LINCOLN SECURITIES COMPANY v. POPPE, INC.

Minnesota Supreme Court1926-12-24No. No. 25,717

169 Minn. 392

Summary · law.co

Holding. The order vacating the ex parte order bringing in Thorpe as a party defendant is affirmed because Thorpe is not a necessary party; the central issues of usury and holder-in-due-course status can be fully determined between the company and Poppe without Thorpe's presence.

Lincoln Securities Company sued Poppe on three promissory notes that had been indorsed to the company by the original payee, O. J. Thorpe. Poppe raised a usury defense and argued that Thorpe was a necessary party to the action, contending that the case could not be fully resolved without him. The trial court initially granted an ex parte motion to make Thorpe a defendant, but later vacated that order. Poppe appealed the vacation order.

The court addressed two main questions: whether the vacation order was appealable and whether Thorpe was a necessary party under the applicable statute. The court found the order appealable because it affected a substantial right. On the merits, the court held that the question of whether the company was a bona fide purchaser for value could be fully determined without Thorpe's participation. Although a usury finding might give rise to a separate claim by Poppe against Thorpe under state law, this did not make Thorpe a necessary party in an action at law where the company and Poppe's rights could be completely adjudicated.

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Key issues

Appealability of orders vacating ex parte orders adding party defendants
Necessity of a party under procedural rules when defendant has separate claims against that party
Rights and remedies of a maker of a usurious note who is sued by an indorsee

Procedural posture

Poppe appealed from the trial court's order vacating an ex parte order that had made Thorpe a party defendant in an action by the company to recover on indorsed promissory notes.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Lees, C.

Defendant gave three promissory notes to O. J. Thorpe. He indorsed them to plaintiff, who sues to recover the amount due thereon.

The defense is usury, coupled with an allegation that plaintiff is not a bona fide purchaser for value and before maturity, and an allegation that there cannot be a full determination of the action unless Thorpe is brought in as a party.

After serving the answer, defendant obtained an ex parte order making Thorpe a party defendant. He failed to appear or answer. Subsequently plaintiff moved for the vacation of the order. The motion was granted and defendant appealed.

There is a preliminary question as to the appealability of the order. The rule that no appeal lies from an ex parte order, and that a nonappealable order cannot be brought to this court by an appeal from an order vacating or refusing to vacate it, is subject to at least one exception, viz: If the order affects a substantial right within the meaning of subdivision 7, § 9498, G. S. 1923, it is appealable. Security St. Bank v. Brecht, 150 Minn. 502, 185 N. W. 1021. In Lewis v. Babcock, 150 Minn. 394, 185 N. W. 384, we considered and passed upon the merits of an order vacating an ex parte order bringing in an additional party defendant. But in that case the appeal was taken by the party brought , in and not as here by the original defendant,- and the action was of an equitable nature and not one at law. In view of the ruling in the Brecht case, it must be held that the order now under consideration is appealable.

Thorpe was brought in as an additional party under G-. S. 1923, § 9181. Two issues were raised by the pleadings: Were the notes usurious? Was plaintiff a holder in due course?

It is clear that the second question could- be fully determined without Thorpe’s presence as a party defendant. That is the test to be applied in passing upon a motion based on § 9181. Davis v. Sutton, 23 Minn. 307; Clay County Land Co. v. Alcox, 88 Minn. 4, 92 N. W. 464; Eimon Merc. Co. v. Cassidy, 151 Minn. 470, 187 N. W. 520. There is no reason why a plaintiff should not be permitted to carry on the action without the intermeddling of a person with whom plaintiff has no concern. Plaintiff is not interested in Thorpe’s liability to defendant if he exacted an unlawful rate of interest from defendant.

The answer to the other question is not so clear. If the notes were usurious, the rights of the parties would be controlled by GL S. 1923, § 7038. Defendant would be liable to plaintiff if plaintiff was a bona fide purchaser for value and before maturity, but could recover from Thorpe the amount defendant had been compelled to pay plaintiff. Defendant’s right of action against Thorpe is distinct from the right of action asserted by plaintiff against defendant. In an action at law, that is an important consideration. Eimon Merc. Co. v. Cassidy, supra. Under the circumstances, whether Thorpe should be brought in as a party defendant rested largely in the discretion of the trial court and we cannot say that its discretion was not properly exercised.

Farmers & Merchants Bank v. Tate, 96 Neb. 142, 147 N. W. 213, cited by counsel for defendant, is not in point for the reason that the defense was based on a fraud perpetrated by the payee of the note with the aid of the indorsee, a coconspirator.

Order affirmed.