Opinion ID: 169059
Heading Depth: 1
Heading Rank: 3

Heading: Mr. Wade's Claims Against EMCASCO

Text: 66 Mr. Wade separately appeals the district court's grant of summary judgment in favor of EMCASCO on his breach of contract, breach of the duty of good faith, and fraud claims. 4 We turn first to Mr. Wade's contract claims.
67 Kansas law requires that every legal action be prosecuted by the real party in interest. Kan. Stat. Ann. § 60-217(a). In causes of action arising from a contract, only parties to the contract may enforce the contract because the person who possesses the right sought to be enforced is the real party in interest. O'Donnell v. Fletcher, 9 Kan.App.2d 491, 681 P.2d 1074, 1076 (1984). Kansas law, however, allows an injured party to assign his right to recovery under a contract to a third party. Alldritt v. Kan. Centennial Global Exposition, Inc., 189 Kan. 649, 371 P.2d 181, 187 (1962) (In this state all choses in action, except torts, are assignable. Accordingly it has been held that a cause of action for damages for breach of contract is assignable. (citations omitted)). Where the injured party assigns all of his rights to a third party, the assignee becomes the real party in interest and the assignor can no longer pursue a claim on his own behalf. See Army Nat'l Bank v. Equity Developers, Inc., 245 Kan. 3, 774 P.2d 919, 932 (1989); First Nat'l Bank of Topeka v. United Tel. Ass'n, Inc., 187 Kan. 29, 353 P.2d 963, 970 (1960) (explaining that the assignee of an account [is] its legal holder and therefore the proper representative of the account as against the debtor). 68 As part of the confession of judgment between Mr. Nguyen and Mr. Wade, the two men entered into a Covenant Not to Execute and Assignment of Rights. App. 839-41. The agreement provided, in pertinent part: 69 Wade assigns to Nguyen, his executors, administrators, legal representatives, agents, successors and assigns all of his rights flowing from any interest he may have giving rise to a claim against any insurer to pay damages Wade is legally obligated to pay Nguyen, including without limitation insurance policies issued by EMC. 70 Id. at 840. Once Mr. Wade assigned all of his contractual rights under his insurance policy to Mr. Nguyen, Mr. Wade no longer possessed the right to enforce the contract against EMCASCO. He is therefore not the real party in interest and cannot maintain a cause of action against EMCASCO for breach of contract or breach of the duty of good faith arising from the contract.
71 Because tort claims are unassignable under Kansas law, Mr. Wade remains the real party in interest for the fraud claim. His fraud claim, however, fails under Kansas law because it is an impermissible attempt to recharacterize the breach of contract claim and does not allege an independent tort. 72 To maintain a fraud claim under Kansas law, the basis of the claim must be different from the conduct upon which a breach of contract claim is based. See Brown v. Chaffee, 612 F.2d 497, 503 (10th Cir.1979) (interpreting Kansas law and concluding Brown cannot turn an action for breach of contract into an action for fraud by merely alleging reliance on representations that the contract would be performed and detriment from its breach); Heller v. Martin, 14 Kan.App.2d 48, 782 P.2d 1241, 1245 (1989). Furthermore, the fraud must have resulted in damages greater than those caused by the breach of contract alone. Heller, 782 P.2d at 1245; cf. Guarantee Abstract & Title Co. v. Interstate Fire & Cas. Co., 232 Kan. 76, 652 P.2d 665, 668 (1982) ([T]here must be an independent tort resulting in additional injury before punitive damages can be recovered in a breach of an insurance contract action.). 73 Mr. Wade's allegations of fraud are indistinguishable from his breach of contract claims. Mr. Wade alleges, as the basis for his fraud claim, that EMCASCO intentionally misrepresented to Mr. Wade that Mr. Cooper would vigorously defend Mr. Wade against Mr. Nguyen's claim, despite EMCASCO's knowledge that Mr. Cooper would also consider EMCASCO's interests. EMCASCO's representation, however, was merely a statement that it would perform its obligation under Mr. Wade's insurance policy to defend Mr. Wade against any claims. Thus, Mr. Wade's fraud claim is merely a claim that EMCASCO breached its contractual duty to defend Mr. Wade against claims arising from the accident and that Mr. Wade was injured by EMCASCO's failure to satisfy its contractual obligation. Such a claim sounds in breach of contract, not fraud. See Brown, 612 F.2d at 503; Heller, 782 P.2d at 1245. 74 Nor has Mr. Wade alleged fraud damages distinct from those arising from EMCASCO's breach of contract. In his Amended Petition, Mr. Wade claimed that EMCASCO's breach of contract caused a judgment in excess of $3 million [to be] entered against [him] and prevented [him] from borrowing money secured by his home and . . . from selling his home. App. 319. Similarly, the damages that he claims arose from EMCASCO's alleged fraud were as follows: a judgment in excess of $3 million [was] entered against him; he has been deprived of the benefits of his insurance policy; he has been and will be precluded from using his real estate as security for loans; he has been and will be prevented from buying or selling real estate. Id. at 325. The damages claimed under the breach of contract claim and the fraud claim are identical. The only additional injury Mr. Wade alleges in the fraud claim is that he was deprived of the benefits of his insurance policy. Id. This injury directly relates to the contract, and damages arising from this injury were recoverable under the breach of contract claim. Because Mr. Wade has failed to allege an additional injury distinct from those caused by the breach of contract, he has failed to establish an independent tort of fraud.