Court Opinion

ID: 9473219
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:23:08.116425+00
Date Added: 2024-06-11T17:43:23.599308
License: Public Domain

MORTON, Senior District Judge,
concurring in part and dissenting in part.
I concur in Part I of the majority opinion.
1 dissent from the remainder of the opinion.
Ohio will no doubt be surprised to learn that it is the only state where fraudulent inducement of contract can be concealed by throwing an integration clause into the written memorial of an agreement. See, e.g., Betz Laboratories, Inc. v. Hines, 647 F.2d 402, 406 (3d Cir.1981) (Penn, law); Centronics Financial Corp. v. El Conquistador, 573 F.2d 779, 782 (2d Cir.1978) (N.Y. law); Baker v. Jewell, 77 S.D. 573, 96 N.W.2d 299, 302 (1959); Bates v. Southgate, 308 Mass. 170, 31 N.E.2d 551 (1941); 3 Corbin, Contracts § 573 (1960). Of course, the Ohio courts hold to the contrary. Niehaus v. Haven Park West, Inc., 2 Ohio App.3d 24, 440 N.E.2d 584, 586 (1981); see Walters v. First National Bank of Newark, 69 Ohio St.2d 677, 433 N.E.2d 608, 611 (1982). Ohio follows the general rule
that where one party to a contract has been induced to enter into it through fraud, deceit, and misrepresentation of the other party as to material matters, the defrauded party does not become bound by its terms, notwithstanding the contract contains a provision that there are no agreements or statements binding upon the parties except thase contained therein. Fraud which enters into the actual making of a contract cannot be excluded from the reach of the law by any formal phrase inserted in the contract itself.
Niehaus, supra (quoting 24 Ohio jurisprudence 2d 639, Fraud and Deceit, Section 27).1 The parol evidence rule does not bar evidence of fraudulent inducement because the evidence is offered not to add to or vary the terms of the written contract, but to avoid it in toto — including the integration clause. E.g., Betz Laboratories, Inc., supra, at 406; Baker v. Jewell, supra, 96 N.W.2d at 302; Dallas Farm Machinery Company v. Reaves, 158 Tex. 1, 307 S.W.2d 233, 234 (1957).2
Of course, an integration clause or a contractual provision specifically disavowing the assurances allegedly relied upon is strong evidence that thase assurances were never made or that their incorporation in the written agreement was considered and rejected. See Betz Laboratories, Inc., supra, at 406-407, Dallas Farm Machinery Company, supra. Such factors are matters for the trier of fact to weigh. Mechanistic formulations such as those adopted by the majority can only frustrate the true *453goal of all contract law: ascertainment and enforcement of the parties’ true intentions.
I also dissent from the majority’s ruling that the integration clause bars the plaintiffs from asserting a cause of action based on the defendants’ breach of their implied duty to develop the purchased leases in a diligent manner. Ohio courts follow the rule that “[ajbsent an express provision to the contrary, [a mineral] lease includes an implied covenant to reasonably develop the land.” Beer v. Griffith, 61 Ohio St.2d 119, 399 N.E.2d 1227 (1980). I hardly consider the generalized integration clause used in this contract the kind of express provision needed to rebut this presumed duty. See Centronics Financial Corp., supra, at 782; Kingsley v. Western Natural Gas Co., 393 S.W.2d 345, 349 (Tex.Civ.App. 1965). Whether the parties intended the defendants to assume this duty of diligent development is a question for the trier of fact to decide from all the evidence.3
In reviewing the history of this case, I have concluded that the confusion surrounding it arises from the failure to distinguish theories of liability and the remedies available under those theories. As the majority notes, “[A] plaintiff may not have a contract both enforced and rescinded at the same time.” That principle is perfectly correct as regards remedies. In seeking to establish liability, however, a party may argue that a contract should be enforced; or, in the alternative, that it should be rescinded for fraud. I am afraid the majority, recognizing the inconsistency of these theories and the overlapping damages claimed under them, has sought to simplify the trial of the issues by legal formalism. The same result could be achieved by bifurcating the trial of the issues of liability and damages. If the trier of fact finds that the defendants were guilty of both fraudulent inducement and breach of contract, the plaintiffs should then be forced to declare under which theory of liability they wish to proceed. If they choose fraudulent inducement, the plaintiffs should be forced to elect between the remedies of rescission, reformation, or damages.

. In Sparhawk v. Gorham, 101 Ohio App. 362, 139 N.E.2d 652, 654 (1956) and Djubasak v. Taylor, 128 N.E.2d 849, 850 (Ohio Ct.App. 1955) parol evidence of fraudulent misrepresentations was admitted despite the presence of an integration clause in the final written contract. Those courts reasoned that the prior oral representations constituted collateral agreements separate and apart from the written agreements. A careful reading of those cases reveals they were simply early formalistic gropings toward the equitable rule applied in Niehaus, supra. See generally, Metzger, The Parol Evidence Rule: Promissory Estoppel's Next Conquest, 36 Vand.L. Rev. 1383 (1983).

. The majority’s attempt to distinguish the authorities cited in our original opinion is unpersuasive. I have scrutinized Globe Steel Abrasive Co. v. National Metal Abrasive Co., 101 F.2d 489 (6th Cir.1939) and Monaghan v. Rietzke, 85 Ohio App. 497, 89 N.E.2d 159 (1949) in vain for any indication that the promises those plaintiffs sought to enforce were included in the written contracts. To the contrary. Globe Steel, supra, reversed the district court's holding that enforcement of the alleged promise would violate the parole evidence rule. In Monaghan, supra, the written document was a quitclaim deed that recited consideration of $1.00 and other good and valuable consideration. The promise the plaintiff sought to enforce was that the grantee would provide her with life support in exchange for the transfer. As for Dunn Appraisal Co. v. Honeywell Information Systems, Inc., 687 F.2d 877 (6th Cir.1982), any case can be distinguished on the ground of something it did not say. I find it highly unlikely, however, that a large corporation such as Honeywell would not include an integration clause in its contracts as a matter of course.

. Since I would hold that the defendants had an implied obligation to develop the leases under the assignment, I need not decide whether such an obligation was implied in the leases themselves. In my opinion, the most reasonable interpretation of the defendants’ promise to assume all obligations under the leases is that it was made to insure that those obligations would be performed for the lessors, not the plaintiffs' benefit. At the very least, the lessors would be an indispensable party to any action to enforce those obligations. Fed.RXiv.P. 19.