Farmers Cooperative Ass'n v. Amsden, LLC

November 6 2007

DA 06-0556

IN THE SUPREME COURT OF THE STATE OF MONTANA

2007 MT 286

FARMERS 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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