Title: Padgett v. Theus
Citation: 484 P.2d 697
Docket Number: 
State: Alaska
Issuer: Alaska Supreme Court
Date: May 10, 1971

Padgett v. Theus Annotate this Case 484 P.2d 697 (1971) Vern L. PADGETT and Investment Enterprises, Inc., Appellants, v. James THEUS, a/k/a Jim Theus, and Pearl Theus, Appellees. No. 1260. Supreme Court of Alaska. May 10, 1971. *698 Albert Maffei, Anchorage, for appellants. Helen L. Simpson, Anchorage, for appellees. Before BONEY, C.J., and DIMOND, RABINOWITZ, CONNOR and ERWIN, JJ. OPINION RABINOWITZ, Justice. Being land poor and pressed by numerous creditors, appellees Jim and Pearl Theus entered into a somewhat unusual contract with Earl Bell and appellants Vern L. Padgett and Investment Enterprises, Inc. Basically, the Theuses promised to convey 12 parcels of land to Investment Enterprises. Vern Padgett promised to lend Investment Enterprises $10,000. The corporation in turn promised to transfer one-third of its stock to the Theuses and to lend Jim Theus $10,000. Investment Enterprises further promised to transfer one-third of its stock to Earl Bell, for unstated consideration, and to transfer one-third of its stock to Vern Padgett. Thereafter, the Theuses brought an action in superior court against Vern Padgett and Investment Enterprises claiming breach of contract and praying for rescission and reconveyance of the realty which they had transferred to Investment Enterprises. In their complaint, the Theuses alleged that they had performed as promised, but that Padgett and Investment Enterprises had not. The latter, in their answer, admitted that the Theuses had performed as promised, but denied any breach on their part, claiming that a subsequent modification of the contract included a waiver of "strict enforcement" by the Theuses, and that no party had as yet defaulted under the contract as modified. After trial to the court without jury, "partial" findings of fact and conclusions of law were entered. In its findings of fact, the trial court found that [t]he property described was conveyed to the corporation. Vern Padgett did not advance to Investment Enterprises, Inc. any money to make the loan and Investment Enterprises, Inc. did not make a loan to Plaintiffs herein. Regarding Padgett's and Investment Enterprises' assertion that a modification of the contract had been agreed to by the parties, the court further found that Pearl Theus had never agreed to any modification of the contract.[1] In its conclusions of *699 law, the court determined that the Theuses were entitled to a reconveyance of the 12 parcels because of a "partial failure of consideration." In granting this relief, the court reasoned that the $10,000 loan was the "principal consideration" upon which the Theuses promise to convey the realty was based.[2] In an "Amended Partial Judgment," the trial court ordered Investment Enterprises to transfer title to five of the parcels to the Theuses.[3] By a "Final Judgment," the court ordered that title to the remaining seven parcels be transferred to the Theuses.[4] Investment Enterprises and Vern Padgett now appeal from this final judgment. Appellants contend that Jim Theus failed substantially to perform as promised by not disclosing liabilities and defects of title regarding several of the subject real properties; that this failure on the part of the Theuses led the parties to agree to a modification of the contract regarding the required performance of Padgett; and that in light of these factors the court's grant of rescission and restitution of the realty to the Theuses was inappropriate. Appellants also contend that due to the fact that Earl Bell was a party to the contract in question, he was an indispensable party and should have been allowed to litigate his interest in the case at bar. We find no merit in the first of appellants' contentions. The trial court found that the Theuses had conveyed to Investment Enterprises the real property they were required to under the contract. Also relevant is the trial court's finding that Pearl Theus never agreed to a modification of the contract regarding Padgett's promised performance of a $10,000 loan.[5] Since our review of the record does not leave us with the conviction that these findings of fact of the trial court were clearly erroneous, we affirm the lower court's judgment which provided for restitution of the 12 parcels of realty to the Theuses and cancellation of a promissory note Jim Theus gave to Padgett pursuant to the contract.[6] We now turn to the second and more troublesome issue in this appeal, namely, whether Earl Bell was an indispensable party to the action in question and, if so, whether the judgment should be set aside and the case remanded for a new trial in order that Bell be made a party and be afforded the opportunity of fully protecting his interests. Earl Bell was a party to the contract at issue; for unstated consideration Investment Enterprises promised to give him one-third of its stock. On the other hand, Bell was not made a party to the action, though he testified as a witness in behalf of Investment Enterprises *700 and Padgett.[7] At no stage of the proceedings at the trial court level did Investment Enterprises or Padgett move to dismiss the action on the grounds that the Theuses had failed to join Bell as an indispensable party.