Lead Opinion
. Edward W. Brice, Jr., Paul Goodrich, and Joseph Timilty (collectively referred to as “defendants”) appeal a judgment of the United States District Court
I. Facts
In 1981, Tower Village Nursing Care Center, Inc. (“Tower Village”), sought to renovate a hospital in St. Louis, Missouri, and operate it as a nursing home. After Tower Village ran into financial difficulties, its general contractor, SPCM, sued Tower Village and various state and federal government agencies which provided financing for the renovation. SPCM’s lawsuit was settled after extensive negotiations, and a Memorandum of Agreement was executed on March 13, 1985 (Separate Appendix for Appellee at 27-32). Under the agreement, Lexington Management Co. (“Lexington”) was to lease the nursing home from Tower Village, the Missouri Housing Development Commission (“plaintiff”) was to make a loan to Tower Village, Tower Village was to execute a note to plaintiff, and Lexington’s principals, Edward W. Brice, Jr., Paul Goodrich, and Joseph Timilty, all Massachusetts residents, were to guaranty the note. The SPCM lawsuit was filed in St. Louis, and
Pursuant to the agreement, Tower Village executed a note to plaintiff for $1.95 million in principаl plus 11% interest on any unpaid balance. Defendants’ guaranty covered all interest and $950,000 of the principal. The guaranty agreement also provided that all payments were to be made in Kansas City, Missouri, and contained a forum selection clause providing that if defendants were sued based on the guaranty agreement, the suit was to be in Missouri. Kansas City is in the Western District of Missouri, while St. Louis is in the Eastern District of Missouri.
Tower Village quickly defaulted on the note, and plaintiff filed this action to enforce the guaranty in federal district court in the Eastern District of Missouri. Defendants moved to dismiss on the ground that the Western District of Missouri was the only appropriate venue. The district court denied the motion, on the basis that the Eastern District had “the greater weight of contacts” with this case. Missouri Housing Development Corp. v. Brice, slip op. at 3-4 (Jan. 12, 1987) (order denying motion to dismiss for improper venue) {Brice I). Defendants then filed an answer, in which they admitted having executed the guaranty-
Plaintiff then moved for summary judgment. After defendants responded to plaintiff's motion, Lexington’s lease was terminated as part. of an agreement between Lexington and the U.S. Department of Housing and Urban Development. Missouri Housing Development Corp. v. Brice, slip op. at 2-3,
While the cross-motions for summary judgment were pending, Timilty denied signing the guaranty in his answers to plaintiff’s request for admission and interrogatories and during his deposition. On the other hand, defendants’ own memorandum in support of their motion for summary judgment continued to assert that they had signed the guaranty (Separate Appendix for Appellee at 85).
After the district court granted plaintiff’s motion for summary judgment, defendants moved to amend the order of judgment to delete Timilty’s name, on the ground that Timilty had not signed the guaranty agreement. The district court denied this motion based on defendants’ admission in their answer that they had signed the guaranty. The district court later entered a separate order setting plaintiff’s damages at slightly over $1.57 million.
On appeal, Brice and Goodrich argue that (1) venue in the Eastern District of Missouri was improper and (2) they are not liable under the guaranty agreement because HUD rather than defendants terminated Lexington’s lease. Timilty appeals separately on the ground that he did not sign the guaranty agreement.
II. The Brice/Goodrich Appeal
A. Venue
Under 28 U.S.C. § 1391(a) (1988), venue in diversity cases lies “in the judicial district where all plaintiffs or all defendants reside, or in which the claim arose.” Defendants reside in Massachusetts, while plaintiff is located in Jefferson City, Missouri, a city in the Western District of Missouri. Thus, plaintiff may establish
The district court initially noted that both the Eastern and Western Districts were proper venues, because “there will be occasions when more than one district may serve as a proper venue,” Brice I, slip op. at 3, citing Leroy v. Great Western United Corp.,
On appeal, defendants argue that (1) in contract cases, all claims arose at the place of performance regardless of the weight of plaintiff’s other contacts, and (2) in the present case, the weight of the contacts was clearly in the Western District.
