stating that privity may be gained by "acquir[ing] an interest in the subject matter of the action either by succession, inheritance, or purchase from a party subsequent to the action"Summary of this case from Mangum v. Town of Wrightsville Beach
Filed 2 July 1993
1. Judgments 243 (NCI4th) — res judicata — persons in privity with parties The married defendants are in privity with a party to a prior action where, pursuant to a consent judgment in the prior action and an ensuing deed, they obtained title to the subject property from plaintiff subsequent to the prior action. The minor defendant is in privity because he is an heir of a party to the original action.
Am Jur 2d, Judgments 567 et seq.
2. Judgments 303 (NCI4th) — res judicata — property disposed of by court order — trust or equitable lien prohibited Under res judicata, no trust or equitable lien can be impressed upon property disposed of by an order of the court. Before any kind of trust or equitable lien could be impressed upon property conveyed pursuant to a consent judgment, the consent judgment would have to be directly attacked by a motion in the cause.
Am Jur 2d, Judgments 428.
3. Judgments 363 (NCI4th) — equitable distribution consent judgment — conveyance of property — claims for trust and equitable lien — improper collateral attack Plaintiff could not collaterally attack an existing equitable distribution consent judgment in a former action by seeking to engraft a constructive trust or an equitable lien on property conveyed to defendant husband's brother pursuant to the judgment on the ground of intrinsic fraud by defendant husband in failing to abide by the judgment. Nor could the minor defendant collaterally attack the consent judgment by seeking to engraft an express trust on such property. The sole remedy for plaintiff and the minor defendant was to modify or set aside the consent judgment through a Rule 60 motion in the cause.
Am Jur 2d, Judgments 630 et seq.
On discretionary review pursuant to N.C.G.S. 7A-31 of an unpublished decision of the Court of Appeals, which affirmed in part and vacated and remanded in part the judgment entered for defendants by Jones (Arnold O.), J., at the 4 March 1991 Civil Session of District Court, Wayne County. Heard in the Supreme Court 15 March 1993.
Law Offices of Roland C. Braswell, by Roland C. Braswell, for plaintiff-appellee.
Paul B. Edmundson, Jr.; and Dees, Smith, Powell, Jarrett, Dees Jones, by Tommy W. Jarrett, for defendant-appellants Mr. and Mrs. Durwood Smith.
Bruce and Bryant, P.A., by R. Michael Bruce, for defendant-appellee John E. Duke, Guardian ad Litem for Cornelius Wayne Smith.
Chief Justice EXUM dissenting.
Justices FRYE and PARKER join in this dissenting opinion.
The issue that we must resolve in this case is whether an existing equitable distribution judgment in a former action may be collaterally attacked. We conclude that the Court of Appeals erred in allowing a collateral attack upon a judgment in a prior action, which ordered an equitable distribution, and hold that the judgment must be directly attacked by a motion in the prior case to modify or set aside the judgment.
An examination of the pleadings and affidavits filed in support of the motion for summary judgment reveals the following: On 18 February 1983, Wayne Smith brought an action for absolute divorce in District Court, Wayne County, against Gatsy N. Smith. Gatsy Smith answered and counterclaimed for alimony and equitable distribution of property. On 4 May 1984, the court granted Wayne Smith an absolute divorce. On that same day and in that same action, a consent judgment was entered. The consent judgment required, inter alia, that simultaneously with the execution of the judgment, plaintiff and defendant both were to pay 50% of the federal and state taxes totalling in excess of $12,000, and that Wayne Smith was to pay Gatsy Smith $500.00 to cover 50% of the payment that she had made to a surveyor, Bobby Rex Kornegay, to keep a judgment from being entered against them. The consent judgment further provided:
That the parties own 37.7/16 [sic] acres of land and it is agreed that the plaintiff and defendant will deed to Durwood Eugene Smith [the brother of Wayne Smith] a 7/12 interest and to the defendant a 5/12 interest in said land.
Furthermore, the consent judgment provided that each of the parties was declared to be the owner of the property allotted to him or her, "free and clear of any claim from the other party." The consent judgment concluded "[t]hat this property settlement is in full and complete settlement of any and all rights that the parties might have arising out of the marriage between them or the equitable distribution laws of this State or otherwise." The judgment was consented to by all of the parties and signed by the trial judge.
Pursuant to the consent judgment, Gatsy Smith conveyed a 7/12 undivided interest in the property to Durwood E. Smith by deed dated 7 May 1984 and executed and recorded on 8 May 1984. Because the plaintiff in that action, Wayne Smith, had previously deeded his interest in the above property to Gatsy Smith on 5 June 1974, he did not sign the deed with Gatsy Smith to Durwood E. Smith.
In March 1985, almost a year after the consent judgment was entered in the prior divorce action, Gatsy Smith filed this action against Wayne Smith and Mr. and Mrs. Durwood Smith. Gatsy Smith claimed that Wayne Smith had never paid his part of the taxes or reimbursed her for the survey expense and had not intended to do so when the consent judgment was entered into. She further contended that Wayne Smith committed a fraud on the court in that Durwood Smith was never intended to be the beneficial owner of the 7/12 interest in the property and that Durwood Smith was holding the 7/12 interest in the property in trust for Wayne Smith. Gatsy Smith claimed that she had been defrauded by Wayne Smith and that he had never intended to carry through with anything he had agreed to in the consent judgment. Gatsy Smith prayed that Durwood Smith and his wife be declared to hold title to the subject property in trust for the use and benefit of Wayne Smith and, further, that an equitable lien be declared against the subject property in the amount of $13,805.96. In the interim, Wayne Smith died and Michael A. Ellis was appointed the administrator of his estate.
In 1989, the trial court allowed Gatsy Smith's motion to add Wayne Smith's two legitimated minor children, Cornelius Smith and Chadwick Brian Smith, as defendants. The children, each represented by a guardian ad litem, filed crossclaims contending that the property in question was owned by Durwood Smith but was subject to an express trust in favor of Cornelius Wayne Smith. Mr. and Mrs. Durwood Smith answered the complaint and crossclaims by denying the minor children's claims and asserting that Durwood Smith was the owner of the property free and clear of any express trust or equitable lien.
Mr. and Mrs. Durwood Smith subsequently filed a motion for summary judgment. At the hearing, Mr. and Mrs. Durwood Smith contended that all of the parties in this action were the same parties or were in privity with the parties in the prior action. Thus, defendants argued, all the parties were bound by the prior action and could not collaterally attack the equitable distribution judgment. After a hearing on the motion, the trial court allowed Mr. and Mrs. Durwood Smith's motion for summary judgment and dismissed the complaint and both crossclaims.
Gatsy Smith and the two minor children appealed to the Court of Appeals, which, in an unpublished opinion pursuant to Rule 30(e), upheld the dismissal of the claim of Chadwick Brian Smith, but vacated and remanded the action to the trial court as to defendant Cornelius Smith and plaintiff Gatsy Smith. This Court granted Mr. and Mrs. Durwood Smith's petition for discretionary review on 17 December 1992. We find no error by the trial court and thus reverse the Court of Appeals' holding in regard to defendant Cornelius Wayne Smith and plaintiff Gatsy Smith.
Defendants Mr. and Mrs. Durwood Smith contend that Gatsy Smith and Cornelius Smith are barred by the doctrine of res judicata from bringing an action collaterally attacking the equitable distribution judgment. We agree.
North Carolina follows the general rule "`that a final judgment, rendered on the merits, by a court of competent jurisdiction, is conclusive of rights, questions and facts in issue, as to the parties and privies, in all other actions involving the same matter.'" Masters v. Dunstan, 256 N.C. 520, 523, 124 S.E.2d 574, 576 (1962) (quoting Bryant v. Shields, 220 N.C. 628, 634, 18 S.E.2d 157, 161 (1942)). In order for a person to be privy to an action, he must have acquired an interest in the subject matter of the action either by succession, inheritance, or purchase from a party subsequent to the action. Id. at 525, 124 S.E.2d at 577-78.
