No. 81-40 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

STATE OF MONTANA, upon the relation of 

FLORENCE-CARLTON CONSOLIDATED SCHOOLS 

DISTRICT 15 & 6" et al., 

Petitioners, 

DISTRICT COURT OF THE FIRST JUDICIAL 

DISTRICT OF THE STATE OF MONTANA, IN 

AND FOR THE COUNTY OF LEWIS & CLARK et ax., 

Respondents. 

ORIGINAL PROCEEDING : 

Counsel of Record: 

For Petitioners: 

Herron, Meloy & Llewellyn, Helena, Montana 

Clayton Herron argued, Helena, Montana and 

Peter Meloy argued, Helena, Montana 

For Respondents: 

Bellingham & Christenson, Billings, Montana 

Cresap McCracken argued, Great Falls, Montana 

Bruce T. Toole argued, Billings, Montana 

John North, Helena, Montana 

Robert Gannon, Butte, Montana 

Thomas D. Ebzery, Billings, Montana 

Murphy, Robinson Law Firm, Kalispell, Montana 

Gregory C. Black, Butte, Xuntana 

Alan Hux and Carol Dunn, Indianapolis, hdiana 

Hon. John Henson, District Judge, Missoula, Montana 

Submitted: June 12, 1981 

Decided : 

Filed: AUG 3 - 1981 

* 

Clerk 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This action was commenced in the District Court of 

the First Judicial District, in and for the County of Lewis 

and Clark, by complaint for declaratory judgment on August 

31, 1979. On March 20, 1980, an amended complaint, adding 

necessary parties and deleting parties deemed unnecessary to 

this action, was filed. Plaintiffs-relators filed a motion 

for leave to file a second amended complaint on June 18, 

1980. Prior to any action of the court regarding this 

motion, relators filed a second motion for leave to file a 

revised second amended complaint. Defendants objected to 

this motion and requested sanction be imposed upon relators 

as a condition to proceeding with this revised second 

amended complaint. Respondent District Court granted the 

motion for leave to file the revised complaint, but reserved 

ruling on the requested terms. After briefing by all 

parties, respondent District Court granted defendants' 

request by imposing an award of costs upon relators as a 

condition precedent to proceeding with the revised second 

amended complaint. From this order, relators petition for a 

writ of supervisory control. 

On August 31, 1979, Friends of the Earth, Inc., 

Edward M. Dobson, Daniel H. Henning, Gary Matson, Vicki 

Gale, Robert K. Lendis, the Montana Education Association, 

and the Montana State Federation of Teachers, as plaintiffs, 

filed a complaint for declaratory judgment against the 

Montana Board of Land Commissioners and Westmoreland 

Resources, Inc., as defendants. This complaint alleged 

basically that the land commissioners were not requiring 

Westmoreland Resources, Inc., to pay the full market value 
for royalty rights for the extraction of coal on state trust 

lands as required by law. The complaint prayed for 

declaratory judgment that coal leases issued to Westmoreland 

by the land commissioners were null and void, for an 

adjudication of the land commissioners1 duty to obtain full 

market value, and for attorney fees and costs of suit. 

Westmoreland Resources, Inc., filed successive 

motions for substitution of judge, and the Honorable John S. 

Henson assumed jurisdiction on November 1, 1979. Pursuant 

to stipulation of the parties and order of the court, an 

amended complaint was filed on January 17, 1980, which added 

Florence-Carlton Consolidated Schools, Districts 15 and 6, 

as a plaintiff to this action. 

On March 11, 1980, following motions, notices, and 

hearings, the District Court ruled that Friends of the 

Earth, Inc., did not have standing and was, therefore, 

dismissed from the action. The court also ruled that 

additional parties were indispensable to the action and 

ordered plaintiffs, relators here, to effect joinder of such 

parties. On March 20, 1980, in compliance with this order, 

relators filed an amended complaint joining the following 

defendants with the land commissioners and Westmoreland 

Resources, Inc.: Arkland Company; Ayrshire Coal Company; 

the Carter Oil Company; Consolidated Coal Company; Decker 

Coal Company; Gulf Oil Corporation; Mapco, Inc.; Mobil Oil 

Corporation; Spring Creek Coal Company; Peabody Coal 

Company; Peter Kiewit Sons1 Corporation; Robert W. Adams; 

United States Steel Corporation; Western Energy Company; 

Thermal Energy, Inc.; and Thermal Resources, Inc. 

