No. 85-242
I N T H E SUPREME COURT O F T H E S T A T E O F MONTANA
1986
DECKER COAL COMPANY,
Plaintiff,
-vs-
COMMONWEALTH E D 1 SON COMPANY,
Defendant.
O R I G I N A L PROCEEDING:
COUNSEL O F RECORD:
For P l a i n t i f f :
C r o w l e y L a w F i r m ; Jack R a m i r e z argued, B i l l i n g s ,
Montana
D y k e m a , G o s s e t t , S p e n c e r , G o o d n o w & T r i g g ; D o n a l d S.
Y o u n g , D e r e k I . M e i e r , J e f f r e y M. L i p s h a w , D a n i e l J.
Stephenson, D e t r o i t , M i c h i g a n
G e o r g e F. H e i d e n , O m a h a , N e b r a s k a
For D e f e n d a n t :
H o o k s & B u d e w i t z ; P a t r i c k J. H o o k s argued, T o w n s e n d ,
Montana
I s h a m , L i n c o l n & B e a l e ; D o n a l d J. M c L a c h l a n , J a m e s A.
F l e t c h e r , M i c h a e l J. G i l l , J a m e s K . M e g u e r i a n ,
Chicago, Illinois
Submitted: D e c e m b e r 5 , 1985
~ e c i d e d : February 2 0 , 1986
9570
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This case is before the Montana Supreme Court pursuant
to a certification by the United States Court of Appeals for
the Ninth Circuit. Plaintiff Decker Coal Company ("Decker")
brought suit against defendant Commonwealth Edison Company
("Edison") in the United States District Court for the
District of Montana. Edison moved to dismiss the complaint,
asserting, among other things, that Decker lacked the
capacity to sue in its own name. The Distict Court held that
Decker does have the capacity to sue in its own name, and
Edison appealed. The Ninth Circuit viewed the capacity
question as important to the resolution of this dispute and
certified the issue to this Court.
For the reasons discussed below, we find that under
Montana law Decker has the capacitiy to maintain a suit
against Edison in its own name and consequently we answer the
certified question presented by the Ninth Circuit in the
affirmative.
Decker Coal Company is a joint venture between Wytana,
Inc., a Delaware corporation, and Western Minerals, Inc., an
Oregon corporation. It is engaged in the surface mining of
low sulphur coal and operates its plant in Decker, Montana.
Commonwealth Edison Company is an Illinois corporation. In
1974, Decker Coal and Edison entered a long-term contract
under which Decker agreed to supply coal to Edison in
quantities between minimum and maximum tonnages from 1 9 7 8 to
1997.
Article XI of the contract contained a force majeure
provision which allowed performance to be deferred or excused
upon certain events. The contract called for delivery F.O.B.
the Montana mine. The coal would then be shipped via
railroad to Edison plants in Illinois and Indiana.
Edison invoked the force majeure provision to defer or
terminate coal purchase obligations in May, June and July,
1983. Edison claimed that structural damage to its plant in
Illinois and a cracked turbine rotor at its Indiana plant
justified invocation of the force majeure provision.
On January 4, 1984, Decker filed a complaint in the
United States District Court for the District of Montana
seeking a declaration that the problems at the Edison plant
did not qualify as force majeure events. Decker also sought
damages for breach of contract, claiming that Edison failed
to take sufficient measures to prevent damage to its
generating plants thereby breaching an alleged contractual
duty to mitigate damages.
Several days later, Edison filed an action in the
Northern District of 1l.linoi.s seeking a declaration that it
properly invoked the force majeure provision of the contract.
On February 3, Decker filed a motion in the Montana
action to enjoin further prosecution of the Illinois case.
On February 8, Edison filed a motion to dismiss the Montana
complaint on the grounds that: (1) Decker lacked capacity to
maintain the action in its own name; (2) the District Court
did not have personal jurisdiction over Edison; and (3) the
District of Montana was an improper venue. Edison also
sought transfer of the case to the Northern District of
Illinois.
The Montana District Court, Chief Judge Rattin, ruled
that jurisdiction was properly asserted, that venue was
proper in Montana because the alleged contract breach
occurred in Montana, and that Decker had the capacity to sue
as a partnership entity under Montana law. The motion to
transfer was denied, and the motion to enjoin the Illinois
proceeding was granted.
Edison appealed from the Montana District Court's order
to the United States Court of Appeals for the Ninth Circuit.
On appea.1, Edison raised the issues of capacity,
jurisdiction, and venue. Following full briefing and oral
argument, the Ninth Circuit determined that the capacity
issue, which is governed by Montana law, may be dispositive
of this case. Accordingly, by an order dated March 21, 1985,
has certified the following question to this Court:
Does Decker Coal Company, a.s a joint
venture between two out-of-state
corporations, have capacity to bring suit
as a plaintiff against a corporation
under Montana law?
Both Decker and Edison agree tha.t under Montana law,
Decker's capacity to maintain its Federal Court action is
governed by statute. Rule 17(b) of the Federal Rules of
Civil Procedure provides that the capacity of a party (other
than an individual or a corporat-ion) to sue "shall be
determined by the law of the state in which the District
Court is held." Thus, Montana law governs the question of
Decker's capacity to bring suit against Edison in the Montana
District Court. If Decker lacks capacity to maintain suit in
the state courts of Montana, it likewise lacks capacity to
sue in Montana Federal Court.
