Ex parte LIBERTY NATIONAL LIFE INSURANCE COMPANY.
(In re Thomas E. Deas v. Liberty National Life Insurance Company et al.)
Supreme Court of Alabama.
*951 D. Brent Baker and Ross A. Frazer of Frazer, Greene, Upchurch & Baker, L.L.C., Mobile, for petitioner.
*952 Frederick P. Gilmore of Gilmore Law Office, Grove Hill, for respondent.
HOUSTON, Justice.
Liberty National Life Insurance Company ("Liberty National") petitions for a writ of mandamus directing the Clarke Circuit Court to permit Liberty National to amend its answer to the complaint filed against it by Thomas Deas. Liberty National seeks to add as an affirmative defense Alabama's 20-year rule of repose and contends that until our recent clarification of the rule of repose in Ex parte Liberty National Life Insurance Co.,
On June 1, 1958, Thomas Deas purchased a $5,000 whole-life policy from Liberty National. According to Deas, the policy was to be "paid up" in 20 years. Deas also alleges that on or about May 15, 1978, he received noticе that his policy was in fact "paid up."
On December 22, 1978, a $3,000 loan was taken against the policy. Deas claims that he had nothing to do with the loan, and that he never received either the check Liberty National issued in his name or the $3,000. The check was cashed or deposited in December 1978. Deas alleges that he first learned in March 1999 that in 1978 a loan had been taken against his policy for $3,000 and had not been repaid, leaving only a small amount of value in the policy.
Dеas sued Liberty National in the Clarke Circuit Court on February 13, 2001, alleging fraud, negligence, wantonness, and conversion. Each of Deas's claims is based upon allegedly wrongful actions of Liberty National that occurred on or before December 1978.
On April 3, 2001, Liberty National filed an answer; that answer did not include the rule of repose as an affirmative defense. On January 18, 2002, we released our decision in Ex parte Liberty National, which clarified the law on the rule of repose. On February 22, 2002, Liberty National filed a mоtion for a summary judgment, asserting for the first time the rule of repose as a defense to Deas's claims. Deas filed a response, arguing that, because the rule of repose is an affirmative defense,[2] it was deemed waived when Liberty National did not assert it in its answer.
At a March 20, 2002, hearing on the motion, Liberty National was granted a continuance so that it could reply to Deas's waiver argument. The next day, however, Liberty National filed a motion for leave to amend its answer to add the rule of repose as an affirmative defense. The trial court denied this motion on August 28, 2002. This petition followed.
A writ of mandamus, being a drastic and extraordinary remedy, will issue to correct a trial court's ruling regarding the amendment of pleadings only when it is shown that the trial court has exceeded its discretion. Rector v. Better Houses, Inc.,
*953 Typically, if a party fails to plead an affirmative defense, that defense is deemed to have been waived. Robinson v. Morse,
Rule 15(a), Ala. R. Civ. P., reflects Alabama's liberal policy in favor of allowing amendments to pleadings:
"Unless a court has ordered otherwise, a party may amend a pleading without leave of court, but subject to disallowance on the court's own motion or a motion to strike of an adverse рarty, at any time more than forty-two (42) days before the first setting of the case for trial, and such amendment shall be freely allowed when justice so requires. Thereafter, a party may amend a pleading only by leave of court, and leave shall be given only upon a showing of good cause. A party shall plead in response to an amended pleading within the time remaining for a response to the original pleading or within ten (10) days after service of the amended pleаding, whichever period may be longer, unless the court orders otherwise."
However, the extent of the trial court's discretion in permitting amendments has not been precisely delineated and has been, at times, unclear.
We noted in Ex parte GRE Insurance Group,
"`"[R]efusal of an amendment must be based on a valid ground,"' Ex parte Bailey,814 So.2d 867 , 869 (Ala.2001) (quoting Stead v. Blue Cross-Blue Shield of Alabama,294 Ala. 3 , 6,310 So.2d 469 , 471 (1975)) (emphasis omitted), such as `actual рrejudice or undue delay.' Ex parte Thomas,628 So.2d 483 , 486 (Ala.1993)."
However, as evidenced by the placement of the phrase "freely allowed" in the text of Rule 15, that phrase applies only to those amendments sought "more than forty-two (42) days before the first setting of the case for trial." Rule 15, Ala. R. Civ. P. In that situation, a trial court has no discretion; it can deny a requested amendment only if there exists a "valid ground" for the denial, such as "actual prejudice or undue delay." Ex parte GRE Ins. Group,
When, as here, the amendment is sought within the 42-day window, the trial court is free to deny a party leave to amend his or her pleading unless the party can demonstrate "good cause." Rule 15, Ala. R. Civ. P. The language of Rule 15 makes clear that upon a showing of "good cause" a trial court is not required to allow the amendment; after such a showing allowing the amendment becomes an option the trial court can choose. Id. ("... and leave shall be given only upon a showing *954 of good cause") (emphasis added).[3] However, in light of the overarching liberal policy of allowing amendments under Rule 15, the appropriate way to view the request for leave to amend, if a party demonstrates "good cause," is as though the request had been brought more than 42 days before trial, when the trial court does not have "unbridled discretion" to deny the leave to amend, but can do so only upon the basis of a "valid ground" as stated above. Ex parte Bailey,
Here, there is no evidence of either actual prejudice or undue delay. The only pоssible prejudice to Deas stemming from allowing Liberty National to amend its answer that the parties have mentioned is the fact that Deas's claims might be extinguished. However, this fact, even if true, does not establish prejudice:
"`[I]t is obvious that an amendment, designed to strengthen the movant's legal position, will in some way harm the opponent.' Cuffy v. Getty Ref. & Mktg. Co.,648 F.Supp. 802 , 806 (D.Del.1986). `In the context of a [Rule] 15(a) amendment, prejudice means that the nonmoving party "must show that it was unfairly disadvantaged or deprived of the opportunity to present facts or evidence which it would have offered had the ... amendments been timely."' Id. ... (Quoting Heyl & Patterson Int'l v. F.D. Rich Housing of Virgin Islands, Inc.,663 F.2d 419 , 426 (3d Cir.1981).) `And by prejudice to the rights of the other party is meant, without loss to him other than such as may result from establishing the claim or defense of the party applying.' McDaniel v. Hoblit,34 Wyo. 509 , 515,245 P. 295 , 297 (1926)(emphasis added [in Ex parte GRE Ins. Group]). In other words, the defense asserted in the amended answer is not prejudicial, merely because it might constitute a meritorious defense to the plaintiff's claim."
Ex parte GRE Ins. Group,
Given the state of the law on April 3, 2001, when Liberty National filed its original answer, Liberty National was justified in not including the rule of repose as an affirmative defense. As Liberty National correctly pоints out in its brief to this Court, the case of Oehmig v. Johnson,
When Liberty National filed its motion to amend its answer, a trial date had been set, and the motion was filed within 42 days of the trial date. That trial date was then continued indefinitely, and at the time the trial court ruled on Liberty National's motion, the case had not been reset for trial. Liberty National filed its motion to amend approximately two months after our decision in Ex parte Liberty National. However, there is no indication that this delay was unreasonable or troublesome, or that the amendment, if allowed, will cause any undue delay in the resolution of the case. Cf. Rector,
Clearly, then, had Liberty National's first response to our Ex parte Liberty National decision bеen to timely seek an amendment of its answer to add the rule of repose as an affirmative defense, it would have been entitled to do so. Furthermore, Liberty National's filing a motion for a summary judgment based on the rule of repose before asking for leave to amend its answer, while perhaps making denial of the summary judgment proper, does not in any way bar the trial court from allowing Liberty National to amend its answer, nor did it prejudice Deas.
Because we hold that Liberty National did demonstrate "good cause," and because we can find no evidence of actual prejudice or undue delay that would be caused by allowing Liberty National's requested amendment, we conclude that the trial court exceeded its discretion in denying Liberty National's motion for leave to amend. We issue the writ of mandamus and direct the trial court to grant Liberty National's motion for leave to amend its answer to include the rule of repose as an affirmative defense.
PETITION GRANTED; WRIT ISSUED.
SEE, BROWN, HARWOOD, WOODALL, and STUART, JJ., concur.
MOORE, C.J., and LYONS and JOHNSTONE, JJ., dissent.
LYONS, Justice (dissenting).
I join Justice Johnstone's well-supported discussion of the inadequacy of Liberty National's showing of good cause that might excuse it for failing to include the affirmative defense of repose in its original answer filed on April 3, 2001.
*956 In Ex parte Liberty National Life Insurance Co.,
"The rule of repose is not subject to tolling of any kind, except where there have been affirmative acts of the defendant explicitly and unambiguously acknowledging the existence and validity of the plaintiff's claim. Ex parte Grubbs,542 So.2d 927 , 930-31 (Ala. 1989); Boshell v. Keith,418 So.2d 89 , 91 (Ala.1982); Snodgrass v. Snodgrass,176 Ala. 276 , 280-81,58 So. 201 , 201-02 (1912)."
This order was entered on February 8, 2001, almost two months before the answer was filed in this proceeding. Our opinion in Ex parte Liberty National is entirely consistent with this settled principle of Alabama law. This Court held as follows:
"The difference between the rule of repose and a statute of limitation is further demonstrated by the rule's sole exception. We have stated that `[t]he only circumstance that will stay the running of the 20 year period of repose is a recognition of the existence of the claimant's right by the party defending against the claim.'"