1. What Test Applies?
The first question the court must address is what test should be used in determining where plaintiffs claim arose. The Supreme Court has stated that:
the broadest interpretation of the language of § 1391(b) that is even arguably acceptable is that in the unusual case in which it is not clear that the claim arose in only one specific district, a plaintiff may choose between those two (or conceivably more) districts that with approximately equal plausibility — in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff) — may be assigned as the locus of the claim.
Leroy,
Plaintiff argues that we should apply the “weight of the contacts” test enunciated in Broadcasting. Defendants argue, by contrast, that none of the post-Leroy tests are applicable in breach of contract actions and that contract claims always arise at the place of performance. Thus, we must consider (1) whether Leroy and later cases are applicable to contract actions and (2) if so, which of the various tests should be adopted.
a) Venue in Contract Cases
Defendants argue that under Eighth Circuit precedent, “the jurisdiction where performance of a contract is expected is a place in which contractual claims arise.” In re Nine Mile Ltd.,
In Nine Mile, the plaintiffs filed suit in Iowa for breach of contract and the district court transferred the case to South Carolina because the contract was to be performed there. We affirmed, holding that “the jurisdiction where performance of a contract is expected is a place in which contractual claims arise,”
In Gardner, a contractor sued a subcontractor for anticipatory repudiation of a supply contract. The repudiation occurred in Illinois, while performance was to occur in Arkansas. The contractor brought suit in Arkansas, and the subcontractor alleged that venue was improper because the repudiation occurred in Illinois. We disagreed, holding that “the claim arose ... in the district in which a substantial part of the omissions giving rise to the claim occurred. ... [Tjhis presumably would be in the district whеre defendant omitted to perform his contract,”
to further the convenience of the parties, the primary purpose of the venue statutes, and to allow a suit to be brought at the place where the claim arose, which could include the place where the performance was to have taken place.... [The statute] is intended to expand the venue statute by placing venue, in addition to the residency of the parties, at the place where the claim of action arose, which can be construed in this case as the place where performance was to have taken place.
Id. (emphasis added). In sum, Gardner stands for two propositions: (1) venue is appropriate in any district in which “a substantial part of the omissions giving rise to the claim” occurred and (2) the district of performance can be one of those districts. This does not mean, however, that other places, such as the place of negotiation, cannot also have substantial contacts with the litigation.
We realize that other circuits have adopted defendants’ interpretation of Gardner and Nine Mile. See, e.g., Broadcasting,
Accordingly, we hold that although the place of performance is certainly relevant to any discussion of venue, venue in contract cases should be evaluated under the same tests applicable to non-contract diversity cases.
b) Venue Generally
As noted above, the Gardner and Nine Mile appear to have endorsed the “substantial contacts” test for determining where a claim arose. The “substantial contacts” rule, however, is no longer good law in the Eighth Circuit. In Maybelline Co. v. Noxell Corp.,
We reversed, holding that “we are not persuaded that Arkansas can be grouped with those few districts that constitute the locus of the claim.” Maybelline,
[i]n several pre-Leroy cases interpreting the “where the claim arose” lаnguage of 28 U.S.C. § 1391(a) (1982), this court found that venue was proper where a “substantial part of the [events or] omissions giving rise to the claim occurred.” Gardner Engineering Corp. v. Page Engineering Co.,484 F.2d 27 , 33 (8th Cir.1973); see Cochrane v. Iowa Beef Processors, Inc.,596 F.2d 254 , 261 (8th Cir.), cert. denied sub nom. Iowa Beef Processors, Inc. v. Hawkins,442 U.S. 921 ,99 S.Ct. 2848 ,61 L.Ed.2d 290 (1979). The “substantial part” test was also applied in one post-Leroy section 1391(a) case, in which the court noted in a footnote citation that Leroy was supportive of a position analogous to the contrary of the court’s position. In re Nine Mile Ltd.,692 F.2d 56 , 60 & n. 6 (8th Cir.1982) (per curiam). [Plaintiff] argues that the substantial part test is applicable here and has not been altered by Leroy. The district court found that venue was proper under either standard. We conclude that we must follow the Supreme Court’s interpretation of section 1391(b) in Leroy in our review of this section 1391(b) issue, and thus Leroy represents the correct standard for dеtermining whether [plaintiff’s] claim arose in the Eastern District of Arkansas.
Id. at 906 n. 8. This footnote suggests that the “substantial contacts” test is inconsistent with Leroy and that the “weight of the contacts” test should be applied.
