Opinion ID: 2772691
Heading Depth: 2
Heading Rank: 1

Heading: The Unpled Claim

Text: [¶38] The parties first dispute whether the claim is “unpled.” Spike argues he did plead a claim for breach of the duty of loyalty, and the water rights self-dealing is included within that claim. He contends the complaint is sufficient if it provides the opposing parties with notice of the claims against them, and that pleadings must be “liberally construed to ensure substantial justice.” Krenning v. Heart Mountain Irrigation Dist. 2009 WY 11, ¶ 30, 200 P.3d 774, 783 (Wyo. 2009). The trustees cite the same case for the proposition that “[a] plaintiff has a ‘fundamental obligation’ to apprise his adversaries of the nature of the claim against them.” Id. [¶39] W.R.C.P. 8 provides, “A pleading which sets forth a claim for relief . . . shall contain . . . (2) a short and plain statement of the claim showing that the pleader is entitled to relief . . . .” W.R.C.P. 8(a). The rule further provides, “Each averment of a pleading shall be simple, concise, and direct. No technical forms of pleading or motions are required.” W.R.C.P. 8(e)(1). All pleadings are to be construed liberally so as to do substantial justice. W.R.C.P. 8(f). Whether the specificity requirement of the rule has been satisfied rests upon whether fair notice has been provided to the opposing party. Harris v. Grizzle, 599 P.2d 580, 583 (Wyo. 1979). [¶40] Our precedent on this issue depends somewhat upon the type of claim that is alleged. For example, when reviewing a negligence claim, we have found that “[n]o specification of the facts upon which the conclusion of negligence is based [need be] included.” Guggenmos v. Tom Searl-Frank McCue, Inc., 481 P.2d 48, 51 (Wyo. 1979); W.R.C.P. Form 9; Harris, 599 P.2d at 583-84; see also BB v. RSR, 2007 WY 4, ¶¶ 12-13, 149 P.3d 727, 732-33 (Wyo. 2007) (finding that a complaint for custody modification alleging that a material change in circumstances had occurred was sufficient). In such cases, a legal conclusion need not be supported by factual allegations to comply with Rule 8. However, in other cases, such as wrongful death claims, we have held, “[T]he pleadings should set out with reasonable certainty the acts on which the liability is based and all facts essential to constitute a legal cause of action for wrongful death.” Harris, 599 P.2d at 583. We have recognized that discovery often serves to apprise the parties of the precise claims made despite vague pleadings. In re U.S. Currency Totaling $7,209.00, 2012 WY 75, ¶ 24, 278 P.3d 234, 240 (Wyo. 2012); BB, 2007 WY 4, ¶ 13, 149 P.3d at 732-33; Watts v. Holmes, 386 P.2d 718, 719 (Wyo. 1963). [¶41] We recently addressed the issue of a defective pleading in the context of piercing the corporate veil. Ridgerunner, LLC v. Meisinger, 2013 WY 31, 297 P.3d 110 (Wyo. 12 2013). In that case, the plaintiffs sued a corporation for breach of contract, and also named one of its officers as a defendant. All of the allegations in the complaint were directed toward the corporation (the contract was between the plaintiffs and the corporation, not the individual officers). Id. at ¶ 13, 297 P.3d at 114-15. The allegations against the officer stated only that the officer was acting as an agent of the corporation. Id. at ¶ 13, 297 P.3d at 115. In affirming the district court’s dismissal of the officer from the complaint, we stated, “While piercing the corporate veil is a ‘doctrine wherein liability for an underlying [cause of action] may be imposed upon a particular individual,’ and not a separate cause of action, the complaint must still ‘contain sufficient information to indicate a desire to proceed under the doctrine of piercing the corporate veil.’” Id. at ¶ 15, 297 P.3d at 116 (internal citations omitted). [¶42] Spike cites Lynch v. Patterson, 701 P.2d 1126 (Wyo. 1985), to support his conclusion that his pleading of the broad claim of breach of the duty of loyalty is sufficient under W.R.C.P. 8. In Lynch, we stated: A complaint which gives fair notice to the opposing party of the claims against him satisfies the specificity standard of notice pleading under our rules of civil procedure. Allegations of particular acts or omissions of the defendant are unnecessary where the duty owed by the defendants appears to exist and to have been breached. This rule holds especially where the facts lie more properly in the knowledge of the adverse party and details of the breach are available through discovery. Id. at 1134 (internal citations omitted). In Lynch, a minority stockholder brought a stockholder derivative action seeking to recover damages allegedly resulting from actions taken by three corporate directors in violation of their fiduciary duties. Id. at 1128. In his complaint the minority stockholder alleged that the defendants illegally removed assets from the corporation to the detriment of the corporation and