No. 89-107
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
ALDRICH & COMPANY,
Plaintiff and Respondent,
-vs-
DAN J. DONOVAN, d/b/a D.J. DONOVAN
CONSTRUCTION,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Dan J. Donovan, pro se, Denver, Colorado
For Respondent:
Thomas J. Stusek; Work Law Firm, Billings, Montana
Submitted on Briefs: June 30, 1989
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This is an appeal from a judgment for amounts due and
owing on a promissory note and a customer's job-by-job
account. Dan Donovan, d/b/a D.J. Donovan Construction
(Donovan), is a building contractor. Aldrich & Company
(Aldrich), is a retailer of building supplies. Donovan
executed a promissory note for approximately $5,400 owed to
Aldrich on an "open" account. He also maintained a
"job-by-job" account with Aldrich, each item charged being
assigned to a specific project. Due to nonpayment of amounts
due on the note and the account, Aldrich brought suit in the
District Court of the Thirteenth Judicial District,
Yellowstone County. Donovan counterclaimed for fraud and
breach of warranty regarding building materials purchased
from Aldrich. Both sides moved for summary judgment.
Aldrich obtained a summary judgment in its favor. On appeal,
Donovan argues procedural matters and there are questions of
material fact which exist as to Aldrichls claim. We affirm
the District Court's judgment.
Donovan presents three issues for review:
1. Did the District Court1s denial of summary judgment
to Donovan, in violation of Rules 8(d) and 36(a) and (b),
M.R.Civ.P., constitute an abuse of judicial discretion and/or
clear error requiring reversal and entry of judgment for
Donovan?
2. Did the District Court's grant of summary judgment to
Aldrich, in spite of its failure to file an Answer to the
First Amended Counterclaim, constitute an abuse of discretion
requiring reversal?
3. Should the District Court's judgment be reversed, and
the cause remanded for trial?
While working as a contractor in Billings, Donovan
concentrated on residential and commercial remodeling. He
maintained an "open" charge account with Aldrich. Donovan
encountered problems in making payments on his open account.
When the account reached approximately $5,200, Aldrich
informed Donovan that he would have to execute a promissory
note in that amount before any further credit could be
extended to him. In July of 1984, Donovan executed such a
note.
Aldrich then agreed to open a "job-by-job" charge
account for Donovan. Charges to the account included items
used in a remodeling job for a Mr. Graff. Graff and Donovan
had a disagreement during the course of the job, and Donovan
refused to charge any more materials for Graff to the
job-by-job account. Graff then agreed to open his own
account with Aldrich, which he used to charge items for the
work being done by Donovan. Due to nonpayment of mounting
sums owed on the Graff project, Aldrich eventually placed a
mechanic's lien on Graff's house. The lien was later
foreclosed, and according to Aldrich, the proceeds were used
to pay off both Graff's own account and the charges in
Donovan's job-by-job account related to the Graff job.
Donovan continued to have problems paying Aldrich. In
January of 1986, Aldrich initiated this action for nonpayment
against Donovan, seeking collection of the note. In February
of 1986, Aldrich amended its complaint to add a claim for the
unpaid balance of Donovan's job-by-job account.
The pleadings and motions in this case are a morass.
The case reached a point where the matters to be addressed by
the District Court were: (1) Aldrich's renewed motion for
summary judgment, with attendant briefs, affidavits and
exhibits; and (2) Donovan's combined motion for (a) leave to
amend his counterclaim a second time, (b) summary judgment,
and (c) to reopen and compel discovery, also accompanied by
briefs, affidavits and exhibits. The court granted Donovan's
motion to amend his counterclaim, but denied his discovery
and summary judgment motions. The court granted Aldrich's
motion for summary judgment. This appeal followed.
At the outset, our review of the record in this case has
shown that the District Court is to be commended, both for
its patience and its persistence in examining the record to
arrive at its ruling.
I.
Donovan's arguments on appeal are essentially those he
raised in the District Court, and fall into two categories.
The first is based on procedural rules, and the second is
based on substantive law. Donovan's procedural arguments
assign error to the District Court's decisions to grant
summary judgment in favor of Aldrich and deny summary
judgment in favor of Donovan for the same reasons. According
to Donovan, Aldrich's failure to file discovery responses
within the time specified in Rule 36, M.R.Civ.P., resulted in
Donovan's requests for admissions being deemed admitted.