Under Montana law, Rule 17(b) of the Montana Rules of
Civil Procedure governs capacity to sue in Montana courts.
Montana. Rule 17 (b) provides that " [t]he capacity of persons
to sue and be sued shall be determined by appropriate
statutory provisions." Thus, both parties agree, Montana
Rule 17(b) is entirely dispositive of the question before
this Court. Therefore, early Montana cases which disputably
held that a partnership does not have the capacity to
maintain a suit in its own name are of little value. See
Gardiner v. Eclipse Grocery Company (1925), 72 Mont. 540, 234
P. 490; Wilson v. Yegen Bros. (1909), 38 blont. 504, 100 P.
613. It should also be noted that under Montana law a joint
venture (such as Decker) is treated like a partnership.
Murphy v. Redland (1978), 178 Mont. 296, 583 P.2d 1049.
In light of the above discussion, this Court is
essentially being asked to interpret Rule 17(b) of the
Montana Rules of Civil Procedure. Edison argues we must
strictly interpret this rule. In other words, that in the
absence of express statutory authorization, no person has the
capacity to file a lawsuit in Montana. And, Edison argues,
there is simply no statutory provision granting a partnership
(or joint venture) the capacity to sue in its own name in
Montana courts.
Decker, on the other hand, argues Rule 17 (b) should be
interpreted liberally. Decker argues Rule 17(b) does not say
that no person has capacity to sue unless and until there is
a statute passed that expressly grants such capacity. The
rule merely says that in determining whether someone has the
capacity to sue, this Court should look at the statutes of
Montana. There is no statute in Montana that expressly
denies partnerships the capacity to sue, just as there is no
statute expressly granting the capacity to sue. Therefore,
Decker argues, this Court must determine on the basis of
existing statutes whether the Montana Legislature intended
that partnerships be treated as separate entities distinct
from their partners. If so, then Decker should have the
capacity to sue. We agree with Decker's interpretation of
Rule 17 (b).
First, Decker directs this Court's attention to the
Uniform Partnership Act (UPA), adopted by Montana in 1.947,
S 35-10-101 et. seq., MCA. Although Decker submits the UPA
does not expressly deal with the question of a partnership's
capacity to sue, Deck.er argues the UPA does show the modern
tendency to treat a partnership as a legal entity distinct
from and independent of the individuals composing it. For
example, under S 35-10-301, MCA, a partnership may own
property in its own name. Al.so, und.er S 35-10-301 (3) (e),
MCA, a partnership may own a "claim" against third persons.
The Minnesota Supreme Court, in Gleason v. Sing inn. 1941),
297 N.W. 720, described the changes brought about by the UPA:
While a copartnership at common law was
not considered a distinct entity from the
partners composing it, the modern
tendency is the other way, i.e., to treat
a partnership as an entity distinct from
and independent of the individuals
composing it. 20 R.C.L. p. 804, S6, and
cases under note 16. That notion has
grown in popularity and has been
confirmed in many situations so as to be
recognized as "the oneness of any
somewhat permanently combined group
without the aid of law." ID. p. 805.
The uniform partnership act, 2 Mason
Einn. St. 1927, 57384-7428, has wrought
decided changes in the common law
conception of such organizations, as was
pointed out in Windom Nat. Bank v. Klein,
191 Minn. 447, 254 N.W. 602. There is a
tendency to treat a partnership as an
entity under our bankruptcy act. Cf .
Loomis v. Wallblom, 94 Minn. 392, 396,
102 N.W. 1114, 69 L.R.A. 771, 3 Ann.Cas.
798; Angel1 v. White Eagle 0 . & R. Co.,
169 Minn. 183, 210 N.W. 1004, 20 Harv. L.
Rev. 589. 1t is so generally treated in
the business world, and no good reason is
apparent why the law should not conform
to business custom and usage. 22
Harv.L.Rev. 393; 24 Id. 603; 28 Id. 762;
29 Id. 158, 291, 838; 8 Columbia L.Rev.
391; 13 Id. 143.
297 N.W. at 722.
We agree with Decker that from the language of the UPA
and Gleason it is clear that a partnership is indeed a legal
entity distinct from its partners. Therefore, a partnership
has the capacity to sue in its own name.
Decker goes on to list some examples of other Montana
statutes which show an intent by the Montana Legislature to
treat the partnership as a distinct entity for the purposes
of litigation. For instance, under § 25-5-104, MCA, a
partnership may be sued in its own name. Also, § 25-35-505,
MCA, provides that a partnership may sue in small claims
court in its own name.
In light of the above discussion, this Court has little
choice but to follow the clear intent of the Montana
Legislature to treat partnerships as distinct entities with
power to sue. It would be illogical and unfair to conclude
that a partnership may own a claim but cannot enforce it; may
own property but cannot protect it; may be sued but cannot
sue; may sue in small claims court but not in Federal Court.
The Montana Legislature should not be deemed to have acted so
capriciously.
It is undoubtedly true, as Edison suggests, that the
Montana Legislature could have enacted a statute permitting
partnerships to sue in their own names. Conversely, it could
have enacted a statute prohibiting a partnership from suing
in its own name. The fact is that it did neither. In the
absence of express guidance from the Legislature this Court
must follow what we submit is the clear intent of the
Legislature to treat partnerships as distinct entities with
power to sue.
We find that under Xontana law Decker has the capacity
to maintain a suit against Edison in its own name and
consequently we answer the certified question presented by
the Ninth Circuit in the affirmative.
We concur: