Richards of this risk 

and of the fact that the trust was not intended to be a complete 

investment program with all assets committed to the single fund. 

Furthermore, the complaint alleges, Brown's agent knew that 

Richards controlled the funds in a fiduciary capacity on behalf of 

her mentally incompetent ward, that she had no significant 

investment experience, that she possessed a limited education, and 

that she relied completely on Brown's advice in making the 

investment. 

Soon thereafter, the value of the trust shares declined 

precipitously. Realizing that her ward's estate was losing money, 

Richards began selli.ng the shares. On March 16, 1987, she sold 

5,654 shares, incurring a loss of $1,244. on March 21, 1988, 

Richards liquidated the remaining 34,029 shares, incurring a 

further loss of $61,252. 

On October 14, 1988, Freeman replaced Richards as guardian 

and conservator of Stone's estate. He filed this lawsuit in the 

District Court of Murray County, Oklahoma, on May 2, 1994, seeking 

recovery for the above-mentioned financial losses, as well as 

interest, attorney's fees, and punitive damages. Freeman alleged 

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that, in materially misrepresenting the nature of the investments 

to Richards, Brown was civilly liable under Section 408 of the 

Oklahoma Securities Act, Okla. Stat. Ann. tit. 71, § 408 (West 

1988), and that Brown was also liable for a breach of fiduciary 

duty. 

Following removal of the matter to federal court, Brown filed 

a motion to dismiss, arguing that the Oklahoma Securities Act 

claim was barred by the three-year statute of limitation specified 

in Okla. Stat. Ann. tit, 12, § 78(f) (West 1988) ,1 and that the 

fiduciary duty claim was barred by a five-year statute of 

limitation under Okla. Stat. Ann. tit. 12, § 95 (West 1988). 

Freeman responded that the§ 96 tolling provision_ completely 

suspended the applicable statutes of limitation, permitting the 

claims to be raised at any time until one year after his ward's 

legal disability is removed. The district court found in favor of 

Brown and dismissed the action. This appeal followed. 

The sufficiency of a complaint, including the determination 

of whether it is time barred, is a question of law which we review 

de novo. Hunt v. Bennett, 17 F.3d 1263, 1265 (lOth Cir. 1994), 

gert. denied, __ u.s. __ , 115 s.ct. 107 (1994). On an appeal of a 

district court dismissal, we must accept as true the allegations 

contained in the complaint. Nalker v. Pacific Basin Trading Co., 

1 The parties dispute precisely what limitation period applies 

to the claims alleging violations of the Oklahoma Securities Act. 

Specifically, they disagree as to whether a 1992 amendment to the 

Act served to extend the limitation period for bringing thenexisting claims. Because we hold that § 96 operates to preserve 

Stone's claims until one year after hiS legal disability is 

removed, r~gardless of which statutes of limitation would 

otherwise apply, we need not address this issue. 

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Appellate Case: 94-7099 Document: 01019279830 Date Filed: 01/03/1996 Page: 4 
536 F.2d 344, 346 (lOth Cir. 1976). In this case, neither Stone's 

legal disability nor the date on which the causes of action 

accrued is in dispute. Thus, our decision turns on two narrow 

issues: (1) whether § 96 serves to prevent the applicable 

statutes of limitation from running, and (2) whether Stone is the 

holder of the causes of action in this case. 

II. The Effect of § 96 

As to the first issue, relying on the decisions of the 

Supreme Court of Oklahoma and an earlier interpretation of § 96 by 

this court, we hold that the section tolls the applicable statutes 

of limitation. 

We turn first to the general purposes underlying limitation 

and tolling statutes. By prescribing the periods within which 

claims may be brought, statutes of limitation encourage the prompt 

resolution of disputes and keep proprietary expectations free from 

disruption. As the Supreme Court of Oklahoma has noted, they also 

pr·omote effective participation by defendants in the judicial 

process: 

The theory of limitation statutes is that a 

defendant should be given notice within a certain period 

that he will be called upon [to] defend a certain action 

and he should have sufficient notice to inform him as to 

the nature of the claim so that he will be able to 

preserve the evidence and prepare adequately. 

