Polk v. Denver Dist. Court

Decision Date22 March 1993
Docket NumberNo. 92SA330,92SA330
Citation849 P.2d 23
PartiesCharles R. POLK, Petitioner, v. The DENVER DISTRICT COURT; and The Honorable Herbert L. Stern, III, a Judge of the Denver District Court, Respondents.
CourtColorado Supreme Court

Richard B. Podoll, John J. Eberle, Podoll & Podoll, P.C., Denver, for petitioner.

Brian J. Berardini, Brown & Berardini, P.C., Denver, for respondents.

Justice MULLARKEY delivered the Opinion of the Court.

In this original proceeding brought pursuant to C.A.R. 21, the petitioner Charles R. Polk seeks a writ of mandamus compelling the trial court to permit him to amend his answer to add counterclaims. We issued a rule to show cause and now discharge that rule.

I.

In 1984, Polk, an executive vice-president of the Writer Corporation, took out a personal loan with United Bank of Denver and signed a promissory note for $350,000, with repayment beginning in June 1987. Polk secured the loan with some of his Writer Corporation common stock, then valued at twice the amount of the loan balance, and he gave United Bank authority to sell the pledged stock if its market value should decline. After a decline in the market price of the stock in June 1987, however, United Bank requested, and Polk agreed, that additional Writer Corporation stock be pledged as security for the repayment of the loan.

In late September or early October 1987, the market price of the Writer Corporation stock again fell, and United Bank again requested that Polk pledge more stock to cover the deficiency. Polk instead instructed United Bank to sell the stock, which United Bank acknowledged. If sale were possible and had been made at that time, the revenue received would have been sufficient to cover the outstanding balance on the loan, as well as leaving an excess of $221,000 to be returned to Polk. United Bank argues, however, that the instruction to sell was withdrawn by Polk a few days later. As a result, the stock was not sold, and the value of the stock subsequently dropped, becoming worthless. In addition, Polk defaulted on the repayment of the promissory note. United Bank brought suit to enforce the promissory note in May 1989. Polk filed an answer to United Bank's complaint in June 1989, denying liability and asserting as an affirmative defense that any damage suffered by United Bank was the result of its own conduct or actions. At that time, no counterclaims were asserted by Polk. Trial was initially set for January 1990, but was continued until June 1990 in order to permit further discovery. Shortly before the date of trial, Polk filed for bankruptcy and the trial was stayed pending resolution of that action. In August of 1991, Polk moved to dismiss his own bankruptcy petition, and the trial was subsequently reset for September 1992.

In April 1992, five months prior to the new trial date, Polk moved to amend his answer to include nine counterclaims against United Bank: (1) negligence; (2) negligent misrepresentation; (3) fraud; (4) breach of fiduciary duty; (5) breach of contract of agency; (6) breach of good faith; (7) promissory estoppel; (8) extreme and outrageous conduct; and (9) exemplary damages. In July, the trial court denied Polk's motion to amend because it was "made effectively on the eve of trial" since the answer was filed years ago, the counterclaims asserted facts known to Polk at the time of the answer, and no reasonable excuse was given for the delay. Furthermore, the court found that amendment would be futile, as the counterclaims were barred by the statute of limitations and did not relate back.

Polk contested the trial court's denial of his motion to amend as an abuse of discretion, and we issued a rule to show cause. Under the circumstances of this case we find that the trial court did not abuse its discretion in denying the motion. The rule to show cause is discharged.

II.
A.

To determine whether Polk should have been allowed to amend his complaint, we must first examine the status of the law concerning amendments of pleadings. C.R.C.P. 15(a) provides in part:

A party may amend his pleading once as a matter of course at any time before a responsive pleading is filed or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, he may so amend it any time within twenty days after it is filed. Otherwise, a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires....

The part of the rule permitting amendment by leave of court is applicable in this situation. Under well-established law, leave to amend is a discretionary matter which is left to the trial court to determine. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); H.W. Houston Const. Co. v. District Court, 632 P.2d 563, 565 (Colo.1981). Thus, absent an abuse of discretion, we will not interfere with the trial court's ruling. 1 H.W. Houston, 632 P.2d at 565. It is therefore necessary for us to scrutinize the bounds of the court's discretion. As our analysis will show, Polk has failed to establish that the trial court abused its discretion.

