Opinion ID: 479412
Heading Depth: 1
Heading Rank: 1

Heading: Evidence of Overdrafts

Text: 14 Marine argues that the bankruptcy court improperly considered evidence of the overdrafts in Prescott's bank accounts in determining whether Marine received a preference. Marine notes that the trustee's original complaint did not allege that the overdrafts increased Prescott's debt to Marine, and because the trustee never formally amended his complaint to include this argument, Marine contends it never received fair notice that the overdrafts were in issue, as is required by Federal Rule of Civil Procedure 8(a), applicable in bankruptcy proceedings through Bankruptcy Rule 7008(a). While Marine admits the trustee raised the issue of the overdrafts in his response to Marine's motion for summary judgment, Marine suggests this occurred after most time for discovery and trial preparation had passed. As a result, Marine says that because it did not believe the overdraft issue was before the court it did not include a history of Prescott's accounts in its exhibits or perform discovery regarding Prescott's practice of regularly overdrafting his accounts. 15 We agree with the district court that the bankruptcy judge acted within his discretion in admitting evidence of Prescott's overdrafts and ruling on whether the overdrafts constituted an additional preference to Marine. That the original complaint did not raise the issue does not prevent the bankruptcy court from ruling on the matter. As this circuit recently said, the Federal Rules of Civil Procedure create [a system] in which the complaint does not fix the plaintiff's rights but may be amended at any time to conform to the evidence. Duckworth v. Franzen, 780 F.2d 645, 649 (7th Cir.1985) cert. denied, --- U.S. ----, 107 S.Ct. 71, 93 L.Ed.2d 28 (1986). The procedure for amending pleadings to conform to the evidence is established by Federal Rule of Civil Procedure 15(b), applicable in bankruptcy courts by Bankruptcy Rule 7015: 16 When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues.... 17 Fed.R.Civ.P. 15(b). The intent of rule 15(b) is to provide the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties. Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir.1982). 18 The key factor in determining whether the pleadings have been amended is whether the issue has been tried with the express or implied consent of the parties. The test for such consent is whether the opposing party had a fair opportunity to defend and whether he could have presented additional evidence had he known sooner the substance of the amendment. Hardin, 691 F.2d at 456. One sign of implied consent is that issues not raised by the pleadings are presented and argued without proper objection by opposing counsel. See Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384, 389 (5th Cir.1984); Leatherman v. Gateway Transportation Co., 331 F.2d 241, 246 (7th Cir.1964); Gallegos v. Stokes, 593 F.2d 372 (10th Cir.1979). To demonstrate lack of consent, the objection should be on the ground that the contested matter is not within the issues made by the pleadings. Fed.R.Civ.P. 15(b); see United States Fidelity and Guaranty Co. v. United States, 389 F.2d 697, 698-99 (10th Cir.1968) ([w]here no objection is made to evidence on the ground it is outside the issues of the case, the issue raised is nevertheless before the trial court for determination, and the pleadings should be regarded as amended in order to conform to the proof) (citations omitted). Implied consent may also be found if the opposing party itself presents evidence on the matter. See Hardin, 691 F.2d at 457; 6 C. Wright and A. Miller, Federal Practice and Procedure Sec. 1493 at 463-65. 19 Here, Marine knew prior to trial that the overdraft issue would be raised. On August 13, 1984, it received the trustee's Memorandum in Opposition to Motion for Summary Judgment which incorporated claims that the overdrafts constituted additional indebtedness to Prescott. On August 31, 1984, Marine received the trustee's Proposed Findings of Fact and Conclusions of Law which also indicated that the overdrafts would be addressed at trial. At the trial, Marine objected to certain evidence concerning the overdrafts on grounds of hearsay and relevancy but never objected that the evidence was outside the pleadings. Marine never made a showing of prejudice regarding the evidence or argued an inability to defend the issue. It never sought a continuance for additional time to meet new evidence. Under these circumstances we cannot say that the bankruptcy court exceeded its substantial discretion in considering the evidence. See 6 Wright & Miller Sec. 1495 at 480-81.