Wadford v. Davis, 192 N.C. 484 (1926)

Nov. 10, 1926 · Supreme Court of North Carolina

192 N.C. 484

WILLIAM WADFORD et al. v. D. W. DAVIS et al.

(Filed 10 November, 1926.)

1. Executors and Administrators — Statutes—Assets—Creditors—Petition to Sell Lands — Actions—Procedure.

Where tbe executor of tbe decedent bas proceeded under tbe provisions of C. S., 74, to sell tbe realty to make assets to pay debts, and bas filed bis petition as required by C. S., 79, it being made to appear that tbe personalty was insufficient, and tbe proceedings are still pending, tbe surplus of tbe sale is to be regarded as realty to be distributed among tbe devisees, C. S., 56, and a judgment creditor of a devisee desiring to attack a debt set forth in tbe petition as being in fraud, and thus diminishing their distributive share of tbe estate, they should'do so in these proceedings, and not by independent action.

2. Same — Ex Parte Proceedings. — Parties—Judgments—Independent Actions.

Where tbe executor bas filed a proper petition for tbe sale of realty to pay debts (O. S., 79), the judgment creditors interested in tbe surplus, if not made parties, and desiring to contest one of tbe debts set out in tbe partition for fraud, may make themselves parties and proceed therein accordingly, tbe procedure being eat parte on tbe part of tbe executor (O. S., 759), and an independent action by them will not lie for fraud until after final judgment in tbe proceedings.

3» Same — Presumptions.

The regularity of the proceedings by an executor to sell lands to make assets to pay debts due by the estate will be presumed in the absence of evidence to the contrary. O. S., 74, 79, 56, 759.

4. Same — Intervenors.

The judgment 'creditors of the decedent, having an interest in the surplus of the sale of realty to make assets to pay debts, are such necessary or proper parties as to entitle them to intervene in the proceedings of the executor, and make themselves parties, before final judgment. 0. S., 456.

Appeal by plaintiffs from Barnhill, J., March Term, 1926, of Waxe. Affirmed.

This is a civil action brought by William Wadford, Mary Eva Wall, G. G. Wall, J. M. Brewer, trustee in bankruptcy for Wake Grocery Company, and certain other judgment creditors of W. E. Mitchell, against D. W. Davis, W. E. Mitchell, W. E. Mitchell, Executor, W. A. Wall, Lucy A. Wall, N. Y. Gulley, commissioner.

The material allegations are that Mary Mitchell died in June, 1923, leaving a last will and testament duly probated in Wake County and the bulk of her property consisting of real estate was devised to W. E. Mitchell. That W. E. Mitchell was appointed executor, of the last will and testament of Mary Mitchell, and has duly qualified and is acting as such. That a special proceeding entitled “W. E. Mitchell, executor of Mary Mitchell, and W. E. Mitchell, Lucy A. Wall, W. A. Wall, ex parte ” was commenced in the Superior Court of Wake County before the clerk to sell the land of Mary Mitchell, deceased, to pay certain alleged indebtedness amounting to some $5,500. A part of the indebtedness, a $4,000 note alleged to be given by Mary Mitchell, deceased, to her daughter Lucy A. Wall, “is a false and spurious document and was not in truth or in fact ever executed or delivered by the said Mary Mitchell, deceased.” That this $4,000 spurious note was a scheme and pretense to cheat and defraud the creditors of W. E. Mitchell. That the “defendants W. E. Mitchell, D. W. Davis and Lucy A. Wall, wrongfully and fraudulently conspired together to cheat and defraud the creditors of the said W. E. Mitchell and to cause to be executed and put forth the said alleged note,” etc. That W. E. Mitchell is insolvent, except what was devised • to him by his mother, Mary Mitchell.

The plaintiffs prayed judgment, in part: (1) That defendants be restrained and enjoined from further prosecuting the special proceeding and the commissioner appointed by the court from selling the land, etc. (2) Alleged $4,000 note be declared null and void, etc.

The defendants answer and deny the material allegations of the complaint and for a further answer say: “That the defendants are informed and believe, and so allege, tbat tbe note for $4,000 and interest on it will amount to approximately $4,900. For tbe funeral expenses, taxes, and other debts, and costs of administration fixed by law, including tbe $4,000 note and interest, will aggregate about $5,500, and tbat tbe order of tbe clerk of tbe Superior Court of Wake County was orderly and properly made, and these plaintiffs bad no right to interfere with such sale, thus nullifying a judgment of a court of competent jurisdiction; tbat if tbe plaintiffs have any cause of action, they should have made themselves parties to tbe special proceeding now pending before tbe clerk of tbe Superior Court, and asserted their right to tbe fund, which by law remains real estate and subject to judgment liens, after tbe debts of testatrix are paid. In addition to tbe amounts above set forth, tbe will itself provides tbat Lucy A. Wall be paid tbe sum of $300, and all other personal property, consisting of household and kitchen furniture, was specifically devised, and it is necessary to sell tbe land to pay this legacy. Wherefore, tbe defendants pray judgment: First, Tbat plaintiff’s action be dismissed. Second, Tbat tbe land be sold under tbe order of tbe clerk of tbe Superior Court of Wake County, heretofore made. Third, Tbat tbe plaintiffs be taxed with tbe costs incurred by reason of tbe restraining order. Fourth, Tbat if plaintiffs claim any right to fund arising from tbe sale of said lands tbat they be required to assert their rights in tbe special proceeding now pending in tbe court of tbe clerk of tbe Superior Court.”