B.

The first step in our analysis is to interpret the phrase "leave shall be freely given when justice so requires" from C.R.C.P. 15(a). In Eagle River Mobile Home Park v. District Court, 647 P.2d 660, 662 (Colo.1982), we considered the application of Rule 15(a), including in particular this instructive phrase, and stated that:

[t]he rule prescribes a liberal policy of amendment and encourages the courts to look favorably on requests to amend. See generally 3 J. Moore, Federal Practice § 15.08 (2d ed. 1980); 6 C. Wright & A. Miller, Federal Practice and Procedure, § 1484 (1971). Although leave to amend is not to be granted automatically, the court should not impose arbitrary restrictions on the application of the rule or exercise its discretion in a manner that undercuts its basic policy. Pleadings are not sacrosanct, Brown v. Schumann, 40 Colo.App. 336, 339, 575 P.2d 443, 445 (1978), and amendments thereto should be granted in accordance with the overriding purposes of our rules of civil procedure--"to secure the just, speedy, and inexpensive determination of every action." C.R.C.P. 1(a).

(quoting Varner v. District Court, 618 P.2d 1388, 1390 (Colo.1980)). Thus Polk is correct in observing that a motion to amend is entitled to a lenient examination. This leniency is not without limits, however.

In assessing a motion to amend, a trial court must weigh certain primary considerations, which we have previously delineated:

If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared 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 virtue of allowance of the amendment, futility of amendment, etc.--the leave sought should, as the rules require, be "freely given."

Varner, 618 P.2d at 1390 (quoting Foman, 371 U.S. at 182, 83 S.Ct. at 230); Eagle River, 647 P.2d at 663. Thus, the trial court must assess the motion to amend in light of the totality of the circumstances. It must balance the policy favoring the amendments of pleadings against the burdens which granting the amendment may impose on the other parties. See Gaubatz v. Marquette Minerals, Inc., 688 P.2d 1128, 1130 (Colo.App.1984).

Considering the circumstances of this case, Polk asserts that the original answer filed gave United Bank sufficient notice of the underlying facts to be disputed and that granting a continuance, if necessary, would not prejudice United Bank. We reject Polk's assessment of the facts.

First of all, the counterclaims being asserted are not merely restatements of or even expansions on what was contained in the answer, but are completely new issues which incorporate facts outside the range of the facts contained in the original answer. The amended answer contains allegations concerning an agency contract, fiduciary duty and Polk's physical and mental health, among other things. These issues, not previously raised, would prejudice United Bank by requiring it to conduct additional and unanticipated discovery long after the case had been at issue. See Robertson v. Board of Educ., 39 Colo.App. 462, 467, 570 P.2d 19, 23 (1977) (no abuse of discretion found in the denial of "the amendment on the grounds that the untimely amendment [by the plaintiff] would require taking additional testimony on an issue not anticipated by defendant, and would unduly delay resolution of the case which had been on the docket for over one year."). See also Eckstine v. Harris, 521 P.2d 1280, 1281 (Colo.App.1974) (no abuse of discretion in denying motion to amend where case was three and one-half years old, plaintiffs were not apprised of issue before trial and continuance would be necessary if amendment were granted).

As the trial court points out, the motion for amendment was made almost three years after the filing of the original answer and only five months before trial. It must be recognized that the timing of the motion to amend affects the analysis of the validity of the motion. With the hearing on the motion to amend being held only two months before trial and with the scope of the counterclaims far exceeding Polk's previous assertions of defenses and facts, it is clear that the trial could not have been held as scheduled. Rather, the trial date would have to have been continued yet again in order to permit proper discovery of these new issues.

Polk correctly points out that desire to preserve a scheduled trial date alone is insufficient reason to deny a motion to amend. As we stated in Eagle River, "[w]here the prejudice suffered by...

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