LAVA SHADOWS V. JOHNSON, 1996-NMCA-043,
121 N.M. 575, 915 P.2d 331
LAVA SHADOWS, LTD., a New Mexico limited
partnership,
Plaintiff-Appellant,
vs.
JOHN J. JOHNSON, IV, Defendant-Appellee.
COURT OF APPEALS OF NEW MEXICO
1996-NMCA-043, 121 N.M. 575, 915 P.2d 331
APPEAL FROM THE DISTRICT COURT OF
BERNALILLO COUNTY. W. DANIEL SCHNEIDER, District Judge.
Petition for Writ of Certiorari filed
March 25, 1996, denied April 17, 1996.
ROBERT D. MONTGOMERY, Albuquerque, NM,
for Appellant.
ROBERT G. KAVANAGH, THREET & KING,
Albuquerque, New Mexico, for Appellee.
HARRIS L HARTZ, Judge. RUDY S. APODACA,
Chief Judge, RICHARD C. BOSSON, Judge, concur.
{1} Lava Shadows,
Ltd., a limited partnership, sued John J. Johnson IV, a former general partner.
Johnson counterclaimed against Lava Shadows and prevailed. The district court
then entered judgment in favor of Johnson against William Weideman, a general
partner of Lava Shadows. Weideman appeals, contending that the district court
could not enter judgment against him because he had not been a party to the
action at the time of trial. We agree and reverse.
{2} The Lava Shadows complaint,
filed on June 1, 1990, sought from Johns on an accounting and restitution for
monies allegedly owing because of his overbilling for services. Johnson
answered and counterclaimed for conversion, an accounting, and dissolution of
the partnership. Weideman was not named as a party in either the complaint or
the counterclaim, although he verified the complaint.
{3} Johnson
subsequently filed for bankruptcy, and the claim against him was discharged.
The counterclaim, however, proceeded to trial by the court in April 1994. After
trial, District Judge Philip R. Ashby wrote counsel a letter announcing that he
would award Johnson $ 212,845.60 in damages against Lava Shadows. Johnson
submitted requested findings of fact and conclusions of law, including a conclusion
that he should have judgment against Lava Shadows and Weideman jointly and
severally. This conclusion appeared in the district court's findings and
conclusions, but Lava Shadows filed for bankruptcy before judgment could be
entered.
{4} Shortly thereafter
Judge Ashby retired from the bench. After the case was assigned to District
Judge W. Daniel Schneider, Johnson moved for entry of judgment against
Weideman. The caption of the motion, as with all prior pleadings, named only
Lava Shadows as plaintiff and Johnson as defendant.
See SCRA 1986,
1-010(A) (rule governing captions). The court's notice of hearing, which had
the same caption, was sent to Johnson's attorney, to a former attorney for
Johnson, and to Robert D. Montgomery as "attorney for Plaintiff."
Despite the absence of Weideman's name from the caption and notice, at the
hearing on February 8, 1995 Montgomery announced that he was appearing for Lava
Shadows "and William Weideman, general partner." Montgomery's
arguments on behalf of Weideman rested on Lava Shadows' bankruptcy, not the
failure to join Weideman as a party. After the hearing the court sent a letter
to all counsel announcing that the motion would be granted. Montgomery then
filed a pleading on behalf of Weideman entitled "Special Appearance and
Motion to Determine Jurisdiction," contesting the court's jurisdiction to
enter judgment against Weideman. The court held a hearing on the matter but
rejected Weideman's argument and entered judgment against him.
{5} Our analysis
proceeds in two steps. First, we consider the question whether Weideman was, or
could be deemed to be, a party at the time of trial. Second, having answered in
the negative, we consider whether after trial Weideman could be joined and
judgment entered against him. Again, we answer no. We therefore reverse the
judgment.
A. Was Weideman a Party at the Time of Trial?
{6} It is an
elementary, if not oft-stated, principle that judgment may not be
{*577} entered against one not a party to the
action.
Fazzi v. Peters, 68 Cal. 2d 590, 440 P.2d 242, 245, 68 Cal.
Rptr. 170 (Cal. 1968) (en banc). A person does not become a party subject to
liability merely by receiving notice of the action. The pleading that provides
notice must seek relief against the person. Ordinarily, a court has
jurisdiction to enter judgment against a person only if the person receives
proper notice, and such notice must include notice that the person is a party
against whom judgment is sought.
See Restatement (Second) of Judgments §
2 cmt. b (1980) ("Restatement").
{7} In the present
case Weideman was not named in the caption of the complaint or counterclaim.
Nor did either pleading pray for relief for or against him. If Weideman is to
be considered a party, it must arise from his relationship to the party Lava
Shadows--a limited partnership of which he was general partner. But
partnerships are now recognized as jural entities distinct from the partners
themselves. "Suits may be brought by or against a partnership as
such[.]" NMSA 1978, §
38-4-5 (Repl. Pamp. 1987). The fact that the
partnership is a party does not in itself make the partners parties.