The amended complaint sought to render void all state 
school land coal leases held by the above-named defendants. 

It sought declaratory judgment alleging solely that the 

royalty rates in the existing leases did not reflect full 

mar ket value. No alternative theories or grounds for 

challenging the leases than that included in the original 

complaint of August 31, 1979, were included in the amended 

complaint filed March 20, 1980. 

On June 18, 1980, relators filed and served a motion 

for leave to file a second amended complaint. All 

defendants, except the Board of Land Commissioners, 

Westmoreland Resources, Inc., Thermal Resources, Inc., and 

Thermal Energy, Inc., had filed responsive pleadings to the 

amended complaint of March 20, 1980, prior to the second 

motion to amend. The proposed second amended complaint 

added an additional count in mandamus and set forth five 

additional allegations, reasons and bases for relators' 

contention that the coal leases were null and void. 

Defendant United States Steel Corporation objected to 

the filing of the second amended complaint and, in the 

alternative, requested the court to impose sanctions upon 

relators, such sanctions to be a reasonable allowance of 

attorney fees necessarily incurred in preparing an answer to 

the second amended complaint. This objection was filed June 

24, 1980. 

Prior to a ruling on either relators' motion for 

leave to file a second amended complaint or United States 

Steel's objection to such motion, relators filed a motion 

for leave to file a revised second amended complaint on July 

16, 1980. The proposed effect of this revision was to make 

ten changes to the second amended complaint, such changes 
being matters of style and correct usuage, rather than 

matters of substance. This motion was noticed for hearing 

on August 6, 1980. 

Prior to August 6, 1980, all defendants served and 

filed objections to relators' motion for leave to file the 

second amended complaint revised. All defendants requested 

sanctions or conditions be imposed upon relators in the 

alternative. 

Following hearing on August 6, 1980, respondent 

District Court ruled that leave was granted to relators to 

file the second amended complaint (revised). The court 

reserved ruling on the question of imposition of sanctions 

until further briefing could be submitted by all parties. 

On September 24, 1980, respondent court granted 

the request for terms by awarding costs to defendants. The 

award was limited by the court to the "expenses, costs, 

attorney fees and so forth that the defendants have 

incurred" relating to the revised second amended complaint. 

Defendants requested that such information be 

presented to the court by affidavits. The court requested 

such affidavits from defendants by October 7, 1980. The 

court then granted relators until October 13, 1980, to 

review the affidavits and decide whether to request a 

hearing regarding the costs or to simply file something on 

the record. 

Defendants filed af f idavits of costs ranging from 

$209.28 to $2,520. Relators filed an affidavit and motions 

in opposition to claims for attorney fees on October 13, 

1980, but failed to request a hearing on the matter. Eventually relators did file a motion for a hearing on November 
28, 1980. The motion, however, came af ter the imposed 

deadline; thus, the court took no action regarding the 

request. 

On November 28, 1980, the court awarded each 

defendant $150 partial costs as a condition to relators1 

proceeding on the revised second amended complaint. The 

court further ordered that such an award was not due the 

Montana Board of Land Commissioners or Westmoreland 

Resources because those defendants had not filed any 

responsive pleadings in the matter. Relators were required 

to make payment within thirty days after entry of the 

j udgment . 

On December 22, 1980, relators deposited with the 

clerk of the court five checks in the amount of $150 each, 

payable to the five separate law firms handling the action 

for defendants. The checks were deposited with the express 

reservation that they were to be delivered only if the court 

indicated that the amount received was in full satisfaction 

of its order. These checks, however, were never delivered 

to defense counsel because on January 9, 1981, Judge Henson 

wrote relators1 counsel, informing him that relators were 

required to pay each defendant designated by the order $150, 

not each law firm involved (a total award of $2,400). 

Subsequently, various defendants filed motions for 

dismissal because of relators1 noncompliance with the order 

of November 28, 1980. On January 30, 1981, relators filed 

this petition for writ of supervisory control regarding the 

order awarding costs as a condition to proceeding on the 

revised second amended complaint. 

There have been two issues submitted to this Court 
for review: 

1. Is a writ of supervisory control an appropriate 

form of judicial review in this instance? 

