Farmers Cooperative Ass'n v. Amsden, LLC ( 2007 )

November 6 2007
DA 06-0556
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 286FARMERS COOPERATIVE ASSOCIATION,
Plaintiff, Counterdefendant and Appellant,
v.
AMSDEN, LLC,
Defendant, Counterclaimant and Appellee.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and For the County of Powder River, Cause No. DV 04-2367
Honorable Gary L. Day, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Jeff A. Turner, Towe, Ball, Enright, Mackey & Sommerfeld, Billings,
Montana
James L. Edwards, Stevens, Edwards, Hallock & Carpenter, Gillette,
Wyoming
For Appellee:
John L. Amsden, Beck, Amsden & Ruggiero, Bozeman, Montana
Gary Kalkstein, Kalkstein & Johnson, Missoula, Montana
Submitted on Briefs: June 20, 2007
Decided: November 6, 2007
Filed:
__________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.
¶1 Farmers Cooperative Association (FCA) appeals from two orders of the Sixteenth
Judicial District, Powder River County, denying FCA’s motion to amend the pleadings and
granting Amsden, LLC’s (Amsden) motion for summary judgment. We affirm.
¶2 FCA presents the following issues for review:
¶3 Whether the District Court abused its discretion in denying FCA’s motion to amend
its complaint.
¶4 Whether the District Court properly granted Amsden’s motion for summary judgment.
PROCEDURAL AND FACTUAL BACKGROUND
¶5 Amsden entered into a buy-sell agreement with FCA to purchase a gas station and
convenience store in Broadus, Montana. The purchase price included the real estate and
assorted equipment. The parties agree that Amsden paid the purchase price in full at closing.
FCA alleges that the parties also entered into a separate oral agreement around the time of
the buy-sell agreement to purchase inventory and additional equipment.
¶6 FCA commenced this action on December 27, 2004, when it sued Amsden for breach
of contract. FCA alleged that Amsden had failed to pay the entire purchase price contained
in the buy-sell agreement. FCA asserted that Amsden owed $49,566.60 for the real estate
and $2,498.27 for equipment identified in the buy-sell agreement. Amsden’s answer claimed
that it had paid in full. Although FCA did not allege any amounts owed outside the buy-sell
agreement, Amsden attempted during discovery to obtain information from FCA relating to
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any possible claims arising from the purchase of inventory. FCA objected to this
interrogatory, asserting that it would “not lead to the discovery of admissible evidence.”
¶7 FCA moved to amend its complaint on December 22, 2005, more than four months
after the deadline set by the court’s scheduling order to amend pleadings had expired. FCA
argued that it needed to amend the complaint to reflect accurately the claims that it had made
in its original complaint. FCA also argued that its amendment would not change the nature
of the claim for relief or the amount that it sought to recover. Amsden did not object timely
to the motion. The court granted FCA leave to amend on January 11, 2006, for good cause
shown and notwithstanding the expiration of the deadline to amend the pleadings.
¶8 FCA’s first amended complaint alleged that it sought to recover for Amsden’s failure
to pay for inventory and supplies, not Amsden’s failure to pay the full purchase price under
the buy-sell agreement. Amsden objected to FCA’s motion to amend the same day the court
granted it. The court recognized that Amsden’s objection was untimely. The court
nevertheless rescinded its order granting leave to amend. The court ordered a hearing to
explore Amsden’s argument that allowing the amendment would cause prejudice and delay.
The court finally denied FCA’s motion for leave to amend on the grounds that the motion
had been untimely and that FCA did not show good cause under M. R. Civ. P. 16(b) for the
delayed amendment. The court also determined that Amsden would have been prejudiced
both by the late amendment on the inventory issue and by FCA’s assertion during discovery
that purchase of the inventory was not relevant to its claim for relief.
¶9 Amsden next moved for summary judgment on the grounds that FCA’s original
complaint did not allege sufficiently claims relating to payment for inventory. Amsden
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further argued that it had paid the full purchase price under the buy-sell agreement. FCA did
not contest these assertions. The District Court agreed that no substantial issues of material
fact existed under the original complaint relating to Amsden’s payment of the full purchase
price. The court further determined that FCA’s original complaint failed to allege any claims
relating to the inventory. FCA appeals.
