White v. Lobdell

No. 83-135
IN THE SUPREME COURT OF THE STATE OF BIONTAIJA
1984

ROGER WHITE and KAREN SdHITE,
Plaintiffs and Appellants,

FRANK LOBDELL and KATHRYN LOBDELL,
PONDEROSA REAL ESTATE and FIDELITY
REAL ESTATE,
Defendants and Respondents.

APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Jack L. Green, Judge presiding.

COUNSEL OF RECORD:
For Appellants:
Datsopoulos, MacDonald & Lind; Christopher B.
Swartley argued, Missoula, Montana

For Respondents :
Baldassin, Connell & Beers; William R. Baldassin
argued for James and Robert Payne, Missoula,
Montana

Submitted: November 3, 1983
Decided: March 1, 1984

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Filed: .. - : \P
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Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
Plaintiffs Roger and Karen White appeal from the order
of the Fourth Judicial District Court, Missoula County,
denying their motion under Rule 21, M.R.Civ.P. to join Robert
and James Payne as defendants. We reverse the order of the
District Court.
The issues are:
1. Is an order denying a motion for joinder a final
judgment or order which must be appealed within 30 days
pursuant to Rule 5, M.R.App.Civ.P.?
2. Did the District Court err in denying plaintiff's
motion to join defendants under Rule 21, M.R.Civ.P.?
3. Does the statute of limitations bar plaintiffs from
pursuing this action against the Paynes?
4. Does res judicata or collateral estoppel preclude
Paynes from denying liability?
In 1979, Roger and Karen White filed suit against Frank
and Kathryn Lobdell, Robert and James Payne, Ponderosa Realty
Company (Ponderosa) and Fidelity Real Estate (Fidelity) . The
Whites were purchasers and the Lobdells were sellers of real
estate in Missoula, Montana. Ponderosa was the listing
office from which Fidelity received the listing as a
participant in the Missoula Multiple Listing Service. Robert
Payne was the broker, officer a.nd majority stockholder of
Ponderosa. Robert's son James was a real estate salesman for
the compa.ny .
On June 24, 1980, the Paynes were, according to the
District Court, "dismissed with prejudice." The conversation
that occurred between the Court and counsel regarding
dismissal of the Paynes was as follows:
"THE COURT: Do the Defenda.nts Lobdells and Payne
have any objection?
"MR. MILODRAGOVICH: None, Your Honor. One
question I have for purposes of clarity of the
 record, when the caption was originally established
on this the Defendants were Robert and Jim Payne; I
think since then it's been stipulated that
Ponderosa Real Estate, which was the organization
that they were working for, was the actual party in
interest and that Paynes were taken out of it. I
don't know what the status of that is as far as at
the present time. I know we show it as Ponderosa
Realty in the pretrial order.
"MR. SWARTLEY: For the record, Your Honor, the
complaint - originally drawn reflecting Ponderosa
was
Realty as 2 partnership or sole proprietorship; we
7-

