Miller v. First National Bank

67 S.E.2d 362, 234 N.C. 309, 1951 N.C. LEXIS 481
CourtSupreme Court of North Carolina
DecidedOctober 31, 1951
StatusPublished
Cited by2 cases

This text of 67 S.E.2d 362 (Miller v. First National Bank) is published on Counsel Stack Legal Research, covering Supreme Court of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Miller v. First National Bank, 67 S.E.2d 362, 234 N.C. 309, 1951 N.C. LEXIS 481 (N.C. 1951).

Opinion

DbviN, C. J.

The defendant Bank appealed from the denial of its motion to strike certain paragraphs from the complaint filed in the suit instituted by the plaintiff to surcharge the accounts of First Security Trust Company as executor and trustee of his father’s estate. It is alleged the defendant Bank had absorbed by consolidation or merger the named Trust Company and assumed its liabilities. The gravamen of the charge in the complaint is negligence and mismanagement on the part of the Trust Company constituting a breach of trust, particularly in respect to the sale of 754 shares of stock of the Hutton & Bourbonnais Company which had been bequeathed in trust for the plaintiff under his father’s will. Plaintiff, now of full age, seeks to recover damages for the loss alleged to have resulted. He alleges that the conduct of the Trust Company, for which the defendant Bank is now liable, under the circumstances set out at length, amounted to a constructive fraud upon his rights. In order to present the entire matter plaintiff has also set out in his complaint the fact that a judgment of the Superior Court was rendered in a proceeding instituted by the Trust Company as executor in which all interested persons were made parties, including the present plaintiff, approving the sale of the shares of stock now complained of. The judgment roll, including the pleadings, findings and judgment, is attached to the complaint and for the purpose of attack made part of it.

Plaintiff’s allegation that the sale of the shares of stock complained of was approved by a judgment of the Superior Court in an adversary action in which the plaintiff here was party defendant and appeared by [316]*316a guardian ad litem and answered, nothing else appearing, would raise a complete defense to bis complaint on that ground, and bis allegations of negligence and mismanagement in respect to tbe sale of tbis stock would not avail against a valid judgment rendered by a court having jurisdiction of tbe parties and of tbe subject matter.

It is alleged tba't tbe Superior Court wbicb rendered tbe judgment was without jurisdiction of tbe subject matter, but we do not think tbe judgment is open to attack on tbis ground, as a court of equity has power to entertain a petition to sell land to pay debts, though personal property remains undisposed of, in order to preserve tbe personal property from being sacrificed (Settle v. Settle, 141 N.C. 553, 54 S.E. 445; King v. R. R., 184 N.C. 442, 115 S.E. 172). However, no action was taken on tbis petition, and some time later an amended petition was filed, wbicb tbe present plaintiff’s guardian ad litem and tbe adult defendants answered, presenting a proposal for tbe sale of tbis stock and asking tbe court’s approval and authority to tbe executor to conclude tbe sale for tbe reasons assigned.

Tbe facts set out would seem to indicate tbe court bad jurisdiction both of tbe parties and of tbe subject matter. Hence mere irregularities in tbe rendition of tbe judgment would not justify an independent action to avoid its effect. Irregularities may be corrected by motion in tbe cause. McIntosh, sec. 652; Simms v. Sampson, 221 N.C. 379, 20 S.E. 2d 554; Carter v. Rountree, 109 N.C. 29, 13 S.E. 716.

Tbe remaining ground left tbe plaintiff upon wbicb to maintain his action, in tbe face of tbe judgment wbicb would otherwise bar bis access to tbe relief demanded, is that of fraud. He alleges tbe judgment was void for constructive fraud on tbe part of tbe Trust Company wbicb entered into tbe rendition of tbe judgment.

