Bonde v. Stern

14 N.W.2d 249, 73 N.D. 273, 1944 N.D. LEXIS 61

• Court: North Dakota Supreme Court
• Decided: April 27, 1944
• Docket: File No. 6879
• Status: Published

Opinions

Nuessle, J.

This action was brought to recover money judgments against the defendants. The facts set out in the complaint may be stated briefly as follows: The defendants owned some urban property in South Dakota. They wished to borrow, with this property as security. To that end, on July 20, 1928, they executed their notes or- bonds aggregating $45,000, tbe bonds being for $500 each with interest at 6 per cent payable semi-annually. To secure these they executed and delivered a mortgage and trust deed covering the property in question to the Northern & Dakota Trust Company, a corporation, trustee. The bonds were sold to various purchasers. The first eighteen of the bonds were paid, together with all interest on the whole indebtedness to August, 1936. In the meantime, the defendants had parted with the title. On January 6, 1938, the remaining bonds, numbered 19 to 90 inclusive, remained unpaid and there was due on each of them $500 with interest from August 1, 1936. The defendants desiring to refinance made an agreement with the trustee, all the holders of the outstanding bonds approving and consenting thereto, whereby it was agreed that the mortgage should be foreclosed, the defendants paying part of the foreclosure expense. It was further agreed that a portion of the past due interest and certain taxes on the premises should be paid by the trustee while foreclosure was pending, and if the funds in the trustee’s hands from rentals on the property were not sufficient to enable the trustee to make these paymens, the defendants would contribute the remainder. It was further agreed that if and when the sheriff’s deed issued to the trustee on foreclosure, the defendants would at once pay any taxes remaining due and unpaid, and all back interest at an agreed reduced rate, and thereupon the property should be redeeded to them and they would give back a new mortgage for the outstanding obligation with interest at 4 per cent. “And that if there is any breach of this agreement by the first parties (the defendants) or of the new mortgage and trust deed to be given as herein provided the second party (the trustee) as trustee or its successor in trust, or any individual bondholder, his heirs or assigns, shall be privileged to thereupon proceed personally against the first parties or any of them, their administrators or executors, as though this agreement had not been made.”

Pursuant to the foregoing agreement the mortgage was foreclosed by the trustee. Plaintiffs and the trustee did and performed all the things that were required to be done and performed by them under the terms of the agreement. The property was bid in at foreclosure sale for the full amount of the mortgage debt. No redemption was made and the trustee took a sheriff’s deed. But the defendants failed and refused to carry out the agreement, whereupon this action was begun in October, 1942, by the named plaintiffs, some thirty in number, in their own behalf and for all other bondholders similarly situated. In addition to the foregoing facts they recited in their complaint the names of the bondholders and the numbers and amounts of the bonds owned by each. They further alleged that, “the owners of bonds 19 to 90 (excepting 37, 41, 54, 80, 89 and 90) are thirty-nine or more in number and are scattered over the United States and it is impracticable to bring them all into court, and each bondholder’s interest is identical and common except that some own more than one bond, so this action is brought upon the direction and consent of the bondholders’ committee by the plaintiffs named, for their benefit and for the benefit of all the bondholders, and each offers upon payment of the bond or bonds owned by them with interest or any judgment herein rendered for such principal and interest to assign or convey their interest in the real property now owned by Allan Williamson, trustee.” (Williamson had superseded the Northern & Dakota Trust Company as trustee.)

Their prayer for relief was that “each individual plaintiff demands judgment against the defendants and each of them for the principal amount of each bond or bonds owned by them, with interest at 2 per cent per annum from August 1, 1936 to August 1, 1938, and with interest at 6 per cent per annum from August 1, 1938 and for their costs and disbursements, and that a judgment be rendered in favor of each of the bondholder’s for the principal amount of each bond or bonds owned by them with interest at 2 per cent from August 1, 1936 to August 1, 1938, and with interest at 6 per cent from August 1, 1938 upon their becoming active plaintiffs in this suit before judgment or upon their later application to become plaintiffs and have judgment, and for such other and further relief as may be just and equitable.”