The case of Bredberg v. Long,
Accordingly, we hold that under Bred-berg and Leroy, a claim arises for venue purposes at the location of the “weight of the contacts.”
c) Weight of Contacts
Defendants argue that plaintiff’s claim arose in the Western District because if the contract was to be performed in the Western District, the breach itself (Tower Village’s default) occurred in that district. Plaintiff argues that its claim arose in the Eastern District because (1) the nursing home leased by Lexington is located in the Eastern District, (2) the negotiations for the guaranty agreement occurred in the Eastern District, and (3) the guaranty was part of a settlement of the SPCM case, which was pending in the Eastern District.
Although the question is an extremely close one, we agree with thе district court’s holding that the preponderance of contacts is in the Eastern District of Missouri and that plaintiff’s claim arose in that district. Until defendants actually signed the guaranty agreement, all activity related to the agreement (including the SPCM lawsuit and related negotiations) occurred in the Eastern District. Furthermore, defendants executed the guaranty so that they could lease a nursing home located in the Eastern District. By contrast, the Western District’s major link with this case is that defendants were required to mail their checks to Kansas City. See Zumft v. Doney Slate Co.,
B. Summary Judgment
In their motion for summary judgment, defendants argued that the termination agreement constituted “a termination by HUD” within the meaning of the guaranty agreement, and therefore released defendants from all liability. The district court rejected this argument, holding that “the language of the October 9, 1987, agreement makes clear that HUD did not terminate whatever lease may have been in effect at the time, but rather consented to Lexington’s termination of its tenancy in the premises.” Brice II, slip op. at 3. The district court also relied on the affidavit of Kenneth Lange, the St. Louis manager of HUD, which stated that the agreement “was intended to foreclose any interpretation that HUD was terminating Lexington’s lease.” (Separate Appendix for Appellee at 97.) On appeal, defendants argue that the guaranty agreement’s termination provision includes mutual as well as unilateral termination. Defendants also note that guaranty clauses should be construed in favor of the guarantors.
Under Fed.R.Civ.P. 56(c), summary judgment should be granted only if “thеre is no genuine issue of material fact and ... the moving party is entitled to a judgment as a matter of law.” For the reasons stated below, we agree with the district court that the lease was terminated by Lexington and not by HUD, and with its holding that summary judgment for the plaintiff was appropriate.
The guaranty provides that:
The Guarantors’ liability hereunder for both principal and interest on the Note shall terminate in the event that the Lease entered into by and between Lexington Management Company, Inc. for the Northview Village Nursing Center [formerly known as the Tower Village Nursing Care Center] located at 2415 North Kingshighway Boulevard, St. Louis, Missouri (“project”) is terminated by Creditor [MHDC] or the Secretary of the United States Department of Housing аnd Urban Development or his successors (“HUD”) for any reason other than a material default under the Lease as determined by a court of competent jurisdiction.
Brice II, slip op. at 2 (emphasis added). Lexington’s lease was terminated on October 9, 1987, by an agreement between HUD and Lexington. The termination agreement states that:
1. Lexington agrees to relinquish voluntarily its interests in the aforementioned Lease and the Addendum thereto as well as any rights to purchase owner’s real estate....
2. In consideration of Lexington’s promises, releases, and actions described in paragraph 1, hereof, HUD agrees to permit Lexington to terminate or have terminated its interest in the Leаse and Addendum thereto and its tenancy of Northview Village Nursing Center without further liability on the part of Lexington to HUD for any acts which occurred prior to February 14, 1984 or on or after October 8, 1987....
3. In consideration of Lexington’s promises, releases, and actions as described in paragraph 1 above including waiver of its rights under Section 441.060, R.S.Mo. 1986, [termination of tenancy at will, sufferance or month to month tenancy] HUD agrees to the termination on or before October 7, 1987, of any Lease entered into by and between Tower and Lexington for the Northview Village Nursing Center, including those dated April 13, 1984, and the First Amendment to Lease for the sole reason to permit HUD to take clear title, possеssion andcontrol of the property and not for any other reason.
Id. at 3.
