King v. W. R. Hall Transp. and Storage Co.

• Decision Date: 18 January 1982
• Docket Number: No. 79SC342,79SC342
• Parties: Peggy Lou KING, Kenneth M. Jones, Rita M. Jones and Rancho Deluxe, Ltd., Petitioners, v. W. R. HALL TRANSPORTATION AND STORAGE CO., a Colorado corporation, Respondent, and John Gatenby, The American Asphalt Corporation, Del Herman, d/b/a Steamboat Excavating Moffat Ready Mix, Inc., and Richard D. Gilstrap, Defendants.
• Court: Colorado Supreme Court

Page 916

641 P.2d 916

Peggy Lou KING, Kenneth M. Jones, Rita M. Jones and Rancho Deluxe, Ltd., Petitioners, v. W. R. HALL TRANSPORTATION AND STORAGE CO., a Colorado corporation, Respondent and John Gatenby, The American Asphalt Corporation, Del Herman d/b/a Steamboat Excavating Moffat Ready Mix, Inc. and Richard D. Gilstrap, Defendants.

No. 79SC342.

Supreme Court of Colorado.

Jan. 18, 1982.

Rehearing Denied March 1, 1982.

Harry A. Tucker, Jr., Craig, for petitioners Peggy Lou King, Kenneth M. Jones and Rita M. Jones.

Kourlis & Thornberry, Thomas C. Thornberry, Craig, for petitioner Rancho Deluxe, Ltd.

Sharp & Black, P. C., Mary Jane Simmons, Steamboat Springs, for respondent W. R. Hall Transp. and Storage Co.

DUBOFSKY, Justice.

The defendants, owners of real property subject to mechanics' liens, appealed from the Court of Appeals' decision in W. R. Hall Transp. & Storage Co. v. King, 43 Colo.App. 202, 606 P.2d 75 (1979) which reversed the dismissal by the Moffat County District Court of mechanics' lien actions brought by the plaintiff, W. R. Hall Transportation and Storage Company. We granted certiorari and reverse the judgment of the Court of Appeals.

The plaintiff originally filed an action against John Gatenby and American Asphalt Corporation on August 20, 1976, for $17,818.56, the value of 1,000 tons of asphalt supplied by the plaintiff to Gatenby during May, June and July, 1976 (Civ. Action No. 3472). The plaintiff obtained a default judgment against Gatenby on October 12, 1976. On November 26, 1976, relying on C.R.C.P. 15(a), ¹ the plaintiff, without leave of the court, amended the complaint to add a number of additional parties and claims. ² The amended complaint sought to add to the personal money judgment claims against Gatenby and American Asphalt Corporation mechanics' lien claims against six separate parcels of property to which Gatenby had furnished asphalt. ³ At the same time, the plaintiff recorded a single notice of lis pendens listing each of the parcels.

On February 3, 1977, two of the defendants added in the amended complaint moved for an order dropping them as defendants or severing the claims against them. On the same day, the court advised the plaintiff that it intended to dismiss all lien defendants except one because there was no identity as to property owners or material delivered as required by section 38-22-110, C.R.S.1973. ⁴ The court entered an order on February 14, 1977 under C.R.C.P. 21 dropping all the added defendants except the owners of the first parcel of property listed in the amended complaint on the ground that there had been a misjoinder of parties. C.R.C.P. 21 provides:

Misjoinder of parties is not grounds for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action on such terms as are just. Any claim against a party may be severed and proceeded with separately.

The court held that the remaining issues against the other parcels of real property and the other parties should proceed, if at all, by separate actions.

The plaintiff filed separate actions (Civ. Action No. 3530, against Rancho Deluxe, Ltd., property, and Civ. Action No. 3531, against Shady Lawn Motel property) on March 4, 1977. In the complaints commencing these separate actions, the plaintiff incorporated by reference the notice of lis pendens filed with the amended complaint in Civil Action No. 3472 on November 26, 1976. The plaintiff did not file separate notices of lis pendens in connection with either Civil Action No. 3530 or No. 3531. The defendants in both actions sought partial summary judgment because section 38-22-110 bars an action establishing a mechanic's lien if it is not commenced within six months after the last work or labor is performed, material furnished, or improvements completed. The last day asphalt was provided to Rancho Deluxe, Ltd. was July 2, 1976 and to Shady Lawn Motel, July 6, 1976. The separate actions against the two defendants were not filed until March 4, 1977, approximately eight months after the material was furnished. The district court granted summary judgment for the defendant property owners in Civil Action No. 3531 on January 5, 1978 on this ground and because the plaintiff failed to record notice of lis pendens upon the filing of the action. The court ruled that improper commencement of an action resulting in dismissal does not toll the mechanics' lien statute during the pendency of the improperly commenced action and that notice of lis pendens in connection with one action is not sufficient to notify interested persons of another action. The same order was entered in Civil Action No. 3530 on March 4, 1978.