To this complaint the defendants demurred on the grounds, (1) that several causes of action were improperly united therein, and (2) that the complaint did not state facts sufficient to constitute a cause of action. The second ground of demurrer was later abandoned, the defendants conceding the complaint stated a cause of action. But the defendants stood upon the first ground of demurrer, to wit, that several causes of action were improperly united in the complaint.

The defendants, in support of their demurrer, contend that the complaint sets forth facts constituting divers causes of actions at law, and that there is a misjoinder of such causes of action for the reason that the obligations on which recovery is sought are not jointly owned but are separately owned by the different plaintiffs, and therefore the complaint is subject to challenge by demurrer pursuant to § 7442, Comp. Laws 1913, providing that a defendant may demur to a complaint when it appears upon the face thereof that several causes of action have been improperly united. On the other hand, plaintiffs insist that the action is one in equity; that full and complete relief can not be had without the exercise and application of equitable principles; that, therefore, the action is properly brought pursuant to the provisions of § 7406 of the Code of Civil Procedure, Compiled Laws 1913.

The court overuled the demurrer. Whereupon the defendants perfected the instant appeal from the order overruling the same.

Much attention is devoted by the respective parties to the question as to whether the instant case is an action at law or a suit in equity. We are of the opinion, however, that this question is immaterial here. Our Code of Civil Procedure makes it so.

Section 7355 Comp. Laws 1913, provides:

“The distinction between actions at law and suits in equity and the forms of all such actions and. suits heretofore existing are abolished; and there shall be in this state hereafter but one form of action for the enforcement or protection of private rights and the redress of private wrongs, which shall be denominated a civil action. . . .”

Consistent with the foregoing declaration it is further provided:

Section 7403.

“All persons having an interest in the subject of the action and in obtaining the relief demanded may he joined as plaintiffs except as otherwise provided in this chapter.”

Section 7406.

“Of the parties to the action those who are united in interest must be joined as plaintiffs or defendants; . . . and when the question is one of a common or general interest of many persons, or when the parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for tbe benefit of the whole.”

Section 7439.

“All forms of pleading heretofore existing are abolished; and hereafter the forms of pleadings in civil actions in courts of record and the rules by which the sufficiency of the pleading is to be determined are those prescribed by this code.”

- Section 7466.

“The plaintiff may unite in the same complaint several causes of action, whether they are such as have been heretofore denominated legal or equitable, or both, where they all arise out of:

1. The same transaction, or transactions connected with the same subject of action; or

But the causes of action so united . . . must affect all the parties to the action, and not require different places of trial, and must be separately stated.”

Section 7679.

“Judgment may be given for or against one or more of several plaintiffs, and for or against one or more of several defendants; and the court may determine the ultimate rights of the parties on each side as between themselves. . . .”

The foregoing sections were enacted in almost identically their present forms as parts of the Dakota Code of Civil Procedure, whence we inherited them, by the Territorial Legislature in 1868. The title and preamble to the Code of Civil Procedure then adopted for the Territory of Dakota, read:

“An Act to Simplify and Abridge the Practice, Pleadings and Proceedings of the Courts of This Territory:

“Whereas, it is expedient that the present forms of actions and pleadings in cases at common law should be abolished, that the distinction between legal and equitable remedies should no longer continue, and that an uniform course of proceeding, in all cases, should be established; therefore,

“Be it enacted . . .”

