Farmers Co-Op. Ass'n v. Amsden, LLC

• Decision Date: 06 November 2007
• Docket Number: No. DA 06-0569.,DA 06-0569.
• Citation: 339 Mont. 452,171 P.3d 684,2007 MT 287
• Parties: FARMERS COOPERATIVE ASSOCIATION, Plaintiff and Appellant, v. AMSDEN, LLC, Defendant and Appellee.
• Court: Montana Supreme Court

171 P.3d 684

2007 MT 287

339 Mont. 452

FARMERS COOPERATIVE ASSOCIATION, Plaintiff and Appellant, v. AMSDEN, LLC, Defendant and Appellee.

No. DA 06-0569.

Supreme Court of Montana.

Submitted on Briefs June 26, 2007.

Decided November 6, 2007.

For Appellant: Jeff A. Turner, Towe, Ball, Enright, Mackey & Sommerfeld, PLLP, Billings, Montana, James L. Edwards, Stevens, Edwards, Hallock & Carpenter, P.C., Gillette, Wyoming.

For Appellee: Gary Kalkstein, Kalkstein & Johnson, PC, Missoula, Montana, John L. Amsden, Beck, Amsden & Ruggiero, Bozeman, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Appellant Farmers Cooperative Association (FCA) appeals the District Court's order granting a motion to dismiss for failure to state a claim filed by Appellee Amsden, LLC (Amsden). We affirm.

¶ 2 We address the following issues:

1. Did the District Court err by dismissing FCA's complaint pursuant to M.R. Civ. P. 13?

2. Did the District Court err by not converting Amsden's motion to dismiss to a motion for summary judgment after considering FCA's motion to consolidate?

3. Did the District Court err by denying FCA's motion to consolidate?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 Amsden entered into a buy-sell agreement with FCA to purchase a gas station and convenience store in Broadus, Montana. The written agreement provided that the price included the real estate and assorted equipment. While the parties agree that Amsden paid the purchase price of the written agreement in full, FCA alleges that the parties also entered a separate oral agreement to purchase inventory and additional equipment.

¶ 4 FCA filed an action, denominated as Cause No. DV-38-2004-2367 (Action 2367), on December 27, 2004, suing Amsden for breach of contract. FCA alleged that Amsden failed to pay the entire purchase price and that Amsden owed FCA a total of $52,064.87-$49,566.60 for the real estate and $2,498.27 for the equipment identified in the agreement. During discovery, Amsden attempted to obtain information from FCA relating to possible claims arising from the purchase of inventory. FCA objected to this interrogatory, stating that it would "not lead to the discovery of admissible evidence."

¶ 5 On December 22, 2005, more than a month after the deadline set by the District Court's scheduling order to amend pleadings had passed, FCA moved to amend its complaint. FCA argued that amending was needed in order to accurately reflect the claims made in the original complaint. FCA contended that it would not change the nature of the cause of action or the amount of recovery sought. The District Court granted FCA leave to amend on January 10, 2006, for good cause shown and notwithstanding the expiration of the time for amendment of pleadings.

¶ 6 FCA's first amended complaint sought recovery for Amsden's failure to pay for inventory and supplies and not Amsden's failure to pay the full agreement purchase price. Amsden objected to FCA's motion to amend two days after the court granted it. The District Court recognized that Amsden's objection was untimely, but nonetheless rescinded its order granting leave to amend and set a hearing regarding Amsden's objections. Following the hearing, the court denied FCA's motion for leave to amend on the basis that the motion was untimely and FCA had not shown good cause under M.R. Civ. P. 16(b) for the delayed amendment. Moreover, the court determined that the late amendment and FCA's prior assertion that purchase of the inventory was not relevant to discovery would prejudice Amsden.

¶ 7 Amsden moved for summary judgment on the grounds that FCA's original complaint did not sufficiently allege claims relating to payment for inventory. Amsden further argued that it had paid the full purchase price under the agreement. FCA did not contest these assertions. The District Court found that no substantial issues of material fact existed under the original complaint and granted Amsden's motion for summary judgment on Action 2367. Amsden appealed, and we affirmed the District Court's grant of summary judgment in Farmers Cooperative Association v. Amsden, LLC, 2007 MT 286, 339 Mont. 445, 171 P.3d 690.