[8] It is in this appeal that appellants have for the first time clearly raised the indispensable party issue.[9] Ordinarily an issue which was not raised in the trial court will not be treated on appeal. Decisions under the federal rules, however, indicate that this court has the discretion nevertheless to treat indispensable party issues raised for the first time at the appellate level. It has been held that federal trial courts should treat indispensable party issues sua sponte when the parties fail to raise them, Hoe v. Wilson, 76 U.S. (9 Wall.) 501, 19 L. Ed. 762 (1870); that federal appellate courts may consider indispensable party issues not raised at the trial level, McShan v. Sherrill, 283 F.2d 462 (9th Cir.1960); Brown v. Christman, 75 U.S.App.D.C. 203, 126 F.2d 625, 631-632 (1942); that federal appellate courts may even raise an indispensable party issue for the first time sua sponte, Haby v. Stanolind Oil & Gas Co., 225 F.2d 723 (5th Cir.1955); that it is quite proper, however, to consider an indispensable party issue foreclosed on appeal if the party failed to assert it at trial, Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102 , 111, 88 S. Ct. 733, 19 L. Ed. 2d 936, 945-946 (1968). Adopting these authorities, we think the case at bar presents an appropriate occasion to treat the indispensable party issue now asserted by appellants. *701 In State, Department of Highways v. Crosby, 410 P.2d 724 , 725-726 (Alaska 1966) (footnotes omitted), we held that our rule pertaining to necessary joinder of parties[10] recognizes the classifications of indispensable, necessary, and proper parties which were first developed in equity courts, and that [a]n indispensable party is one whose interest in the controversy before the court is such that the court cannot render an equitable judgment without having jurisdiction over such party. The determination of indispensability or lack of it involves a discretionary balancing of interests. On the one hand, consideration must be given to the possibility of rendering a judgment that will have an adverse factual effect on the interests of persons not before the court, and to the danger of inconsistent decisions, the desire to avoid a multiplicity of actions, and a reluctance to enter a judgment that will not end the litigation. On the other hand, consideration must be given to the desirability of having some adjudication if at all possible rather than none, leaving the parties before the court without a remedy because of an `ideal desire to have all interested persons before the court.' Courts exist for the determination of disputes, and they have an obligation in particular litigation to make meaningful determinations if at all possible.[11] The case at bar presents circumstances involving different considerations from those in Crosby which must be weighed in determining the indispensability of Bell. In the instant case, the indispensable party issue did not unequivocally surface until the matter had reached the appellate level. There are significant differences between the situation which confronted the trial *702 court at the pleading and trial stages and the situation now facing this court. At the appellate level we must consider the effect of Investment Enterprises' and Padgett's failure to raise the indispensable party issue at the trial level, and the significance of the fact that a judgment binding on the Theuses, Padgett, and Investment Enterprises, but not upon Bell, has already been entered.[12] From the trial court vantage point, we conclude that Bell was an indispensable party and should have been joined. There is no question that the value, or potential value, of Bell's interest under the contract sought to be rescinded, consisting of one-third of the stock in Investment Enterprises, could have been substantially affected by a decree returning all of the realty to the Theuses. Bell's identity was known, he was available and actually testified at the trial, and could have been joined without creating any jurisdictional problems.[13] Thus, guided by Crosby's discretionary balancing of interests criteria in determination of indispensability, we conclude that Bell should have been joined while the matter was at the trial level. Viewing the matter from the appellate vantage point, we conclude that the trial court's judgment should not be set aside despite the failure to join Bell. At this level of adjudication we must weigh, in addition to those factors held relevant in Crosby, the ramifications of appellants' failure to raise the indispensable party issue at trial, the significance of the fact that after trial a judgment, binding upon the Theuses, Padgett, and Investment Enterprises was entered, and the justice and feasability of fashioning appropriate relief at the appellate level in order to lessen or avoid any substantial prejudice to Bell flowing from the trial court's judgment.[14] The matter of appellants' failure to raise the indispensable party issue in the superior court will be first examined. At the trial stage, procedural means were available to appellants by which they could have avoided or lessened the dangers of multiple litigation and inconsistent relief.[15] After a completed trial in which appellants failed to assert these interests, we hold that they are now precluded from asking this court to weigh such factors as the dangers of multiple actions and inconsistent relief in deciding whether the lower court's judgment should be set aside.