On December 20, 2016, the Supreme Court of Wyoming issued an opinion in favor of Trefren Construction Co. in Trefren Construction Co. v. V&R Construction, LLC et al., 386 P.3d 317, 2016 WY 121 (Wyo. 2016). The opinion is available here. Andrew A. Irvine, P.C, represented plaintiff-appellant Trefren Construction.
Trefren Construction appealed the District Court of Lincoln County’s denial of its motion to amend its complaint and substitute the real party in interest, as well as the District Court’s grant of summary judgment to Defendants-Appellees, V&R Construction, LLC, and Cocca Development, Ltd. Upon review, the Supreme Court found “the district court erred in dismissing the complaint for lack of subject matter jurisdiction, abused its discretion in denying the motion to substitute, and erred in prematurely ruling on the merits of the parties’ contract claims.” Trefren Construction Co., 386 P.3d at 318. As a result, the Supreme Court reversed the district court’s decision and remanded the case for further proceedings in accordance with its opinion. Also, on January 24, 2017, the Supreme Court awarded costs to Trefren Construction and issued a mandate reversing the district court’s decision.
The Supreme Court’s opinion is especially significant with respect to the application and scope of W.R.C.P. Rule 17(a) concerning the real party in interest, but the Court’s opinion is also significant with respect to application of Rule 15(a), concerning the amendment of a complaint, and Rules 21 and 25 concerning the substitution of parties.
Trefren Construction filed its complaint in the district court against V&R Construction and Cocca Development on September 19, 2014 to collect amounts owed by V&R and Cocca for work completed by Trefren Construction on a new Shopko store in Afton, Wyoming. Id. at 319. V&R and Cocca filed and answer and the litigation proceeded through discovery. Id. During discovery, however, on April 23, 2015, Mr. Timothy N. Trefren, the owner of Trefren Construction, died after a long battle with cancer. Id. at 318, 321.
At some point following Mr. Trefren’s death, V&R and Cocca discovered that Mr. Trefren had operated Trefren Construction as a sole proprietorship and not as a Wyoming corporation as stated in Trefren Construction’s complaint. Id. at 319-20. As a result, immediately following an unsuccessful mediation and with a trial date scheduled for January 19, 2016, V&R and Cocca on November 20, 2015 filed a motion to dismiss the case, arguing that because Trefren Construction was not a valid Wyoming corporation when the complaint was filed, the case could not proceed because there was no real party in interest as plaintiff. Id. at 320.
Three days later, on November 23, 2015, Trefren Construction motioned the district court to substitute the Estate of Timothy Nelson Trefren as the real party in interest in the case, acknowledging that Trefren Construction Co. had been operated as a sole proprietorship and, as a result, the assets and liabilities of Trefren Construction had been transferred to the Estate, thereby making the Estate the new real party in interest. Id. V&R and Cocca opposed substitution of the Estate and requested that the district court vacate the scheduled trial date and order further briefing on V&R and Cocca’s motion to dismiss. Id. at 320-21.
Through further briefing, Trefren Construction argued that “whether viewed singularly or in combination, [W.R.C.P.] Rules 17(a), 21, 25 and 15(a) ‘readily allow the substitution of The Estate of Timothy N. Trefren as the real party in interest in this case.’” Id. at 321. Meanwhile, V&R and Cocca argued that they would be prejudiced if the case proceeded with the Estate as the real party in interest. Id.
In reviewing the parties’ briefs, the district court did not address Trefren Construction’s arguments that substitution of the Estate was proper under Rules 17(a), 21 and 25(c). Instead, the district court focused solely on Rule 15(a) concerning amendment of a complaint and Rule 25(a) concerning substitution upon the death of a party. Id. The district court deemed Trefren Construction’s motion to amend its complaint untimely and further determined that amendment would not serve the interests of justice. Id. In addition, focusing on Trefren Construction as a Wyoming corporation and not as a sole proprietorship, the court found Rule 25(a) inapplicable because no party to the action had died. Id.
With respect to the real party in interest question, the district court found that because there was no existing Wyoming corporation by the name of Trefren Construction Co., the named plaintiff was a non-existent entity and could not be the real party in interest. Id. at 322. The district court concluded that because the named plaintiff was not the real party in interest, the complaint had to be dismissed for lack of subject matter jurisdiction. Id. The court then turned to an analysis of the enforceability of the parties’ contracts and determined that because Trefren Construction Co. was named in the contracts and was not, in fact, a Wyoming corporation, the contracts were voidable. Id.
On February 9, 2016, the district court entered an Order Denying Motion for Substitution of Party, Denying Motion for Leave to Amend Complaint, and Granting Defendants’ Motion for Summary Judgment. Id. at 321. Trefren Construction timely appealed the district court’s order. Id. at 322.
On appeal, Trefren Construction argued that the district court’s ruling, which suggested that dismissal must follow when an action is not brought in the name of the real party in interest, was contrary to the plain terms of Rule 17(a). Id. at 325. The Supreme Court agreed. Id. The Supreme Court recognized, “Rule 17(a) directs that ‘[n]o action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest.’” Id. (citing W.R.C.P. 17(a)). Thus, the Supreme Court concluded, “not only does Rule 17(a), but its plain terms, not mandate dismissal when an action is not prosecuted in the name of the real party in interest, but it expressly requires the opposite—that the court allow a reasonable time to cure the defect through ratification, joinder or substitution.” Id.