Constructive fraud differs from active fraud in that tbe intent to deceive is not an essential element, but it is nevertheless fraud though it rests upon presumption arising from breach of fiduciary obligation rather than deception intentionally practiced. 23 A.J. 756; Rhodes v. Jones, 232 N.C. 547, 61 S.E. 2d 725; Hatcher v. Williams, 225 N.C. 112, 33 S.E. 2d 617; City Bank Farmers Trust Co. v. Cannon, 291 N.Y. 125; Ryan v. Plath, 18 Wash. (2) 839.

Constructive fraud has been frequently defined as “a breach of duty wbicb, irrespective of moral guilt, tbe law declares fraudulent because of its tendency to deceive, to violate confidence or to injure public interests. Neither actual dishonesty nor intent to deceive is an essential element of constructive fraud.” 37 C.J.S. 211; Greene v. Brown, 199 S.C. 218.

Tbe plaintiff alleges in substance that tbe sale of tbe shares of stoek by tbe trustee, to tbe injury of plaintiff, under tbe circumstances set out in tbe complaint, constituted a breach of tbe fiduciary obligation im[317]*317posed upon tbe Trust Company in good conscience to guard tbe interests of tbe infant beneficiary, and was bence constructively fraudulent.

Eut if plaintiff’s complaint be sufficient to allege constructive fraud, b.e is confronted by another burdle.

In order to sustain a collateral attack on a judgment for fraud it is necessary that tbe allegations of tbe complaint set forth facts constituting extrinsic or collateral fraud in tbe procurement of tbe judgment. It is well settled that tbe fraud for which a judgment may be vacated or enjoined in equity must be in tbe procurement of tbe judgment. Horne v. Edwards, 215 N.C. 622, 3 S.E. 2d 1; McCoy v. Justice, 199 N.C. 602, 155 S.E. 452; Mottu v. Davis, 153 N.C. 160, 69 S.E. 63; U. S. v. Throckmorton, 98 U.S. 61; Freeman on Judgments, sec. 1233. “Extrinsic or collateral fraud operates not upon matters pertaining to tbe judgment itself but relates to the manner in which it is procured.” Freeman on Judgments, sec. 1233.

In McCoy v. Justice, supra, Justice Adams quotes with approval from Freeman on Judgments: “For judgments are impeachable for those frauds only which are extrinsic to tbe merits of tbe case, and by which tbe court has been imposed upon or misled into a false judgment. They are not impeachable for frauds relating to tbe merits between tbe parties. All mistakes and errors must be corrected from within by motion for a new trial, or to reopen the judgment, or by appeal.” Where the fraud is extrinsic or collateral, operating without, the remedy also is without, and the judgment may be collaterally attacked or set aside by an independent action. McIntosh 745; Carter v. Rountree, 109 N.C. 29, 13 S.E. 716.

To avoid a judgment on this ground there must be shown extrinsic fraud, or fraud collateral to the matters in issue and heard by the first court, and not fraud in the matter on which the judgment was rendered. U. S. v. Throckmorton, supra. “The fraud which warrants equity in interfering with such a solemn thing as a judgment must be such as is practiced in obtaining the judgment and which prevents the losing party from having an adversary trial of the issue.” Mottu v. Davis, supra.

The question here is whether the fraud charged relates to inequitable conduct on the part of the trustee which prevented the court from considering the plaintiff’s case, or whether the court was imposed upon to the extent that facts material to the present plaintiff’s case and in his interest were concealed or were not presented. McLean v. McLean, 233 N.C. 139, 63 S.E. 2d 138.

The plaintiff’s position is that the allegations of his complaint considered in the light favorable for him are sufficient to make out a case of constructive fraud.

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Related

Miller v. First National Bank of Catawba County
67 S.E.2d 362 (Supreme Court of North Carolina, 1951)
McNinch v. . Trust Co.
110 S.E. 663 (Supreme Court of North Carolina, 1922)

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67 S.E.2d 362, 234 N.C. 309, 1951 N.C. LEXIS 481, Counsel Stack Legal Research, https://law.counselstack.com/opinion/miller-v-first-national-bank-nc-1951.