Saint Paul Fire and Marine Ins. Co. v. Spann, 355 P.2d 567, 571 

(Okla. 1960). However, legislatures and courts create exceptions 

to such statutes where foreseeable obstacles prevent the prompt 

filing of complaints and where considerations of fundamental 

fairness demand the preservation of a cause of action. In this 

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way, statutory and equitable tolling tempers the strict regimes of 

dates and deadlines imposed by statutes of limitation. The 

objective is to ensure that a person forfeits his rights only when 

he inexcusably delays assertion of them. 

The tolling provision under scrutiny in the present case, § 

96, states in relevant part: 

If a person entitled to bring an action other than for 

the recovery of real property, except for a penalty or 

forfeiture, be, at the time the cause of action accrued, 

under any legal disability, every such person shall be 

entitled to bring such action within one (1) year after 

such disability shall be removed . . . . 

In interpreting such provisions, we follow the plain meaning of 

the words used by the legislature in light of subsequent analysis 

offered by the appellate courts of the state. Here, the language 

is broad and inclusive: if a person is legally disabled, he is 

protected by the provision. Accordingly, his legal claims are 

preserved until one year after his disability is removed. The few 

exceptions to this rule are stated explicitly in the statute 

itself.2 

Of particular importance to our disposition of this case is 

the fact that the tolling statute preserves a legally-disabled 

person's cause of action regardless of whether he is represented 

by a guardian who might otherwise bring the action within the 

normal limitation period. Accordingly, the Oklahoma Supreme Court 

held in Ischomer v. Fryer that not only may a guardian bring an 

action on behalf of his ward during the entire period of the 

2 12 O.S.A. § 96 specifically excepts actions for the recovery 

of real property, which are treated independently under 12 O.S.A. 

§ 94. It also provides a separate set of deadlines for actions 

arising from personal injury to minors due to medical malpractice. 

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ward's disability (in that case, minority), but the ward may also 

bring the action after the disability is removed: 

[T]here cannot be a suspension of the right of the 

minors to recover their property at any time during 

their minority, and that the right exists at all times 

and is not renewed after they have attained their 

majority, as contended for by the defendant, but is a 

right that may be exercised by the guardian at any time 

during their minority or by themselves after they have 

attained their majority, within the time granted under 

the saving clause of the statute. 

231 P. 298, 299 (Okla. 1924}. The Oklahoma Supreme Court 

reiterated this understanding of the statute more recently, in 

Hamilton By and Through Hamilton v. Vaden: 

The general rule is that after a guardian ad litem has 

been appointed for a minor, the guardian has the right, 

but not the obligation, to sue within the prescribed 

period of limitation. The guardian's failure to bring suit, or the discontinuation of a suit within the 

statutory period does not prejudice the minor's rights. 

The action is not barred by the two-year limitation 

until one year after the disability of infancy has been 

removed. 

721 P.2d 412, 416 (Okla. 1986} (citations omitted}. Thus, § 96 

does more than merely delay the running of the relevant statute of 

\ limitation for a specific period of time. It indefinitely 

suspends the statute of limitation and preserves the legallydisabled person's claim until one year after the disability is 

removed.3 This understanding of § 96 squares with the Oklahoma 

Supreme Court's 11 longstanding recognition that the statutory 

3 If, however, the ward's disability is removed relatively soon 

after the cause of action arises, such that the normal statute of 

limitation would provide a longer period of time within which to 

bring the action, § 96 does not suspend the statute. As the 

Oklahoma Supreme Court has noted, the intent of the Oklahoma 

legislature in enacting § 96 was 11 to extend the amount of time in 

which a plaintiff may bring a cause of action. 11 Hamilton, 721 

P.2d at 418. 

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rights of minors and incompetents are to be jealously guarded. 11 

Sogner Fed. Say. & Loan Ass'n v. Smoot, 894 P.2d 1082, 1090 (Okla. 

1995). 

This court has construed § 96 on one prior occasion, in 

Walker v. Pacific Basin Tradins Co., 536 F.2d 344 (lOth Cir. 

