Cudworth v. Cudworth, 9975

• Citation: 312 N.W.2d 331
• Decision Date: 12 November 1981
• Docket Number: No. 9975,9975
• Parties: Fred CUDWORTH, Plaintiff and Appellee, v. Jack CUDWORTH, Personal Representative of the Estate of Edwin Cudworth, Deceased, Defendant and Appellant. Civ.
• Court: United States State Supreme Court of North Dakota

Page 331

312 N.W.2d 331

Fred CUDWORTH, Plaintiff and Appellee, v. Jack CUDWORTH, Personal Representative of the Estate of

Edwin Cudworth, Deceased, Defendant and

Appellant.

Civ. No. 9975.

Supreme Court of North Dakota.

Nov. 12, 1981.

Robert E. Manly, of Manly & Manly, New Rockford, for plaintiff and appellee.

James Bekken, of Hovey, Bekken & Ramstad, New Rockford, for defendant and appellant.

VANDE WALLE, Justice.

Jack Cudworth appeals a judgment of the district court, Eddy County, which voided his sale of land and canceled a mortgage upon the land due to a breach of his fiduciary duty as a personal representative. We affirm in part but remand for modification of the judgment.

After Jack's brother, Edwin, died intestate, Jack was appointed personal representative. The major asset of the estate was 727 acres of land. Before Jack sold the land he sent a letter to the heirs soliciting suggestions about how and to whom the land should be sold. Jack listed four options. Two of the options were described as unworkable and cumbersome by Jack. A third option was to sell the land to the highest bidder. The fourth option was to sell the land to Jay, Jack's son. A number of heirs responded, including Fred Cudworth, a brother to Jack and Edwin. Jack then sold the land to his son, Jay, for $180,000. Jay borrowed $95,000 from his father, Jack, and the remainder from a bank. When Jay received a loan for the total amount from the Farmers Home Administration (FmHA) he repaid his father and the bank. Fred does not contest that the land should be sold nor the purchase price, only the sale to Jay.

There are three issues:

1. Must the judgment of the trial court be set aside due to the nonjoinder of Jay, the grantee, and the FmHA, a mortgagee, as parties defendant?

2. Does Section 30.1-18-13, N.D.C.C. (§ 3-713, Uniform Probate Code), permit the trial court to void the sale of property of the estate by a personal representative to his son?

3. Is the sale by the personal representative to his son of property of the estate a breach of the trust imposed by Section 30.1-18-11, N.D.C.C. (§ 3-711, Uniform Probate Code)?

Fred was the plaintiff in the action below and Jack was the named defendant. Fred's suit was to void both the sale to Jay and the mortgage upon the property. Neither Fred nor Jack attempted to join Jay or the FmHA as parties defendant. Jack now argues that the judgment against him must be set aside because of the absence of "indispensable" parties under Rule 19, N.D.R.Civ.P. Fred argues that a defense of failure to join indispensable parties may not be asserted for the first time on appeal. Each cites authority for his position but ignores the context in which each of their assertions may be correct. We believe that in this situation, if a judgment appears to prejudice the interests of an absent party and the question of joining the absent party has not been raised at the trial, we may act to protect the absent party.

The purpose of the compulsory joinder rule, Rule 19, N.D.R.Civ.P., is to protect an absent party from prejudice, protect parties from harassment by successive suits, and protect the courts from being imposed upon by multiple litigation. Wright & Miller, Federal Practice & Procedure: Civil § 1609. The failure of the court to protect those not before it may amount to a violation of due process should the judgment in the action have the effect of destroying the rights of the absent party. In Provident Tradesmens B. & T. Co. v. Patterson, 390 U.S. 102, 123, 88 S.Ct. 733, 745, 19 L.Ed.2d 936, 952 (1968), the Court implied that indispensability may involve an issue of due process:

"Neither Rule 19, nor we, today, mean to foreclose an examination in future cases to see whether an injustice is being, or might be, done to the substantive, or, for that matter, constitutional, rights of an outsider by proceeding with a particular case."

In National Farmers Union Prop. & Cas. Co. v. Schmidt, 219 N.W.2d 111, 114 (N.D.1974), we said:

"The spirit and purpose of Rule 19(a) and 19(b) are to protect the interest of parties who might be deprived of due process by the trial of an action in their absence ..."

The time at which a party raises another's absence is immaterial when the interests of the absent parties are prejudiced. If the interests of the absent parties have been prejudiced the issue of their nonjoinder may be raised for the first time at the appellate level. 390 U.S. at 111, 88 S.Ct. at 738-739, 19 L.Ed.2d 945-946.