See,
e.g., Fazzi; Brittany Ltd. v. Brittany of Michigan, 468 So. 2d 344, 345
(Fla. Dist. Ct. App.),
review denied, 479 So. 2d 117 (1985);
Losito
v. Gingo, 107 Ga. App. 840, 131 S.E.2d 780, 781-82 (Ga. Ct. App. 1963);
Cortiza
v. Rosenblat, 291 So. 2d 425, 428 (La. Ct. App. 1974);
X-L Liquors v.
Taylor, 17 N.J. 444, 111 A.2d 753, 760 (N.J. 1955);
Blum, Gersen &
Stream v. 346 East 72nd Street Assocs., 172 A.D.2d 444, 569 N.Y.S.2d 15
(App. Div. 1991);
Post & Front Properties v. Roanoke Constr. Co.,
117 N.C. App. 93, 449 S.E.2d 765, 768-69 (N.C. Ct. App. 1994);
Foster Lumber
Co. v. Glad, 303 N.W.2d 815, 816 (S.D. 1981); 2 Alan R. Bromberg &
Larry E. Ribstein,
Bromberg and Ribstein on Partnership § 5.12(c), at
5:95 (1991).
But see Fincher v. B & D Air Conditioning & Heating
Co., 816 S.W.2d 509 (Tex. Ct. App. 1991),
writ denied (Tex. Feb. 26,
1992),
and cert. denied, 506 U.S. 823, 121 L. Ed. 2d 41, 113 S. Ct. 77
(1992).
{8} Johnson relies,
however, on
National Surety Co. v. George E. Breece Lumber Co., 60 F.2d
847 (10th Cir. 1932), for the proposition that "even in an action against
the partnership in its own name, judgment may be rendered against a partner
individually if he has been served with process or has appeared in the
action."
Id. at 850. This proposition rests on a longstanding New
Mexico statute, Section 38-4-5, which reads:
Suits may be brought by or against a partnership as
such, or against all or either of the individual members thereof; and a judgment
against the firm as such may be enforced against the partnership's property,
or that of such members as have appeared or been served with summons;
but a new action may be brought against the other members in the original cause
of action. When the action is against the partnership as such, service of
summons on one of the members, personally, shall be sufficient service on the
firm.
(Emphasis added.) In our view, this statute does not assist
Johnson.
{9} We first address
the "served with summons" language. One might infer from the
emphasized language that if a general partner is served with a complaint
against the partnership, the served partner is deemed a party so that judgment
can be entered against the partner. We do not draw that inference. In
Fazzi
the California Supreme Court considered a similar statute, which read:
"When two or more persons, associated in any
business, transact such business under a common name, whether it comprises the
names of such persons or not, the associates may be sued by such common
name, the summons in such cases being served on one or more of the
associates; and the judgment in the action shall bind the joint property
of all the associates, and the individual property of the party or parties
served with process, in the same manner as if all had been named defendants
and had been sued upon their joint liability."
440 P.2d at 244 (italics deleted) (emphasis added) (quoting
Cal. Civ. Code § 388 (West 1954)). The court reviewed the history of the
statute and judicial interpretations throughout that history. It concluded that
the language referring to "individual property" was inserted to avoid
any implication {*578} that a partner
could not be bound in an action against a partnership even if the partner was
joined as a defendant. 440 P.2d at 246. The court held that the statute did not
render a partner a party unless so named. It rejected a lower court ruling that
"an individual judgment may be rendered against a [served] partner not
joined as a defendant in an action against the partnership of which he is, or
is alleged to be, a member." 440 P.2d at 247; see Bromberg &
Ribstein, supra, § 5.12(c), at 5:94 to 5:98.
{10} New Mexico has no
comparable history to elucidate the meaning of Section 38-4-5. (The statement
in
National Surety quoted above is both ambiguous and dictum.) But the
California court's construction is compelling because it is a plausible reading
of the statutory language and because it comports with well-entrenched legal
doctrine that recognizes the distinction between a person acting in an
individual capacity and a person acting in a representative capacity.
See,
e.g., Restatement,
supra, § 36 cmt. a. When a partnership is served
by serving a partner, the partner is functioning in a representative capacity.
If the partner is not a party, service upon the partner cannot constitute
service upon the partner in the partner's individual capacity. We hold that a
partner does not become a party to a suit against the partnership solely by
virtue of being served with summons in the case; the partner must also be
identified as a party in the complaint. In short, the partners whose personal
property is subject to a judgment creditor under Section 38-4-5 are those
partners "served with summons"
as parties in their individual
capacities.
{11} We take a similar
view of the provision in Section 38-4-5 stating that when partners "have
appeared" in an action, judgment against the partnership can be enforced
against the property of those partners individually. The term
"appear" in this context has a technical meaning. One does not
"appear" simply by "showing up" during the course of the
litigation. An appearance is "[a] coming into court as party to a suit,
whether as plaintiff or defendant."
Black's Law Dictionary 125
(rev. 4th ed. 1968). It involves "submitting to the jurisdiction of the
court in a manner showing knowledge of the suit and an intention to
appear."
