Court Opinion

ID: 5177484
Source: CourtListenerOpinion
Date Created: 2022-01-06 01:09:50.469338+00
Date Added: 2024-06-11T08:26:24.224551
License: Public Domain

EDMONDSON, J.,
concurring (Joined by WATT, J. and GURICH, J.).
1 I concur with the Court's opinion and write separately to explain the procedural infirmity of appellant's assignments of error. The trial court ruled that the nature of the *1020equitable relief sought by taxpayer required the presence of the bondholders because of 12 0.9$.2011 §$ 2019, and I agree based upon the inadequate appellate record and briefs which fail to show reversible error.
I. Bondholders aé Named Parties
12 Bondholders need not always be named parties in litigation which affects their interests. The U.S. Supreme Court provided the following explanation:
. creditors of a corporation are not, unless otherwise provided by statute, made parties in a suit between a stockholder and the corporation to determine liability on a stock subscription, between the corporation and a third person to recover corporate assets, or in a suit brought against the corporation by creditors, stockholders or officers. It has been held that bondholders are not necessary parties to and are bound by the decree-even if adverse to their interests-in litigation wherein an indenture trustee under a bond issue is a party and exercises in good faith and without neglect his contractual authority to represent and assert the lien securing the issue. And so are these petitioners bound by the decrees in the chancery suit in which the Commissioners as parties appropriately asserted the lien for benefit of certificate holders-unless there was fraud or collusion.
Kersh Lake Drainage Dist. of Jefferson, Lincoln and Desha Counties v. Johnson, 809 U.S. 485, 491, 60 S.Ct. 640, 84 L.Ed. 881 (1940).
For additional example, in FDIC v. Bank of New York, 479 F.Supp.2d 1 (D.D.C.2007), the court observed:
It is well settled that adjudicating an absent person's claim cannot "impair or impede the person's ability to protect [his] interest" if he is adequately represented by one of the existing parties. Id.; see Ramah Navajo Sch. Bd., Inc. v. Babbitt, 87 F.3d 1338, 1351 (D.C.Cir.1996). Accordingly, as a rule, "bondholders are not necessary parties to ... litigation wherein an indenture trustee under a bond issue is a party and exercises in good faith and without neglect his contractual authority to represent and assert the lien securing the issue." Kersh Lake Drainage Dist. v. Johnson, 809 U.S. 485, 491, 60 S.Ct. 640, 84 L.Ed. 881 (1940); accord Elwell v. Fosdick, 134 U.S. 500, 512, 10 S.Ct. 598, 33 L.Ed. 998 (1890).
Only under limited and special cireum-stances have courts concluded that trustees do not adequately represent the interests of absent beneficiaries. For example, when a single trustee represents beneficiaries with conflicting interests, the beneficiaries will be necessary parties.
479 F.Supp.2d at 10.
Generally, an indenture trustee may represent bondholders without each of them being made a party or being named as a party although the bondholders' interest is affected by the litigation. Further, in FDIC v. Bank of New York, a party relied upon Federal Rule of Civil Procedure 19, and argued that its noteholders were necessary parties because their absence would subject the party to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations. The court rejected this argument because the party "represents the Noteholders as indenture trustee, the Noteholders will be bound by this Court's decision. ..." Id. 479 F.Supp. at 12.1 This is nothing new and an additional example is provided by Jack's Cookie Corp. v. Giles County, 219 Tenn. 131, 407 S.W.2d 446, 23 MecCanless 131 (1966).
As to the first general issue of whether all necessary parties are before the Court, it *1021is submitted that the chancellor below was correct in not demanding that the bondholders be made parties-defendant. Union Planters National Bank is sued as Trustee under the mortgage and deed of trust doe-ument, and in this capacity represents the interests of the bondholders. In this capacity, its interest in the defense of this case is insured because of its duty as a fiduciary to the bondholders
407 S.W.2d at 448.
13 Does one of the named parties possess express contractual/trust/bond authority or power to represent the bondholders, or (2) does one of the named parties have authority implied in low to represent the bondholders?2 Does Bank of Oklahoma, N.A., identified as "trustee," possess authority to represent the bondholders? None of these questions are briefed by the parties This absence on appeal relates to Appellant's failure to satisfy his burden to present error on appeal.3
H. 12 O.8. § 2019 and Equity
