Danks v. Holland

• Decision Date: 29 September 1976
• Docket Number: No. 9231,9231
• Citation: 246 N.W.2d 86
• Parties: Keith D. DANKS, Plaintiff and Appellee, v. William J. HOLLAND, Defendant, Third-Party Plaintiff, and Appellant, v. RED RIVER TRANSFER & STORAGE, INC., a corporation, Third-Party Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 86

246 N.W.2d 86

Keith D. DANKS, Plaintiff and Appellee, v. William J. HOLLAND, Defendant, Third-Party Plaintiff, and Appellant, v. RED RIVER TRANSFER & STORAGE, INC., a corporation,

Third-Party Defendant and Appellee.

Civ. No. 9231.

Supreme Court of North Dakota.

Sept. 29, 1976.

Syllabus by the Court

1. A judgment entered without prejudice is appealable. Sec. 28--27--01, N.D.C.C.

2. An order, even if not appealable itself, may be reviewed by the Supreme Court if a judgment entered pursuant to the order is appealed, or if the order is made in an action which culminates in a judgment which is appealed. Sec. 28--27--02, N.D.C.C.

3. A third-party complaint may be used to interplead as a third-party defendant one who is, or may be, liable for all or part of a claim against a party to the principal action. Rule 14, N.D.R.Civ.P. Otherwise, it may be dismissed by the court.

4. A trial court has a broad discretion to permit or deny the use of third-party actions.

5. Officers and directors of corporations are generally not personally liable for ordinary debts of the corporations in the absence of fraud, recognized extraordinary circumstances, or special statute imposing liability.

6. The compelling of answers to interrogatories relating to third-party action was properly denied where third-party action was dismissed.

7. A finding that an appeal is frivolous, with imposition of costs, will be made only where the appeal is flagrantly groundless.

Steven C. Lian, of Farhart, Rasmuson, Olson & Lian, Minot, for plaintiff and appellee and third-party defendant and appellee.

Richard P. Olson, of Pringle & Herigstad, Minot, for defendant, third-party plaintiff, and appellant.

VOGEL, Justice.

The principal issues before us on this appeal relate to the dismissal of a third-party complaint by the trial court, the propriety of an order of the trial court denying an order to compel discovery, whether a judgment entered without prejudice is appealable, and whether the appeal is frivolous. We hold in favor of appealability and against frivolity, and affirm the judgment.

Keith D. Danks, the plaintiff, is the principal owner and chief executive officer of two corporations, Red River Transfer & Storage, Inc., and Hanson-Maves & Company the business and records of which are so intermingled as to make them appear to be one business.

William J. Holland worked as the Minot manager for the two corporations from the fall of 1970 until October 1, 1973. His salary was paid by Red River. He was paid $200 per week during the entire period of his employment, but he also received 'bonuses' of $2,000 for fiscal 1970, $3,000 for fiscal 1971, and $5,000 for fiscal 1972. Red River's fiscal years ended on September 30. The $3,000 bonus for 1971 consisted of $1,500 checks from each of the two corporations. The 1972 bonus was paid by Hanson-Maves.

Holland asserts that the bonuses were part of his compensation and that he is entitled to a bonus for the reasonable value of his services over and above his salary for the period from October 1, 1972, to October 1, 1973, at the end of fiscal 1973. These contentions were put forth as a defense to the principal action and as a basis for the third-party complaint.

The original action was brought by Danks to obtain repayment of $10,382.50 which he was required to pay to a bank on account of his cosignature on a $10,000 bank loan to Holland which Holland had not paid. Holland conceded that the debt was unpaid and did not deny that Danks was required to pay it, with interest. The trial court therefore granted summary judgment in favor of Danks and against Holland for $10,382.50 in the principal action. In that action Danks had denied personal liability for any bonus, pointing out that the employment contract was between Holland and the two corporations. Holland thereupon commenced the third-party action against Red River Transfer & Storage, Inc.

The trial court dismissed the third-party complaint without prejudice, and denied a motion to compel discovery in the third-party action. Holland appealed from the judgment, the dismissal of the third-party complaint, and the order denying the motion for discovery.

I. MOTION TO DISMISS APPEAL

Danks moved in this court to dismiss the appeal, claiming that the appeal is from a nonappealable order. The appeal was 'from the final judgment and the orders granting the Plaintiff summary judgment, dismissing the Third Party Complaint and denying the . . . Motion to Compel Discovery . . .' Holland contends that the fact that the judgment as to the third-party complaint was dismissed 'without prejudice' deprives the judgment of finality and makes it nonappealable, and that the orders are nonappealable under Section 28--27--02, N.D.C.C., which permits appeals from an 'order affecting a substantial right . . . when such order in effect determines the action and prevents a judgment from which an appeal might be taken' or an 'order which involves the merits of an action or some part thereof' as well as certain other orders. These arguments are not persuasive.

