No. 82-204 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982

0. A. LIEN and BLUE OX CORPORATION, a Corporation, Plaintiffs and Appellants,

MURPHY CORPORATION, a Corporation, Defendant and Respondent.

Appeal from: District Court of the Fifteenth Judicial District, In and for the County of Roosevelt Honorable 

### M. James Sorte,Judge presiding. Counsel of Record: For Appellants: Goetz,Madden & Dunn, Bozeman,Montana James Goetz argued,~ozeiaan., Montana For Respondent: Robert J. Emmons argued, Great Falls,Montana

Submitted: November 16, 1982 Decided: December 16, 1982 Filed: 

## El; j.

## 61982Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of the Court. Defendant,Murphy Corporation (Murphy)filed a Rule 41(b), M.R.Civ.P., motion for summary judgment January 11, 1952, in the Fifteenth Judicial DistrictCourt. The court granted defendant's motion April 27, 1982. Plaintiffs (Blue Ox) now appeal the summary judgment. InAugust 1952,Murphy began hydrocarbon exploration and production activities on land, a portion of which was later purchased by Blue Ox for farming purposes. Pipes used in Murphy's operations began leaking oil and other products, thus increasing the salinity level of the ground water and damaging Blue Ox's property. Settlements for the damage

weremade in 1961 and 1963;however, the damage is alleged to have continued. On October 25, 1971,Blue Ox filed a complaint alleging negligence and lease violations by Murphy, resulting in damage to Blue Ox's land. Murphy submitted interrogatories

on January 3, 1972,which Blue Ox answered May 9, 1972. Supplementary interrogatories of February 1, 1972,have

never been answered by Blue Ox. Interrogatorieswere submitted to Murphy inApril of 1973. Pursuant to an agreement between counsel and the District Court of the Fifteenth Judicial District, those interrogatorieswere not answered until July 27, 1978. On January 20, 1978, the District Court filed an order to show causewhy the case should not be dismissed for failure to prosecute. That order was vacated by agreement of theparties. ThenMurphy moved on December 24, 1979, to have the cause dismissed for the same reason.Blue Ox's original attorney and attorney of record was Mr. Gorham Swanberg. Due to Swanberg's dissatisfaction with his role, attemptsweremade to hire another attorney. Mr. Peter Maltese retained the file from spring 1977 until August 1978, when he declined to represent Blue Ox. Mr. James Lucas took fromAugust 1978 until January 1980 to reach the same conclusion. Mr. Raymond Peete successfully defended Blue Ox againstMurphy's motion to dismiss for failure to prosecute, but refused to further act as Blue Ox's attorney. On May 30, 1980, Blue Ox's new attorney and present counsel,Mr. James Goetz,moved the court for permission to amend the 1971 complaint to include further damage which had occurred to the land. Themotion was denied August 20, 1980, for the following reasons: 1. The newmotion changed the theory of the case from negligence and breach of lease to seven different theories of liability: (a) breach of contract; (b)negligence; (c) negligence alleging 

### -- res ipsa loquitor; (d)nuisance; (e) trespass; (f) strict liability; and (g)breach of lease. 2. The newmotion asked forpunitive damages in the amount of $100,000and total damages of $650,000. The original complaint asked for damages of $15,000. 3. The changes in the theories, the additional damages prayed for and the lapse of nine years between the original and the amended complaintwere grossly inequitable to Murphy. Blue Ox then, on September 30, 1980, filed for a writ of supervisory control to review those orders. This Court denied the writ November 20, 1980, stating: "The application for supervisory control or other appropriatewrit is denied on the grounds that there is an adequateremedy by appeal, that no energency situation is shown, and thatpetitioners themselves have been guilty of laches, a delay, and have failed toprosecute their action diligently." On December 14, 1980, Blue Ox filed a separate action based upon the denied amended complaint. Murphy attempted tomove that action toFederal DistrictCourt on March 18, 1980, but that court remanded the cause totheMontana District Court October 2, 1981, with a recommendation for consolidation of the 1971and the 1980 causes. Blue Ox subsequently moved for such a consolidation. Itwas denied January 26, 1982. On February 24, 1982, Blue Ox filed a motion for reconsiderationof themotion toamend the original complaint. That motion citedBlasdel v. Montana Power Co. (1982)