This Code was enlarged and re-enacted by the Territorial Legislature in 1877. Its progenitor was the Code of Civil Procedure of the State of New York, long in effect at the time of its adoption by the Territorial Legislature. A reading of the Code, and particularly of the several sections heretofore quoted, clearly evidences a legislative intention, not only to prescribe a uniform course of procedure by doing away with the then forms of actions and pleadings in cases at common law, but also to make available in all cases, whether at law or in equity, the broader equitable rules then prevailing. Such has been the conclusion of the courts generally in proceedings under the new Code of Civil Procedure. And the early New York cases so viewed the provisions of the new Code. See McKenzie v. L’Amoureaux, 11 Barb. 516, decided in 1851. In this case the court was considering § 119 of the New York Code, identical with our § 7406, supra. The court held that the purpose of this section was to retain “in the new practice the same rules by which to determine whether the proper parties were before the court which then prevailed in the court of chancery. The section in question requires that, except in a specified case, all who are united in interest shall-be joined as parties; and then declares that when the action involves a question of common or general interest to several parties, or when, though united in interest the parties are very numerous and it is impracticable to bring them all before the court, then one or more may sue or defend for all.” Likewise, in Loomis v. Brown, 16 Barb. 325, decided in 1853. In this case an action was brought by Loomis and others against Brown and others for money judgments on an undertaking entered into on the granting of an injunction. The claims of the several plaintiffs were wholly different and distinct. The defendants demurred to the complaint on the ground that there was an erroneous joinder of the plaintiffs in that the claims were distinct and separate arising out of the separate natures of their interests. The court, in overruling the demurrer, said: “The covenant is joint, and when that is so, it is said the covenantees may sue jointly. People v. Holmes, 5 Wend. 191, 197; Watts v. Sanders, 10 B Mon 372; Platt, Covenants 130. However that may be, we are now to determine this question, as it arises under the Code of Procedure, which abolished all distinctions between the forms of pro ceeding in actions at law and suits in equity. With the view of embracing all cases, whether of law or equity, and of making them conform to one general rule, the code provides in the 117th section (our § 7403, supra) that ‘all persons having an interest in the subject of the action, and in obtaining the relief demanded, may be joined as plaintiffs, except as otherwise provided in this title.’ This is now the rule in all cases, whether such as were formerly the subjects of suits in equity or of actions at law; and we are to administer it according to its spirit and true intent, however the practice may differ from the rule that heretofore has prevailed in actions at law. It is only necessary to advert to the fact that the rule prescribed by the code is applicable to all suits, and then consider the identity of the rule the code has adoped for the joinder of plaintiffs, with the rule as it prevailed in equity, to be convinced that we are now to hold the same rule applicable to both. In Mitford’s Pleading, it is said to be the constant aim of equity to do complete justice by settling the rights of all persons interested in the subject of the suit. ... We think it was the manifest intent of the legislature to make a change in relation to parties in suits at law, and to assimilate the practice in that respect to the praotice that had before then prevailed in courts of equity. . . .”

And again, in Kirk v. Young, 2 Abb Pr 453, decided in 1856, the court said: “The language of § 119 of the Code is too unequivocal and broad to admit of any doubt that the legislature intended that when the parties ‘are very numerous, and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole’ whether the action would have been, under the old system, legal or equitable. Those distinctions, as two separate systems of procedure, are abolished by the Code; and all the provisions of the Code are applicable to every action, without reference to those distinctions.”

In New York & N. H. R. Co. v. Schuyler, 17 NY 592, decided in 1859, a demurrer was interposed to the complaint on the ground of misjoinder of causes of action. The court, overruling the demurrer, said concerning the amendment to the Code of Civil Procedure providing that the plaintiff may unite in the same complaint several causes of action, whether they be such as have heretofore been denomi nated legal or equitable, or both, where they all arise out of the same transaction or transations connected with the same subject of action. “This amendment, therefore, was not designed to introduce any novelty in pleading or practice. Its language ‘is, I think, well chosen for the purpose intended, because it is so obscure and so general as to justify the interpretation which shall be found most convenient and best cal'oulated to promote the ends of justice. It is certainly impossible to extract from a provision so loose and yet so comprehensive any rules less liberal than those which have long prevailed in courts of equity.”

The sum of the holdings in these cases is that the provisions of the Code of Civil Procedure, with which we are here concerned, are enactments of rules of equity pleading and are applicable in all actions whether at law or in equity. And when a question arises as to their use, construction or application, equitable precedents may be looked to for guidance.