the benefit of the defendant directors. Id. at 1134. The district court found that the defendants had breached their fiduciary duties when they unilaterally increased their salaries while refusing to declare a dividend. Id. at 1133. The directors appealed, asserting that the issue of increased salaries had not been pled by the plaintiff. Id. We found that, “Although the complaint does not specify excessive salaries, the allegations . . . were sufficient to give notice to the defendants that the plaintiff contested the removal of assets from the corporation, whether in the form of salary increases or otherwise.” Id. at 1134. We went on to state: [The plaintiff] complained that the directors had breached their fiduciary obligations by diverting funds from the corporation to its detriment. This allegation sufficed to inform the defendants that an issue existed as to the 13 reasonableness of the executive salaries and we will not overturn the award for excessive compensation on the ground of a defective complaint. Id. [¶43] Lynch is distinguishable from the facts of this case. There, diversion of assets could reasonably include excessive salaries, sufficient to provide the defendants with adequate notice of that issue. In this case, Spike identified three specific ways in which he contended the trustees had breached their duties of loyalty, none of which gave fair notice that water rights were at issue. We agree with Cam and Julia that the breach of duty of loyalty arising from the water rights was a claim of which they did not have fair notice. [¶44] Here, Spike identified land transactions that he alleged constituted a breach of the duty of loyalty, but he did not identify any water transactions as a basis for that claim. The BRT trustees took a great many actions during the period that Spike now challenges. If we found as Spike urges that the breach of duty of loyalty claim encompasses any and all of those acts, the defendants would potentially be required to prepare to litigate any of the actions they took as trustees. That interpretation stretches the concept of notice pleading too far.
[¶45] Normally, our rules of civil procedure would provide an orderly avenue for conforming the pleadings to the evidence. W.R.C.P. 15(b) states: 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. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice the party in maintaining the party’s action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. 14 [¶46] Here, however, Spike did not file a motion to amend the pleadings, the trustees did not consent, and the district court made no determination on that issue. [¶47] We have recognized in other cases that a district court had de facto ordered the pleadings amended even if it had made no such explicit ruling. Strahan v. Strahan, 400 P.2d 542, 543 (Wyo. 1965); Willard Given & Assocs. v. First Wyoming Bank-East Cheyenne, 706 P.2d 247, 249 (Wyo. 1985); Lore v. Town of Douglas, 355 P.2d 367, 36870 (Wyo. 1960). In Strahan, the mother filed a contempt petition against father for failing to pay child support. 400 P.2d at 543. Both parties presented evidence at the hearing concerning the changed circumstances of the parties. Id. The district court then advised the parties that it was going to treat the issue of modification as if it had been presented to the court for a determination, and modified the visitation schedule. Id. at 545. The district court did not declare that it was amending the pleadings pursuant to W.R.C.P. 15(b); however, upon review, we determined that the district court had essentially performed that function. Id. at 544. “The record before us reveals that the trial judge in this instance considered the issue of modification as having been tried, at least by implied consent; he treated the issue as if it had been raised in the pleadings; and he let the parties know he would decide the matter on that basis.” Id. at 545 (emphasis added). In contrast, in this case, the district court never ruled on the trustees’ pretrial objections, and simply, over objection, allowed the exhibits in at trial without letting the parties know how it would decide the matter. [¶48] The court and the parties might have solved their dilemma by resorting to the last sentence of Rule 15(b): “The court may grant a continuance to enable the objecting party to meet such evidence.” Neither party moved for a continuance, and the district court did not suggest it. We found in White v. Board of Trustees of Western Wyoming Community College District, 648 P.2d 528, 537 (Wyo. 1982), that a party’s failure to request a continuance can foreclose appeal on the issue of an unpled claim. There, we affirmed the district court when it allowed evidence at a termination hearing concerning underage drinking and marijuana use by students while under a professor’s supervision. The professor claimed on appeal that he was surprised