G & C Land v. Farmland Management Services ( 2014 )

Case: 14-10046 Document: 00512779186 Page: 1 Date Filed: 09/23/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 14-10046 FILED
Summary Calendar September 23, 2014
Lyle W. Cayce
Clerk
G & C LAND,
Plaintiff-Appellant,
v.
FARMLAND MANAGEMENT SERVICES,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 5:12-CV-134
Before STEWART, Chief Judge, and JOLLY and SOUTHWICK, Circuit
Judges.
PER CURIAM:*
Plaintiff-Appellant G&C Land (“G&C”) appeals the district court’s grant
of summary judgment in favor of Defendant-Appellee Farmland Management
Services (“Farmland”) in this suit arising out of an agricultural lease
agreement. For the reasons stated herein, we AFFIRM.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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I.
Plaintiff-Appellant G&C is a Texas general partnership engaged in the
farming business. Defendant-Appellee Farmland is a California corporation
engaged in the business of leasing farmland for landowners. On June 7, 2007,
G&C and Farmland entered into an Agricultural Sublease (the “Lease”)
involving over 5,000 acres of farmland in Yoakum County, Texas (the
“Property”). The term of the Lease was for five years. G&C took possession of
the Property in 2007 and maintained possession until the expiration of the
Lease’s term at the end of the fifth crop season in 2011.
At the time that G&C took possession of the property, the irrigation
system on the property was run by diesel-powered generators. Despite the
unavailability of electricity at the time of contracting, Farmland’s agents
represented to G&C that Farmland intended to make electricity available to
power the irrigation system by the second year. According to G&C, Farmland’s
agent David Baughman represented that “within a year, we will have
[electricity]. We probably won’t get it this year, but by our second year we are
going to get the electricity put in this farm. We already have the money set
back in an account to do that. And that is our intentions [sic].”
During the term of the Lease, Farmland’s agents made numerous
attempts to have electrical services extended to the Property. Specifically,
Farmland’s agents engaged in multiple negotiations with the Lea County
Electrical Cooperative, the local electric supplier, to have electricity provided
to the Property. Despite these efforts, electrical services were not extended to
the Property until the fifth year of the Lease. Consequently, for almost the
entirety of the Lease’s term, the irrigation system on the Property was powered
by diesel-powered generators, which far exceeded the cost of those powered by
electricity.
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Based on the foregoing, G&C sued Farmland in state court asserting
claims for common law fraud, negligent misrepresentation, and violations of
the Texas Deceptive Trade Practices Act (“DTPA”), Tex. Bus. & Com. Code §
17.41 et seq. On August 6, 2012, shortly after 10:00 A.M., G&C was granted a
default judgment when Farmland failed to timely respond to G&C’s petition.
Less than two hours later on the same day, Farmland electronically filed, in
lieu of an answer, a notice of removal with the United States District Court for
the Northern District of Texas. Farmland then filed a motion to set aside the
default judgment, which was subsequently granted by the district court on
October 12, 2012.
Thereafter, G&C filed a motion to amend its complaint seeking to add
several non-diverse defendants that were Farmland’s agents, representatives
or employees. The district court found, inter alia, that G&C sought
amendment for the purpose of destroying diversity and denied its motion for
leave to amend.
Farmland filed a motion for summary judgment contending that G&C’s
claims failed as a matter of law. Specifically, Farmland argued that G&C
failed to produce sufficient evidence to support its claim for common law fraud,
failed to demonstrate that the misrepresentations were of an existing fact to
give rise to a claim for negligent misrepresentation, and G&C’s claims brought
pursuant to the DTPA were barred by the applicable statute of limitations.
The district court granted Farmland’s motion and entered summary judgment
in its favor. Thereafter, G&C filed this appeal arguing that the district court
erred in (1) setting aside the default judgment, (2) denying it leave to amend
its complaint, and (3) granting summary judgment in Farmland’s favor.
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II.
A.
First, G&C contends that the district court erred by setting aside the
default judgment. G&C does not challenge the district court’s findings as to
whether setting aside the judgment would be prejudicial or whether Farmland
presented a meritorious defense. Instead, G&C argues that the district court
erred when it found that Farmland’s failure to timely answer the complaint or
file a notice of removal was not willful, but rather, the result of excusable
neglect. Farmland responds that the district court properly found that its
failure to timely answer G&C’s petition was not willful.