Of course it must be presumed that when the Territorial Legislature adopted the New York Code, it adopted it with the construction theretofore put upon its provisions by the courts of that state. Cass County v. Security Improv. Co. 7 ND 528, 75 NW 775; State ex rel. McCue v. Blaisdell, 18 ND 31, 119 NW 360; Severtson v. Peoples, 28 ND 372, 148 NW 1054. And on those occasions when we have passed upon questions touching the construction of the provisions of our Code of Procedure, our holdings have been wholly consistent with the conclusion we derive from the New York cases as stated above. See Black v. Minneapolis & N. Elevator Company, 7 ND 129, 73 NW 90; Beddow v. Flage, 22 ND 53, 132 NW 637; Stark County v. Mischel, 33 ND 432, 156 NW 931; Kvello v. Lisbon, 38 ND 71, 164 NW 305: Varnes v. Schwartz, 50 ND 511, 197 NW 129; Ulness v. Dunnell, 61 ND 95, 237 NW 208, 18 Am Bankr Rep (NS) 199.

The instant action is representative but not derivative. The named plaintiffs bring it in their own behalf and on behalf of others similarly situated. The prayer of the complaint is for several judgments in the amounts evidenced by the notes held by the various named plaintiffs, and those unnamed who may ask for judgment. The plaintiffs say they are warranted in thus bringing it pursuant to the equitable rules embodied in §§ 7406 and 7466, supra, and in demanding judgment as they do, pursuant to the provisions of § 7679, supra. They contend that though the plaintiffs may have several causes of action as against the defendants, they are very numerous and have a common and general interest in the questions of Taw involved and in the relief demanded, and that, in addition thereto, all of them have an interest in the subject of the action.

It therefore becomes necessary to consider the allegations of the complaint, all of which are admitted by the defendants’ demurrer, and to then say whether under the Code provisions and pursuant to the practice as shown by equitable and other precedents their position is well taken.

It appears from the allegations of the complaint that plaintiffs’ causes of action arise from the breach of the agreement made with the defendants on January 6, 1938. It is true the defendants contend that the action is not predicated on the agreement of January, 1938 but on the original notes. But it is clear to us that there is no ground for this contention. If this is not so, the complaint fails to state a cause of action. The plaintiffs originally held the bonds or notes of the defendants. The mortgage securing these notes was foreclosed. The property was bid in for the full amount of the debt secured thereby. Unless the agreement saves it the obligation was thus extinguished and the plaintiffs are through so far as the defendants are concerned. But, by their breach of the agreement in failing to comply with the conditions which induced the foreclosure and under which the foreclosure was had and the security bid in, the defendants resuscitated the obligation and again became liable in the amounts evidenced by their notes held by the several plaintiffs. To say otherwise would be to countenance and reward unfaith and trickery. This being so the rights of the plaintiffs which pursuant to the agreement are several arise out of the breach of the same contract and the relief is in each case identical with that of all the others, to wit, damages in the amounts of the notes held, the only difference and distinction being that the amounts of the several judgments sought by the plaintiffs will be different as their notes differ in amounts. Certainly, the bringing of one action in manner and form as the instant action was brought will not only lessen the costs to the plaintiffs, to say nothing of the defendants, but it will light en the labors of the eonrt and the expense to the public that must bear the burden of maintaining the court. Equity always has sought to avoid multiplicity of suits, and to “do complete justice by settling the rights of all persons interested in the subject of the suit.” Clearly, such also must have been the legislative purpose in enacting the provisions of the Code of Civil Procedure. Furthermore, we can see no practical reason why such a procedure should not be followed here. No added burden is imposed on the defendants — rather, a benefit. It does not appear that there is any defense to any of these note obligations. And, if there be, there is no reason why the issues thus arising cannot well be tried, either simultaneously with the others, or separately if, in the judgment of the court, that should be the advisable thing to do. There can be no difficulty on the score that several judgments must be entered: — one for each of the plaintiffs who is entitled to judgment. The statute, § 7679, supra, providently takes care of that possibility by providing that judgment may be given for or against one or more of several plaintiffs and for or against one or more of several defendants, and the court may determine the ultimate rights of the parties on each side as between themselves. Clearly, another enactment of an equitable rule consistent with the declared purpose and with the other provisions of the code. Our conclusion is that viewing the complaint in the light of equitable precedents, where the rules embodied in the Code of Civil Procedure were formulated and applied, it is not subject to the challenge interposed and the demurrer must be overruled.