DISCUSSION
¶10 Whether the District Court abused its discretion in denying FCA’s motion to amend
its complaint.
¶11 FCA raises three separate arguments in support of its claim that the District Court
abused its discretion when it denied FCA’s motion to amend its complaint. FCA first argues
that the District Court improperly dismissed the motion without showing that FCA was
guilty of delay, bad faith or dilatory motive. FCA next argues that Amsden cannot
demonstrate that the late amendment would have caused prejudice because correspondence
between the parties had put Amsden on notice of FCA’s intent to raise the inventory issue.
Finally, FCA argues that the court abused its discretion in denying it leave to file an untimely
amended complaint, while correspondingly granting Amsden’s untimely objection. We
address each argument in turn.
¶12 The decision to grant or deny a motion to amend lies within the discretion of the
district court. Bitterroot Inter. Sys. v. West. Star Trucks, 2007 MT 48, ¶ 48, 336 Mont. 145, ¶
48, 153 P.3d 627, ¶ 48. We review a district court’s denial of a motion to amend a pleading
to determine whether the court abused its discretion. Reier Broad. Co. v. Mt. State Univ.-
Bozeman, 2005 MT 240, ¶ 8, 328 Mont. 471, ¶ 8, 121 P.3d 549, ¶ 8. M. R. Civ. P 15(a)
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provides that “leave [to amend] shall be freely given when justice so requires.” A district
court “is justified in denying a motion for an apparent reason such as undue delay, bad faith
or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by allowance of the
amendment, futility of the amendment, etc.” Bitterroot Inter. Sys., ¶ 50 (citations and
internal quotation marks omitted).
¶13 FCA argues that a district court should otherwise grant leave to amend unless the
moving party is guilty of undue delay, bad faith or dilatory motive, citing our decision in
Lien v. Murphy Corp., 201 Mont. 488, 492, 656 P.2d 804, 806 (1982). FCA contends that it
was guilty only of making an inadvertent error in a poorly worded complaint. FCA
mistakenly reads Lien in isolation. Our more recent decisions reveal that undue delay, bad
faith, and dilatory motive represent just three, among many justifications, for denying leave
to amend. Other reasons include “repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by allowance of the amendment,
futility of amendment, etc.” Bitterroot Inter. Sys., ¶ 50; Loomis v. Luraski, 2001 MT 223, ¶
41, 306 Mont. 478, ¶ 41, 36 P.3d 862, ¶ 41; Lindey’s v. Professional Consultants, 244 Mont.
238, 242, 797 P.2d 920, 923 (1990).
¶14 The District Court focused on the amendment’s potential for causing undue prejudice
to Amsden. We previously have found undue prejudice when the opposing party already had
expended “substantial effort and expense” in the course of the dispute that “would be
wasted” if the moving party were allowed to proceed on a new legal theory. Eagle Ridge
Ranch v. Park County, 283 Mont. 62, 68-69, 938 P.2d 1342, 1346 (1997). We also have
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balanced this prejudice against the sufficiency of the moving party’s justification of the
delay. Bitterroot Inter. Sys., ¶¶ 52-54.
¶15 FCA’s original complaint alleged only breach under the buy-sell agreement. FCA
never indicated before December 22, 2005, that it would pursue recovery for inventories
covered by the alleged separate oral agreement. Amsden proceeded for nearly a year under
the presumption that it needed to defend itself only from allegations arising from the buy-sell
agreement. FCA’s refusal to answer Amsden’s interrogatories about the sale of inventory
bolstered this presumption.
¶16 FCA claimed in its response to Amsden’s interrogatories that the subject of inventory
would be irrelevant to the ongoing action. The inventory issue, in fact, presented an entirely
new claim for relief. The inventory claim did not arise under an integrated contract for real
property, like the buy-sell. It instead arose under an alleged separate oral contract for goods.
The fact that Amsden easily could prove that it had paid in full under the buy-sell
agreement, and had prepared accordingly, compounds the potential for prejudice.
¶17 FCA also failed to provide a sufficient reason for the late amendment. FCA simply
called its original complaint “not well-worded.” FCA otherwise did not explain sufficiently
why it had failed to allege the inventory issue in its original complaint, why it refused to
answer interrogatories on inventory, or why it had waited nearly a year to assert the
inventory claim. These failures combined with Amsden’s showing of prejudice presented
sufficient justification for the District Court to deny FCA’s motion for leave to amend.