The plaintiff appealed to the Court of Appeals ⁵ which reversed the trial court's entry of summary judgment in Civil Action Nos. 3530 and 3531. The Court of Appeals held that the trial court order of February 14, 1977 was a severance of claims ⁶ rather than a dismissal because the February 14th order did not characterize the dropping of the added parties as a "dismissal." The Court of Appeals found that the trial court's failure to characterize its order as a dismissal misled the plaintiff and deprived it of its right to pursue a timely appeal. The appeals court concluded that since the order should have been a severance, the statute of limitations in section 38-22-110 was tolled by the filing of the amended complaint in Civil Action No. 3472 on November 26, 1976.

The defendants in Civil Action Nos. 3530 and 3531 sought certiorari, arguing that the effect of dropping parties is dismissal of those parties as a matter of law under C.R.C.P. 21, that the pendency of the mechanics' lien actions against the misjoined parties did not toll the six-month statute of limitations for such claims, and that it was the plaintiff's responsibility to inform the court of the statute of limitations problem if parties were dropped. We agree with the defendants' contentions and therefore reverse the judgment of the Court of Appeals.

The district court correctly characterized its order, both before the order was entered and when the court granted the defendants' motions for partial summary judgment, as a dismissal of claims against the defendants. C.R.C.P. 21, which is identical to Fed.R.Civ.P. Rule 21, ⁷ alters the common law rule requiring dismissal of an entire action in which parties have been improperly joined. Kerr v. Compagnie De Ultramar, 250 F.2d 860 (2d Cir. 1958); 3A Moore's Federal Practice P 21.03, at 21-8 (1979); 7 Wright & Miller, Federal Practice and Procedure § 1681, at 319 (1972). According to Federal Rules commentators, the primary purpose of Fed.R.Civ.P. 21 is to permit the cure of defects in joinder of parties, preserving so much of the action as is properly before the court. 3A Moore's Federal Practice, supra, P 21.05(2), at 21-41. See Wright & Miller, Federal Practice and Procedure, supra, § 1681. The language of the rule emphasizes that misjoinder is not fatal and that a range of alternative remedies should be employed to preserve those issues and parties properly included in an action. Thus, the rule, having stated that misjoinder "is not grounds for dismissal of an action," goes on to delineate the proper remedy for eliminating improperly joined parties: "Parties may be dropped ... by order of the court on motion of any party or of its own initiative at any stage of the action on such terms as are just." Then, to clarify that not only improper parties but improperly brought claims as well may be dropped without jeopardizing an action, the rule sets out the correct procedure for eliminating improper claims : "Any claim against a party may be severed and proceeded with separately." While severance of all claims against a given party may have the effect of splitting off a complete separate action against that party, the general intent of the rule is to specify alternative remedies: dropping of an improper party; severance of an improper claim. See Wright & Miller, supra, § 1689, at 345. ("Although the primary significance of Rule 21 is in the joinder of parties, it does have an effect on the joinder of claims.")

In its February 14th order, the trial court stated:

Rule 21, ... provides that dismissal is not the remedy for misjoinder, however, but that parties may be dropped on such terms as are just. The Court concludes that the interests of justice and the provisions of the Statute, C.R.S. 38-22-111 require that ... all Defendants except (Gatenby and six other defendants) be dropped from this proceeding.

IT IS THEREFORE ORDERED that:

All Defendants other than (the above defendants) be and they are dropped as parties Defendant.

(Emphasis in original.)

The court's intent that the additional parties be dropped is clear from the language of the order; the Court of Appeals' characterization of the order after the fact as a severance was error. The decision whether to drop parties is within the sound discretion of the court, duPont Glore Forgan, Inc. v. Arnold Bernhard & Co., 73 F.R.D. 313 (S.D.N.Y.1976), United States v. E. I. DuPont De Nemours & Co., 13 F.R.D. 490 (D.Ill.1953), and will not be disturbed on appeal unless abuse is shown. United States v. Wyoming National Bank of Casper, 505 F.2d 1064 (10th Cir. 1974); 3A Moore's Federal Practice, supra, P 21.03(1), at 21-10; Wright & Miller, supra, § 1688, at 342.

Later, in granting partial summary judgment in Civil Action No. 3531, the trial court stated: In "dropping" the parties in its Order dated February 14, 1977, the Court did not dismiss Civil Action No. 3531, but dropped improper parties under the mechanic's lien Statute. The "action" was not dismissed, but as to the dropped parties, the Court's Order was tantamount to a dismissal.

The Court of Appeals held that "(s)ince the trial court did not characterize its February 14 order as a dismissal at the time it was entered, it was an abuse...