by the allegations, and expected to defend himself on an entirely different allegation pursuant to the notice that he was given. Id. at 537. However, the matter was raised by the school district in opening statements, and was then addressed by several witnesses. White’s counsel “made a half-hearted objection to the subject matter. He referred to [the charge] as ‘euphemistic,’ but never complained that the charge would not include the conduct on band trips reflected by the evidence.” Id. at 534. The professor then proceeded to put on his case. We held that he had received sufficient notice of the claims against him when he was provided the school regulations on drugs and alcohol and “was advised that names of witnesses would be furnished upon request” (which he had not requested). Id. at 537. We went on to find that, “Even if the appellant genuinely felt that he was surprised by the evidence and it was not reflected in the charges, failure to request a continuance on the ground of surprise 15 precludes him from now contending that he was prejudiced.” Id. Here, however, there was no notice to the trustees that the claim would be allowed, they made numerous clear objections on the record, and, under these circumstances, we do not find their failure to request a continuance is fatal to their claim. [¶49] We turn then to the question of whether the trustees’ failure to produce the water rights information in discovery might nevertheless justify consideration of the issue. 3. Should the water petitions have been produced in discovery? [¶50] Generally, this Court reviews a district court’s decision concerning the admission of evidence for an abuse of discretion. Cardenas v. State, 2014 WY 92, ¶ 7, 330 P.3d 808, 810 (Wyo. 2014). [¶51] Spike served an interrogatory on the trustees which asked them to “describe with particularity the details of all transactions of real property . . . .” While this does not expressly identify water rights information, “[a] water right is a ‘property right of high order,’ with ‘none of the characteristics of personal property,’ and it is real property.” King v. White, 499 P.2d 585, 588 (Wyo. 1972) (citation omitted). “[T]he rules of discovery must be liberally construed in such a way as to favor disclosure of facts by both sides.” Paul v. Paul, 616 P.2d 707, 717 (Wyo. 1980) (McClintock, J., dissenting). The trustees violated the rules of discovery when they failed to provide information on the water rights petitions in response to Spike’s interrogatory. [¶52] We do not know if this is the conclusion the district court reached when it allowed the introduction of the water rights petitions, or when it did not require Spike to amend his complaint. W.R.C.P. 37(c) allows the district court, “on motion and after affording an opportunity to be heard,” (emphasis added), to impose sanctions when a party, without substantial justification, fails to comply with discovery rules. In this case, the district court could have imposed the sanction of allowing the evidence to be introduced despite its late disclosure because of the trustees’ failure to fully respond to the interrogatory. However, such an action would have required a motion and hearing, which did not occur here. [¶53] Compliance with the Rule 37 requirement would likely have yielded the additional benefit of providing this court with a decision to review. Without such a decision, we cannot provide the deference to the district court that we would normally apply. The rule that “the district court’s judgment will be affirmed on appeal if sustainable on any legal ground appearing in the record,” Comm. to Restore Mayor-Council Form of Gov’t v. City of Rawlins, 692 P.2d 944, 946-47 (Wyo. 1984), cannot be stretched so far as to permit us to find that the district court allowed the water rights issue to be raised at trial as a Rule 37 sanction for discovery violations, particularly when the parties below had no notice or opportunity to address any such ruling. 16 [¶54] The water rights issue was not pled with enough specificity to comply with W.R.C.P. 8 and provide fair notice, and the pleadings should have been amended pursuant to W.R.C.P. 15. The trustees violated discovery rules when they failed to inform Spike of the water rights petitions, and “[t]rial courts have broad discretion to impose [Rule 37 sanctions], including dismissal of an action or portion thereof.” In re Guardianship of Bratton, 2014 WY 87, ¶ 22, 330 P.3d 248, 253 (Wyo. 2014). But, with no Rule 37 hearing and no articulated decision by the district court, we cannot affirm the admission of those petitions on that ground. The district court, therefore, abused its discretion in admitting the water rights evidence. [¶55] We will nevertheless go on to address the facts regarding the water rights because our conclusion will reveal that the evidentiary ruling error is not prejudicial to the trustees.