later learned - -was a corporation, and I believe
it -
still has corporate existence.
"MR. BALDASSIN: That is correct.
"MR. SWARTLEY: And if that is the case, then the
individual Defendants Robert and James Payne
were--as I am sure that the evidence will develop,
were acting merely as either officers, agents, or
employees of the corporation, and we would be
willing to stipulate to that fact.
"THE COURT: Robert Pa.yne and James Payne will be
stricken as parties Defendant. It will be Frank
Lobdell and Kathryn Lobdell, Ponderosa Realty
Company and Fidelity Real Estate?
"MR. SWARTLEY: Correct.
"THE COURT: Very well." (emphasis added)
Following a recess, the subject was brought up again in
chambers :
"MR. BALDASSIN: I have two requests. First one
is, at an earlier conference in chambers the
Defendants, Robert Payne and James Payne, were
dismissed as parties Defendant; in discussing the
matter with them, they were a little unsure as to
the legal implications of that so I have asked
counsel whether we could go on the record and
formally stipulate that the Defendants, Robert
Payne and James Payne, are hereafter dismissed or
hereby dismissed with prejudice.
"MR. MILODRAGOVICH: We have no objection.
"MR. SWARTLEY: I will stipulate to that.
"THE COURT: Very well, the names of Robert and
James Payne will be dismissed with prejudice."
Later, upon motion by Ponderosa, the District Court
dismissed Ponderosa as a party defendant on the basis of our
decision in State ex rel. City of Havre v. District Court
(Mont. 1980), 609 P.2d 275, 37 St.Rep. 552. In dismissing
Ponderosa, the Court reasoned that Ponderosa's liability
derived solely from the negligent acts of its agents, the
Paynes; since the Paynes had been dismissed with prejudice,
no basis remained for finding Ponderosa liable.
The jury found the Lobdells not liable but found
Fidelity liable for fraud and negligence and awarded $10,255
in damages to the Whites. The jury found Fidelity 40%
negligent and "other parties" 60% negligent.
On appeal we va.cated the District Court's order
dismissing Ponderosa and remanded the cause for retrial.
White v. Lobdell (Mont. 1982), 638 P.2d 1057, 39 St.Rep. 1.
We affirmed the judgment as to the Lobdells. In holding that
the District Court improperly applied City - Havre, we
of
stated:
"What occurred here was not a substantive dismissal
with prejudice of an agent or employee, but rather
the substitution of a proper party before the
court. The District Court simply struck the entity
of a copartnership and inserted the entity of a
corporation. If the corporation had not been
added, the action might be subject to a motion for
misjoinder, but Rule 21, M.R.Civ.P. provides that a
misjoinder of the parties is not a ground for
dismissal and that 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 and
on such terms as are just. The court in this case
simply added a party, the corporation, and dropped
a party, the alleged copartnership." 638 P.2d at
1060, 39 St.Rep. at 5-6.
We reversed that portion of the District Court's decision
that "dismissed with prejudice'' the Paynes and noted that
because "the Paynes had earlier been eliminated from the
cause as party defendants by an order of the court," they
were "not before the court for dismissal with prejudice."
638 P.2d at 1060-61, 39 St.Rep. at 6. Thus, we found that
City of Havre was inapplicable.
The action now before us concerns the District Court's
refusal to join the Paynes as defendants in the second trial.
On February 16, 1982, before the second trial, Whites filed a
motion to join Paynes as defendants under Rule 21, M.R.Civ.P.
After oral argument and submission of briefs, the District
Court denied Whites' motion for joinder, based upon the
purported dismissal with prejudice and the failure of Whites
to object to that dismissal.
Ponderosa failed to appear at the second trial and the
District Court found it liable to the Whites for constructive
fraud. At that time, Ponderosa was insolvent and shortly
thereafter dissolved. Damages were not assessed against
Fidelity.
The Whites appeal the District Court's judgment,
challenging denial of their motion to join the Paynes
pursuant to Rule 21, M.R.Civ.P.
I

Respondent Ponderosa argues that an order denying a
motion for joinder is a final judgment or order which must be
appealed within 30 days pursuant to Rule 5, M.R.App.Civ.P.
Because the Whites did not appeal the order denying joinder
within 30 days, Ponderosa argues the Whites are barred from
challenging the order. The District Court entered its order
denying the motion for joinder on July 29, 1982. Appellants
filed notice of appeal on February 7, 1983, after completion
of the trial on January 24, 1983.
Rule 5, M.R.App.Civ.P. provides that a judgment or order
must be appealed from within 30 days of entry of the judgment
or order. Ponderosa argues that the denial of joinder was a
final judgment from which appeal may have been taken because
it was a final determination of the rights of the parties and
the issues between them. We disagree.
Under Rule 54 (b), M.R.Civ. P., interlocutory judgments
involving multiple claims or parties must be certified as
final judgments in order to be appealable. Benders v.
Stratton (Mont. 1982), 655 P.2d 989, 991, 39 St.Rep. 2389,
2391. Rule 54(b) provides:
 "When multiple claims for relief or multiple
parties are involved in an action, the court may
direct the entry of a final judgment as to one or
more but fewer than all of the claims or parties
only upon an express determimtion that there is no
just reason for delay and upon an express direction
for the entry of judgment. In the absence of such
determination and direction, any order or other
form of decision, however designated, which
adjudicates less than all the claims or the rights
and liabilities of less than all the parties shall
not terminate the action as to any of the claims or
parties, and the order or other form of decision is
subject to revision at any time before the entry of
judgment adjudicating all the claims and the rights
and liabilities of all the parties."
We considered Rule 54 (b) in conjunction with Rule 5 in
the recent case of Granite Ditch Co. v. Anderson (Mont.
1983), 662 P.2d 1312, 40 St.Rep. 630. As here, respondents
in Granite Ditch - argued that appellants' notice of appeal
Co.
was not timely because the District Court's order constituted
a final order which had to be appealed within 30 days. We
rejected that argument and held that absent an express
determination that there is no just reason for delay and
absent certification as a final judgment, an order
adjudicating the rights and liabilities of less than all the
parties is not appealable. 662 P.2d at 1-314, 40 St.Rep. at