The decision to set aside a previously entered judgment is one reserved
to the sound discretion of the district court. Harrell v. DCS Equip. Leasing
Corp., 951 F.2d 1453, 1458 (5th Cir. 1992). Therefore, we review a district
court’s decision to set aside a default judgment for abuse of discretion. CJC
Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 63 (5th Cir. 1992). Factual
determinations underlying the district court’s decision are reviewed for clear
error. Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000).
A district court may set aside a default judgment when the defendant
demonstrates that “good cause” exists to do so. CJC Holdings, 979 F.2d at 64.
The entry of default judgments are “generally disfavored in the law” and
therefore, “should not be granted on the claim, without more, that the
defendant had failed to meet a procedural time requirement.” Lacy, 227 F.3d
at 292 (quoting Mason & Hanger—Silas Mason Co. v. Metal Trades Council,
726 F.2d 166, 168 (5th Cir. 1984)). When determining whether to set aside a
default judgment, district courts are directed to consider “whether the default
was willful, whether setting it aside would prejudice the adversary, and
whether a meritorious defense is presented.” CJC Holdings, 979 F.2d at 64.
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On the record presented, we conclude that the district court did not
clearly err in finding that Farmland’s failure to timely respond to the pleadings
was not willful, but the result of excusable neglect. A party acts willfully when
it intentionally fails to respond to the pleadings. See Lacy, 227 F.3d at 292.
The record reveals that Farmland intended to timely respond to the lawsuit
but failed to do so due to, among other things, the need to conduct further
research to determine whether the case was removable based on diversity.
This resulted in Farmland missing the state court deadline by less than two
hours when it filed its notice of removal. Consequently, the district court did
not clearly err by resolving any doubts “in favor of [Farmland] to the end of
securing a trial upon the merits.” Jenkens & Gilchrist v. Groia & Co., 542 F.3d
114, 123 (5th Cir. 2008) (quoting Gen. Tel. Corp. v. Gen. Tel. Answering Serv.,
277 F.2d 919, 921 (5th Cir. 1960)). Accordingly, we hold that the district court
did not abuse its discretion by setting aside the default judgment. CJC
Holdings, 979 F.2d at 63.
B.
G&C next contends that the district court erred by not allowing it to
amend its complaint to include non-diverse defendants which, if joined, would
have destroyed diversity jurisdiction. Without citing to applicable law or the
record for support, G&C argues that its request for leave was not dilatory
because it filed its motion within the deadline found in the court’s scheduling
order. G&C further accuses the district court of denying it leave to preserve
the court’s decision to set aside the default judgment.
We review a denial of leave to amend a complaint for abuse of discretion.
Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 672 (5th Cir. 2013).
“Although leave to amend under Rule 15(a) is to be freely given, that
generous standard is tempered by the necessary power of a district court to
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manage a case.” Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th
Cir. 2003); see also Fed. R. Civ. P. 15(a)(2). When a party seeks leave to amend
for the purpose of joining non-diverse parties, the district court “must
scrutinize [the] amendment . . . more closely than an ordinary amendment.”
Priester, 708 F.3d at 679 (quoting Short v. Ford Motor Co., 21 F.3d 1107 (5th
Cir. 1994)). “This is because the court’s decision will determine the
continuance of its jurisdiction.” Id. (internal quotations omitted).
In Hensgens v. Deere & Co., this court directed district courts to exercise
discretion when deciding whether to join a non-diverse party. 833 F.2d 1179,
1182 (5th Cir. 1987). The court articulated several factors that district courts
should consider when exercising this discretion, including “the extent to which
the purpose of the amendment is to defeat federal jurisdiction, whether
plaintiff has been dilatory in asking for amendment, whether plaintiff will be
significantly injured if amendment is not allowed, and any other factors
bearing on the equities.” Id.
After weighing the Hensgens factors, the district court found that the
factors tipped in favor of denying G&C leave to amend its complaint. First, the
district court found that G&C sought amendment for the purpose of destroying
diversity jurisdiction because G&C’s allegations were not aimed at the non-
diverse defendants individually, but at the defendants collectively.