2. Did the District Court abuse its discretion in 

awarding "costs" to defendants as a condition to relators' 

proceeding on the second amended complaint ( revised) ? 

Relators contend generally that there is no direct 

appeal or other remedial procedure available in this 

instance. Moreover, if review is not granted under the 

petition or the award not paid, relators will be denied the 

right to have their complaint determined in accordance with 

due process of law, thereby resulting in gross injustice, 

oppression and irreparable injury. 

Regarding the second issue relators contend that the 

District Court has no authority to impose sanctions against 

a party as a condition to allowing proposed amendments to 

its pleadings. Even if terms can be imposed, the District 

Court's awarding of "attorney fees," as opposed to the award 

of "incidental costs," was improper. Furthermore, since the 

defendants have not been prejudiced by the amendments and 

since relators have not engaged in gross misconduct, the 

imposition of sanctions cannot be justified. 

Respondent contends first that the relief asked for 

by relators is not a proper area for a writ of supervisory 

control. The order awarding "costs" is interlocutory in 

nature and does not present extraordinary or compelling 

circumstances beyond simply requiring relators to proceed to 

trial. The issue raised by relators can easily be raised on 

appeal after a trial has been had on the merits and a 

judgment rendered thereon. 
Respondent further contends that authority to impose 

conditions on relators' request to amend their complaint is 

drawn from the language in Rule 15(a), M.R.Civ.P., which 

provides that ". . . a party may amend his pleadings only by 

leave of court or by written consent of the adverse party; 

and leave shall be freely given when justice so requires." 

Thus, the District Court is empowered to act as justice 

requires, to safeguard the parties from prejudice by 

imposing such terms as are just upon the party requesting 

the amendment. Here, defendants have been prejudiced to the 

extent of incurring substantial costs as a result of 

relators' desire to expand their complaint to include 

additional legal theories and relief, thereby justifying the 

imposition of terms. 

Respondent raises a third issue on appeal: Did the 

relators waive any right to an evidentiary hearing on the 

award to be given, either by failing to make a timely 

request for such a hearing or by attempting to comply with 

the District Court's order? The issue, however, need not be 

discussed further in that relators have stated in their 

reply brief that they do not seek a hearing on the amount of 

the award to be granted under the court's order. The 

relators' sole contention is that no amount can be properly 

awarded under the circumstances, and, thus, a hearing is not 

required. 

Proper judicial administration requires freedom of 

action by the District Court prior to trial and 

noninterference on our part at this stage of the proceeding. 

State ex rel. Kosena v. District Court (1977), 172 Mont. 21, 

560 P.2d 522. The institution of an original proceeding in 
this Court seeking a writ of supervisory control can be 

justified, however, when there is no direct appeal or other 

remedial procedure available to provide relief from the 

District Court's action and when extraordinary and 

compelling circumstances are presented. See Rule 17 (a), 

M.R.App.Civ.P. 

In this instance, no direct appeal is available from 

the order requiring relators to pay the award to defendants 

as a condition to allowing the amendment of their complaint. 

Furthermore, we find that extraordinary circumstances are 

present which require an inquiry into the District Court's 

proceedings prior to trial and final judgment. If we 

declined to review the matter at this stage, relators could 

be precluded from proceeding on all counts they deem 

necessary for appropriate relief, resulting in a possible 

improper denial of their right of access to the courts. 

The major issue in this proceeding is whether the 

District Court was within its jurisdiction in imposing terms 

upon the allowance of relators' amended complaint. Rule 

15(a), M.R.Civ.P., provides in part: 

". . . Otherwise a party may amend his 

pleading only by leave of the court or by 

written consent of the adverse party; and 

leave shall be freely given when justice so 

requires." 

Rule 15(a), M.R.Civ.P., as cited above, is identical 

to Rule 15(a) of the federal rules under which it is widely 

held that it is within a court's discretion to impose terms 

or conditions upon granting a motion for leave to amend. 

