Court Opinion

ID: 9790741
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:58:54.244389+00
Date Added: 2024-06-11T07:37:31.310848
License: Public Domain

SUMMERS, Justice,
dissenting.
The case was settled in mid-trial and this colloquy took place:
THE COURT: “Let the record show we’re convened in chambers, out of the presence of the jury.
Counsel have an announcement?”
MR. HAYES: ‘Tes, Your Honor. We have reached a settlement, which is the defendant will pay the policy limits, which is $200,000.00.”
(There were two insurance policies.)
When it later developed the policy limits on one policy was one million dollars, not $100,000.00, plaintiff sought to reform the settlement. The trial court, after taking testimony, in effect gave plaintiff the equitable remedy of reformation. The judge also found that the plaintiffs injuries would have supported a settlement under the policy limits. Our appellate burden in such matters is to affirm unless the lower court’s ruling was contrary to the law or the clear weight of the evidence. Merrill v. Oklahoma Tax Commission, 831 P.2d 634, 640-641 (Okla.1992); Robert L. Wheeler, Inc. v. Scott, 818 P.2d 475, 479-480 (Okla.1991).
Even though parol evidence which is inconsistent with a written agreement is generally not admissible to vary the writing, parol evidence is admissible to show fraud, either actual or constructive. Oklahoma Co. v. O’Neil, 440 P.2d 978, 979 (Okla.1968). In this case parol evidence was admissible to show constructive fraud.
Constructive fraud is defined as: “[A]ny breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him.” 15 Okla.Stat. (1991) § 59. Constructive fraud does not necessarily involve any moral guilt, intent to deceive, or actual dishonesty of purpose. Faulkenberry v. Kansas City Southern Ry. Co., 602 P.2d 203; 206 (Okla.1979). The insurance company’s honest misrepresentation of the policy limits here was a typical case of constructive fraud.
In Gentry v. American Motorist Ins. Co., 867 P.2d 468, 472 (Okla.1994) we said:
Where the evidence establishes constructive fraud that induced the defrauded party to agree to the contract, the instrument may be reformed to conform to the representations of the parties.
Pomeroy wrote:
Equity has jurisdiction to reform written instruments in but two well-defined cases: 1. Where there is a mutual mistake, — an agreement actually entered into, but the contract, deed, settlement, or other instrument, in its written form, does not express what was really intended by the parties thereto; and 2. Where there has been a mistake of one party accompanied by the fraud or other inequitable conduct of the remaining parties. In such cases the instrument may be made to conform to the agreement or transaction entered into according to the intention of the parties.
4 Pomeroy’s Equity Jurisprudence and Equitable Remedies, § 1376 at 2725 (3d ed. 1905), (emphasis added).
Pomeroy’s example number two fits here: a mistake as to the policy limits on the part of the plaintiff “accompanied by the fraud or other inequitable conduct of the remaining part[y]”, the insurance company.
The Court’s substitution of rescission for reformation does little equity. The plaintiff is left to accept the inequitably induced settlement or start all over in court with a now deceased defendant. The insurance company *321is not really sanctioned for its inequitable misrepresentations.
I would reform the contract of settlement as did the District Court, but with this variation. Before the plaintiff was told the incorrect policy limits the plaintiff had offered to settle for $499,000.00. That being so I would hold the plaintiff estopped to now press for the full one million dollars coverage. In equity the appellate tribunal may render the relief that the chancellor should have. Matter of Estate of Bartlett, 680 P.2d 369, 374 (Okla.1984). Therefore I would reform the settlement to be within the actual policy limits of one million dollars, but not to exceed the amount the plaintiff would have settled for, or $499,000.00. Plaintiff should have judgment in that latter amount.