1976}. In keeping with earlier holdings of the Oklahoma Supreme 

Court, we refused to narrow the scope of § 96. We rejected the 

view that the provision excepts a legally-disabled individual who 

nonetheless proves himself capable of bringing legal claims within 

the normal limitation period by doing so through his legal 

guardian. Id. at 346-347. The only exceptions to the privileges 

afforded by § 96 are those enumerated within the statute itself. 

Accordingly, we reject Brown's argument that Freeman is barred 

from bringing the legal claims asserted in the present case 

because Richards,' his predecessor as guardian, could have brought 

the same claims within the normal limitation period. The claims 

remain alive until one year after Stone's disability is removed. 

III. The Holder of the Cause of Action 

The second issue critical to our disposition of this case is 

the determination of who possessed the causes of action against 

Brown for the misrepresentation and breach of fiduciary duty. If 

the claims belonged to Stone, the ward, theri the "person entitled 

to bring an action11 would be "under any legal disability;" and the 

§ 96 tolling provision would apply. If, on the other hand, the 

claims belonged to Richards, Stone's guardian at the time the 

fraud occurred, then the limitation periods would have run; and 

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this suit would have been time-barred when it was filed. We 

conclude that the ward was, and remains, the holder of any legal 

claims arising from Brown's fraudulent behavior. 

In Oklahoma, a ward retains both legal and beneficial title 

to estate property: 

[T]he relation between guardian and ward is not one 

which gives the guardian the legal title to the ward's 

estate. The legal, as well as the beneficial, title to 

personal, as well as real, property remains in the ward, 

and the power of the guardian is a naked trust not 

coupled with an interest. 

Title Guar. & sur. Co. v. Cowen, 177 P. 563, 566 (Okla. 1919); 

accord lschqmer, 231 P. at 299. As guardian of Stone's estate, 

Richards held no interest in the property allegedly lost due to 

Brown's fraudulent misrepresentations. In her contacts with Brown 

and in making investment decisions regarding the estate, Richards 

was acting in her capacity as guardian and conservator, not in her 

individual capacity. It is evident that Brown understood this to 

be the case. Indeed, it is highly improbable that Brown sought to 

induce Richards to invest her own relatively meager personal 

assets. Brown's fraudulent manipulation of Richards' investment 

decisions was manifestly designed to gain investment capital from 

the ward's estate. Thus, it is clear that all parties understood. 

Richards to be acting in her representative capacity when she 

discussed investing her ward's estate with Brown. 

In Oklahoma, a guardian stands in a close representative 

relationship with his ward. 11 His position is that of an agent or 

attorney . . . . " Cooper v. Heffibree, 152 P.2d 695, 698 (Okla. 

1944) . The relationship between guardian and ward is in many 

respects akin to that between agent and principal. Accordingly, 

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when a third party uses an unwitting guardian to gain access to 

the estate of a ward, the ward, not the guardian, is the injured 

party. Notwiths~anding the ward's legal disability, any claim to 

recover lost estate property lies with the ward. Under the 

Oklahoma tolling provision discussed above, the action may be 

brought on the ward's behalf either by the guardian at the time, 

by a successor guardian, or by the ward himself within one year 

after the disability is removed. 

The defendant argues that the guardian was the real injured 

party in this instance and therefore that Richards, not Stone, 

held the causes of action. We regard this view as untenable. 

Stone held title to the property at issue; Richards lost no 

personal property in the transactions with Brown. Fraud may be 

properly characterized as an injury to property, and such a 

characterization is appropriate in this case. Thus, the 

fraudulent inducement to invest estate assets injured _the weird's 

estate; it caused no personal injury to the guardian. Therefore,· 

as legal and beneficial owner of the estate, the ward possesses 

any causes of action against the perpetrator of the fraud. To 

hold otherwise would be to vest the causes of action in an 

uninjured party. Such an arrangement would distort the economic 

incentives that encourage appropriate litigants to raise 

meritorious legal claims•. 

In sum, we find that Brown's allegedly fraudulent dealings 

gave rise to causes of action held by Stone. The § 96 tolling 

provision has preserved these claims, such that Freeman, Stone's 

current guardian, may raise them on Stone's behalf. Accordingly, 

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we REVERSE the order of the district court and remand this action 

to that court for further proceedings consistent with this 

opinion. 

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