Opinion
No. BK-76-484
May 13, 1980
Former Bankruptcy Act — Joinder of Parties — Indispensable Parties — Joint Obligor
Only joint obligees, those to whom a duty is owed, and not joint obligors, persons who owe a duty of performance, are indispensable parties. Thus, the president of the creditor's company, who acted as a guarantor for the company's alleged liability to the debtor, was not an indispensable party within the meaning of Bankruptcy Rule 719 since he was classified by the court as a joint obligor. See Rule 719 at ¶ 20,219.
[Digest of Opinion]
The debtor filed a complaint against an insurance company, and its president as a guarantor, on a promissory note for $25,000. Thereafter, the creditor filed a proof of claim in this court for unpaid insurance premiums, to which the debtor counterclaimed, reasserting its claim of the promissory note, and for $46,000 on account of refunds from the insurance policies.
At issue was whether the creditor's president was an indispensable party to the debtor's counterclaim against the creditor, and if not, whether the first count of the debtor's counterclaim should be dismissed. The thrust of the creditors argument was that the president was an indispensable party based upon an assertion that he and the company were joint obligors on the promissory note, and as joint obligors both must be parties to any action brought by the debtor.
The court determined that even if the president and the company were joint obligors, that fact standing alone would not be sufficient for a finding of "indispensable party." The general rule is that only joint obligees (those to whom a duty is owed) and not joint obligors (persons who owe a duty of performance) are indispensable parties. The court noted that the only true indispensable parties are those whose interest could not be excluded or where the interests of the absent party are inextribably tied into the cause or where relief really is sought against the absent party alone. Thus, the court concluded that the president was not an indispensable party to the debtor's counterclaim against the creditor-company. However, the court granted the creditor's motion to allow the case to proceed in state court without prejudice to the debtor's right to remove the counterclaim back to the bankruptcy court if the action is not prosecuted quickly.