Tarr v. Superior Court, 142 Ariz. 371, 690 P.2d 90, 93
(Ariz. Ct. App. 1984). For example, a plaintiff appears in an action when the
plaintiff's attorney files suit.
See Pacilio v. Scarpati, 165 Misc. 586,
300 N.Y.S. 473, 478 (N.Y. City Civ. Ct. 1937);
cf. State ex rel. State
Police Dep't v. One 1984 Pontiac, 111 N.M. 87-88,
801 P.2d 667, 669-70
(meaning of "appearance" for purpose of requiring notice before
taking default under SCRA 1986, 1-055),
aff'd, 111 N.M. 746,
809 P.2d
1274 (1991); 10 Charles A. Wright et al.,
Federal Practice and Procedure
§ 2686 (1983) (same, with respect to Federal Rules of Civil Procedure, Rule
55).
{12} Johnson suggests
that Weideman's verification of the complaint constituted an appearance by him.
We agree that a partner's filing a complaint would constitute a sufficient
appearance to come within Section 38-4-5. A judgment on a counterclaim could
then be enforced against the partner's individual property. But such a
complaint would need to be filed in the partner's individual capacity. That was
not the case here. The complaint names only Lava Shadows as the plaintiff. The
verification specifically recites that Lava Shadows is the plaintiff and in no
way implies that Weideman is seeking relief in his individual capacity. Thus
the verification, even taken together with Weideman's authorization of the
suit, does not constitute an appearance in the suit by Weideman. Just as
service upon Weideman suffices under Section 38-4-5 only if Weideman is named
as a party, action by Weideman in initiating the suit suffices as an appearance
by him under Section 38-4-5 only if the suit names him as a party.
{13} Because Weideman
was neither served personally as a party nor appeared personally as a party
prior to completion of trial, he was not a party at the time of trial.
B. Could Judgment Be Intered Against Weideman After Trial?
{14} Although Weideman
was not a party at the time of trial, it appears, as Johnson contends, that he
became a party
{*579} after trial when
his attorney announced in court that he was appearing for Weideman to contest
the proposed judgment against him. The attorney later entered a special
appearance challenging the court's jurisdiction over Weideman, but such a
challenge may well have been too late.
See Restatement,
supra, §
10 cmt. b (challenge to personal jurisdiction must be raised in first
responsive pleading);
cf. SCRA 1986, 1-012(H)(1) (defense of lack of
personal jurisdiction is waived by omitting it from responsive pleading or from
motion filed under the rule). We assume, without deciding, that Weideman became
a party and that the district court had personal jurisdiction over him when it
entered judgment against him.
{15} Nevertheless, the
judgment was improper. Weideman had not been a party during trial. He therefore
had no reason or opportunity to raise any defenses that were available to him
but not to the partnership. Characterizing what happened in the manner most
favorable to Johnson's contentions, (1) when Johnson submitted a proposed
conclusion of law stating that he should have judgment against Weideman, he in
effect moved to amend to bring in Weideman as a party, (2) Weideman appeared at
the motion hearing, and (3) the district court permitted the amendment. Yet,
even if Weideman had become a proper party in the case, the court granted
relief without affording Weideman an opportunity to present a defense on the
merits. As our Supreme Court wrote before statehood, "This can not be
done."
Lewinson v. First Nat'l Bank, 11 N.M. 510, 514,
70 P. 567,
567 (1902). In
Lewinson the bank had obtained judgment against a
partnership of which Lewinson was the junior member, but Lewinson had not been
served prior to judgment. The bank then sought relief against Lewinson, relying
on the statute now codified, without any change in language, as Section 38-4-5.
Our Supreme Court wrote:
This action is to extend the lien of [the judgments
against the partnership] against the property of the copartner Lewinson by
bringing suit upon the judgments and not upon the original cause of action.
This can not be done. Under the statute the defendant Lewinson is entitled to
his day in court, to present any defense which he may have to the original
cause of action. Indeed the statute specifically provides that "a new
action may be brought against the other members in the original cause of
action." In this action the defendant Lewinson could not present any
defense to the original cause of action, and was left solely to present such
questions in defense as might affect the jurisdiction of the court and the
regularity of the proceedings in the action in which the two judgments in
question were recovered. Under our statute the default of an insolvent partner,
by which judgment is recovered against his firm, can not cut off the right of
defense on the merits of his solvent copartner in an action against him upon
any claim made against the copartnership whereby it is sought to extend the
lien of such judgment to the individual property of the solvent partner.
11 N.M. at 514-15, 70 P. at 567-68.
{16} The actions of
the district court "cut off [Weideman's] right of defense on the
merits." We follow
Lewinson and reverse the judgment against
Weideman. On this appeal we need not address the merits of the claims against
Weideman or whether any defenses otherwise available to him may be barred by
principles of issue preclusion.
See Restatement,
supra, §
60(2)(c).
{17} We reverse and
remand with instructions to vacate the judgment against Weideman.
RUDY S. APODACA, Chief Judge