Ward Electronics Service, Inc. v. First Commercial Bank

Citation819 F.2d 496
Decision Date02 June 1987
Docket NumberNo. 86-3149,86-3149
PartiesWARD ELECTRONICS SERVICE, INC., Plaintiff-Appellant, v. FIRST COMMERCIAL BANK, Defendant-Appellee.
CourtU.S. Court of Appeals — Fourth Circuit

Julian Karpoff (Karpoff, Title & Mitnick on brief), for plaintiff-appellant.

Robert Dean Perrow (Howard W. Dobbins, Williams, Mullen, Christian & Dobbins on brief), for defendant-appellee.

Before WINTER, Chief Judge, PHILLIPS, Circuit Judge, and YOUNG, United States District Judge for the District of Maryland, sitting by designation.

JAMES DICKSON PHILLIPS, Circuit Judge:

Ward Electronics Services, Inc. (Ward) here appeals the denial of its motion to amend its complaint against First Commercial Bank (FCB). The district court denied the motion because "the proposed amended complaint revises completely the theory upon which [Ward sought] to recover" and because Ward had already amended its complaint once. We hold that the district court abused its discretion in denying the motion and reverse.

Ward obtained a performance bond from Eastern Indemnity Company of Maryland (Eastern Indemnity) to secure its performance of a contract with the United States Army. Pursuant to the bond transaction, proceeds from the Army contract were deposited to an account at FCB. Ward drew upon the funds in the account to pay itself and its vendors as work on the contract progressed. All withdrawals, however, required the signatory approval of Eastern Indemnity.

On February 13, 1985, FCB debited the account by $18,763.80 to satisfy an obligation of Eastern Indemnity to FCB. FCB then issued to Ward a cashier's check for the amount of the funds remaining in the account.

Ward brought this action to recover the debited funds on April 4, 1986. The complaint sought declaratory, compensatory, and exemplary relief for breach of contract, breach of statutory duty of good faith, and fraud. On May 9, 1986, the trial court granted FCB's motion to dismiss all counts of the complaint except the declaratory judgment count and granted Ward leave to amend the breach of contract and fraud counts.

Ward filed its Amended Complaint on May 15, 1986. The Amended Complaint again based Ward's right to recovery on the theory that the bank violated its contract with Ward and committed fraud when it debited the account to satisfy Eastern Indemnity's debt. On July 8, 1986, three days after taking the deposition of FCB and one month before the scheduled close of the two and one-half month discovery period, Ward filed a motion to amend its Amended Complaint, attaching the proposed Second Amended Complaint. The proposed Second Amended complaint deleted breach of contract as a basis for recovery, instead seeking reformation and recovery for breach of fiduciary duty and money had and received.

On August 1, 1986, the trial court denied Ward's motion to amend the Amended Complaint and granted FCB's motion to dismiss the fraud count of the Amended Complaint. On September 30, 1986, the action on the Amended Complaint was tried before a jury, with Ward limited to breach of contract as a theory of recovery. The district court granted FCB's motion for directed verdict at the close of Ward's evidence. This appeal followed.

The singular issue raised by this appeal is whether the district court abused its discretion in denying Ward's motion to amend its Amended Complaint. Rule 15(a) of the Federal Rules of Civil Procedure provides that when a party seeks leave to amend a complaint "leave shall be freely given...

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