Furthermore, the district court found that G&C was aware of the identities
and activities of the non-diverse defendants before it filed suit in state court
and only chose to add them as parties to the suit after the proceedings were
removed to federal court. Second, the district court found that G&C had been
dilatory in its request because it waited over four months after Farmland
removed the case to federal court, and over two months after the court set aside
the default judgment to seek leave to amend. Third, the district court found
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that G&C would not be significantly injured if amendment were not allowed
because Farmland agreed to file, and subsequently did file, an amended
answer in which it admitted that it was liable for the acts and omissions of the
non-diverse defendants who were acting as Farmland’s agents, representatives
or employees. The district court further found that G&C could pursue its
claims against the non-diverse defendants in state court. After review, we see
no abuse of discretion in the district court’s analysis or decision to deny G&C
leave to amend its complaint. Priester, 708 F.3d at 672.
C.
Finally, G&C contends that the district court erred by granting
Farmland’s motion for summary judgment. G&C argues that the district court
improperly characterized Farmland’s alleged misrepresentations as promises
of future action. G&C further argues that its claims brought pursuant to the
DTPA were not time-barred. 1
“We review a district court’s grant of summary judgment de novo,
applying the same standards as the district court.” Antoine v. First Student,
Inc., 713 F.3d 824, 830 (5th Cir. 2013) (citation omitted). Summary judgment
is proper “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a).
1G&C argues for the first time on appeal, that its claims brought pursuant to the DTPA are
not barred by the applicable two-year statute of limitations because the misrepresentations at issue
were continuous in nature. G&C did not raise this argument in the district court. Indeed, G&C did
not respond at all to Farmland’s contention that its claims were time-barred. “Under this Circuit's
general rule, arguments not raised before the district court are waived and will not be considered on
appeal unless the party can demonstrate extraordinary circumstances.” French v. Allstate Indem. Co.,
637 F.3d 571, 582–83 (5th Cir. 2011) (citation omitted); see also State Indus. Prod. Corp. v. Beta Tech.
Inc., 575 F.3d 450, 456 (5th Cir. 2009). G&C makes no argument or showing of extraordinary
circumstances in this case. French, 637 F.3d at 582–83. Accordingly, we decline to consider this
argument raised for the first time on appeal.
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The district court’s jurisdiction was based on diversity jurisdiction
pursuant to 28 U.S.C. § 1332. In a diversity action, a federal court applies the
substantive law of the state in which it sits. McBeth v. Carpenter, 565 F.3d
171, 176 (5th Cir. 2009). Therefore, we look to Texas law to review the district
court’s judgment. Id.
The district court held that G&C’s claims for common law fraud and
negligent misrepresentation failed as a matter of law, noting that both claims
were predicated on Farmland’s promise of future performance rather than
statements of existing fact. We agree. It is undisputed that at the time that
G&C entered into the Lease, the irrigation system was run on diesel-powered
generators and that electrical services had not been extended to the Property
by the Lea County Electrical Cooperative. It is also undisputed that
Farmland’s agents represented that electrical services would be provided by
the second year of the Lease’s term, i.e., at a time in the future. Accordingly,
Farmland’s misrepresentations were promises of future performance and not
representations of existing fact.
Under Texas law, a promise of future performance is actionable fraud if
the promise was made with no intention of performing at the time that it was
made. See In re Haber Oil Co., Inc., 12 F.3d 426, 437 (5th Cir. 1994); see also
Stanfield v. O’Boyle, 462 S.W.2d 270, 272 (Tex. 1971). The district court found,
and we agree, that G&C failed to present evidence to demonstrate that
Farmland did not intend to have electrical services extended to the Property
at the time that the promise was made. To the contrary, the record reveals
that Farmland’s agents made numerous efforts to have electrical services
provided to the Property and that G&C was aware of these efforts. G&C does
not point to any evidence in the record to raise a genuine issue of material fact
to demonstrate Farmland’s fraudulent intent. See Fed. R. Civ. P. 56(a).
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Therefore, summary judgment was appropriate on G&C’s common law fraud
claim.
Finally, “under Texas law, promises of future action are not actionable
as a negligent misrepresentation tort.” De Franceschi v. BAC Home Loans
Servicing, L.P., 477 F. App’x 200, 205 (5th Cir. 2012) (per curiam)
(unpublished) (citing Scherer v. Angell, 253 S.W.3d 777, 781 (Tex. App.—
Amarillo 2007, no pet.)). In light of our finding that Farmland’s
representations were promises of future performance and not statements of
existing fact, we hold that the district court did not err in rendering summary
judgment in favor of Farmland on G&C’s negligent misrepresentation claim.
III.
For the foregoing reasons, the district court’s judgment is in all respects
AFFIRMED.
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