See Key Pharmaceuticals, Inc. v. Lowey (S.D. N.Y. 1972), 54 

F.R.D. 447; Sherrell v. Mitchell Aero, Inc. (D. Wisc. 1971), 

340 F.Supp. 219; Thermodynamics Corp. v. Union Carbide Corp. 
(D. N.H. 1967), 42 F.R.D. 607; Jacobs v. McCloskey & Co. 

(E.D. Pa. 1966), 40 F.R.D. 486. Comments and reasons for 

upholding such an exercise of discretion is fully discussed 

in 6 Wright & Miller, Federal Practice and Procedure, Civil 

"Rule 15(a) gives the court extensive 

discretion to decide whether to grant leave 

to amend after the time for amendment as of 

course has passed. In addition, a number of 

courts have concluded that it gives them 

authority to impose conditions when 

permission to amend is allowed . . . The 

statement in Rule 15(a) that 'leave shall be 

freely given when justice so requires' 

presupposes that the court may use its 

discretion to impose conditions on the 

allowance of a proposed amendment as an 

appropriate means of balancing the interests 

of the party seeking the amendment and those 

of the party objecting to it. The imposition 

of terms often will further the rule's 

liberal amendment policy. If the party 

opposing the amendment can be protected by 

the use of conditions from any possible 

prejudice that might result from the 

untimeliness of the amendment, there is no 

justifiable reason for not allowing it." 

See also 3 Moore's Federal Practice tl15.08 [6]. 

As a result of the District Court's discretion to 

impose terms, the question now becomes whether the court in 

this instance abused its discretion. In this regard, the 

most important factor, and perhaps the most frequent reason 

given for denying leave to amend, is that the opposing party 

will be prejudiced if the movant is permitted to alter his 

pleading. Mitchell v. Mitchell (1976), 169 Mont. 134, 545 

P.2d 657. Other factors to be considered are the good faith 

of the party seeking the amendment, the reasons for the 

movant's delay, and the length of the delay. Mitchell v. 

Mitchell, supra; 6 Wright & Miller, Federal Practice and 

Procedure, Civil 55 1487, 1488. 

Here, the original complaint was filed on August 31, 
1979. The complaint alleged that certain coal leases 

entered into by defendant State Board of Land Commissioners 

and the remaining defendants were voidable or void. The 

complaint was grounded on the theory that the Board, by 

entering into leases which provided for a royalty rate below 

full market value, was in violation of section 77-3-315, 

MCA, and, thus, was in breach of trust responsibilities owed 

to relators. Relators prayed that the District Court issue 

a declaratory judgment adjudicating the duty of the Board of 

Land Commissioners to obtain the full market value of the 

land and declaring the leases null and void for the Board's 

failure to abide by this duty. 

Certain plaintiffs were dismissed from the 

proceedings and additional plaintiffs and defendants were 

joined by order of the court and stipulation of the parties 

in amended complaints filed on January 17, 1980 and March 

20, 1980. No additional allegations or theories challenging 

the validity of the leases were included in these 

complaints. On June 18, 1980, relators filed their motion 

for leave to file the second amended complaint. This motion 

was made after all but four of the defendants had filed 

responsive pleadings to the allegations and grounds for 

relief set forth in the original and amended complaint. 

The second amended complaint again alleged that the 

coal leases were void or voidable. Relators, however, in 

supporting the allegation expanded the theory of their case 

to include the following contentions not previously 

presented to the court: 

(1) The Board, by entering into the leases, had acted 

in violation of Art. X, Section 11, 1972 Mont.Const.; of 
section 81-501 through 81-551, R.C.M. 1947 (sections 

77-3-301 through 77-3-321, MCA) ; section 81-103, R.C .M. 

1947 (sections 77-1-202 and 77-1-203(1), MCA); section 

77-1-102, MCA; and the laws of the State of Montana and the 

United States relating to the powers and obligations of 

trustees. 

(2) The Board has violated its trust responsibilities 

in wasting the assets of the trust by removing the subject 

of the trust (coal deposits) from the competitive market, 

wherein a greater royalty rate could be obtained, for an 

unconscionable period of time. 

(3) The Board has further violated its trust 

responsibilities by failing to effect a forfeiture of the 

leases on the basis that the defendant lessees have breached 

an implied covenant to develop, produce and market the coal. 

(Defendant lessees allegedly have yet to develop the land 

for coal production.) 

(4) The Board, by granting a unilateral, preemptory 

right of termination to defendant lessees without receiving 

a similar right, has unreasonably relinquished control of 

trust assets without mutuality or consideration. 

(5) The royalty rates in the lease do not represent 

full and fair market value as compared with other royalties 

on contiguous or similar land. The leases have thus reduced 

the full market value of the estate constituting a direct 

violation of the purpose of the trust to obtain the maximum 

benefit for its beneficiaries. 