### , Mont. 

### , 640 P.2d 889, 39 St.Rep. 219, as authority for granting themotion toamend. The motion was again denied and Blue Ox fined $100. Meanwhile, Murphy filed a motion January 11, 1982, for summary judgment based on Rule 41(b),M.R.Civ.P., failure toprosecute. That motion was granted April 27, 1982, with the District Court stating: "The reasons the Court has for granting Summary Judgment are setforth indetail in Document Number 66, the Brief of the Defendant Murphy Corporation, and the Court willnot prepare a separate opinion." Document 66 sets forth atleast fivereasons why summary judgment should be granted: 1. For a period of elevenmonths, from November 20, 1980, toOctober 27, 1981, Blue Ox did absolutely nothing to advance theprogress of the original cause. 2. From April 2, 1980, until the present time, Blue Ox has taken no actionswhich would result inthe trial of the original cause. Rather, allactions have been of a 'lateral" nature.3. Blue Ox lastconducted discovery inthis cause July 27, 1978. 4. Blue Ox's activities have been with respect tothe 1980 cause rather than the 1971cause. 5. The issue of "failuretoprosecute" isres judicata. One reason statedby the Supreme Court for its denial of Blue Ox's request for thewritof supervisory control over themotion toamend was thatplaintiffs (BlueOx) 

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# . . have failed toprosecute their action diligently." In this appeal of theorder grantingMurphy summary judgment, the following issues areraised by Blue Ox: I. Whether, on the facts of this case, the District Court properly grantedMurphy's motion for summary judgment forBlue Ox's failure toprosecute, pursuant toRule 41(b), M.R.Civ.P? 2. Whether theDistrict Court properly refused to allow Blue Ox toamend the original complaint? 3. Whether, afterdenying leave toamend the complaint, the DistrictCourt properly denied Blue Ox's motion to consolidatethiscause with cause no. 9317, the 1980 action againstMurphy which addresses the continuing damage by Murphy toBlue Ox's property? Wefind issuenumber two tobe dispositive. Rule 15(a),M.R.Civ.P., provides that even after a responsive pleading has been served, the trial court shall freely grantplaintiff leave toamend the original complaint "when justice sorequires." This rulehas been construed broadly. In Union Interchange, Inc. 

### v. Parker (1960), 138 Mont. 348, 354, 357 P.2d 339, 342, we stated,

# ".

. . it is therule toallow amendments and the exception todeny them. I'The Supreme Court of the United States has held that the policy in favor of allowing amended complaints is offset by such things as "undue delay, bad faith or dilatory motive

on the part of themovant. 

# . .'I Foman v. Davis (1962),371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222, 226. Murphy contends undue delay exists here. Further,Murphy contends that because of our November 20, 1980, order denying Blue Ox's request for a writ of supervisory control, the issue of "unduedelay" is res judicata. We do not agree. We gave as one reason for our denial of the writ, the fact that Blue Ox had been guilty of laches and had failed to prosecute their action diligently. Another reason was the fact that Blue Ox had a right to appeal the District Court's denial of their motion to amend. To hold the "laches" finding res judicata with respect to whether Blue Ox unduly delayed prosecution of the cause would effectively deny their right to appeal. Furthermore, the order denying the writ of supervisory controlwas interlocutory in nature and therefore not res judicata. State ex rel. Davis v. District Court (1977), 172 Plont. 139, 561 P.2d 912. Only final judgments and orders intended to be final in nature are res judicata. 1B Moore's Federal Practice §0.409[1], at 1002 (1980). Prosecution of this case has been delayed. However,

we do not find unreasonabledelay warranting denial of Blue Ox's right to a trial upon themerits. There has been no bad faith or dilatory motive on the part of Blue Ox. Murphy has continuously been kept informed of the new and recurring damages to Blue Ox's land caused by Murphy's operations. Prejudice to defendant has been minimal due to those updates. The new damages and theories of liability set forth in Blue Ox's amended complaint stem from the same occurrence asthe first complaint. Though the evidence shows additional leaks. since the first filing, the occurrence is oil pollution of the underground water supply. New causes of action arising out of the same transaction, occurrence or eventmay be set forth in an amended pleading. 3 Moore's Federal Practice, S15.08[2], at 15-70,(1978)

# . For these reasons, justice requires Blue Ox be allowed to amend their original complaint to reflect the new and recurring damages to the land, as well as the additional theories of liability. Our decision to allow Blue Ox to amend the original complaint renders issue three re consolidationmoot. It also eliminates any reason for dismissing this action for failure to prosecute. In Brymerski v. City of Great Falls (1981)

### , Mont.



### , 636 P.2d 846, 38 St.Rep. 2001,we stated: "Weadopt the rule that a motion to dismiss for failure to prosecutewill not be granted if the plaintiff is diligently prosecuting his claim at the time the motion is filed, even if at some earlier time the plaintiff may have failed to act with due diligence." Brymerski v. City of Great Falls, Mont. at



## , 636 P.2d at 848-849, 38 St.Rep. at 2004. Discoverywas conducted by Blue Ox in the spring and summer of 1982. Pleadingswere made in an effort to place the action in the most procedurally proper position. Appellants

were diligently prosecuting the amended complaint at the time Murphy filed the Rule 41(b), M.R.Civ.P., motion. The District Court's orders denying Blue Ox's leave to amend their complaint and dismissing Blue Ox's action for failure to prosecute are both reversed. This action is remanded to the Fifteenth Judicial District Court for trial

on the merits of Blue Ox's ameWe Concur: