C.E. Alexander & Sons, Inc. v. DEC Intern., Inc.

• Decision Date: 13 May 1991
• Docket Number: No. 18983,18983
• Citation: 1991 NMSC 49,811 P.2d 899,112 N.M. 89
• Parties: , 15 UCC Rep.Serv.2d 464 C.E. ALEXANDER & SONS, INC., a New Mexico corporation, Plaintiff-Appellee, v. DEC INTERNATIONAL, INC., a Wisconsin corporation, Dairy Equipment Company, a subdivision of DEC International, Inc., a Wisconsin corporation, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 899

811 P.2d 899

112 N.M. 89, 15 UCC Rep.Serv.2d 464

C.E. ALEXANDER & SONS, INC., a New Mexico corporation Plaintiff-Appellee, v. DEC INTERNATIONAL, INC., a Wisconsin corporation, Dairy Equipment Company, a subdivision of DEC International, Inc., a Wisconsin corporation Defendants-Appellants.

No. 18983.

Supreme Court of New Mexico.

May 13, 1991.

As Amended on Denial of Rehearing June 12, 1991.

[112 NM 90] Atwood, Malone, Mann & Turner, P.A., Steven L. Bell, Susan Zeller, Roswell, Madden & Strate, P.C., Brice A. Tondre, Wheat Ridge, Colo., for defendant-appellant DEC Intern.

Templeman & Crutchfield, C. Barry Crutchfield, Lovington, Davies Pearson, P.C., Tacoma, Wash., for plaintiff-appellee.

OPINION

BACA, Justice.

Defendant DEC International, Inc. (DEC) appeals the judgment of the district court entered after a jury trial in favor of plaintiff-appellee C.E. Alexander & Sons, Inc. (Alexander) on its breach of implied warranties claims. We affirm.

In 1982, Alexander, a dairy business, began efforts to upgrade the dairy and decided to equip its barn with milking equipment manufactured by DEC. New Mexico Dairy Equipment Co., an authorized dealer for DEC that sold, installed, and serviced dairy farm equipment, entered into a contract with Alexander for the DEC milking equipment, which was installed in Alexander's barn.

Subsequently, Alexander entered into an arrangement with Buster Goff to trade registered dairy cows for unregistered ones, with Goff retaining a fifty percent interest in the registered cows. This partnership contemplated Alexander managing the cows and receiving revenues from milk production. Upon sale of the cows, Goff would receive half of the proceeds.

In the winter of 1983-1984, Alexander's herd experienced an increase in mastitis, an udder infection that is normally present to a certain degree in dairy herds.

Alexander brought suit. The jury found that DEC breached implied warranties of merchantability and fitness for a particular purpose and that the breaches proximately caused damage to Alexander, and it awarded damages of $242,000. The court then awarded prejudgment interest of $105,485.30.

DEC appeals, asserting that: (1) Goff was a necessary and indispensable party to this lawsuit, and therefore, the court was without jurisdiction; (2) the court erred in presenting the breaches of implied warranties issues to the jury; (3) the court erred in its ruling that DEC could not disclaim warranties as a matter of law, and (4) the damage award was based on speculation and conjecture.

I. NECESSARY AND INDISPENSABLE PARTY

The issue confronting us is whether Goff, as Alexander's partner and as owner of an interest in the herd infected with mastitis, was an indispensable party to this litigation under SCRA 1986, 1-019 (Rule 19). The joinder issue was not raised below; we have held, however, that this issue may be raised for the first time on appeal. Sellman v. Haddock, 62 N.M. 391, 403, 310 P.2d 1045, 1053 (1957), overruled on other grounds, Safeco Ins. Co. v. United States Fidelity and Guar. Co., 101 N.M. 148, 679 P.2d 816 (1984); see 3A J.W. Moore, Moore's Federal Practice p 19.19-1 (2d ed. 1990). DEC argues that Goff's interests inextricably were tied with Alexander's claim and asserts that the prejudice to Goff's interests coupled with his nonjoinder creates a jurisdictional defect, or, alternatively, requires a remand to factor out Goff's damages. Although not couched in terms of the balancing approach mandated by Rule 19, basically DEC asks us to treat this matter as would a trial court.

In Holguin v. Elephant Butte Irrigation District, 91 N.M. 398, 401, 575 P.2d 88, 91 (1977),¹ we accepted with reservations a principle decided under our early joinder rule to the effect that failure to join an indispensable party is a jurisdictional defect. The current rule articulates a balancing test to determine whether a suit can continue without a party, and it leaves to the court's discretion the performance of that test. See Envirotech Corp. v. Bethlehem Steel Corp., 729 F.2d 70 (2d Cir.1984) (Rule 19(b) gives district court substantial discretion to weigh factors and determine whether a suit can continue without joinder, i.e. it involves more of a factual than legal determination, and review is limited to abuse of discretion); Cloverleaf Standardbred Owners Ass'n v. National Bank, 699 F.2d 1274, 1277 (D.C.Cir.1983). Under the current rule, we do not consider the test of indispensability to be jurisdictional, and we hereby overrule precedent to the contrary. See Jim Walter Corp. v. FTC, 625 F.2d 676, 681 (5th Cir.1980); Kansas City S. Ry. v. Great Lakes Carbon Corp., 624 F.2d 822, 824 n. 2 (8th Cir.) (view that failure to join indispensable party is jurisdictional against weight of authority), cert. denied, 449 U.S. 955, 101 S.Ct. 363, 66 L.Ed.2d 220 (1980); see generally 3A Moore, supra, p 19.01[5.-9] (joinder rules alone do not create jurisdictional problems, although reference must be made to other jurisdictional rules).

When a Rule 19 claim is raised for the first time on appeal, the analysis differs from when it is raised before a judgment is entered. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968) (quoted with approval in Holguin, 91 N.M. at 401, 575 P.2d at 91). Patterson effectively articulates the reasons why an appellate court should not resort to the balancing test, relying on concepts of finality, the sanctity of judgments, and the limited role of appellate courts. See 390 U.S. at 109-12, 88 S.Ct. at 737-39.

To those reasons, we elaborate upon or add several with special relevance to the instant case. First, when a joinder question is raised before or at trial, the court can entertain evidence regarding the missing party. That is not our role on appeal, and we do not have the appropriate tools at our disposal to determine the factual predicate of a party's indispensability. This problem aptly is brought home in this case, where the parties do not agree whether Goff even was involved with Alexander during the relevant time period. In some cases a remand may be in order to allow the trial court to engage in the appropriate balancing. If the question then returns to us, we would be presented with a factual record and an exercise of discretion to facilitate review. As the remainder of this opinion will clarify, this case does not require such a resolution. Second, at trial, when a court normally should consider joinder in the first instance, no judgment yet has been entered. When a case reaches the appellate level, however, the court has presided over a full trial and the jury has rendered a verdict.

DEC, in its alternative requests for relief, has pointed to two different effects of the nonjoinder. By asking us to remand for a factoring out of Goff's damages, DEC asks us to protect its interests by not requiring it to pay to Alexander the damages alleged to have been incurred by Goff, when potentially it may be subject to later suit initiated by Goff. By asking us to vacate the judgment because Goff was indispensable to this suit, DEC argues, in essence, that the prejudice to Goff by nonjoinder is so great that the judgment cannot stand.²

The information regarding Goff and his role was available to DEC before trial; Goff was a witness for the defense. To perform a Rule 19 analysis now would be to give DEC a technical escape from an adverse judgment when it had ample opportunity to bring the issue before the district court. It also would require us to discard a final and otherwise valid jury verdict. Under these circumstances, we hold that prejudice to DEC's interests created by Goff's nonjoinder is waived as a ground to vacate the judgment. See Patterson, 390 U.S. at 110, 88 S.Ct. at 738; United States v. Sabine Shell, Inc., 674 F.2d 480, 483 (5th Cir.1982) (if parties' failure to join creates a dilemma, "it is one of their own making, one that they could have avoided by joining [the missing parties] earlier in this litigation"); see generally 3A Moore, supra, p 19.19-1.

The relevant issue on appeal is whether failure to join Goff is prejudicial to his interests to the extent that we should vacate the existing judgment. If the trial court had heard the issue, its analysis would "consider the extent to which the judgment may 'as a practical matter impair or impede his ability to protect' his interest in the subject matter." Patterson, 390 U.S. at 110, 88 S.Ct. at 738 (quoting Rule 19(a)). On appeal, however, speculation is not required--the judgment exists, and it in fact may not affect the interests of the unjoined party. Id. at 111, 88 S.Ct. at 738. Under the appropriate circumstances, when a judgment adversely and prejudicially affects the interests of the absent party--"who of course had no opportunity to plead and prove his interest below"--on appeal the court should protect that party's interest. Id. When making this determination, however, we must consider whether, in a practical sense, the judgment prejudicially affects the absent party. Jeffries v. Georgia Residential Fin. Auth., 678 F.2d 919, 928 (11th Cir.), cert. denied, 459 U.S. 971, 103 S.Ct. 302, 74 L.Ed.2d 283 (1982).

We hold that Goff was not prejudiced by his nonjoinder. Goff knew of the litigation; he even appeared as a witness. He was aware of potential claims he might have had, yet chose not to participate and appears to have indicated expressly his desire not to pursue legal redress. Cf. Fetzer v. Cities Serv. Oil Co., 572 F.2d 1250 (8th Cir.1978) (Rule 19 does not require dismissal of action when nonjoined party present throughout entire litigation and no objection made until after judgment). We find no reason to vacate the judgment below and to force the parties and the court system to endure further and repetitive proceedings when Goff himself, although adequately presented with the opportunity to assert his interests, has chosen...