Donovan also invokes Rule 8, M.R.Civ.P., for the proposition
that Aldrich's failure to respond to his first amended
counterclaim means that the allegations of fraud found there
are also deemed admitted. We disagree.
The District Court's Memorandum and Order notes that
Aldrich's delay in responding to discovery was not the result
of bad faith on Aldrich's part, which afforded the court
discretion to allow the responses to be filed late. The
court cited Heller v. Osburnsen (1973), 162 Mont. 182, 510
P.2d 13, as authority for its exercise of discretion. In
Heller, this Court noted that the purpose of Rule 36,
M.R.Civ.P., is to alleviate delay in trials by removing
uncontested issues; if no prejudice would ensue, a court
could allow untimely filing in its discretion.
Aldrich's delay in filing its response was at least in
part due to the fact that after this action began Aldrich's
counsel moved to New York City. He was served there with
Donovan's requests for admissions and interrogatories.
According to the affidavit of the Vice President of Aldrich,
he did not have knowledge of the requests until shortly
before Aldrich's new counsel filed the response. The record
does not disclose any bad faith on Aldrich's part, and given
the fact that Donovan received Aldrich's responses nearly a
year before the court's Memorandum and Order was issued,
Donovan was not prejudiced by the delay.
The discretion granted courts under Rule 36 in Heller
applies with equal force to Donovan's Rule 8 argument
regarding his amended counterclaim. In fact, the procedural
rules relied on by Donovan, if enforced strictly, could have
worked against him. Donovan's amended counterclaim was not
filed until after Aldrich filed an answer to Donovan's
original counterclaim. Because Aldrich had filed its answer
to the original counterclaim, Donovan was required under Rule
15, M.R.Civ.P., to seek leave of court before filing his
amendment. He did not do so until he filed the combined
motion ruled on by the court in the Memorandum and Order
appealed here. The court technically did not grant leave to
file the amendment until it granted summary judgment in favor
of Aldrich, thereby obviating the need for a response by
Aldrich.
Moreover, most of the documents in this case were
untimely filed. Strict construction of procedural rules
could have resulted in judgment against Donovan for failure
to file a timely response to Aldrich's complaints. The
court's leniency allowed for consideration of the merits of
both Aldrich's claims and Donovan's counterclaims. Donovan
therefore was not prejudiced by the court's exercise of
discretion.
11.
Donovan's substantive arguments first address his
counterclaim, and then Aldrich's claim. Donovan's original
counterclaim for breach of warranty alleged that certain
vinyl siding he purchased from Aldrich was not fit for its
intended purpose. After installation, the siding warped and
blistered, requiring replacement. Donovan alleged the
replacement costs as his economic loss. The District Court
addressed this claim only briefly, because it found that
Donovan had not shown damages. He had walked off the job by
the time the siding was replaced; the contractor who took
over the job purchased the replacement siding. On appeal,
Donovan relies on his argument that the procedural rules
discussed above rendered his requests for admissions and the
allegations in his counterclaims deemed admitted, thereby
proving his case. We have held Donovan's procedural
arguments insufficient, and our review of the record shows
the District Court to be correct. Donovan made no showing of
damages to the District Court. We therefore affirm the
District Court on this question.
Donovan's fraud claim alleged that two payments he made
to Aldrich were not properly credited. In his briefs filed
with the District Court, Donovan admits that the payments at
first were credited, but alleges that these same amounts were
later included in the lien filed by Aldrich against Graff.
Donovan thus alleges that the statements of account sent to
him by Aldrich were known by Aldrich to be misrepre-
sentations, which Donovan relied on to his detriment by
filing an action for labor and materials costs against Graff.
The District Court held this claim insufficient, because the
"facts" alleged by Donovan (e.g., Aldrich's knowing
misrepresentations) were mere conclusory statements rather
than evidence. The court held that Donovan had presented
virtually no evidence to support his claim, which therefore
failed as a matter of law.
On appeal, Donovan again relies on allegations
supposedly deemed admitted by the procedural rules discussed
above to prove his case. We have held that these allegations
were not deemed admitted, so this argument fails. However,
even if the allegations in Donovan's fraud counterclaim were
deemed admitted, his claim would fail.