As noted above, the termination agreement states that “HUD agrees to permit Lexington to terminate or have terminated its interest in the Lease,” Id. This language is unambiguous and shows that the lease was terminated by Lexington and not by HUD. Furthermore, Kenneth Lange’s affidavit clearly shows that the parties to the termination agreement intended it to mean that Lexington rather than HUD was terminating the lease. See United States Suzuki Motor Corp. v. Johnson,
III. The Timilty Appeal
As noted above, all defendants originally admitted in their answer and memorandum in support of summary judgment that they signed the guaranty agreement, but Timilty later repudiated this admission in his depositions and discovery responses. Tim-ilty did not, however, bring the repudiation of his answer to the district court’s attention before the cross-motions for summary judgment were decided. Instead, he waited until after the district court granted plaintiff’s summary judgment motion and filed a separate motion to amend his answer and the judgment. The district court denied the motion, based on the rule that “[ajdmissions contained within an answer are binding and conclusive.” Brice III, slip op. at 2. On appeal, Timilty argues that (1) the district court erred in granting summary judgment against him and (2) the district court abused its discretion in denying his motion to amend the judgment.
A. Summary Judgment
Timilty argues that the district court erred in granting summary judgment against him, for two reasons. First, he argues that an admission in an answer is not binding where, as here, it has been rebutted by other evidence of record, and the district court should therefore have considered his deposition and discovery responses. Second, Timilty argues that even if his answer was originally binding, plaintiff effectively waived its right to rely on the answer by asking him about his authorship of the guaranty in interrogatories, a deposition, and a request for admissions. These questions will be addressed in turn.
1. Is Timilty’s Answer Binding?
As a rule, “[ajdmissions in the pleadings ... are in the nature of judicial admissions binding upon the parties, unless withdrawn or amended.” Scott v. Commissioner,
The case of Davis v. A.G. Edwards & Sons, Inc.,
The Fifth Circuit affirmed. The court initially admitted that “[an individual plaintiff’s] statement in the affidavit certainly conflicts with the [plaintiffs’] earlier statements in their complaints.” Id. The court went on to hold, however, that “this factual dispute does not render summary judgment inappropriate. Irrespective of which document contains the more accurate accounts, the [plaintiffs] are bound by the admissions in their pleadings, and thus no factual issue can be evoked by comparing their pleadings with [the] affidavit.” Id. at 108. Thus, Davis stands for the proposition that even if the post-pleading evidence conflicts with the evidence in the pleadings, admissions in the pleadings are binding on the parties and may support summary judgment against the party making such admissions.
We find the Davis court’s reasoning to be highly persuasive,
2. Rule 15(b)
Fed.R.Civ.P. 15(b) provides that “[w]hen issues not raised in 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.” Timilty argues that because plaintiff raised “execution of the Guaranty as an issue throughout discovery and long after the answer to the Complaint was filed ... [that issue] was litigated ‘by express or implied consent of the parties,’ ” Brief of Appellаnt Joseph Timilty at 15. Thus, the question presented is whether, under Rule 15(b), a party has “tried” the validity of an opposing party’s admissions merely by asking about those admissions in a discovery proceeding.
Although we have found no ease directly on point, we hold that such discovery inquiries do not amount to “implied consent”
Accordingly, we hold that plaintiff did not waive its right to rely on Timilty’s admissions.
B. The Motion to Amend
Even an obviously binding admission, of course, may be amended under Fed.R.Civ.P. 15. After the district court granted plaintiff’s motion for summary judgment, Timilty unsuccessfully moved to amend the judgment and his answer to reflect his contention that he did not sign the guaranty. On appeal, Timilty argues that the district court abused its discretion by denying the motion to amend. For the reasons stated below, we disagree.
Under Fed.R.Civ.P. 15(a), an amendment to an answer “clearly will not be allowed when the moving party has been guilty of delay in requesting leave to amend and, as a result of the delay, the proposеd amendment, if admitted, would have the effect of prejudicing another party to the action.” 6 Wright & Miller § 1488, at 659-62 (2d ed. 1990).
In this case, Timilty is clearly guilty of delay, and plaintiff has clearly been prejudiced by such delay. Although Timilty stated in a deposition prior to summary judgment that he never signed the guaranty, the district court correctly noted that “this point was not raised prior to summary judgment nor was a request made to amend defendants’ answer despite the fact that this deposition was taken over three months prior to the Court’s ruling on the summary judgment motion.” Missouri Housing Development Corp. v. Brice, slip op. at 2,
Notes
. The Honorable Stephen N. Limbaugh, United States District Judge for the Eastern District of Missouri.