Here, the order denying joinder did not adjudicate the
claims, rights or liabilities of al.1 parties nor was the
order certified as a final judgment. Thus, the order was not
a final judgment requiring appeal within 30 days.
Further, the order denying joinder is not one
specifically denominated. as appealable under Rule 1,
M.R.App.Civ.P. Orders are not appealable unless specifically
denominated as such in Rule 1. Shields v. Pirkle
R.efrigerated Freight Lines, Inc. (1979), 181 Mont. 37, 42,
591 P.2d 1120, 1123. This case was not ripe for appeal until
completion of trial on January 24, 1983 when the interests of
all parties were finally determined. Rule 5 does not bar
appeal of the District Court's order.

The Whites argue that the District Court erred in
denying their motion to join the Paynes as defendants under
Rule 21, M.R.Civ.P. They argue that because this Court held
the Paynes were not dismissed with prejudice, the Paynes
were subject to joinder under Rule 21. Ponderosa argues that
grant or denial of a motion for joinder lies in the
discretion of the District Court and that the District Court
did not abuse its discretion in denying the motion.
In Holiday Publishing Co. v. Gregg (S.D.N.Y. 19711, 330

F.Supp. 1326, the Court allowed joinder of additional
defendants and reviewed the policies behind Rule 21,
F.R.Civ.P., which is identical to Rule 21, M.R.Civ.P. The
Court found that the same liberal standards applicable to
amendment of pleadings should apply to joinder of parties.
"The instant case is similar to Kaminsky v. Abrams,
41 F.R.D. 168 (S.D.N.Y. 1966). There, as here,
plaintiff moved, under Rules 15 and 21, to add
parties defendant and amend the complaint . . ..
In granting the motion, Judge Tenney remarked:
"'In any event, the liberal standards upon which
amendments are to be granted when leave of the
Court is required under Rule 15(a) should guide the
Court on motions to add parties under Rule 21.'
"Amendment is favored - - - the merits -the
so that of -
claims presented may be passed upon. Conley v.
Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80
(1957); and unless good reason appears to deny the
motion, to do so would b m a b u s e - discretion,
of
Foman v.~a=s,371 u,,
.~
s- 182, 83 S.Ct. 227,
230, 9 ~ . ~ d . 2 d -
222 (1962).I1 - ~ o l i d apublishing,
~
330 F.Supp. at 1328 (emphasis added).
The Court in Holiday Publishing found that the
defendants' reasons for seeking to deny joinder "swim
upstream against the philosophy of the Federal Rules and the
decisions construing them." 330 F.Supp. at 1328. Defendants
contended that joinder should be denied because plaintiff
knew earlier of his claim against the defendants he sought to
join, granting the joinder would delay the litigation, and
granting the motion would prejudice defendants' rights by
increasing their costs of defense. None of these
considerations were found to outweigh the policies of
allowing for full litigation of all claims on the merits and
allowing joinder "freely."
In Foman v. Davis (1962), 371 U.S. 178, the Supreme
Court emphasized the spirit of the Rules of Civil Procedure:
"It is too late in the day and entirely contrary to
the spirit of the ~ederaiRules of ~i;il ~rocedure
for decisions - - merits - - avoided - -
on the to be on the
basis - - - mere technicalities.
of such 'The Federal
Rules reject the approach that pleading is a game
of skill in which one misstep by counsel may be
decisive to the outcome and accept the principle
that the purpose of pleading is to facilitate a
proper decision on the merits. ' Conley v. Gibson,
355 U.S. 41, 48.

"Rule 15(a) declares that leave to amend 'shall be
. .
freely given when justice so requires'; this
mandate is to be heeded . . ..
If the underlying
facts or circumstances relied upon by a plaintiff
may be a proper subject of relief, he ought to be
afforded an opportunity to test his claim on the
merits. - - absence of any apparent or declared
In. the
reason . .. - leave souaht should, - t h e rules
the d
as -
require, be 'freely given.' Of course, the grant or
denial - a n opportunity t o a m e n d -
of - iswithin the
discretion - - ~ i s t r i c TCourt. but outriaht
of the
refusal - grant the leave without' 9 justify~nq
to
reason appearing - - denial - - - exercise
for the is not an
- discretion: it is merely abuse of that
of h
discretion and inconsistent - - spiriyof -
with the - the
Federal Rules. "
- - -.
371 U.S. at 181-82 (emphasis
added).
As noted in Holiday Publishing, the same standards
should apply to joinder of parties under Rule 21 as apply to
amendments of pleadings under Rule 15. This Court has
followed the rule of Foman in Prentice Lumber Co. v. Hukill
(1972), 161 Mont. 8, 504 P.2d 277, holding that denial of
leave to amend is error where there is no apparent or
declared reason for the denial. 161 Mont. at 17-1-8, 504 P.2d
at 282.
 In Rarnbur v. Diehl Lumber Co. (1964), 144 Mcnt. 84, 394
P.2d 745, we stated that one of the purposes of the Rules of
Civil Procedure is to facilitate the decision of cases on
their merits and that "it is to be considered a serious
matter when a party moves to have a case disposed of on
grounds other that the merits . . . ." 144 Mont. at 90, 394
P.2d at 749. Although some cases speak in broad terms of the
district courts' discretion in granting or refusing joinder,
we must evaluate those cases to determine whether they are
"correct and fair in light of the purpose of the rules to get
to the merits." 144 Mont. at 93, 394 P.2d at 750.
In State ex rel. Stenberg v. Nelson (1971), 157 Mont.
310, 486 P.2d 870, we found that Rule 21 determinations are
discretionary. But that discretion is not license to rule
without valid reasons. We reviewed the trial court's ruling
in Stenberg in light of the policies behind the Rules, "to
the end of adopting that procedure which will result in a
just final disposition of the litigation." 157 Mont. at 319,
486 P.2d at 875. Stenberg concerned severance of actions
against three groups of separate and independent
tort-feasors, rather than joinder of defendants. The claims
in Stenberg were based upon acts by separate tort-feasors who
acted "independently, successively, at different times, in
different places, and whose acts or omissions were entirely
dissimilar . . .." 157 Mont. at 320, 486 P.2d at 876. On
that basis, the District Court's severance of the actions was
found not to have been an abuse of discretion. However,
Stenberg does not support the District Court's refusal in
this case to join the Paynes as defendants.
The reason given by the District Court for refusing to
join the Paynes was that appellants had previously agreed to
dismissal with prejudice. However, in our previous opinion
in this case we found that there had been a substitution of
parties, rather than a dismissal of Paynes with prejudice.
Moreover, even though appellants may have erroneously agreed
to dismissal of Paynes, as the Supreme Court stated in Foman,
"one misstep by counsel" should not be decisive to the
outcome. Viewing this case in light of the policy of the
rules to reach a final determination on the merits rather
than to dispose of cases on technicalities, and in light of
the policy enunciated in Holiday Publishing to liberally
allow joinder under Rule 21, we find that the District Court
abused its discretion in refusing without valid reason to
join Paynes as defendants.
I11

Ponderosa next contends that the statute of limitations
bars appellants from pursuing this action against the Paynes.
The parties' briefs do not make clear which period of
limitation applies. The complaint is framed in terms of
fraud or negligent misrepresentation. Section 27-2-203, MCA
sets a two-year limit on actions for relief on grounds of
fraud or mistake, so that it appears the statute of
limitation on plaintiff's action is two years. See Falls
Sand and Gravel Co. v. Western Concrete, Inc. (D.Mont. 19671,
270 F.Supp. 495; Anderson v. Applebury (1977), 173 Mont. 411,
567 P.2d 951; Rock v. Birdwell (1967), 149 Mont. 449, 429
P.2d 634.
The cause of action accrues under section 27-2-203, MCA
when the fraud is discovered. Here, the fraud was discovered
in April 1979. The complaint was filed in August 1979. The
Paynes were dismissed from the action in June 1980 and
plaintiffs moved to join them in February, 1982. If the

