Appeal from the United States District Court for the District of Montana. D.C. No. CV 90-26 JDS. Jack Shanstrom, District Judge, Presiding
Before: Farris and Kleinfeld, Circuit Judges, and Ezra, District Judge.*fn**
First National Bank of Brookings, South Dakota, ("the Bank") brings this appeal from the district court's entry of a monetary judgment of $252,876.71 in favor of plaintiff in a declaratory judgment action stemming from a dispute over the disbursement of proceeds from a loan agreement that existed between the parties. Berglee contends that the district court erred by applying Montana law rather than South Dakota law, and by awarding monetary damages in a declaratory judgment action. We agree, VACATE the monetary judgment in favor of Berglee, and REMAND for further proceedings in accordance with South Dakota law.
In 1987, the Bank extended a line of credit to Berglee, a Montana rancher, for the purchase, care, and feeding of livestock. Berglee authorized the Bank to disburse loan proceeds directly to Rick Woehlhaff, a cattle feeder who conducted a substantial amount of business with Berglee. Under the original terms of this arrangement, the bank distributed loan proceeds to Woehlhaff only upon presentation of a written claim for reimbursement. In the fall of 1987, that arrangement was modified to allow Woehlhaff to submit reimbursement requests by telephone.
In March 1989, a dispute arose between Berglee and Woehlhaff with regard to feed statements. In a letter dated August 31, 1989, Berglee withdrew the Bank's authorization to make payments to other persons. Nevertheless, the Bank made subsequent payments to Woehlhaff in the amount of $252,876.71.
The Bank asserted that it understood Berglee's August 31 letter to mean that authorization was withdrawn with respect to requests for payment submitted by Woehlhaff after August 31, 1989, but that the letter did not affect the Bank's authorization to disburse loan proceeds for requests made prior to that date.
Berglee commenced this action in the District Court of Montana seeking a declaration that he was not indebted to the Bank for the allegedly unauthorized payments. The Bank counterclaimed for payment on the notes, for foreclosure under the security agreement, for damages sustained from the alleged sale of mortgaged property, and for unjust enrichment (for payments made by the Bank to Woehlhaff on Berglee's behalf).
After two days of jury trial, the Bank dismissed all of its counterclaims except unjust enrichment. The district Judge excused the jury and concluded the trial on the remaining issues of declaratory judgment and unjust enrichment.
Applying Montana law, the court concluded that all disbursements by the Bank after its receipt of the August 31 letter were unauthorized. The court determined that Berglee was entitled to judgment in the amount of $252,876.71*fn1 and dismissed the Bank's counterclaim for unjust enrichment.
The Bank contends that the district court erred by applying Montana law, by awarding monetary damages in a declaratory judgment action, and by rendering judgment in the absence of a necessary party.
A district court's decision concerning the appropriate choice of law is reviewed de novo. Sparling v. Hoffman Construction Co., 864 F.2d 635, 641 (9th Cir. 1988).
Review of decisions to grant or deny declaratory relief is likewise de novo. Tashima v. Administrative Office of the U.S. Courts, 96 ...