In addition to expanding the theory of their action, 

relators' second amended complaint also expanded the prayer 

for relief to include a request for a writ of mandamus 
compelling the Board to void the leases and to make the land 

available for new and renegotiated leases. 

Upon receiving the motion for leave to file this 

amended complaint, defendants objected and argued that, if 

leave was granted, it should be made conditional. 

Defendants' request was based on a contention that by 

allowing the amendment, they would be prejudiced to the 

extent of incurring substantial costs. The District Court 

agreed with defendants' position and imposed terms in 

granting relators' motion. 

In their petition for a writ of supervisory control 

relators argue that since formal discovery proceedings had 

not been instituted e., interrogatories served or 

depositions taken) and since the case had not been set for 

trial or briefing on the merits, there was no prejudice to 

defendants caused by filing the second amended complaint. 

The only retracing of effort required of defendants, 

maintains relators, would be to file amended answers. 

We find that generally the District Court has the 

power to impose terms or conditions on leave to file an 

amended complaint. Relators argue, however, that the 

District Court erred in considering "attorney fees" as a 

component of the partial costs granted as a condition to 

their amendment. In support of the argument, relators rely 

upon the general rule adopted by this Court that in the 

absence of a contractual agreement or specific statutory 

authority, attorney fees are not recoverable. See Winer v. 

Jonal Corporation (1976), 169 Mont. 247, 545 P.2d 1094; 

Kintner v. Harr (1965), 146 Mont. 461, 408 P.2d 487. 

Relators have properly set forth the general rule in 
regard to an award of attorney fees. It should be noted, 

however, that the rule has been expanded to include allowing 

attorney fees in spite of the absence of any specific 

statute or contractual agreement, solely upon equitable 

grounds. See Means v. Montana Power Company (1981), - 

Mont. , 625 P.2d 32, 38 St.Rep. 351. It is upon this 

same inherent equitable power that other courts have allowed 

the imposition of an award of attorney fees as a condition 

to amendment. See Matlack, Inc. v. Hupp Corporation (E.D. 

Pa. 1972), 57 F.R.D. 151; Mirabella v. Banco Industrial de 

la Republics Argentina (1970), 34 App.Div.2d 630, 309 

N.Y.S.2d 400; William v. Myer (1907), 150 Cal. 714, 89 P. 

972. 

If, under all of the circumstances of a case, justice 

would require the imposition of costs as a condition to 

allowing an amendment, equity can further, in extreme cases, 

allow, as an element of those costs, attorney fees. 

Prejudice to a party in this kind of case resulting from an 

amended complaint is not limited solely to general costs 

expended in undertaking additional preparation but obviously 

can include attorney fees expended in responding to issues 

or theories not previously asserted. This discretion by the 

court, however, should be carefully and sparingly used and 

the court should be careful that a spin-off does not develop 

which would or could deny the adverse party access to the 

court and a fair trial on the merits. 

Relators' final argument is that the $150 award to 

each defendant is unsupported, unreasonable, and amounts to 

a clear abuse of discretion by the District Court. 

Due to relators' failure to timely request a hearing 
on the matter, the only evidence upon which the award could 

be based is contained in the affidavits submitted by the 

parties listing the costs incurred as a result of the 

amendment. The total costs listed in the affidavits 

(including attorney fees) ranged from $209.28 to $2,520. 

These claims represent expenditures made by the various law 

firms, which in some instances represent more than one 

defendant. It would appear that the claims have been 

inflated with inappropriate expenditures (i.e., expenses and 

fees for all services as to all pleadings to date, not just 

those expenses and fees related to the filing of the second 

amended complaint) . This, however, does not invalidate the 

$150 assessment, at least mathematically. 

As indicated herein, we affirm the District Court's 

authority to impose conditions on a request to amend 

pleadings, as or when justice requires. The imposition of 

such sanctions, however, requires a showing of extraordinary 

prejudice. We do not find sufficient strength in the record 

here to support this degree of prejudice; nor did all 

parties suffer the same kind or amount of prejudice. 

Therefore, the order imposing cash sanctions is vacated and 

set aside, without prejudice, so that the matter can be 

raised on an appeal, if appropriate. 
We concur: 

D'strict Judge, sitting in 

p 4 ace of Mr. Chief Justice 

Frank I. Haswell