Also instructive is Liberty National's posture in Ex parte Liberty National with respect to Oehmig v. Johnson,
"Third, despite the Plaintiffs' suggestion otherwise (see Respondents' Br. at 14-18), the running of Alabama's rule of repose is not dependent on notice. As early as 1954, this Court announced that repose `is not controlled by an absence of notice.' Merrill v. Merrill, [260 Ala. 408 , 411,]71 So.2d 44 , 45-46 ([]1954). Accord Eatman v. Goodson, [262 Ala. 242 , 248,]78 So.2d 625 , 630 ([]1954) (observing Merrill `repudiated' the belief `that lack of notice would prevent the running of the prescriptive period'). In Ballenger v. Liberty National Life Insurance Company, [271 Ala. 318 ,123 So.2d 166 (1960),] this Court reaffirmed Merrill, holding `[l]ack of notice is not sufficient to avert the application of the doctrine [of repose].' [271 Ala. 318 , 322,]123 So.2d 166 , 169 ([]1960). The statement from Oehmig v. Johnson, [638 So.2d 846 (Ala.1994),] on which Plaintiffs rely is both dictabecause it is unnecessary to the Court's holding (on page 850) that `the rule of repose cannot be used against one with valid record title by one who clearly does not have title' аnd inconsistent with long-standing precedent of the rule of repose.638 So.2d 846 , 851 (Ala.1994), citing neither Merrill nor Ballenger)."
Liberty National's reply brief at p. 10-11. Standing in stark contrast is the following *957 statement at page 6 of Liberty National's petition in this proceeding:
"Liberty National filed its answer on April [3], 2001. At that point in time, the rule of repose did not appear to be a viable defense under Alabama law. See Oehmig v. Johnson,638 So.2d 846 (Ala. 1994), abrogated by Ex parte Liberty National Life Ins. Co., [825 So.2d 758 (Ala.2002) ]."
Its dismissal of Oehmig v. Johnson as dictum in its brief filed in Ex parte Liberty National, while relying upon precedent "as early as 1954," belies Liberty National's present contention as to the state of the lаw on April 3, 2001. This Court's holding in Ex parte Liberty National simply mirrors the foregoing argument in the reply brief by citing Ballenger and Merrill and declining to permit Oehmig to control, as it was dictum "inconsistent with the well-established understanding of the rule of repose."
What appears to have happened in the instant case is a simple matter of Liberty National's various attorneys failing to get on the same page. But for recent cases such аs Rector v. Better Houses, Inc.,
JOHNSTONE, Justice (dissenting).
I respectfully dissent. The validity of the main opinion depends on two of its cardinal holdings. The first of these holdings is that Liberty National has demonstrated "good cause" for its failure to plead the rule of repose in its original April 3, 2001 answer. The second of these holdings is that the trial judge exceeded his discretion in denying, on the ground of "undue delay," the March 21, 2002 motion filed by Liberty National for leave to amend its answer to assert the rule of repose. I respectfully submit that both of these holdings are mistaken.
This dissent will demonstrate, first, that the excuse proffered by Liberty National for its failure to plead the rule of repose in the original April 3, 2001 answer is absolutely illusory. This dissent will demonstrate, second, that the holding of the main opinion on the issue of untimeliness conflicts with the holding by this Court on the same issue in the recent case of Rector v. Better Houses, Inc.,
In petitioning us for a writ of mandamus, Liberty National claims that, when it filed its answer on April 3, 2001, it believed that it could not invoke the rule of repose against the plaintiff-respondent Mr. Deas. Liberty National claims that its belief to this effect was warranted by a statement *958 in Oehmig v. Johnson,
The very Liberty National (Hudson) now cited by Liberty National to us reveals, however, not only that Liberty National should have known, but that Liberty National actually did know, well before April 3, 2001, that the rule of repose was available to bar Mr. Deas's claims irrespective of whether оr when he acquired notice of his claims. Liberty National (Hudson) reveals that, well before April 3, 2001, Liberty National knew and should have known that a claimant's lack of notice of his claim would not save his claim from the bar of the rule of repose. In several ways Liberty National (Hudson) reveals this state of knowledge in Liberty National.
First, Liberty National (Hudson) cites the case of Moore v. Liberty National Insurance Co.,
Second, in Liberty National (Hudson) itself, the Oehmig v. Johnson statement that "[t]he time for the rule of repose cannot run until there is at least constructive notice of a potential claim" did not deter Liberty National from invoking the rule of repose to bar the claims against Liberty National, even though the plaintiffs suing Liberty National in that case were, like the plaintiff suing Liberty National in the case now before us, claiming lack of notice or discovery of their own claims. The discussion of the rule of repose in Liberty National (Hudson) bespeaks that the parties to that case had already joined issue on the question of whether those plaintiffs' lack of notice or discovery of their own claims would savе them from the rule of repose. Only after Liberty National had invoked the rule of repose notwithstanding those plaintiffs' lack of notice or discovery did this Court issue the Liberty National (Hudson) opinion "abrogating" (as Liberty National now says) the Oehmig v. Johnson language about notice. In the case now before us Liberty National could have and should have timely invoked the rule of repose just as it did in Moore v. Liberty National and Liberty National (Hudson), notwithstanding the language about notice in Oehmig v. Johnson, which preexisted all three casesMoore v. Liberty National, Liberty National (Hudson), and the case now before us.
