Insurance Co. of North America v. Dealy

• Decision Date: 17 September 1990
• Docket Number: No. 89-6064,89-6064
• Citation: 911 F.2d 1096
• Parties: Fed. Sec. L. Rep. P 95,624, 17 Fed.R.Serv.3d 1356 INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellee, v. M.E. DEALY, et al., Defendants, William H. Taylor, III, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1096

911 F.2d 1096

Fed. Sec. L. Rep. P 95,624, 17 Fed.R.Serv.3d 1356

INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellee, v. M.E. DEALY, et al., Defendants William H. Taylor, III, Defendant-Appellant.

No. 89-6064.

United States Court of Appeals Fifth Circuit.

Sept. 17, 1990.

Fritz Barnett, Glickman & Barnett, Houston, Tex., for William H. Taylor, III.

A. Rex Jasper & Connye P. Jasper, Lubbock, Tex., pro se.

Raymond C. Kerr, Pope, Shomake, Selwyn, Aguren & Kerr, Houston, Tex., for N.S. Myers, H.G. Myers, J.E. Rhode, R.M. Rhode, W.H. Taylor, III, L. Taylor, L.J. Villarreal and Y. Villarreal.

Michael L. Parham and Paul C. Wolf, Winstead, McGuirem Sechrest & Minick, Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN, POLITZ, and BARKSDALE, Circuit Judges.

POLITZ, Circuit Judge:

We have before us the appeal by William H. Taylor, III, of a summary judgment rendered against him in favor of Insurance Company of North America (INA). We must also give due consideration to an adverse judgment against Leslie Taylor, the deceased wife of William Taylor, who died before service of process was effected. We dismiss the claims against Leslie Taylor and affirm the judgment against William H. Taylor, III.

Background

On December 28, 1984 William H. Taylor, III and his wife Leslie Taylor agreed to purchase a $20,000 limited partnership in the Overlord IV 1984 Oil and Gas Drilling Program (Overlord). Overlord was a Tennessee limited partnership and tax shelter syndicated by its operating general partner, Commonwealth Enterprises, Inc. under a Private Placement Memorandum (PPM).

As did many of the investors in Overlord, the Taylors paid $5,000 cash, and signed a promissory note for $15,000 payable to Overlord over several years. Commonwealth borrowed $15,000 from International Capital Resources, Inc. (ICR), securing the loan with the Taylors' promissory note. INA guaranteed the promissory note with a surety bond payable to ICR in case of default by the Taylors, and the Taylors agreed to indemnify INA for any payments it made as surety. ICR assigned its rights in the promissory note and the surety bond to Credit Lyonnais.

The Taylors made their first installment payments but stopped paying after Commonwealth filed for bankruptcy. Credit Lyonnais, the assignee of the note, made demands upon INA as surety, for payment of overdue funds. INA paid Credit Lyonnais and then demanded reimbursement from the Taylors per the indemnification agreement.

INA filed suit in the Southern District of Texas against 16 defendants, invoking diversity jurisdiction and seeking reimbursement for payments made on Overlord surety bonds. William Taylor was served and jointly filed an answer with two other codefendants. Leslie Taylor died prior to the time suit was filed and therefore service was never made on her, nor has it been made on her estate. Notwithstanding, counsel filed responsive pleadings for the rest of the codefendants, including Leslie Taylor.

INA moved for summary judgment against all defendants to which each of the defendants, again purportedly including Leslie Taylor, responded. A hearing was held on the motion, and summary judgment was entered on January 18, 1989, against all defendants except William Taylor. Judgment was rendered against Leslie Taylor. INA concedes that the judgment omitted William Taylor because of an error on its part concerning which of the Taylors had died.

Undaunted, William Taylor continued with discovery. In due course it dawned upon counsel for INA that a live defendant had not been cast in judgment but that a deceased defendant had. It moved to substitute William Taylor in the stead of Leslie Taylor in the judgment as a "misnomer which is correctable under Fed.R.Civ.P. 60(a)." It also then sought to correct the name of another defendant from Norman Dealy to Norma Dealy and it requested prejudgment interest.

Taylor opposed the INA motion with a pleading entitled "Defendant Bill Taylor's Response in Opposition to Plaintiff's Motion to Amend Judgment and Supplemental Response to Plaintiff's Motion for Summary Judgment." Taylor attached affidavits and a transcript excerpt to his pleading. The court entered an amended final judgment substituting William H. Taylor, III for Leslie Taylor. Taylor timely appealed.

