Partners v. Kinnamon

• Court: Court of Appeal of Missouri (US)
• Citation: 384 S.W.3d 703
• Docket Number: WD 73769.,Nos. WD 73547,WD 73548,s. WD 73547
• Parties: UNIFUND CCR PARTNERS, Appellant, v. Patsy A. KINNAMON and Michael Francis Hawkins, Sr., Respondents.
• Decision Date: 28 August 2012

384 S.W.3d 703

UNIFUND CCR PARTNERS, Appellant,
v.
Patsy A. KINNAMON and Michael Francis Hawkins, Sr., Respondents.

Nos. WD 73547, WD 73548, WD 73769.

Missouri Court of Appeals,
Western District.

July 17, 2012.
Motion for Rehearing and/or Transfer to
Supreme Court Denied Aug. 28, 2012.

Application for Transfer Denied Dec. 18, 2012.

[384 S.W.3d 705]

Thomas M. Martin, Jason C. Bache, Kansas City, MO, for appellant.

Marsha A. Friedman, Ray Edward Sousley, Gregory E. Eufinger, and Stephen B. Small, Kansas City, MO, for respondent.

Before: LISA WHITE HARDWICK, P.J., ALOK AHUJA, J. and DALE YOUNGS, Sp. J.

ALOK AHUJA, Judge.

In 2005 and 2006, Unifund CCR Partners, a general partnership, filed three lawsuits in the associate circuit division of the Circuit Court of Cass County to collect on credit-card debts. Two of the suits were filed against Respondent Patsy Kinnamon, and one against Respondent Michael Hawkins. None of the petitions listed any of Unifund's partners as parties-plaintiff, or otherwise identified Unifund's partners. After service of process on each Respondent, and the Respondents' failure to answer or otherwise defend, Unifund obtained default judgments in each case in 2005 and 2006.

In December 2010, the Respondents moved to vacate the default judgments, arguing that, as a general partnership, Unifund lacked standing to maintain the actions in its own name. The circuit court granted all three motions. It concluded that, because Unifund lacked standing to sue, the judgments entered in its favor were “void at [their] inception.” Unifund appeals.

We consolidated the three cases for review, and now reverse. The Respondents' challenges to the default judgments raise issues concerning Unifund's capacity to sue, not its standing. These arguments do not implicate the trial court's subject-matter jurisdiction. Therefore, the default judgments entered in Unifund's favor were not “void,” and the trial court had no authority to set those judgments aside, five years after their entry.

Standard of Review

Ordinarily, we review the circuit court's ruling on a motion to set aside a judgment under Rule 74.06 for an abuse of discretion. However, whether a judgment should be vacated because it is void is a question of law that we review de novo.
Ware v. Ware, 337 S.W.3d 723, 725 (Mo.App. E.D.2011) (citations omitted).

Analysis

Unifund argues that the Respondents' motions to vacate raised the issue of Unifund's capacity to sue, rather than its standing. According to Unifund, this capacity argument was a non-jurisdictional affirmative defense, which would not render the default judgments “void.” We agree.¹

Missouri adheres to the common-law “aggregate theory of partnership.” See, e.g., Scott v. Edwards Transp. Co., 807 S.W.2d 75, 79 (Mo. banc 1991). ² The aggregate

[384 S.W.3d 706]

theory holds that a general partnership has no legal existence separate from its members (in contrast to the rival “entity theory”). See Eisenberg v. Redd, 38 S.W.3d 409, 411 (Mo. banc 2001); McKinney v. Truck Ins. Exchange, 324 S.W.2d 773, 775 (Mo.App.1959). Missouri's adoption of the Uniform Partnership Law (chapter 358, RSMo) did not change the nature of Missouri partnerships. See Kelley v. DeKalb Energy Co., 865 S.W.2d 670, 671 (Mo. banc 1993) (“Under Missouri's version of the Uniform Partnership Act, a partnership is not a legal entity separate from the individual partners.”).

One consequence of the aggregate theory is that a general partnership has no authority to sue in the firm name alone.

In Missouri, we follow the aggregate theory of partnership rather than the entity theory. Among other things, this means defendant here made a single promise to perform to the six partners jointly. The six partners, thus, have a joint right against defendant. To enforce that right, the six-partner partnership is not considered to be a separate or juristic entity and, generally, all partners are necessary parties-plaintiffs in actions to enforce an obligation due to partnership. Without all partners being joined, the court has no power to adjudicate the rights of any partner.

McClain v. Buechner, 776 S.W.2d 481, 483 (Mo.App. E.D.1989) (citations and internal quotation marks omitted); see also N.E. & R. P'ship v. Stone, 745 S.W.2d 266, 266 (Mo.App. S.D.1988). The requirement that a general partnership sue in the names of all of its partners, rather than in the firm name alone, is long-standing Missouri law. See, e.g., Chouteau v. Hewitt, 10 Mo. 131, 135 (1846) (“The names of all the individuals composing a firm or company not incorporated, must be set forth with certainty in the declaration.”); Revis v. Lamme & Bros., 2 Mo. 207, 208 (1830).