{4 Federal courts have recognized a vast difference between failure to join an indispensable party pursuant to Rule 19 4 and the jurisdiction of a court to adjudicate in the absence of that party.5 Joinder in federal courts is no longer tied to the existence of joint rights and obligations, but is instead based upon "pragmatic considerations." 6 Similarly, we have explained that "a court must '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.'"7 The court considers four factors:
1. To what extent a judgment rendered in the person's absence might be prejudicial to him 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;
8. Whether a judgment rendered in the person's absence will be adequate; and
4, Whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
12 0.8.2011 § 2019(B)(1)-(4).
These are the four factors which guide "equity and good conscience" for determining whether a non-party is indispensable to the litigation.
15 Taxpayer argues that our prior opinion determined that he had a remedy of injunetion against government entities to prevent payments for allegedly illegal bonds. Taxpayer is incorrect. In Tulsa Indus. Auth. v. *1022City of Tulsa, 2011 OK 57, 270 P.3d 113, we stated the following:
Taxpayer sought an order canceling the contractual obligations of the City and TIA, and stated that appropriate relief could be a money judgment to retire the bonds. Taxpayer thus raised several issues, including, but not limited to, the propriety of equity for canceling the issued bonds in these cireumstances, and granting relief in the form of an order compelling payment of money. Whether this request ed relief is proper in equity was not addressed by appellees in the trial court or by the motions to dismiss herein. We decline to address those issues prior to their consideration and adjudication in the trial court. ‘
2011 OK 57, 1 28, 270 P.3d at 127.
We expressly declined to provide a first instance explanation of equitable remedies that were available for a plaintiff in the cireum-stances of this controversy. Taxpayer also argues that we remanded the case to the District Court for it to fashion an equitable remedy upon the presentation of the Taxpayer's evidence. Taxpayer is incorrect. We expressly declined to give an opinion on the nature of equitable remedies available to Taxpayer. Id.
T6 On remand, Taxpayer pled "declaratory and injunctive relief, recision, restitution, unjust enrichment, and quantum merit." Public entities responded arguing that they would be subject to inconsistent judgments by potential actions of bondholders against them if the suit progressed on Taxpayer's claims. In sum, the bondholders could potentially enforce a bond while Taxpayer could potentially get the bond obligation rescinded. When parties claim a $ 2019(B) prejudice in equity is created by a taxpayer seeking to cancel bonds owned by strangers to the litigation, it is an improper response to assert that it is the District Court's obligation to sua sponte fashion some unspecified appropriate remedy for taxpayer's claims as they relate to the named parties and also thereby satisfy non-party bondholders and their interests.8 The allegations of a plaintiff in equity are that the court of equity should grant the particular equitable relief sought to remedy a wrong existing at the time of the decree for which the law fails to provide an adequate remedy.9 Once the other parties filed a § 2019 motion and made a showing of potential inconsistent judgments involving non-party bondholders, Taxpayer was required to respond and show how his requested relief did not create the alleged prejudice of inconsistent judgments, or make some other appropriate response to the § 2019 argument.
T7 The trial court ruled that the nature of the equitable relief sought by taxpayer required the presence of the bondholders because of 12 $ 2019. We have indicated that a party may not seek to "destroy all rights of collection by the [bond] owner and holder thereof who is not a party to the action." 10 However, appellees incorrectly assert that in every instance when the legality of bonds are questioned the bondholders must be made named parties. Kersh Lake, supro; FDIC v. Bonk of New York, supra. In certain cireumstances, equitable relief may be obtained without each bondholder being a named party to the litigation. Appellant did not make a record for appeal or an *1023appellate argument to place his equitable claim within these cireumstances. Taxpayer was given opportunities to amend and add the bondholders. Taxpayer also had the opportunity to argue that one or more of the named parties represented the bondholders in fact or law for the purpose of Taxpayer's equitable request to destroy the bond obligations. Taxpayer had an opportunity to make a record showing such representation. Taxpayer did not make this argument. Taxpayer's arguments on appeal fail to show error on the part of the trial court's orders. I thus concur with the Court's opinion.