In the case sub judice, defendants Mr. and Mrs. Durwood Smith are in privity because, pursuant to the consent judgment of 4 May 1984 and the ensuing deed, they obtained title to the subject property from plaintiff Gatsy Smith subsequent to the earlier action. In addition, defendant Cornelius Smith is in privity because he is an heir of Wayne Smith, a party to the original action.
Under res judicata, no trust or equitable lien can be impressed upon property disposed of by an order of the court. In Walters v. Walters, 307 N.C. 381, 298 S.E.2d 338 (1983), this Court established the rule that:
whenever the parties bring their separation agreements before the court for the court's approval, it will no longer be treated as a contract between the parties. All separation agreements approved by the court as judgments of the court will be treated similarly, to-wit, as court ordered judgments. These court ordered separation agreements, as consent judgments, are modifiable, and enforceable by the contempt powers of the court, in the same manner as any other judgment in a domestic relations case.
Id. at 386, 298 S.E.2d at 342. Before any kind of trust or equitable lien could be impressed upon the property in question, the consent judgment would have to be directly attacked by a motion in the cause. This Court has stated the law as follows:
A judgment regular upon the face of the record, though irregular in fact, requires evidence aliunde for impeachment. Such a judgment is voidable and not void, and may be opened or vacated after the end of the term only by due proceedings instituted by a proper person. The procedural remedy is by motion or petition in the cause and not by independent action. Ordinarily, the persons entitled to have an irregular voidable judgment opened or vacated are the parties thereto or persons in privity with them. In Card v. Finch, supra ( 142 N.C. 140) at p. 148, it is said: "Persons who are not parties or privies and do not, upon the record, appear to be affected, will not be heard upon a motion to vacate a judgment. They have no status in Court. No wrong has been done them by the Court."
Shaver v. Shaver, 248 N.C. 113, 119, 102 S.E.2d 791, 795-96 (1958) (citations omitted). A collateral attack may not be made upon a judgment rendered by a court of competent jurisdiction. Masters v. Dunstan, 256 N.C. at 524, 124 S.E.2d at 576. This rule is applicable to attacks by parties to the action in which the judgment is rendered and by persons in privity with them. Id.
In the case at bar, defendant Cornelius Smith asks for relief from the consent judgment in the prior divorce action by seeking to engraft an express trust on the judgment and the subsequent deed. We find that this constitutes a collateral attack, as Cornelius Smith is trying to change the disposition of the property from that specified in the consent judgment entered in the prior action.
In the instant case, plaintiff Gatsy Smith is collaterally attacking the consent judgment in the previous case for alleged intrinsic fraud. Plaintiff contends that she is entitled to a constructive trust or equitable lien on the property in question based on the fact that defendant Wayne Smith failed to abide by the equitable distribution consent judgment in the original action.
It is clear that in North Carolina an attack upon an order of the court for intrinsic fraud must be brought by motion in the cause. Stokely v. Stokely, 30 N.C. App. 351, 354-55, 227 S.E.2d 131, 134 (1976). However, judgments may be collaterally attacked if the fraud is extrinsic. Id. Our courts have held:
Fraud is extrinsic when it deprives the unsuccessful party of an opportunity to present his case to the court. If an unsuccessful party to an action has been prevented from fully participating therein there has been no true adversary proceeding, and the judgment is open to attack at any time. A party who has been given proper notice of an action, however, and who has not been prevented from full participation, has had an opportunity to present his case to the court and to protect himself from any fraud attempted by his adversary. Fraud perpetrated under such circumstances is intrinsic, even though the unsuccessful party does not avail himself of his opportunity to appear before the court.
Id.; see also Florida National Bank v. Satterfield, 90 N.C. App. 105, 367 S.E.2d 358 (1988). Here, Gatsy Smith fully participated in the original action. Her allegations against Mr. and Mrs. Durwood Smith and Wayne Smith are of intrinsic fraud.
The sole remedy for plaintiff Gatsy Smith and defendant Cornelius Smith was to modify or set aside the consent judgment in the prior case through a motion in the cause pursuant to Rule 60 of the North Carolina Rules of Civil Procedure. Unless and until this is done, it is res judicata to the parties' claims for relief in this action. We therefore reverse the opinion of the Court of Appeals as to plaintiff Gatsy Smith and defendant Cornelius Smith.