A judgment entered without prejudice is generally held to be appealable. United States v. Wallace & Tiernan Co., n. 1, 336 U.S. 793, 69 S.Ct. 824, 93 L.Ed. 1042 (1949); Russell v. Johnson, 14 Wis.2d 406, 111 N.W.2d 193 (1961). Other cases are collected at 4 C.J.S. Appeal and Error § 121, n. 38.

Further, the statute on appeals from judgments, Section 28--27--01, N.D.C.C., does not contain any limitation such as a requirement of finality. It merely says that 'A judgment . . . in a civil action . . . may be removed to the supreme court by appeal as provided in this chapter.' Limitations as to finality and substantiality are found in the statute on appealable orders, Section 28--27--02, N.D.C.C., but not the statute on appeals from judgments, Section 28--27--01.

We hold that a judgment entered without prejudice is appealable. We also hold that the orders, while not appealable in themselves, ¹ are properly before us for review because a judgment entered pursuant to the orders was appealed, and the judgment is appealable. See City of Minot v. Minot Highway Center, Inc., 120 N.W.2d 597 (N.D.1963).

Even if the orders were not made reviewable by entry of a judgment to enforce them, they would still be reviewable on appeal from a judgment, since nonappealable orders may be reviewed on appeals from judgments. Stormon v. District Court of Pierce County, 76 N.D. 713, 38 N.W.2d 785 (1949); Burdick v. Mann, 59 N.D. 611, 231 N.W. 545 (1930).

The motion to dismiss the appeal is denied.

II. DISMISSAL OF THE THIRD-PARTY ACTION

The trial court, after depositions and been taken and interrogatories served and answers to interrogatories refused (see below), ordered that the third-party complaint be dismissed

'without prejudice on the grounds that the Third Party action is not proper since there is no evidence that there is to be an implied bonus to be paid by the Plaintiff to Defendant in view of the clear and undisputed evidence of the expressed bonus policy by the Corporation. There is no evidence of any wrongdoing or other grounds which would form the basis of piercing the Corporate veil and holding the Plaintiff, Keith D. Danks personally liable for any bonus.'

There is some difference of opinion between the parties as to what this order means. Holland is apprehensive that the reference to the 'bonus policy by the Corporation' constitutes a finding on the merits that no bonus was due Holland from anyone, and refers us to a letter in evidence, transmitting a bonus check, which includes these words:

'Please keep in mind that any bonus you receive this year will have no bearing on future years. It could be more or less, depending on sales and profits, efforts that you expend to earn profits, attitudes, honesty, and many other factors that I may notice and consider over the year.'

We do not so read the order. As we read it, the court referred to the bonus policy of the corporation only in order to emphasize that there was no evidence whatever of any obligation by Danks personally to pay a bonus. This conclusion is fortified by the fact that the court made the dismissal without prejudice (thereby permitting a separate action against Red River), and by the clear statement that there was no implied bonus to be paid 'by the Plaintiff (Danks) to Defendant (Holland).' As we read the order, the trial court held that the third-party action was improperly joined to the main action, since the main action was between Danks and Holland, while the third-party claim was one by Holland against one of the corporations and, so far as the record shows, was totally unconnected to the subject matter of the main action. Such a determination does not reach the merits of Holland's claim against one or both of the corporations.

Third-party actions are authorized by Rule 14, N.D.R.Civ.P., if brought against a 'person not a party to the action who is or may be liable to (defendant) for all or part of the plaintiff's claim against him.' Red River is not liable for all or any part of Holland's note to the bank, which was cosigned by Danks. Red River may or may not be indebted to Holland for a bonus for fiscal 1973. If it is so indebted, that debt is unconnected with the bank loan. The third-party claim is not derivative from, or dependent on, the main action. For a similar case, and a similar holding, see LaSalle v. Kane, 8 F.R.D. 625 (E.D.N.Y.1949). The suggestion was made on oral argument that the bank loan was to be paid out of future bonuses, but the record is devoid of evidence to sustain the argument.

Third-party complaints, under Rule 14, are generally brought under theories of indemnity or contribution. 'The general purpose of Rule 14 is to avoid two actions which should be tried together to save the time and cost of a reduplication of...