Las Vegas Ice and Cold Storage Co. v. Far West Bank
| Decision Date | 12 January 1990 |
| Docket Number | Nos. 88-1507,88-1504,s. 88-1507 |
| Citation | 893 F.2d 1182 |
| Parties | , 10 UCC Rep.Serv.2d 1300 LAS VEGAS ICE AND COLD STORAGE COMPANY, a Nevada corporation doing business as Mr. Ice, Plaintiff-Appellant/Cross-Appellee, v. FAR WEST BANK, a Utah chartered banking corporation, Defendant-Appellee/Cross-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Fred R. Silvester, Stewart M. Hanson, Jr., and Charles P. Sampson of Suitter, Axland, Armstrong & Hanson, Salt Lake City, Utah, for plaintiff-appellant/cross-appellee.
Jerry L. Reynolds and Dallas H. Young of Ivie and Young, Provo, Utah, for defendant-appellee/cross-appellant.
Before HOLLOWAY, Chief Judge, and BALDOCK, Circuit Judge and THOMPSON, District Judge. *
Las Vegas Ice and Cold Storage Co. (Las Vegas Ice) filed suit against defendant Far West Bank seeking to recover the amount of a $20,000.00 check drawn on the defendant by a bank customer, pursuant to Sec. 70A-4-213(1) of the Utah Uniform Commercial Code. The plaintiff subsequently moved to amend its complaint to add a claim for punitive damages. The district court denied the motion to amend and entered judgment in favor of the plaintiff. Both parties have appealed. We affirm.
The facts of this case are undisputed. On November 9, 1985, Brookside Ice signed a $20,000.00 check payable to the order of the plaintiff. The check was drawn on Brookside Ice's account with defendant Far West Bank. On November 13, 1985 the plaintiff deposited the check in its account at Valley Bank, which then transferred the check to Zions First National Bank (Zions Bank) for collection. Zions Bank presented the check through the Federal Reserve Bank to the defendant for payment on November 18, 1985. On November 19, 1985 defendant completed the process of posting the check. The provisional settlement of the check, previously made by the defendant, then became final. On November 25, 1985 the defendant returned the check to Zions Bank unpaid because the account of Brookside Ice lacked sufficient funds to cover it. Zions Bank then credited defendant's account, charged Valley Bank's account and sent the check back to Valley Bank. Valley Bank then charged back the provisional credit that had previously been made to plaintiff's account and delivered the check to the plaintiff. At the time the check was drawn and presented to the defendant for payment, Brookside Ice lacked sufficient funds to pay the check and was involved in bankruptcy proceedings.
On April 13, 1986 Las Vegas filed its complaint. On July 2, 1986 the plaintiff moved for judgment on the pleadings and on July 18, 1986 the defendant moved for summary judgment. The motions were referred to a magistrate, who issued his report and recommendation that the defendant's motion be denied, that plaintiff's motion be treated as one for summary judgment, and that the plaintiff's motion be granted, except for the issue of the plaintiff's good faith in presenting the check for payment, which he concluded should be reserved for trial. The court adopted the magistrate's recommendation and entered partial summary judgments on December 19, 1986 and January 13, 1987. On September 10, 1987 the plaintiff filed a motion to amend its complaint to assert a claim for punitive damages, which the court denied. The issue of the plaintiff's good faith in presenting the check for payment was subsequently tried to the court and final judgment was entered in favor of the plaintiff on February 24, 1988.
The court will address the plaintiff's appeal from the district court's denial of its motion to amend its complaint and then Far West Bank's cross-appeal.
I. Motion to Amend
The district court refused to permit the plaintiff to amend its complaint and add a punitive damages claim based on Far West Bank's alleged intentional or reckless disregard of the Uniform Commercial Code and the plaintiff's rights. The denial was based on the district court's findings that the proposed amendment was untimely and would substantially broaden the issues for trial, and that the factual basis for the claim was known to the plaintiff at the time the complaint was filed.
The plaintiff contends that a motion to amend can only be denied because of prejudice to the opposing party or because the proposed amendment would be subject to a motion to dismiss under Fed.R.Civ.P. 12(b)(6), and that neither ground was present in this action. Las Vegas Ice also argues that the district court erroneously based its decision on factual findings regarding the lack of an evidentiary basis for the plaintiff's claim, made after reviewing the defendant's pleadings.