We know many cases may be found that are not in accord with our conclusion as above set forth, but we think the great weight of authority sustains it. See Pomeroy’s Equity Jurisprudence, 5th ed §§ 269 et seq, where the authorities pro and con are reviewed and considered, and where it is said: “Under the greatest diversity of circumstances, and the greatest variety of claims arising from unauthorized public acts, private tortious acts, invasion of property rights, violation of contract obligations, and notwithstanding the positive denials by some American courts, the weight of authority is simply overwhelming that the jurisdiction may and should be exercised, either on behalf of a numerous body of separate claimants against a single party, or on behalf of a single party against such a numerous body, altho there is no ‘common title’ nor ‘community of right’ or of ‘interest in the subject-matter’ among these individuals, but where there is and because there is merely a community of interest among them in the questions of law and fact involved in the general controversy, or in the kind and form of relief demanded and obtained by or against each individual member of the numerous body. In a majority of the decided cases, this community of interest in the questions at issue and in the kind of relief sought has originated from the fact that the separate claims of all the individuals composing the body arose by means of the same unauthorized, unlawful, or illegal act or proceeding. Even this external feature of unity, however, has not always existed, and is not deemed essential. Courts of the highest standing and ability have repeatedly interfered and exercised this jurisdiction, where the individual claims were not only legally separate, but were separate in time, and each arose from an entirely separate and distinct transaction, simply because there was a community of interest among all the claimants in the questions at issue and in the remedy.” We quoted and approved the foregoing statement by Professor Pomeroy and applied its rule in Kvello v. Lisbon, supra. It is true that in the Kvello case equitable relief was sought, but that can make no difference since, as we have shown, the legislative purpose evidenced when the Code of Civil Procedure was adopted was “that the distinction between legal and equitable remedies should no longer continue, and that an uniform course of proceeding, in all cases should be established.” See, also, in this connection, the very interesting and informative article “Bills of Peace With Multiple Parties” by Professor Zechariah Chafee, Jr. 45 Harvard L Rev p. 1297.

It may be well to note in connection with our holding here the case of Atkins v. Trowbridge, 162 App Div 629, 148 NYS 181. This case was, in many respects, very like the instant case. It was brought in the same manner under an identical procedural statute and the plaintiffs had judgment. The judgment was later reversed but not on the ground that there was a misjoinder of parties or causes of action. The action was brought as “an action at law by representatives of holders of securities of a railroad in behalf of themselves and all others who shall come in and be made parties thereto, against a banking company, to recover money damages for its refusal to carry out a contract to purchase mortgage bonds of a railroad corporation which it was proposed to organize to take over and operate the railroad in which the plaintiffs were interested.” The court said in that part of the opinion to which we here particularly call attention:

“The only theory upon which a recovery could be had at the suit of individual bondholders was that each bondholder who subscribed to the reorganization agreement had created the reorganization committee his agent to do certain things, including the making of a contract for the underwriting of the proposed bond issue, and that Vermilye & Co. in contracting with the committee, knowing it to be the agent of the bondholders, had in effect contracted with each bondholder that it would purchase his bonds, and thus make possible the reorganization which was to impart a value to his securities. Hence, each assenting bondholders has a personal cause of action, if any had, for his damages resulting from the failure of Vermilye & Co. to perform its agreement with him. The assenting bondholders were very numerous, and the question of the liability of Vermilye & Co. for damages was one of general interest to all of them. The case was, therefore, brought within that provision of § 448 of the Code of Civil Procedure reading as follows: ‘And where the question is one of a common or general interest of many persons; or where the persons who might be made parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.’ While this section would seem to justify the plaintiffs in bringing this action in their own behalf and in behalf of others similarly situated, it does not determine the nature of the judgment which should have been entered, nor who is entitled to participate in its results.”

The order appealed from is affirmed.

Burke, and Burr, JJ., concur.