On Appeal from the District Court of the Virgin Islands Division of St. Thomas and St. John.
Seitz, Gibbons and Sloviter, Circuit Judges.
Herbert J. Muriel, Newfound Corporation, and Gulf Caribbean Development Corporation, the defendants in an action seeking rescission of a real estate transaction, appeal from an order of the District Court of the Virgin Islands denying their Fed. R. Civ. P. Rule 19 motion to dismiss for failure to join necessary parties, or to join such parties. The trial court determined that the order denying that motion "involves a controlling question of law as to which there is a substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation . . ." 28 U.S.C. § 1292(b) (1982). This court permitted the appeal. We reverse.
When Martha and William George died intestate their estate comprising seventy-three acres of land on St. John was inherited by thirty-seven heirs who became tenants in common. Two of the heirs, Alicia Smith Penha and Vitalia Boynes, retained Herbert J. Muriel, Esq. to handle the administration of the estate and the sale of the property. Each of the heirs executed a power of attorney authorizing Penha and Boynes to sell that heir's interest in the property. On April 2, 1979 Penha and Boynes signed an agreement pursuant to which part of the land was to be sold to Newfound Corporation, the closing to take place on July 1, 1979. Penha and Boynes also signed a memorandum, dated April 2, 1979, in which Muriel declared that he also represented the purchaser, Newfound Corporation.
Meanwhile, however, Alva O'Neal, one of the heirs, had revoked the power of attorney to Penha and Boynes. The closing date was extended by agreement, and on March 15, 1982 Boynes and Penha executed an amendment in which Gulf Caribbean Development Corporation was acknowledged to be Newfound's assignee. The March 15, 1982 amendment provided, further, that the sellers would endeavor to obtain the interest in the land owned by Alva O'Neal.
Efforts to obtain a conveyance of O'Neal's interest were not successful.Nevertheless, on March 16, 1982, Boynes and Penha conveyed the property to Gulf Caribbean Development Corporation, by warranty deed on behalf of all tenants in common except O'Neal. The purchase price of $330,030.00 was paid $66.066.00 in cash, and the balance of $264,024.00 by a promissory note secured by a purchase money mortgage on Gulf Caribbean Development Corporation's entire interest in the property. By then the number of tenants in common had increased, and forty-two were named as mortgagees. The mortgage was duly recorded.
In February of 1983 eleven of the original grantors instituted an action for rescission of the sale. Those eleven plaintiffs contend that Muriel's fraud and undue influence were such as to permit them to recover their property. The defendants moved to dismiss the complaint for failure to join, as necessary parties, the remaining grantors, or alternatively to direct the plaintiffs to join those parties. The defendants contended that if the rescission action proceeded in the absence of all parties having an interest in the promissory note and mortgage complete relief could not be granted, and the mortgagor would be at risk of incurring inconsistent obligations. The trial court denied this motion, reasoning that tenants in common, holding several interests in real estate are not indispensable parties to an action by other tenants relative to their proportionate interests. The court reasoned:
The relief sought by the plaintiffs in this action would apply only to them. The action would not affect the rights of those former tenants in common who have chosen to stay out of the action. Nothing which results from this action would affect the sale of their interests, or the finality of that sale. Other than damages, the plaintiffs seek only the restoration of their own tenancy in common.
Rule 19 was amended in 1966 to simplify and liberalize joinder under the Federal Rules of Civil Procedure. 7 C. Wright and A. Miller, Federal Practice and Procedure, § 1601 (1972). According to the Advisory Committee, the principal consideration is that "persons materially interested in the subject of an action . . . should be joined as parties so that they may be heard and a complete disposition made." Fed. R. Civ. P. 19, advisory committee note. To that end Rule 19(a) provides in relevant part:
A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties ...