§ 562.04

BRIDGEWATER TELEPHONE COMPANY, INC. v. City of Monticello · 2009 2 citations

Bridgewater argues that because a portion of the revenue raised from the bond sales will be placed in an operating reserve fund and used to pay some current expenses associated with the project,2 issuance of the bonds violates Minn. Stat. § 475.52, subd. 1. The district court determined that the current-expenses prohibition does not apply to bonds issued pursuant to the “utility or other public convenience” clause. The district court further concluded that the expenses contemplated by Bridgewater were actually start-up costs, and not current expenses, and therefore did not violate the statute under any interpretation. The district court concluded, and Montieello agrees, that Minn. Stat. § 475.52, subd. 1 allows for the bonds to be used to pay current expenses. The last sentence of the statute provides: “Without limitation by the foregoing the city may issue bonds to provide money for any authorized corporate purpose except current expenses.” Minn. Stat. § 475.52, subd. 1. According to Montieello, under a plain reading of this sentence, it appears that only revenue obtained pursuant to any corporate purpose is prohibited from being applied to current expenses. As the district court stated: “The last clause of the second sentence only limits the first clause of the second sentence.” We disagree. This court finds Bridgewater’s reading of the statute more convincing. The statute should be read so as to give effect to all provisions. Am. Family Ins. Group v. Schroedl, 616 N.W.2d 273, 277 (Minn.2000). The second sentence begins with the language “[wjithout limitation by the foregoing.” This language explains that the catchall provision in the second sentence is not limited by the prior delineation of specific proper uses. The second sentence goes on to state that “the city may issue *914bonds to provide money for any authorized corporate purpose except current expenses.” (Emphasis Added.) A plain reading of this sentence indicates that the bonds may be issued for any corporate purpose, without limitation by the specific grants of power from the first sentence; however, in no event shall any bond money be used to pay current expenses. Therefore, under this plain reading of the statute, Monticello would be overstepping its boundaries if it were to use bond money to pay current expenses. Monticello argues that the operating reserve fund is being used to fund start-up costs, which are necessarily incurred until the project begins to generate baseline income, not current expenses. We agree. The district court relied on the fact that the operating reserve fund would only exist for three years to support its conclusion that the fund was to be utilized for start-up costs, not current expenses.3 Furthermore, Monticello is permitted to use funds allocated to the Operating Reserve Fund as an implied power to be used in carrying out an expressly authorized power. See, e.g., Otter Tail Power Co. v. Village of Wheaton, 235 Minn. 123, 49 N.W.2d 804, 810 (1951) (finding that “authority so granted must include every essential step in the process by which a building once begun-and however it may have been begun-can be carried to completion where its public use becomes an accomplished fact”) (quotation omitted). In the indenture,4 Monticello clarified how the operating funds would be used. At any time prior to the occurrence of an Event of Default hereunder amounts on deposit in the Operating Reserve Fund shall be disbursed by the Trustee in accordance with a City Request for: (1) costs of operating and maintaining the Facilities for an initial start-up period, not to exceed the period ended June 1, 2011, or such shorter period ending on the date operating revenues of the Facilities exceed operating costs (exclusive of depreciation and amortization) or (2) nonrecurring costs incurred prior to June 1, 2011, directly associated with the implementation of the Facilities.... Any funds remaining in the Operating Reserve Fund on June 1, 2011, shall be transferred to the Surplus Fund. Bridgewater argues that the indenture contains proof that Monticello intended to use the bond payments to pay current expenses. The indenture defined operating and maintenance expenses to include “any other current expenses or obligations required to be paid by the city.” This is relevant, according to Bridgewater, because the operating reserve fund, according to the preliminary offering statement, shall be used for the payment of operation and maintenance expenses. Nonetheless, Monticello’s focus on the three-year start-up period and its clarification that the operating reserve fund will be used to pay “nonrecurring” costs is sufficient for this court to conclude that the bond proceeds were not being inappropriately used to pay current expenses. Moreover, the costs in question, which total $1.25 million, are ap*915proximately 4.9% of the total cost of the project, which is $25.68 million. A telecommunications project is inherently different from the building of a park or a museum. Therefore, it is only reasonable to expect that the associated start-up costs will be dissimilar as well. We find nothing in the record to indicate that the money in the operating reserve fund will be used for anything other than start-up costs.5 II. The district court did not abuse its discretion by refusing to allow Bridgewater to amend its complaint. Bridgewater argues that the district court abused its discretion by refusing to allow it to twice amend its complaint. The district court denied Bridgewater leave to file the first amended complaint because the new factual allegations could not change the fact that Monticello was statutorily authorized to issue the revenue bonds. The district court denied Bridge-water leave to file a second amended complaint because permitting Bridgewater to add an additional claim for relief would have significantly delayed the matter and potentially harmed the public body. “The district court has broad discretion to grant or deny leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of that discretion.” State v. Baxter, 686 N.W.2d 846, 850 (Minn.App.2004) (citing Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993)). It does not appear that the district court abused its discretion in refusing to allow Bridgewater to amend its complaint. In the first amended complaint, Bridgewater sought to add additional facts clarifying that Monticello intended to use the bond revenue to pay current expenses and detailing the involvement of Hiawatha in the Fiber Project. Leave to amend pleadings should be freely granted unless it results in prejudice to the other party. Voicestream Minneapolis, Inc. v. RPC Properties, Inc., 743 N.W.2d 267, 272 (Minn.2008). Even if there is no prejudice to the nonmoving party, the court may also properly deny a motion to amend when it would serve no useful purpose. See Enroll v. Indep. Sch. Dist. No. 701, 399 N.W.2d 593, 594 (Minn.App.1987) (“The trial court properly denied appellant’s motion to amend his complaint when the amendment served no useful purpose and was merely a reiteration of claims in the original complaint.”), review denied (Minn. Mar. 25, 1987). Because the evidence presented in the first complaint was sufficient to conclude that the operating reserve fund was being used to pay start-up costs, not current expenses, allowing Bridgewa-ter leave to file its first amended complaint would not have served a purpose. Furthermore, the “public convenience” requirement in the statute did not prohibit Monticello from contracting with Hiawatha. Thus, evidence regarding this relationship would not change the fact that the bonds were issued pursuant to statutory authority. Because the first amended complaint would not have served a useful purpose and the ease would still have been properly dismissed, the district court did not abuse its discretion in denying Bridge-water’s motion to file its first amended complaint. The second amended complaint sought to add an additional claim for relief. As stated above, leave to amend pleadings *916should be freely granted unless it results in prejudice to the other party. Voicestream Minneapolis, 743 N.W.2d at 272. Generally, defending an additional claim is not sufficient prejudice to disallow amendment. See Hughes v. Micka, 269 Minn. 268, 275, 130 N.W.2d 505, 510 (1964). If the amendment will produce significant delay, however, it may be denied. Id. at 275-76,130 N.W.2d at 510-11. Time is of the essence in this litigation. See Minn. Stat. § 562.04 (2008) (“Whenever a bond has been required in any action under section 562.02, the court shall advance the case on its calendar for trial at the earliest feasible date, or the court may advance for trial only the issues which affect the public body.”). This additional claim would have produced significant delay.6 Bridgewater asserts that it was prejudiced by the denial of leave to amend because it will likely need to post a second surety bond to bring this claim as a separate action. But, as Monticello articulates, it is the prejudice to the nonmoving party that should be considered when assessing amended complaints, and the additional claim would have prejudiced Monticello by delaying its access to the proceeds of the bonds and impeding construction on the Fiber Project. In response, Bridgewa-ter argues that the district court could have directed final judgment as to the original complaint, which would have allowed for appeal of the original complaint’s dismissal, and then proceeded with the second amended complaint’s additional claim without requiring Bridgewater to file another lawsuit. This might have been an option. Nonetheless, the district court denied Bridgewater leave to file the second amended complaint, without ruling on the merits of the additional claim, and this was not an abuse of discretion. DECISION The Fiber Project qualifies as a public convenience, and therefore revenue bonds can be issued to finance its creation. Although Monticello cannot use the bond money to pay current expenses, the district court did not err in dismissing Bridgewater’s complaint because Monticello is using the operating reserve fund to pay start-up costs and not current expenses. Lastly, the district court did not abuse its discretion in denying Bridgewa-ter’s motions to amend the complaint. Affirmed.

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