two-year limit applies, the statutory period would have
expired before plaintiffs attempted to join the Paynes.
However, Rule 15 (c), M. R.Civ. P. provides that where parties
are changed, the date of the change relates back to the date
of the original pleading if two conditions are satisfied. If
these two conditions are satisfied here, the Whites' claim is
not barred by the statute of limitations.
The first requirement is that the party to be joined
"has received such notice of the institution of the action
that he will not be prejudiced in maintaining his defense on
the merits . . .." Rule 15 (c)(1), M.R.Civ.P. Paynes clearly
had full notice of the institution of the action because they
were originally parties to the action.
The second requirement is that the party to be joined
"knew or should have known that, but for a mistake concerning
the identity of the proper party, the action would have been
brought against him." Rule 15(c)(2), M.R.Civ.P. As officers
of the corporation Ponderosa Realty, Paynes knew or should
have known of their potential liability in corporate
transactions. They also knew or should have known of the
corporation's financial condition and of their personal
involvement in the real estate transaction giving rise to
this lawsuit. They knew or should have known that but for
their dismissal by the District Court they would have been
individually called to account for their alleged negligent
and fraudulent conduct. Given their close identity of
interest with Ponderosa, it is not unfair to allow relation
back of the joinder to the date the complaint was originall-y
filed.
We conclude the second requirement is also met. Thus,
the date of joinder of the Paynes will relate back to the
date of the original pleading and the statute of limitations
will not preclude the Whites from pressing their claim
against the Paynes.
IV
The final issue is whether res judicata or collateral
estoppel precludes Paynes from denying liability. The
District Court found that " [tlhe damages suffered by the
Plaintiffs resulted from the breach of duty by the employees
of Ponderosa Real Estate.'' The Whites contend that Paynes
should now be estopped from denying liability.
This issue is raised for the first time on appeal. The
District Court has made no ruling on this issue and the
parties' briefs do not address it in detail. We therefore
conclude that it would be premature for this Court to rule on
this issue and we decline to do so.
The District Court's order denying joinder is reversed
and the cause is remanded for further proceedings consistent
with this opinion.

We concur:

%d4&Cl&
Chief Justice

Justices
Mr. Justice L.C. Gulbrandson dissenting.

I respectfully dissent.
Rule 21, P4.R.Civ.P. provides:
"Misjoinder of parties is not ground 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 and
on such terms as are just. Any claim
against a party may be served and
-
proceeded with separately." (Emphasis
added. )
Joinder under this rule is not automatic. The rule only
provides that parties ". . . may be dropped or added ...
on motion . . . ." There is no requirement that they must
be added upon motion. Although the court generally views
requests to join additional defendants with favor, see 3A
Moore's Federal Practice, Paragraph 20.06 (2d.Ed. 1979), it
retains broad discretion in ruling on such a motion. Barr
Rubber Products Co. v. Sun Rubber Co., 425 F.2d 1114,
1126-27 (2d.Cir.), cert, denied, 400 U.S. 878, 91 S.Ct. 118,
27 L.Ed.2d 115 (1970); Fair Housing Development Fund Corp.
v. Burke, 55 F.R.D. 414, 420 (E.D.N.Y. 1972); Allied
Chemical Corp. v. Strouse, Inc., 53 F.R.D. 588, 589-90,
(E.D.Pa. 1971). Factors the judge should consider include
trial convenience, avoidance of prejudice, and minimizing
expense and delay, all to the end of adopting a procedure
that will result in a just and final end to litigation.
State ex rel. Stenberg v. Nelson (1971), 157 Mont. 310, 486

I find no clear error in the District Court's decision
to deny appellants' motion for joinder. The ruling was
based upon appellants' consent to the removal of the
respondents' on June 24, 1980. The motion for joinder was
made almost two years later on February 16, 1982.
It was not an abuse of discretion to deny the motion
for joinder especially in light of l1 the overriding
consideration that the presiding judge must have control of
trial procedures to the extent of shaping trials to meet the
developing circumstances of the case before him." Stenberg,
supra.

I join in the foregoing dissent.

Judge, sitting in pld?ce of Mr.
Justice Frank B. Morrison, Jr.