A different situation is present when a party is prejudiced due to the possibility of harassment through successive suits by absent parties. Rule 12(h)(2), N.D.R.Civ.P., may be used to raise the question of joinder of absent parties before or during the trial. When the question of joinder is raised the trial court is to use the four factors listed in Rule 19 to decide whether to dismiss, join the absent parties, or proceed without the absent parties. However, if a party seeks dismissal in order to protect himself and not to vicariously protect the absent parties against a prejudicial judgment, his motion to dismiss should be timely. Undue delay in making the motion can properly be considered as a reason for denying the motion. Advisory Committee Notes to 1966 Amendment of Rule 19, Fed.R.Civ.P. Once the trial has been concluded, the pragmatic considerations in Rule 19 weigh heavily in favor of preserving the judgment of the trial court or modifying it to protect the interests of the absent parties and against dismissal unless there has been real prejudice to those not before the court. Wright & Miller, Federal Practice & Procedure: § 1609.

The decision in Provident Tradesmens, supra, resolves the issue here: "To say that a court 'must' dismiss in the absence of an indispensable party and that it 'cannot proceed' without him puts the matter the wrong way around: a court does not know whether a particular person is 'indispensable' until it has examined the situation to determine whether it can proceed without him." 390 U.S. at 119, 88 S.Ct. at 743, 19 L.Ed.2d at 950. Only upon consideration of the four interests in Rule 19(b) may the court conclude that a person is indispensable and that in his absence it would be preferable to dismiss the action rather than retain it. Advisory Committee Notes to 1966 Amendment of Rule 19, Fed.R.Civ.P.

Rule 19(b) describes the interests of the four parties which must be considered. The plaintiff's interest is in preserving his judgment. The defendant's interest is in avoiding multiple litigation, inconsistent relief, or sole responsibility for a liability he shares with another. The courts and the public have an interest in the complete, consistent, and efficient settlement of controversies. The third criterion of Rule 19(b), "whether the judgment issued in the absence of the nonjoined person will be 'adequate,' ... (refers) to this public stake in settling disputes by wholes, whenever possible, ... After trial, considerations of efficiency of course include the fact that the time and expense of a trial have already been spent." Provident Tradesmens, 390 U.S. at 111, 88 S.Ct. at 739, 19 L.Ed.2d at 946. The absent party's interest is in the extent to which the judgment may impair or impede his ability to protect his stake in the subject matter of the suit.

Both a trial court and this court have more than one option when faced with a question of joinder of absent parties:

"Rule 19(b) also directs a district court to consider the possibility of shaping relief to accommodate these four interests. Commentators had argued that greater attention should be paid to this potential solution to a joinder stymie, and the Rule now makes it explicit that a court should consider modification of a judgment as an alternative to dismissal. Needless to say, a court of appeals may also properly require suitable modification as a condition of affirmance." Provident Tradesmens, 390 U.S. at 111-112, 88 S.Ct. at 739, 19 L.Ed.2d at 946. (Footnotes omitted; emphasis added.)

The absent parties here, Jay and FmHA, have an interest in the land, the subject matter of this suit. Jay has a deed to it and FmHA has a mortgage on it. Their interests have been prejudiced by the judgment of the trial court. It is unnecessary, however, to reverse the judgment because the interests of the absent parties, Jay and FmHA, can be protected; nor is it necessary to remand for a new trial with all parties present. We do not believe that Jay or FmHA could have legal arguments different from Jack's. Counsel for both parties at oral argument agreed with this insofar as it involves Jay. The fact that an absent party had an interest in the suit only means that he cannot be bound by the judgment, i. e., that it is not res judicata as to, or legally enforceable against, a nonparty. "It obviously does not mean either (a) that a court may never issue a judgment that, in practice, affects a nonparty or (b) that (to the contrary) a court may always proceed without considering the potential effect on nonparties simply because they are not 'bound' in the technical sense." Provident Tradesmens, 390 U.S. at 110, 88 S.Ct. at 738, 19 L.Ed.2d at 945. (Footnotes omitted.) Here, we believe that the interests of all parties (the plaintiff, the defendant, the court and the public, and the absent parties) can be protected by remanding for modification to order repayment to Jay and FmHA.

The second issue requires an interpretation of Section 30.1-18-13, N.D.C.C. (§ 3-713, Uniform Probate Code). That section reads:

"Any sale or encumbrance to the personal representative, his spouse, agent, or attorney, or any corporation or trust in which he has a substantial beneficial interest, or any transaction which is affected by a substantial conflict of interest on the part of the personal representative, is voidable by any person interested in the estate except one who has consented after fair disclosure, unless:

"1. The...