Third, Liberty National (Hudson) cites precedents which predate April 3, 2001, *959 when Liberty National filed its answer in the case now before us, and which refute the notion that a claimant's lack of notice or discovery of his own claim would save it from thе rule of repose. Liberty National (Hudson) cites Boshell v. Keith,
Fourth, Liberty National (Hudson) dismisses the notice language in Oehmig v. Johnson as mere "dicta" "which was not supported by citation to any authority."
Finally, the discussion of the rule of repose in Liberty National (Hudson) is itself dictum. Thus it could not change the law and thereby provide Liberty National with any basis for claiming that Liberty National was timely invoking a new rule by pleading the rule of repose after the issuance of Liberty National (Hudson).
The foregoing discussion demonstrates that, when Liberty National first answered on April 3, 2001 in the case now before us, Liberty Nationаl was already an old hand at invoking the rule of repose against plaintiffs who lacked notice or discovery of their own claims. Liberty National had already so defended itself both before Oehmig v. Johnson in Ballenger v. Liberty National and after Oehmig v. Johnson in Moore v. Liberty National and in Liberty National (Hudson).
On April 3, 2001, Liberty National was on notice of the law which not only allowed but also required that Liberty National then plead the rule of repose against Mr. Deas in order to preserve the bar to his claims. Liberty National cannot rightly claim that Liberty National (Hudson) was its epiphany on the topic of notice and the rule of repose, or is its salvation for its failure to plead the rule of repose timely in its original answer of April 3, 2001.
In Rector, supra, the plaintiff sought to amend her complaint seven months after she had filed it but some time before the defendant filed its motion for summary judgment. In the case now before us, Liberty National sought to amend its answer nearly twelve months after Liberty National had filed it and one month after Liberty National had filed its motion for summary judgment, which is still pending. In approving the trial judge's disallowance *960 of Rector's amendment, the Rector Court reasoned:
"In Boros v. Baxley,621 So.2d 240 (Ala. 1993), we explained:
"`Although Rule 15(a) itself calls for liberal amendment, this Court has held consistently that "the grant or denial of leave to amend is a matter that is within the discretion of the trial court and is subject to reversal on appeal only for an abuse of discretion."'
"621 So.2d at 245 (citations omitted). Thus, `Rule 15, [Ala. R. Civ. P.], is not carte blanche authority to amend a complaint at any time.' Stallings v. Angelica Uniform Co.,388 So.2d 942 , 947 (Ala. 1980) (quoting Stead v. Blue Cross-Blue Shield of Alabama,294 Ala. 3 , 6,310 So.2d 469 , 471 (1975)). `[U]ndue delay in filing an amendment, when it could have been filed earlier based on the information available or discovеrable, is in itself ground for denying an amendment.' Puckett, Taul & Underwood, Inc. v. Schreiber Corp.,551 So.2d 979 , 984 (Ala.1989). `[I]f the court determines... that a party has had sufficient opportunity to state a claim ... but has failed to do so, leave to amend may properly be denied.' Walker v. Traughber,351 So.2d 917 , 922 (Ala.Civ.App. 1977)."
What is sauce for the goose is sauce for the gаnder. The trial judge in the case now before us did not exceed his discretion in denying, on the ground of undue delay, the March 21, 2002 motion filed by Liberty National seeking leave to amend its answer. Thus, I respectfully submit that we should deny the writ.
LYONS, J., concurs.
NOTES
Notes
[1] In Ex parte Liberty National, we discussed the history of the rule of repose and returned, through clarification, to the traditional meaning of the rule; namely, that "the 20-year period begins to run against claims the first time those claims could have been asserted, regardless of the claimant's notice of а claim."
[2] See Harkins & Co. v. Lewis,
[3] A comparison of the language of Rule 15 "and leave shall be given only upon a showing of good cause"with the alternative phrase "and leave shall be given upon a showing of good cause" demonstrates the point.
[4] In Ex parte Liberty National,
"This statement, which was not supported by citation to any authority, is inconsistent with the well-established understanding of the rule of repose described above. Furthermore, Oehmig was not decidеd on the basis of this incorrect statement; rather, Oehmig was decided on the basis that the rule of repose could not be used offensively (in a manner similar to the concept of adverse possession) `against one with valid record title by one who clearly does not have title' in order to divest the title owner of property.
[5] Rector seems to conflict with Poston v. Gaddis,