Analysis

We note sua sponte a threshold jurisdictional question. Click v. Abilene Nat'l Bank, 822 F.2d 544 (5th Cir.1987). Do we have appellate jurisdiction when the defendants include a predeceased codefendant whose estate was never duly served, and on whose behalf counsel made an unauthorized appearance, when there has been neither a judgment against that defendant nor a dismissal of the complaint, and no Fed.R.Civ.P. 54(b) certificate has issued? We answer in the affirmative.

We have appellate jurisdiction only over final judgments, 28 U.S.C. Sec. 1291, and over certain interlocutory decrees and orders, none of which are applicable herein. We also have jurisdiction over an otherwise nonfinal judgment which either does not address the demands against all of the parties or does not address all of the issues against a party, if the district court issues the dual certification prescribed by Fed.R.Civ.P. 54(b). Kelly v. Lee's Old Fashioned Hamburgers, Inc., 908 F.2d 1218 (5th Cir.1990) (en banc). No such certification has been made herein. Is that failure fatal to our jurisdiction? We hold that it is not.

Leslie Taylor died before being served and her estate has not been made a party herein. When the failure of service within 120 days of filing and the failure to make a showing of good cause for nonservice came to the court's attention, it should sua sponte have dismissed the suit without prejudice, pursuant to the directive of Fed.R.Civ.P. 4(j). The district court could and should have done so on its own motion, if necessary.

Because Leslie Taylor was never properly before the district court it did not have the requisite competence to render a judgment against her. In diversity cases capacity to sue and be sued is determined by the law of the individual's domicile. Fed.R.Civ.P. 17(b). Leslie Taylor was a domiciliary of Texas at the time of her death. Under Texas law a judgment against a party who died before service of process and whose estate has not been made a proper party is void. Edens v. Grogan Cochran Lumber Co., 172 S.W.2d 730 (Tex.Civ.App.1943). The appearance for the decedent ostensibly made by counsel was without effect. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950).

The instant case is analogous to FSLIC v. Tullos-Pierremont, 894 F.2d 1469 (5th Cir.1990). In that case, we reaffirmed the holding of Nagle v. Lee, 807 F.2d 435 (5th Cir.1987), that unserved defendants are not parties for purposes of Rule 54(b) and a judgment does not lack the finality necessary for appeal merely because claims against unserved defendants are unresolved. The Tullos-Pierremont court, noting that 28 U.S.C. Sec. 1291 has long been interpreted in a "practical rather than a technical manner," 894 F.2d at 1475 (citations omitted), and that "housekeeping or ministerial actions may be legitimately regarded as de minimis," id. (citations omitted), dismissed the appeal rather than order what it saw as an unnecessary remand for mandatory dismissal pursuant to Rule 4(j). We do likewise. The demands against Leslie Taylor are dismissed as prescribed by Fed.R.Civ.P. 4(j). The Amended Judgment.

Taylor argues that the district court improvidently amended its final judgment by changing Leslie Taylor's name to his. This, he asserts, was beyond the discretion of the district court under Fed.R.Civ.P. 60(a). Were this in fact the substitution of one party for another, without more, then the Rule 60(a) power to remedy "[c]lerical mistakes in judgments, orders or other parts of the record ... arising from oversight or omission" would have been exceeded. However, the record reflects that Taylor treated INA's motion to amend as one for summary judgment, not for merely the correction of a clerical error. INA and the court were free to do likewise. Just as a motion to dismiss under Fed.R.Civ.P. 12(b)(6) may be treated as a Rule 56 motion for summary judgment in an appropriate setting, so, too, may the instant motion by INA. Cf. 4 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1029 (1987) ("The federal rules are designed to discourage battles over mere form and to sweep away needless procedural controversies ...," discussing Fed.R.Civ.P. 1 mandate to construe Rules "to secure the just, speedy, and inexpensive determination of every action."). Concluding that the motion to amend was in substance, if not form, a motion for summary judgment, and that the district court treated it as such, we turn to the substantive merits of Taylor's appeal.

Summary Judgment.

Summary judgment is appropriately granted by a district court when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The standard of appropriateness of summary judgment for this court is the same as for the district court. Nunez v. Superior Oil Co., 572 F.2d 1119 (5th Cir.1978). All inferences are drawn from the evidence in the light most favorable to the nonmoving party. Southmark Properties v. Charles House Corp., 742 F.2d 862, 873 (5th Cir.1984). We have taken into account both the evidentiary materials submitted by Taylor before and those submitted after the filing of the INA motion to determine whether the evidence he submitted and the inferences drawn from it suffice to withstand a summary judgment.

Taylor asserts that he is not liable on the indemnification agreements because they are contracts...