Thus, it is undisputed that Unifund, a general partnership, had no authority to file the present actions in its firm name alone. The question remains, however, as to the proper characterization of that defect: whether it defeated the trial court's subject-matter jurisdiction and rendered any resulting judgment void, or instead whether the proper-party issue was a waivable affirmative defense.

The Respondents' right to relief depends on a finding that the default judgments were void, not simply erroneous. Generally, a defendant may move to set aside a default judgment by showing good cause for the defendant's failure to appear, and a meritorious defense. Rule 74.05(d). Such a motion, however, “shall be made within a reasonable time not to exceed one year after the entry of the default judgment.” Id. Here, the Respondents moved to set aside the default judgments more than four years after those judgments were entered against them. Given the passage of time, they had no right to proceed under Rule 74.05(d). Instead, they invoked Rule 74.06(b)(4), arguing that the default judgments were “void” because Unifund did not have standing to proceed in its own name. A Rule 74.06(b)(4) motion which claims that a judgment is void is not subject to any specific time limit. Rule 74.06(c).

Because “[l]itigants can request relief from a void judgment pursuant to Rule 74.06(b) at any time,” “[t]he concept of a void judgment is narrowly restricted' ... to protect the strong public policy interest in the finality of judgments.” Forsyth Fin. Grp., LLC v. Hayes, 351 S.W.3d 738, 740 (Mo.App. W.D.2011) (citations and internal quotation marks omitted).

A judgment is “void” under ... [R]ule [74.06(b)(4) ] only if the court that rendered

[384 S.W.3d 707]

it lacked personal or subject matter jurisdiction or acted in a manner inconsistent with due process of law....

... A judgment is not void merely because it is erroneous. In cases where personal and subject matter jurisdiction are established, a judgment should not be set aside unless the court acted in such a way as to deprive the movant of due process.... These due process concerns typically do not arise in cases of default judgment, where the defendant received proper notice of the proceedings and waived rights as a result of his own failure to appear.

Id. at 740–41 (citations and internal quotation marks omitted); see also, e.g., Kerth v. Polestar Entm't, 325 S.W.3d 373, 388–89 (Mo.App. E.D.2010); State ex rel. Koster v. Walls, 313 S.W.3d 143, 145 (Mo.App. W.D.2010). The fact that a plaintiff's pleading is deficient, and fails to state a claim for relief, does not render the resulting judgment “void.” Forsyth Fin., 351 S.W.3d at 741.

We assume that, if Unifund lacked standing to sue the Respondents, the circuit courts which entered the default judgments lacked subject-matter jurisdiction, and those judgments would therefore be “void.” ³ Respondents' arguments did not raise issues of standing, however.

In City of Wellston v. SBC Communications, Inc., 203 S.W.3d 189 (Mo. banc 2006), the Missouri Supreme Court distinguished the concepts of capacity and standing. It explained:

Capacity to sue refers to the status of a person or group as an entity that can sue or be sued, and is not dependent on the character of the specific claim alleged in the lawsuit....

Standing to sue evaluates the sufficiency of a plaintiff's interest in the subject of the lawsuit. It is a concept used to ascertain if a party is sufficiently affected by the conduct complained of in the suit, so as to insure that a justiciable controversy is before the court.... Objections to standing, unlike objections based on the real party in interest rule, cannot be waived....

Id. at 193 (citation omitted); see also, e.g.,

[384 S.W.3d 708]

Midwestern Health Mgmt., Inc. v. Walker, 208 S.W.3d 295, 298 (Mo.App. W.D.2006) ( “Capacity to sue refers to a party's right to avail itself access to the courts because it is without any general disability. Standing to sue, on the other hand, exists when a party has an interest in the subject matter of the suit that gives it a right to recovery, if validated.” (citations omitted)).

In City of Wellston, the City brought suit in its own name to collect certain business license taxes it had imposed, rather than suing in the name of the State (as arguably required by statute). The Supreme Court held that this was an issue of capacity, not standing:

Missouri courts on multiple occasions have treated errors in bringing a claim directly rather than in the name of another party, or similar defects, as issues of capacity rather than standing, which may be waived or avoided by amendment of the pleadings.

203 S.W.3d at 193. “[E]ven assuming ... that Wellston should have brought suit in the name of the state, the trial court erred in believing that this error” implicated the City's standing, rather than its capacity to sue. Id. at 195.

City of Wellston cited favorably to the Court's prior decision in Board of Public Works of Rolla v. Sho–Me Power Corp., 362 Mo....