The Supreme Court further stated, the fact the named plaintiff (Trefren Construction) was not a Wyoming corporation with the capacity to sue at the time it filed its lawsuit against V&R and Cocca “had no bearing on the requirement that a reasonable time be allowed for substitution.” Id. Substitution remained “an available mechanism to cure the defect in naming the real party in interest.” Id. As a result, based on the plain terms of Rule 17(a), and further analysis of related federal case law, the Supreme Court held, “Rule 17(a) did not mandate dismissal.” Id.
Next, the Supreme Court considered the “district court’s determination that dismissal was required because the real party in interest requirement is jurisdictional.” Id. The Supreme Court recognized that, in conflict with Rule 17(a), previous cases had held that the real party in interest requirement was jurisdictional. Id. (citations omitted). More recent cases, however, suggested that the requirement was not jurisdictional. Id. (citations omitted). The Supreme Court resolved this conflict by holding, consistent with the Court’s more recent decisions, “that the real part in interest requirement is not jurisdictional.” Id. The Supreme Court specifically overruled the previous cases holding otherwise. Id. at 326.
Having determined that neither Rule 17(a) nor jurisdictional limits mandated dismissal of Trefren Construction’s complaint, the Court next addressed whether the district court abused its discretion in denying Trefren Construction’s motion to substitute the real party in interest. Id. at 326. Because Trefren Construction invoked Rule 17(a) to substitute the Estate of Timothy N. Trefren, in addition to Rules 15, 21 and 25, and “Rule 17 is the controlling rule with respect to a real party in interest analysis,” the Supreme Court first reviewed the district court’s Rule 17 ruling rather than the district court’s rulings on Rules 15 and 25. Id. at 326-27.
First, the Supreme Court reviewed the district court’s finding that “[t]he time that has lapsed from when this action was filed until mediation failed and the motion to dismiss or for summary judgment was filed was more than a reasonable amount of time for the real party in interest to ratify, join, or seek substitution as the Plaintiff in this matter pursuant to Rule 17.” Id. at 327. With respect to the timeliness of Trefren Construction’s motion to substitute, the Supreme Court agreed with Trefren Construction’s argument that the district court measured the delay in filing the motion to substitute from the wrong date. Id.
The Supreme Court provided, “Rule 17(a) requires that an action not be dismissed ‘until a reasonable time has been allowed after objection’ for substitution of the real party in interest.” Id. (citing W.R.C.P. 17(a) (emphasis in original)). As result, the Supreme Court held that the district court erred “in measuring the delay from the date the action was originally filed, rather than from the date on which [V&R and Cocca] made their real party in interest objection.” Id. The properly measured delay of three days from the time V&R and Cocca made their objection (November 20, 2015) until Trefren Construction filed its motion to substitute (November 23, 2015) “was not unreasonable.” Id.
Second, the Supreme Court considered whether Trefren Construction’s naming of the plaintiff was an “honest mistake” and whether V&R and Cocca would be prejudiced by substitution. Id. at 327-28. The Court found that there was no evidence that Trefren Construction’s naming was anything but an “honest mistake,” and, further, there was no showing of prejudice. Id. The Supreme Court noted that upon substitution of the Estate, the case would remain the same in most particulars and any necessary additional discovery or amendments to pleadings could be readily handled by the district court. Id. at 328. The Court thus concluded, “the district court abused its discretion under Rule 17(a) when it denied Trefren Construction’s motion to substitute the Estate as the real party in interest.” Id.
Finally, with regard to the district court’s grant of summary judgment on contract enforceability, the Supreme Court found the district court’s ruling fundamentally flawed because V&R and Cocca had not even moved for summary judgment “on the ground that the parties’ contracts were voidable and they submitted no evidence on that question.” Id. at 329. In following, “Trefren Construction had no notice that a claim that the parties’ contracts were voidable would be considered by the district court as a basis for entering an order of summary judgment in favor of [V&R and Cocca].” Id. V&R and Cocca did not make a prima facie showing that the parties’ contracts were voidable and Trefren Construction was under no obligation and “had no opportunity or reason to submit evidence defending against an allegation that it represented itself as a corporation during contract negotiations.” Id. 329. Based on these findings, the Supreme Court held, “[t]he district court’s summary judgment ruling that the contracts were voidable, was thus procedurally infirm and unsupported by a showing of undisputed material facts.” Id.
In conclusion, the Supreme Court provided: “[w]e concluded that the district court erred in dismissing the complaint for lack of subject matter jurisdiction, and in so ruling, we overrule our prior decisions holding that the real party in interest requirement is jurisdictional. We further conclude that the district court abused its discretion in denying Trefren Construction’s motion to substitute and erred in granting summary judgment to [V&R and Cocca] on the enforceability of the parties’ contract claims.” Id. The Supreme Court reversed the district court’s order and remanded the case for proceedings in accordance with the Court’s holdings. Id. As a result, the case is again before the District Court of Lincoln County, and Trefren Construction is allowed to proceed in collecting the amounts owed by V&R and Cocca.