Without the bank's consent, Las Vegas Ice could amend its complaint only by leave of court. Fed.R.Civ.P. 15(a). Although leave to amend "shall be freely given when justice so requires," id., whether leave should be granted is within the trial court's discretion. First City Bank, N.A. v. Air Capitol Aircraft Sales, Inc., 820 F.2d 1127 (10th Cir.1987). Consequently, a district court's grant or denial of a motion to amend is reviewed for abuse of discretion. State Distributors, Inc. v. Glenmore Distilleries Co., 738 F.2d 405 (10th Cir.1984). Several factors are typically considered by the courts in determining whether to allow amendment of a complaint.
These include whether the amendment will result in undue prejudice, whether the request was unduly and inexplicably delayed, was offered in good faith, or that the party had sufficient opportunity to state a claim and failed. Where the party seeking amendment knows or should have known of the facts upon which the proposed amendment is based but fails to include them in the original complaint, the motion to amend is subject to denial.
Untimeliness alone may be a sufficient basis for denial of leave to amend. Contrary to plaintiff's assertion, prejudice to the opposing party need not also be shown. In First City Bank, N.A., 820 F.2d at 1133, this court held "that a district court acts within the bounds of its discretion when it denies leave to amend for 'untimeliness' or 'undue delay.' ".
Las Vegas Ice failed to assert its punitive damages claim until approximately a year and a half after the complaint was filed, 9 months after partial summary judgment was entered and only a few months before the case was scheduled for trial on the sole remaining issue of good faith. The district court, in denying the plaintiff's motion, relied on the plaintiff's untimely assertion of the proposed amendment, noting that the facts underlying the claim were known to the plaintiff at the time suit was instituted. Although the district court's partial reliance in its decision on the defendant's pleadings was improper, the court acted within its discretion when it denied the plaintiff's motion to amend due to its untimeliness.
In its cross-appeal, Far West Bank contends that the district court erroneously concluded that it failed to "account" to the plaintiff for the amount of the check, as required by Utah Code Ann. Sec. 70A-4-213(1). 1 The defendant also argues that the district court improperly permitted the plaintiff to bring a direct action against it under the U.C.C. Another basis for the defendant's appeal is the district court's refusal to permit the defendant to assert breach of warranty defenses. Finally, the defendant challenges the district court's finding that Las Vegas Ice acted in good faith when it deposited the check, due to its knowledge that Brookside Ice was, at that time, in reorganization proceedings.
The defendant challenges the district court's findings of fact and of law. Findings of fact are not overturned unless they are clearly erroneous. Amoco Production Co. v. Western Slope Gas Co., 754 F.2d 303 (10th Cir.1985). A finding of fact is not clearly erroneous unless "it is without factual support in the record, or if the appellate court, after reviewing all the evidence, is left with the definite and firm conviction that a mistake has been made." LeMaire v. United States, 826 F.2d 949, 953 (10th Cir.1987).
Issues of law are reviewed de novo. Bill's Coal Co., Inc. v. Board of Public Utilities of Springfield, Missouri d/b/a City Utilities, 887 F.2d 242 (10th Cir.1989). Although an appellate court is not constrained by a trial court's conclusions of law, State Distributors, Inc., 738 F.2d at 412, with respect to questions of first impression under state law, the district court's view of the unsettled law of his state is accorded deference. See Matthews v. IMC Mint Corp., 542 F.2d 544 (10th Cir.1976).
The plaintiff's action was premised on U.C.C. Sec. 4-213(1), which provides that when an item is finally paid by a payor bank, 2 the payor bank is accountable for the amount of the item. The defendant does not dispute that there was final payment, but basically argues that it accounted to the plaintiff because it did not return the check for insufficient funds prior to the statutory time when the provisional credit became final. We disagree with the plaintiff's strained interpretation of the term "accountable". Because it returned the check unpaid, Far West Bank failed to "account" for the item. See 1 J. White, R. Summers, Uniform Commercial Code Sec. 17-2 (3rd ed 1988) ("In some sense 'accountable' can be read as liable.") 3
Far West Bank asserts that because it is not entitled to assert the defenses which would be available to Valley Bank, if sued by the plaintiff, and because U.C.C. Sec. 4-213(1) does not impose strict liability on a payor bank, the plaintiff's claim is against Valley Bank, instead of Far West Bank, for improperly charging back its account. Consequently, the defendant maintains, the district court improperly permitted the plaintiff to sue it directly instead of requiring Las Vegas Ice to sue Valley Bank, with...
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