M & S Construction & Engineering Co. v. Clearfield State Bank

467 P.2d 410, 24 Utah 2d 139, 1970 Utah LEXIS 617
CourtUtah Supreme Court
DecidedMarch 31, 1970
DocketNo. 11694
StatusPublished

This text of 467 P.2d 410 (M & S Construction & Engineering Co. v. Clearfield State Bank) is published on Counsel Stack Legal Research, covering Utah Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
M & S Construction & Engineering Co. v. Clearfield State Bank, 467 P.2d 410, 24 Utah 2d 139, 1970 Utah LEXIS 617 (Utah 1970).

Opinion

CALLISTER, Justice.

This is the second appeal by plaintiff, M & S Construction and Engineering Company, in its action for an alleged breach of a loan agreement against defendant, Clearfield State Bank. On the prior appeal, this court reversed and remanded the case for a trial on all counts including a counter-claim and cross-claim.1

Shortly prior to the commencement of the second trial, the defendant bank filed a motion to amend the pretrial order to add two additional defenses, which motion the court granted. The bank in its amended [141]*141pleading asserted (a) that plaintiff was without capacity to maintain the action for the reason that its corporate rights, powers, and privileges had been suspended by the State of Utah pursuant to Sec. 59-13-61, U.C.A.1953, on about March 31, 1966, and such suspension had continued since that date; (b) that plaintiff was not the real party in interest, since prior to the commencement of its action, it had assigned its cause of action to Steenberg Construction Company.

Defendant filed a motion to dismiss on the ground of the aforementioned defenses. Plaintiff filed an affidavit in opposition to defendant’s motion, wherein plaintiff, through its president, deposed that it had entered into a default and completion agreement on November 6, 1963, with Steenberg Construction Company in which it had assigned all its right, title and interest in and to all its assets including unliquidated claims. Plaintiff asserted that the parties did not intend to assign plaintiff’s cause of action by said agreement, and if such were the effect, it constituted a mistake. The affidavit further recited that the assignment was made only as a security arrangement, and in any event on the 14th of May, 1969, Steenberg had relinquished or reassigned the claim, as witnessed by an attached exhibit. Plaintiff further swore that on May 19, 1969, it was relieved from any suspension for the nonpayment of taxes and had been reinstated by the State of Utah. The exhibit accompanying the affidavit was an agreement executed by Steen-berg and M & S, wherein it is recited that the parties did not intend to include and did not include in the assignment of the assets of M & S any of the claims or causes of action M & S had against Clearfield State Bank. Steenberg represented that it had made no claim and makes no claim to the causes of action of M & S against the bank. Furthermore, Steenberg relinquished and/or assigned to M & S any and all claims which Steenberg might have or claim to have to the causes of action of M & S against the bank.

Plaintiff asked leave of the court to file an amended complaint, wherein it alleged that Steenberg and M & S did not intend to include plaintiff’s claim against the bank in the assignment of November 6, 1963, and if it be so interpreted, it constituted a mistake. Plaintiff further pleaded that if the cause herein sued upon were included in the assignment, the claim had been reassigned by Steenberg. The trial court denied plaintiff’s motion to amend the complaint.

The trial court dismissed plaintiff’s complaint with prejudice and granted defendant judgment on its counterclaim and cross-claim.

In the trial court’s order granting defendant’s motion to dismiss, the court found that plaintiff’s cause of action accrued on October 25, 1963; that M & S assigned its cause on November 6, 1963; and that it [142]*142commenced its action on December 19, 1963. The court held that plaintiff’s action must he dismissed on the ground that upon the suspension of plaintiff’s corporate rights, powers, and privileges, it lost the power to continue the action, and plaintiff’s cause of action abated. Such defense accrued to defendant by reason of plaintiff’s suspension and continued notwithstanding plaintiff’s subsequent reinstatement. The court further held that plaintiff was not the real party in interest, because prior to the commencement of the action, it had assigned the claim upon which it was based to Steen-berg. The court ruled that any subsequent reassignment to plaintiff would not overcome defendant’s defense that plaintiff was not the real party in interest, as required by Rule 17(a), U.R.C.P.

After the determination of the trial court, this court held in Mackay & Knobel Enterprises, Inc. v. Teton Van Gas, Inc.2 that the action of a suspended corporation should not be dismissed on the ground that it lacked capacity to maintain the suit. This court observed that while a suspended corporation is under some disabilities as provided by Sec. 59-13-62, U.C. A. 1953, there is no express provision that it is without capacity to sue. The trial court erred by its dismissal of plaintiff’s action on the ground that it lost its power to continue the action upon its suspension for nonpayment of its taxes.

Was the trial court compelled by Rule 17(a), U.R.C.P., to dismiss plaintiff’s complaint ? The pertinent section provides:

Every action shall be prosecuted in the name of the real party in interest; * *. The Federal Rule 17(a) was amended in 1966 by the addition of the following sentence :

No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest,

Defendant contends that since Utah has not enacted this amendment the principle involved therein is inapplicable to the instant action. This argument is refuted in 3A Moore’s Federal Practice (2d Ed.), Sec. 17.15-1, pp. 601-603, wherein it is observed:

* * * This amendment was originally a contribution from admiralty, and was. later extended to civil actions as well. It is believed the amendment restates the better decisions, and it is not a departure from the practice as it had recently developed in both admiralty and civil actions prior to 1966.
[143]*143The purpose of the provision is to prevent forfeiture when determination of the proper party to sue is difficult or when an understandable mistake has been made. Thus its main thrust is to allow a correction in parties after the statute of limitations has run, despite the valid objection that the original action was not brought by the real party in interest. The provision was not intended, however, to authorize fictitious name suits.

Moore further explains, Id. Sec. 17.01 [8], pp. 24-25:

The provision that no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed, after the objection has been raised, for ratification, substitution, etc., is added simply in the interests of justice. In its origin the rule concerning the real party in interest was permissive in purpose: it was designed to allozo an as-signee to sue in his own name. That having been accomplished, the modern function of the rule in its negative aspect is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally the judgment will have its proper effect as res judicata.3

In Crowder v.

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Related

Levinson v. Deupree
345 U.S. 648 (Supreme Court, 1953)
MacKay & Knobel Enterprises, Inc. v. Teton Van Gas, Inc.
460 P.2d 828 (Utah Supreme Court, 1969)
Shaw v. Jeppson
239 P.2d 745 (Utah Supreme Court, 1952)
Link Aviation, Inc. v. Downs
325 F.2d 613 (D.C. Circuit, 1963)

Cite This Page — Counsel Stack

Bluebook (online)
467 P.2d 410, 24 Utah 2d 139, 1970 Utah LEXIS 617, Counsel Stack Legal Research, https://law.counselstack.com/opinion/m-s-construction-engineering-co-v-clearfield-state-bank-utah-1970.