The two payments at issue were in the approximate
amounts of $500 and $2,300. The record shows that the first
payment was credited to Donovan's note, and the second to
Donovan's account for the Graff job. Donovan admitted in his
briefs below that these credits were correct. The record
also shows that when the payments were made, Donovan did in
fact owe the money to Aldrich. The gravamen of Donovan's
claim is that these amounts were included in Aldrich's lien
against Graff, which somehow worked to Donovan's detriment in
asserting his claim against Graff. We disagree.
First, no misrepresentations were made to Donovan
regarding these payments. The sum sought by Aldrich on the
note reflects credit for that payment, and no sum is sought
for Graff materials charged to Donovan's account. Any
misrepresentation that may have been made by Aldrich
regarding amounts owed on the Graff job would have been made
in its lien action against Graff.
Second, any reliance by Donovan on the credits shown in
Aldrich's statements was irrelevant. The note at issue has
nothing to do with the disputed Graff sums. The note was
signed in July of 1984, and concerned amounts charged by
Donovan prior to that date. The record, including the lien
filed by Aldrich against Graff, shows that Aldrich began
supplying materials for the Graff job in September of 1984,
two months after the note was signed. Donovan therefore
could not have included the note payment in any claim against
Graff. The record also shows that approximately $16,000
worth of materials were supplied by Aldrich for the Graff
job. It would be illogical to assume that Donovan's decision
to bring a claim against Graff for a remodeling job of this
size turned on the $2,300 payment he made to Aldrich. While
Donovan's action against Graff was the subject of arguments
to the District Court in this case, the record does not show
that the disputed $2,300 payment had anything to do with
Donovan's failure to obtain judgment.
Donovan would have had to show nine separate elements to
obtain a judgment for fraud. Selvidge v. McBeen (Mont.
1988), 750 P.2d 429, 45 St.Rep. 168. The District Court
correctly held that Donovan's arguments alleged conclusory
statements rather than facts. Our review has also shown that
the facts in the record do not support two key elements of
fraud, misrepresentation and reliance. We therefore affirm
the District Court on this question.
We now turn to the issue of Aldrich's entitlement to
summary judgment for sums sought on Donovan's note and charge
account. Only two of Donovan's arguments remain to be
addressed at this point, the others having been discussed
above. On the question of the note, Donovan admits he
executed the note, but asserts that he did so under economic
duress. He alleges duress in that Aldrich would not extend
him further credit unless he signed the note.
A claim of economic duress requires a showing that the
contract at issue was made under circumstances evincing a
lack of free will on the part of the contracting parties. It
is not sufficient to show that consent was secured by the
pressure of financial circumstances, or that one of the
p a r t i e s m e r e l y i n s i s t e d on i t s l e g a l r i g h t . S h i p l e t v. F i r s t
S e c u r i t y Bank o f L i v i n g s t o n (Mont. 1 9 8 8 ) , 762 P.2d 242, 45
St.Rep. 1816. The n o t e a t i s s u e h e r e e v i d e n c e d a n e x i s t i n g
debt owed by Donovan to Aldrich. Aldrich did not force
Donovan to incur the debt. A l d r i c h had a l e g a l r i g h t to
r e q u i r e s e c u r i t y o f some s o r t b e f o r e e x t e n d i n g f u r t h e r c r e d i t
t o Donovan. H e was therefore " p r e s s u r e d " o n l y by h i s need
for further credit, n o t by any d u r e s s imposed by A l d r i c h .
A l d r i c h was therefore entitled to summary judgment on the
note.
Donovan a r g u e s t h a t t h e amount s o u g h t on h i s a c c o u n t had
been paid in full. Aldrich submitted account statements
showing t h e amount it s o u g h t a s b e i n g owed by Donovan on two
s p e c i f i c jobs. Donovan's argument a l l e g e d t h a t h e had " p a i d
in full", but listed two different jobs. Donovan never
denied owing money for the two jobs listed by Aldrich.
Aldrich was therefore entitled to summary judgment as to
these amounts as well. We affirm the judgment of the
D i s t r i c t Court.
W e Concur: ,
/