. The district court also rejected defendants' defenses of impossibility and frustration of purpose.
. Defendants also raise two other arguments; each is without merit. First, defendants argue that the place of performance is dispositive under Missouri law. It is well settled, however, that "the determination of where 'the claim arose’ for purposes of federal venue under § 1391 is a federal question whose answer depends on federal law." Leroy v. Great W. United Corp.,
Second, defendants claim that even under Leroy, there will usually be only one district where venue is proper. We have held, however, that "a claim may arise in more than one district for [venue] purposes." Bredberg v. Long,
. Under the "substantial part” test, venue is appropriate in any district in which "a substantial part of the events or omissions giving rise to the claim occurred.” Cochrane,
. We note in passing that we have found no post-Mwe Mile cases in this circuit which address the impact of Leroy on venue in contract cases.
. Because the Maybelline court considered only the three factors listed in Leroy (location of witnesses, location of evidence, and convenience of defendants), it could be argued that Maybelline implicitly repudiated Bredberg. See Maybelline Co. v. Noxell Corp.,
. We therefore need not address plaintiffs argument that defendants waived all objections to venue by consenting to be sued in Missouri.
. We therefore need not address plaintiffs contention that even if the termination agreement released defendants from post-termination liability, it did not release defendants from debt incurred prior to October 9, 1987.
. We note in passing that Timilty has distinguished the cases cited by the district court and by plaintiff. We hold, however, that the distinctions between such сases and the present case do not apply to Davis. See Mikulecky v. Marriott Corp.,
. It follows that we neеd not address plaintiffs contention that even if Timilty’s discovery responses would otherwise have precluded summary judgment, the district court correctly refused to consider the responses because defendants failed to mention them in their memoran-da.
. Indeed, one circuit has held that Rule 15(b) may not be used to amend otherwise binding admissions even if contrary evidence was introduced at trial. See Lucas v. Burnley,
. We note that the cases cited by Timilty are easily distinguishable. See Gutting v. Falstaff Brewing Corp.,
Concurrence Opinion
concurring in part and dissenting in part.
In my view, the district court erred in denying defendant Timilty’s motion to amend the judgment and his answer to reflect his contention that he did not sign the guaranty.
Rule 15 of the Federal Rules of Civil Procedure states unequivocally that leave to amend a pleading ‘‘shall be freely given whеn justice so requires.” Fed.R.Civ.P. 15(a). The liberal allowance of amended pleadings “provide[s] maximum opportunity for each claim to be decided on its merits rather than on procedural technicalities.” 6 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 1471, at 505-06 (2d ed. 1990). The Supreme Court has stated:
In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave should, as the rules require, be “freely given.”
Foman v. Davis,
The district court denied Timilty leave to amend based on the “unjust hardship” an amended answer would work on the plaintiff, “who was placed on notice that the validity of all of the defendants’ signatures to the guaranty was not at issue.” On the contrary, Timilty denied signing the guaranty in his answers to plaintiff’s request for admissions and interrogatories and during his deposition. He also presented deposition testimony of an expert witness who testified that Timilty’s signature had been forged. The plaintiff therefore had notice that Timilty denied signing the guaranty before the district court granted summary judgment.
Although Timilty should have filed his motion to amend promptly after the interrogatories were answered and his deposition filed, his delay did not cause the plaintiff undue prejudiсe. The plaintiff was aware of Timilty’s defense of forgery when it raised the issue of the guaranty’s execution in discovery. In fact, the plaintiff had taken steps to refute the defense. The plaintiff does not allege that witnesses are no longer available, that witnesses’ recollections would be dimmed by the delay, or that it would be otherwise harmed by the delay. Of course, the plaintiff would be required to go to trial on this issue of whether Timilty signed the guaranty, but this is not the type of prejudice recognized by law. Timilty is entitled to have this disputed issue resolved at trial. To deprive him of this opportunity is to deny him simple justice.
Accordingly, I concur in the opinion in all respects but one: I would reverse the denial of Timilty’s motion to amend his answer and remand to the district court with directions to it to give Timilty the opportunity to amend his answer and to have the disputed issue tried.