¶ 8 However, prior to the entry of the District Court's order dismissing Action 2367, FCA filed a separate complaint against Amsden, denominated as Cause No. DV-38-2006-2401 (Action 2401). Action 2401 alleged that Amsden had failed to pay for inventory and equipment sold pursuant to the same buy-sell agreement litigated in Action 2367. FCA again claimed that Amsden owed FCA a total of $52,064.87, the same amount alleged in Action 2367. In response to FCA's complaint, Amsden submitted a motion to dismiss for failure to state a claim pursuant to M.R. Civ. P. 12(b)(6). Amsden argued that FCA's complaint was barred by M.R. Civ. P. 13, stating that the inventory and equipment claim was a compulsory counterclaim that FCA should have raised in Action 2367. Accordingly, Amsden argued that because FCA failed to timely assert the claim in Action 2367, it was barred from review in Action 2401. FCA responded by filing a motion to consolidate the two actions. In this motion, FCA referenced Action 2367 in detail. The District Court held a hearing regarding the parties' motions and considered the pleadings as well as FCA's motion to consolidate before granting Amsden's motion to dismiss for failure to state a claim upon which relief can be granted. The District Court also ruled that the motion to consolidate had been mooted by its dismissal of the action. FCA appeals.

STANDARD OF REVIEW

¶ 9 We review de novo a district court's ruling on a motion to dismiss for failure to state a claim pursuant to M.R. Civ. P. 12(b)(6). Meagher v. Butte-Silver Bow City-County, 2007 MT 129, ¶ 13, 337 Mont. 339, ¶ 13, 160 P.3d 552, ¶ 13. A motion to dismiss under M.R. Civ. P. 12(b)(6) has the effect of admitting all well-pleaded allegations in the complaint. Meagher, ¶ 13. The complaint is construed in the light most favorable to the plaintiff, and all allegations of fact contained therein are taken as true. Meagher, ¶ 13. The determination whether a complaint states a claim is a conclusion of law. Plouffe v. State, 2003 MT 62, ¶ 8, 314 Mont. 413, ¶ 8, 66 P.3d 316, ¶ 8. Additionally, a district court's decision to dismiss a complaint on the basis of M.R. Civ. P. 13(a) is a conclusion of law. Zimmerman v. Connor, 1998 MT 131, ¶ 7, 289 Mont. 148, ¶ 7, 958 P.2d 1195, ¶ 7. A district court's conclusions of law are reviewed to determine if interpretation of the law was correct. Plouffe, ¶ 8.

DISCUSSION

¶ 10 1. Did the District Court err by dismissing FCA's complaint pursuant to M.R. Civ. P. 13?

¶ 11 FCA argues that the District Court erred by barring FCA's complaint as a compulsory counterclaim that should have been brought in Action 2367, pursuant to M.R. Civ. P. 13, in response to Amsden's counterclaim. FCA argues that there is "no applicable authority or reasonable interpretation of Rule 13 that supports the District Court's ruling." In sum, FCA asserts that compulsory counterclaims apply only to defendants and not plaintiffs. Furthermore, FCA implies that the District Court misapplied M.R. Civ. P. 13 because Rule 13 prompts application of the doctrines of res judicata and collateral estoppel, which are not "viable arguments" since a final judgment had not been filed in Action 2367.

¶ 12 However, Amsden does not rely on res judicata or collateral estoppel. Rather, Amsden argues that when answering FCA's complaint in Action 2367, it asserted compulsory counterclaims relating to "FCA's failure to execute an indemnity agreement and a lease for signage in connection with the sale of the convenience store." Amsden asserts that FCA's current inventory and equipment claim arose from the sale of the convenience store and therefore must have been raised in Action 2367 as a compulsory counterclaim in FCA's reply to Amsden's compulsory counterclaims. Consequently, Amsden argues that FCA's inventory and equipment claim is barred from litigation in Action 2401. While both parties offer general authority with regard to the interpretation of M.R. Civ. P. 13, neither cites to case authority which specifically has adopted the respective interpretation they encourage this Court to adopt. Application of Rule 13 to a pleading replying to a counterclaim is thus an apparent matter of first impression in Montana.

¶ 13 Compulsory counterclaims are governed by M.R. Civ. P. 13(a) which states in pertinent part:

A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

The purpose of Rule 13 is to "avoid a multiplicity of suits by requiring the parties to adjust, in one action, their various differences growing out of any given transaction." Zimmerman, ¶ 9. "If a ... counterclaim is compulsory it must be pleaded ... [or it] will be barred." Zimmerman, ¶ 12.

¶ 14 First, we note that there is no indication from the language of Rule 13(a) that only "defendants" must assert compulsory counterclaims. Rather, Rule 13(a) requires that the pleadings state as a counterclaim "any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim...." M.R. Civ. P. 13(a) (emphasis added). A "pleading" includes complaints, answers, replies to counterclaims, answers to cross-claims, third-party complaints, and third-party answers. M.R. Civ. P. 7(a). Accordingly, by the rule's plain language, a "reply to a counterclaim" is a pleading and therefore triggers the need for the replying party to assert all counterclaims that arise out of the same...