Bottum v. Herr

• Decision Date: 22 November 1968
• Docket Number: Nos. 10447,10474,s. 10447
• Citation: 162 N.W.2d 880,83 S.D. 542
• Parties: Joseph B. BOTTUM III, Plaintiff and Appellant, v. Delane D. HERR, Defendant and Respondent.
• Court: South Dakota Supreme Court

Page 880

162 N.W.2d 880

83 S.D. 542

Joseph B. BOTTUM III, Plaintiff and Appellant, v. Delane D. HERR, Defendant and Respondent.

Nos. 10447, 10474.

Supreme Court of South Dakota.

Nov. 22, 1968.

Morris Myers, Aberdeen, for plaintiff and appellant.

Martens, Goldsmith, May & Porter, Pierre, for defendant and respondent.

HOMEYER, Judge.

This appeal involves primarily a problem of nonjoinder of parties in an action to recover on a lost promissory note.

The complaint alleged that the defendant, Delane D. Herr, on or about March 1, 1964, executed and delivered to Roland E. Bauer, his promissory note for $7,500 due March 1, 1965, with interest at 8% Per annum. That said note was lost by the payee on or about August 1, 1965, and was not endorsed when lost. That on or about March 1, 1965, $1,000 was paid on the principal and $600 in interest. That Bauer assigned the note to the plaintiff, Joseph H. Bottum III, on February 1, 1966, and a copy of the assignment is attached to the complaint. Judgment for $6,500 with interest from March 1, 1965, is asked for.

The assignment recited it was made as collateral security for the assignor's indebtedness to the plaintiff, whether due or to become due, and gave him unrestricted power to collect the indebtedness and to renew or extend time of payment. It directed all proceeds collected, less expenses, to be applied on the indebtedness of the assignor to plaintiff.

By Answer, defendant alleged that (1) the complaint did not state a claim upon which relief could be granted, (2) plaintiff lacked capacity to sue, (3) misjoinder and nonjoinder of parties, and (4) denied all allegations of the complaint either on his own knowledge or because he lacked sufficient knowledge thereof. In answer to an interrogatory served before trial concerning (3) defendant stated Roland E. Bauer was a necessary party.

At the trial, J. Alvin Moore was called as a witness by plaintiff. Moore had acted as scrivener in preparing the note and also a second mortgage on two lots given as security. He testified that Bauer had given him an assignment ¹ of the note and mortgage on April 10, 1964, as security for an indebtedness of $5,000 which was later renewed and upon which there was unpaid about $4,600 at the time of trial. It is conceded that plaintiff had no notice or knowledge of this assignment until it was produced at the trial which began March 9, 1967. ² Moore's discovery deposition was taken by the defendant on March 1, 1967. Nothing in such deposition indicates an assignment to him or his interest in the note he prepared. When shown the assignment, Exhibit 3, Bauer acknowledged his signature to the instrument, but he had no recollection of executing an assignment to anyone other than plaintiff.

At the close of plaintiff's case, defendant moved for a directed verdict on three grounds: (1) Plaintiff was not the real party in interest; (2) The assignment was void because it was champertous, and (3) Plaintiff had failed to establish his cause of action by clear and convincing evidence. Prior to a ruling, defendant withdrew (2) and (3) and asked the court to grant his motion 'on the sole ground that the plaintiff is not the real party in interest' because of the assignment to Moore mentioned supra. The court granted the motion on this ground and a judgment of dismissal was entered from which plaintiff has appealed.

The evidence developed at the trial showed a sufficient assignment of legal title for purposes of collection so that under RCP 17(a), (SDCL 1967 § 15--6--17(a)) plaintiff was authorized to maintain an action to recover on the lost promissory note. J. F. Anderson Lumber Co. v. National Surety Co., 49 S.D. 235, 207 N.W. 53; Citizens Bank v. Corkings, 9 S.D. 614, 70 N.W. 1059; Dewey v. Komar, 21 S.D. 117, 110 N.W. 90. It shows a substantial indebtedness from Bauer to plaintiff when the assignment was made. Thus it was not void as champertous. SDC 13.1253. The statute does not prohibit an attorney from taking an assignment of a chose in action or evidence of debt in payment of services actually rendered or as security for his services rendered or to be rendered in litigation. 14 Am.Jur.2d, Champerty & Maintenance, § 5; 14 C.J.S. Champerty & Maintenance § 14. In Savage v. Horne, Fla., 49 So.2d 329, the court said: 'It is not champerty for a client to assign to his attorney an interest in the subject matter of the suit as security for payment for his services, or in payment of a precedent debt or for services actually rendered.' See also Hudson v. Sheafe, 41 S.D. 475, 171 N.W. 320, which is cited in the opinion. The fact that Bauer's claim against defendant if paid in full would have exceeded his indebtedness to plaintiff does not make the transaction champertous. By the express terms of the instrument plaintiff was required to account for amounts collected and to apply the same to such indebtedness.

From the present state of the record it appears J. Alvin Moore was a necessary party. A necessary party is one without whom a complete determination or settlement of the questions involved cannot be made. Keeley Lumber & Coal Company v. Dunker, 76 S.D. 281, 77 N.W.2d 689. Likewise, in our opinion, Roland E. Bauer, the assignor, was a necessary party. The record shows that he was the equitable owner of the lost note subject only to interests therein claimed by Moore and plaintiff as security for indebtedness owed them by Bauer. To determine the entire controversy both Moore and Bauer were necessary parties to the action. This does not mean, however, that the court was correct in dismissing the action.

RCP 21, (SDCL 1967 § 15--6--21), does not make misjoinder of parties a ground for dismissal. Parties may be added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just. Since Moore and Bauer have or claim to have a joint interest, they should be joined as plaintiffs, or if they refuse, as defendants. RCP 19(a), (SDCL 1967 § 15--6--19(a)). Failure to join necessary parties is not a jurisdictional defect and the proper practice is to continue the suit or delay the trial until they can be brought in. ³ Flowers v. Germann, 211 Minn. 412, 1 N.W.2d 424; Renner v. Crisman, 80 S.D. 532, 127 N.W.2d 717. Even where parties have been said to be indispensable, ordinarily a dismissal should not be ordered, but an opportunity should be afforded to bring in such parties. Warner v. First National Bank of Minneapolis, 8 Cir., 236 F.2d 853; Mattson v. Cuyuna Ore Co., 24 F.R.D. 363; 3 Moore's Federal Practice, § 21.04; 2 Barron & Holtzoff, Federal Practice and Procedure, § 542.

The judgment of dismissal is reversed and the case is remanded to the trial court for further proceedings not inconsistent with this opinion. If appellant fails or refuses to join such parties so that a complete determination of matters in controversy can be accomplished, after the opportunity is offered, the complaint of course should be again dismissed.

Defendant-respondent has filed a cross appeal and plaintiff-appellant has filed a motion to dismiss. The matter was heard on March 18, 1968 and an order was entered deferring disposition of the motion...