[16] In Crosby, in discussing the interests to be balanced in reaching a determination as to indispensability, we noted the desirability of having, and the court's obligation to make, a meaningful adjudication of the dispute if at all possible. This interest encompasses somewhat broader considerations in the situation where the action has proceeded to judgment and the indispensable party issue is raised for the first time at the appellate level. For after trial, considerations of the public's and the court's interests in complete, consistent, and efficient settlement of controversies takes on greater relevance. The latter factor of efficient settlement necessarily includes the time and expense already incurred at trial. In addition to this element of time and expense, both the public and the Theuses now have a strong interest in preserving the *703 judgment which was obtained after a complete trial.[17] Also to be considered at the appellate level are Bell's interests in the subject litigation, the impact of the judgment upon his interests, his ability to protect these interests, and the feasability and justice of our granting protective relief to Bell. It is clear from the record that Bell had an interest in the litigation. In the contract in question, Investment Enterprises promised to transfer to him one-third of its stock. Undoubtedly the value of Bell's stock would have been greatly diminished by a decree restoring all 12 parcels of realty to the Theuses.[18] Bell, an Anchorage contractor, had associated with Jim Theus in several enterprises prior to the execution of the contract in question. Theus, Bell, and Padgett all agree that the primary purpose of the subject contract was to disentangle Theus' snarled financial situation, to liquidate his real properties, and to place the proceeds in a trust company the three had formed. Bell claims to have contributed to Investment Enterprises from $200 to $300 together with a promise by Theus to him of a 25 per cent interest in the Kenai Courthouse, then owned by Jim Theus. Bell further testified that it was contemplated he would work at developing the Theuses former properties and assist in selling them in return for his one-third interest in Investment Enterprises. The record further reveals that Bell was aware of the difficulties Jim Theus was encountering in attempting to get Padgett to make the $10,000 loan to Investment Enterprises as promised. It is also clear that Bell knew of the instant litigation from its very inception, was aware of the scope of the relief the Theuses were seeking, and was cognizant of the litigation's potential impact upon the value of his stock and his ability to retain the same. Bell himself joined in some unsuccessful last minute pretrial settlement efforts, and at the trial testified against the Theuses and in support of Padgett's contention that the Theuses had agreed to a modification of the contract regarding Padgett's promised performance of a $10,000 loan.[19] Bell, *704 with full knowledge of the scope and potential impact of this litigation upon his interests, chose not to intervene as a party, although he testified at the trial in support of Padgett's position in an effort to defeat the Theuses' action.[20] We therefore hold that appellants, by virtue of Bell's own inaction in failing to intervene in the litigation, should be estopped from asserting that Bell's interest in the present case requires that the judgment be set aside on grounds of failure to join an indispensable party.[21] Under the discretionary balancing of interests test governing determination of indispensability as articulated in Crosby and amplified in this opinion, the superior court's judgment should be affirmed. We reach this conclusion upon balancing the following interests. Investment Enterprises and Padgett are foreclosed because of their failure to raise the indispensable party issue at trial from asking this court to weigh the dangers of their being subjected to inconsistent decisions or a multiplicity of actions. Further, because of the time and expense which have been involved in bringing the matter to judgment, the public and judicial interests in efficient settlement of controversies should be weighed. Additionally, both the public and now the Theuses have a strong interest in preserving this judgment which was obtained after trial. These interests when considered together with Bell's own actions have led us to the conclusion that considerations of equity and good conscience do not require that the judgment be vacated, or that protective relief be fashioned by this court in regard to Bell's stock interests in Investment Enterprises.[22] Bell had *705 ample, timely notice of the litigation and the implications it carried for his stock holdings in Investment Enterprises. Despite his knowledge of the scope of the relief sought in the litigation and the importance of the litigation in regard to his holdings in Investment Enterprises, Bell chose not to intervene as a party in the action. In such circumstances we cannot ascribe significant weight to any interest of Bell's which would tend to militate against preserving the fully litigated judgment which was obtained in the case at bar. The judgment entered below is affirmed.