Opinion ID: 2517229
Heading Depth: 1
Heading Rank: 5

Heading: Did the district court err in granting summary judgment in the absence from this case of Newpoint, an indispensable party?

Text: [¶ 16] District court rulings on the joinder of parties, including allegedly indispensable parties, are reviewed for an abuse of discretion. Grove v. Pfister, 2005 WY 51, ¶ 4, 110 P.3d 275, 277 (Wyo.2005); Albrecht v. Zwaanshoek Holding En Financiering, B.V., 762 P.2d 1174, 1178 (Wyo.1988). The court rule governing joinder is found at W.R.C.P. 19: (a) Persons to be joined if feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if: (1) in the person's absence complete relief cannot be accorded among those already parties; or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may: (i) as a practical matter impair or impede the person's ability to protect that interest; or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. If the person has not been so joined, the court shall order that the person be made a party. If the person should join as a plaintiff but refuses to do so, the person may be made a defendant, or, in a proper case, an involuntary plaintiff. If the joined party objects to venue and joinder of that party would render the venue of the action improper, that party shall be dismissed from the action. (b) Determination by court whenever joinder not feasible. If a person as described in subdivisions (a)(1) and (a)(2) hereof cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: (1) To what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; (2) The extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) Whether a judgment rendered in the person's absence will be adequate; (4) Whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. . . . . [¶ 17] In addition to this provision in the court rules, the lien statutes provide a mechanism for making a contractor such as Newpoint a party in a lien foreclosure action brought by a subcontractor such as Elkhorn against an owner such as KM: The contractor shall defend any action brought by his employee, subcontractors hired by the contractor, their employees or by any suppliers of materials provided under contract in accordance with this chapter at his own expense. During the pendency of the action the owner or his agent may withhold from the contractor the amount of money for which a lien is filed. If judgment is rendered against the owner or his property on the lien foreclosure, he may deduct from any amount due to the contractor the amount of the judgment and costs. If the owner has paid the contractor in full he may recover from the contractor any amount paid by the owner for which the contractor was originally liable. Wyo. Stat. Ann. § 29-2-108 (LexisNexis 2007). [¶ 18] Before we discuss this law, and the issue of indispensable parties, we must make a point. This is not a question of the effect of the district court's denial of a motion to join Newpoint as an indispensable party. As noted above, after KM filed two motions to add Newpoint, Inc., as a party defendant, KM and Elkhorn stipulated to such joinder, and an order was entered to that effect. See supra ¶ 7. Elkhorn's complaint was amended, Newpoint, Inc. answered, and filed a counterclaim against Elkhorn and a cross-claim against KM. See supra ¶¶ 7, 8. Both Elkhorn and KM responded to Newpoint, Inc.'s claims. Subsequently, the district court was notified that Newpoint, Inc. had filed for bankruptcy protection in Oklahoma, and the question of the applicability of the bankruptcy stay, discussed above, arose. See supra ¶ 12. Consequently, the limited issue now before us is whether the district court abused its discretion in failing to stay or dismiss the entire case because of Newpoint, Inc.'s non-participation, a question not much different from the one just answered. [¶ 19] We believe that the district court's concurrent entry of its two orders one granting summary judgment to Elkhorn against KM on the limited issue of the lien foreclosure, and one staying all proceedings that in any way affected Newpoint's rights and obligationswas precisely what was intended by the automatic bankruptcy stay, by the lien statutes, and by the court rule governing indispensable parties. We begin by noting the purpose of the lien statutes, which is to create a means of securing the claims of a particular class of creditors and to prevent unjust enrichment arising out of the enhancement of value of property from labor and materials which would otherwise go without payment. Engle v. First Nat'l Bank of Chugwater, 590 P.2d 826, 830 (Wyo. 1979). Allowing the insolvency or bankruptcy of the contractor to defeat the lien claim of a subcontractor would, of course, thwart that purpose. That reasoning is reflected in W.R.C.P. 19(a), (b)(4), which directs the district court, in determining whether in equity and good conscience the action should proceed among the parties before it when an indispensable party cannot be joined, to consider [w]hether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. In addition, W.R.C.P. 19(a) makes it clear that a person should not be joined as a party under the rule if joinder will [] deprive the court of jurisdiction over the subject matter of the action.... Clearly, the intent of the rule is that it not be used to prevent adjudication of claims between parties where that adjudication can be accomplished, as here, in the absence of the allegedly indispensable party. Newpoint, the contractor, does not need to be present in this lawsuit for Elkhorn, the subcontractor, to foreclose its lien against KM, the owner. Hamel, 713 P.2d at 1154. [¶ 20] Without