. See also Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 113 Hawaii 251, 151 P.3d 732, 760 (2007), ("It has been held that bondholders are not necessary parties to and are bound by the decree-even if adverse to their interests-in litigation wherein an indenture trustee under a bond issue is a party and exercises in good faith and without neglect his contractual authority to represent and assert the lien securing the issue."). CL Broward County v. State, 515 So.2d 1273, 1274 (Fla.1987) ("An indispensable party has been defined as 'one whose interest in the subject matter is such that if he is not joined a complete and efficient determination of the equities and rights between the other parties is not possible.' ... [and pursuant to statute] it appears that the only parties absolutely necessary to a bond validation are the issuing entity and, if the conditions necessitating a defense are met, the state.")

. For example, when a municipality issues bonds paid by real property special assessments the city may be classified as an agent for the bondholder for the purpose of collecting funds and payment of bonds. State ex rel. Southern Surety Co. v. Armstrong, 1932 OK 381, 13 P.2d 198 ("'The duty of such [municipal] officers is merely to act as the agent or instrumentality for the bondholder in the collection or disbursement of the funds so collected. . ..") (Syllabus by the Court).

. Powers v. District Court of Tulsa County, 2009 OK 91, n. 22, 227 P.3d 1060, quoting Pracht v. Oklahoma State Bank, 1979 OK 43, 592 P.2d 976, 978 (''The appellant bears the burden of demonstrating a sufficient record and applicable law to demonstrate in this Court that the trial court committed error since error in the lower court is not presumed.").

. Cornett v. Carr, 2013 OK. 30, ¶9, 302 P.3d 769, 772 (This Court has routinely relied upon federal case law to assist with interpretation of the corresponding sections of the Oklahoma Pleading Code.).

. Thunder Basin Coal Co. v. Southwestern Public Service Co., 104 F.3d 1205, 1211 n. 4 (10th Cir.1997) ("It is sufficient to state that Southwestern's attempt to frame the question of Rule 19(b) indispensability in terms of subject matter jurisdiction necessarily fails. The issue of indispensability under Rule 19(b) is not a jurisdictional question.").

. Schutter v. Shell Oil Co., 421 F.2d 869, 871 (5th Cir.1970), citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 106-107, 88 S.Ct. 733, 19 LEd.2d 936 (1968) (explaining that the more rigid determination of joinder based upon the common law doctrine of joint rights and obligations was replaced by the 1966 amendment to Rule 19 which made "indispensability" based upon "pragmatic considerations.").

. Colton v. Huntleigh USA Corp., 2005 OK 46, ¶33, 121 P.3d 1070, 1079, quoting 12 O.S.2001 § 2019(B).

. It is not clear from the Taxpayer's briefs whether he sought a judgment to void the nature of the obligation as a bond, or whether he sought a judgment to make the underlying repayment obligation void, or both. Generally, this Court has recognized that although a bond may be void, the underlying obligation may still nevertheless be enforceable unless such would violate statute or public policy. For example, an obligation evidenced by a statutorily improper bond may be enforced via equity as a common-law obligation when the obligation in the bond relies upon a valuable consideration and when such enforcement is not prohibited by statute or public policy. Gillespie v. Frisbie, 1915 OK. 300, 46 Okla. 438, 148 P. 991; Lowe v. City of Guthrie, 1896 OK 22, 4 Okla. 287, 44 P. 198.

. Superior Oil & Gas Co. v. Mehlin, 1910 OK. 96, 25 Okla. 809, 108 P. 545, 138 Am.St.Rep. 942 (The relief granted in equity is based upon circumstances existing at the time of the decree.); Clinton v. Miller, 1923 OK 306, 96 Okla. 71, 216 P. 135, 137 (The allegations established by a plaintiff must show that equity may be used to remedy a wrong for which there is no adequate remedy at law.)

. Hollingsworth v. City of Guthrie, 1952 OK 250, 206 Okla. 634, 245 P.2d 1159, 1160.