¶18 FCA argues, however, that the District Court could not have found prejudice in light
of the fact that Amsden had been on notice of FCA’s intent to raise the inventory issue. FCA
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points to correspondence between the parties before and during litigation concerning
inventory. It contends that the correspondence reflects the fact that Amsden was on notice
that FCA intended to seek payment for inventory in the action. FCA argues that it had
refused to discuss inventory during discovery because Amsden’s interrogatory related to the
cost-basis of the inventory. FCA asserts that the cost-basis was irrelevant because FCA
intended to sell the inventory for the same amount for which it originally had purchased the
inventory.
¶19 Amsden did not merely inquire about the inventory’s cost-basis. Amsden’s
interrogatory requested a list of the inventory items in question, the amount FCA paid for
those items, the amount billed to Amsden, and any invoices or statements related to the sale
of inventory from FCA to Amsden. FCA’s refusal to answer on the basis that its answer
would “not lead to the discovery of admissible evidence,” moreover, does not support the
reasoning that FCA asserts on appeal. This plain statement suggests that FCA would not
pursue recovery under the alleged separate inventory agreement in its action for breach of the
buy-sell agreement. FCA may have notified Amsden that it had concerns about the
inventory. In the context of litigation, however, FCA disclaimed its intention to pursue an
inventory claim through its inventory response and through its omission of any inventory
claim in its original complaint.
¶20 Finally, FCA asserts that the District Court abused its discretion when it denied
FCA’s untimely motion for leave to amend while allowing Amsden’s untimely objection to
FCA’s motion. FCA points to our decision in Aldrich & Co. v. Ellis, 2002 MT 177, ¶ 27,
311 Mont. 1, ¶ 27, 52 P.3d 388, ¶ 27, for the proposition that a court abuses its discretion
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when it denies leave to file an amended complaint on the grounds that it is untimely, while
correspondingly granting an untimely motion to the opposing party.
¶21 Our decision in Aldrich, however, did not pronounce such a broad, bright-line rule.
Aldrich considered the timeliness of the parties’ motions only as one factor. We held in
Aldrich that the district court abused its discretion for a number of reasons. The denied
amendment asserted a meritorious claim that may have changed the outcome of the case.
See Aldrich, ¶ 28. The proceedings had not yet progressed to an advanced stage, as the
parties had conducted no discovery and the court had not yet set a trial date. Aldrich, ¶ 27.
We balanced the fact that the district court granted the plaintiff’s untimely motion while
denying the defendant’s untimely motion against those other facts in determining that the
district court abused its discretion. Aldrich, ¶ 27-28.
¶22 The District Court likewise considered several factors in evaluating whether to grant
FCA leave to amend. The court considered whether FCA timely had filed its motion. The
court considered whether FCA had shown good cause pursuant to M. R. Civ. P 16(b). And
the court considered whether the late amendment would prejudice Amsden. All of these
considerations support the District Court’s decision.
¶23 Whether the District Court properly granted Amsden’s motion for summary judgment.
¶24 FCA argues that the District Court improperly granted Amsden’s motion for summary
judgment. We review de novo a district court’s decision to grant summary judgment, using
the same criteria applied by the district court under M. R. Civ. P. 56. Shelton v. State Farm
Mut. Auto Ins. Co., 2007 MT 132, ¶ 13, 337 Mont. 378, ¶ 13, 160 P.3d 531, ¶ 13. Summary
judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and
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admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.”
M. R. Civ. P. 56(c). We draw all reasonable interferences in favor of the party opposing
summary judgment. Shelton, ¶ 13.
¶25 In light of our decision that the District Court properly denied FCA’s motion for leave
to amend the pleadings, this dispute contains no genuine issue of material fact. All of the
pleadings in this case indicate that FCA’s sole allegation in this action is that Amsden
breached the buy-sell agreement by not paying the full purchase price. Both FCA and
Amsden agree on appeal that Amsden had paid the purchase price in full. The District Court
correctly determined that Amsden was entitled to summary judgment as a matter of law.
¶26 Affirmed.
/S/ BRIAN MORRIS
We Concur:
/S/ KARLA M. GRAY
/S/ JOHN WARNER
/S/ PATRICIA COTTER
/S/ JIM RICE
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