doubt, Wyo. Stat. Ann. § 29-2-101 was incorporated in the lien laws for the owner's protection, and the owner has a clear right to insist that the contractor be made a party. Hamel, 713 P.2d at 1154. We have previously noted, however, that this right is only the right to have the contractor made a party if such is possible. True, 577 P.2d at 1005. This is consonant with the introductory language to W.R.C.P. 19(a), which indicates that persons are to be joined under the rule if feasible, and to the body of the rule, which contains several exceptions to joinder where such could defeat the underlying action: person not subject to service of process, subject matter jurisdiction would be destroyed, or venue would be rendered improper. See Hoiness-LaBar Ins. v. Julien Constr. Co., 743 P.2d 1262, 1269 (Wyo.1987) (not indispensable party if not subject to service of process). It is also consonant with the fact, noted above, that inclusion of an indispensable party is a discretionary decision, not one made as a matter of law. See American Beryllium & Oil Corp. v. Chase, 425 P.2d 66, 68 (Wyo.1967) (no fixed rule determines whether person with interest is an indispensable party; rather, peculiar facts of case are determinative). The general rule has been described as follows: Parties are indispensable only when their interest in the controversy is such that a final decree cannot be made without either affecting that interest or leaving the controversy in such condition that its final disposition may be inconsistent with equity and good conscience. An indispensable party is one whose interest is such that a final decree cannot be entered without affecting that interest or in whose absence the controversy cannot be terminated. A person is an indispensable party only when the judgment to be rendered necessarily must affect his or her rights. A party becomes an indispensable party if the party has an interest relating to the subject of the action and is so situated that the disposition of the action in the party's absence may as a practical matter impair or impede the party's ability to protect that interest. An indispensable party is one whose interest in the controversy makes it impossible to completely adjudicate the matter without affecting either that party's interest or the interests of another party in the action. A party is indispensable when his or her rights are so connected with the claims of the litigants that no degree can be made without impairing those rights. The absence of an indispensable party prevents a court from granting relief. However, the doctrine of indispensability is not jurisdictional. A person who has no interest in the controversy between the parties to the action is not an indispensable party. Persons who might conceivably have an interest in the outcome of litigation are not to be considered indispensable parties. Every person who has any interest in a controversy or subject matter of a suit that is separable from the interest of the other parties before the court, so that it will not necessarily be directly or injuriously affected by a decree that does complete justice between them, is a proper party to the suit but is not an indispensable party. 59 Am.Jur.2d Parties § 10 (2d ed. 2012). [¶ 21] A mechanic's lien foreclosure, in the context of the case sub judice, is a statutory procedure that allows a subcontractor to obtain from the property the reasonable value of the labor and materials put into that property. It has the joint equitable goals of preventing unjust enrichment and providing restitution. Horseshoe Estates v. 2M Co., 713 P.2d 776, 779 (Wyo.1986); Engle, 590 P.2d at 830. Perhaps it could be said that the usual necessity for a subcontractor establishing a lien and seeking to foreclose it is that the contractor did not pay for the subcontractor's services. Allowing the owner to hide behind the contractor's bankruptcy would render the statutory lien process nugatory. The legislative policy behind the lien statutes is clearthe parties providing the labor and materials are to be paid where possible. [6] [¶ 22] In its final argument in regard to this issue, KM cites A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999-1001 (4th Cir. 1986) for the proposition that Newpoint is an indispensable party because KM is entitled to absolute indemnity from Newpoint. In response, Elkhorn distinguished A.H. Robins from the instant case by pointing out that in the latter the question of indemnity is not at all clear, and that matter remains to be resolved between KM and Newpoint in the bankruptcy. We agree with Elkhorn. The contingent nature of any indemnification claims simply renders them too remote to justify staying these state lien foreclosure proceedings and transferring the entire matter to the bankruptcy court. Ni Fuel Co. v. Jackson, 257 B.R. 600, 616 (N.D.Okla.2000). In turn, allowing these proceedings to continue will not affect the indemnity claims involving the bankrupt entity and the bankruptcy estate: [If] the state court action [is] permitted to proceed, that state court action will not determine whether or not a right to indemnification exists. The state court action would only determine liability and damages on the claims before the state court. Whether or not a claim for indemnity can be brought against the bankrupt debtors is a decision left for the bankruptcy court. Id. This is precisely what has happened in the instant case. The district court maintained jurisdiction over the statutory lien foreclosure, and then stayed the balance of the proceedings for resolution in the bankruptcy court. That was the correct course of action.