Tbe court below rendered judgment as follows: “Tbat any right tbat tbe plaintiffs, or either of them may have against tbe defendants, or either of them on account of tbe matters and things alleged -in tbe complaint could be asserted only in tbe special proceeding pending before tbe clerk of tbe Superior Court of Wake County for tbe sale of tbe lands of Mary Mitchell, deceased, to make assets for tbe payment of tbe alleged indebtedness of tbe said Mary Mitchell, deceased, which said special proceeding is referred to in tbe complaint filed in tbe cause, and tbe court being of tbe further opinion tbat this court has no jurisdiction to bear and determine tbe issues raised in tbe pleadings filed in tbe above entitled cause and tbat tbe complaint does not state a cause of action; and tbe defendant having demurred ore terms to tbe complaint, it is ordered and adjudged tbat said demurrer be, and it is, hereby sustained and tbat this action be, and is hereby dismissed,” etc.

Tbe plaintiffs excepted and assigned as error tbe judgment rendered, and appealed to tbe Supreme Court.

Mills & Mills, E. W. Timberlalce & Son, Douglass & Douglass and B. N. Simms for plaintiffs.

N. Y. Gulley for defendants.

Clarkson, J.

C. S., 74, is as follows: Sale of realty, if personalty insufficient for debts. "When tbe personal estate of a decedent is- insufficient to pay all tbe debts, including tbe charges of administration, tbe executor, administrator or collector may, at any time after tbe grant of letters, apply to tbe Superior Court of tbe county where tbe land or some part thereof is situated, by petition, to sell tbe real property for tbe payment of tbe debts .of such decedent.”

C. S., 56, is as follows: Surplus of realty sold for debts is real assets. All proceeds from tbe sale of real estate, as hereinafter provided, which may not be necessary to pay debts and charges of administration, shall, notwithstanding, be considered real assets, and as such shall be paid by tbe executor, administrator or collector to such persons as would have been entitled to tbe land bad it not been sold.”

An ex parte petition was filed in tbe Superior Court of "Wake County before tbe clerk to sell tbe land of Mary Mitchell, deceased, to pay her debts. Tbe executor and all tbe devisees under tbe will, all being of age, were made parties and an order made appointing a commissioner to sell tbe land. Tbe contents of tbe petition for sale must be as follows: 0. S., 79. “Tbe petition, which must be verified by tbe oath of tbe applicant, shall set forth, as far as can be ascertained: (1) Tbe amount of debts outstanding against tbe estate. (2) Tbe value of tbe personal estate, and tbe application thereof. (3) A description of all tbe legal and equitable real estate of tbe decedent, with tbe estimated value of tbe respective portions or lots. (4) Tbe names, ages and residences, if known, of tbe deyisees and heirs at law of tbe decedent.”

A license to sell real estate will be granted if tbe personalty is insufficient for tbe payment of tbe debts. It must be shown in a petition to sell land to make assets that tbe personal estate has been exhausted, or it will be clearly insufficient to pay tbe debts of tbe estate. C. S., 74; Shields v. McDowell, 82 N. C., p. 137; Clement v. Cozart, 107 N. C., 695; Moseley v. Moseley, ante, 243.

In Morris v. House, 125 N. C., 555, it is said: “It was claimed on tbe argument for tbe plaintiffs (and we are not furnished with any argument or brief for defendant), that tbe sale was made under tbe second order (May Term, 1864), which order is styled ‘John Carson, administrator, etc., and others, ex parte’ and tbe report of sale is styled ‘John Carson, administrator, etc., and others, ex parte,’ and tbe plaintiffs contend that this of itself shows that they were not parties. We do not assent to this proposition, though tbe better and more regular way would have been to make tbe heirs at law of tbe defendant’s intestate parties defendant, yet we do not say that this was absolutely necessary in order to bind tbe heirs and convey tbe title. It has been held that it was not. Harris v. Brown, 123 N. C. 419, and Ex parte Avery, 64 N. C., 113.”

C. S., 759, is as follows: “Ex parte; commenced by petition. If all the parties in interest join in the proceeding and ask the same relief, the commencement of the proceedings shall be by petition, setting forth the facts entitling the petitioners to relief, and the nature of the relief demanded.” C. S., 760, the “clerk acts summarily,” etc.

The presumption from the record is that this ex parte special proceeding is regular in every respect. From a careful reading of the complaint, there is no allegation that the interlocutory order, ordering the sale made by the clerk was obtained by fraud, nor is there any final judgment in the cause. The whole basis of the complaint is that the $4,000 note made by Mary Mitchell to Lucy A. Wall “is a false and spurious document,” and the further allegations charging those who “fraudulently conspired to cheat and defraud the creditors of W. E. Mitchell.” So far as the ex parte proceeding had gone, at the time of the commencement of this action, there is nothing shown by the record that it was irregular, erroneous or void. Fowler v. Fowler, 190 N. C., 536; Finger v. Smith, 191, N. C., 818. The action for the sale of the land, under the ex parte proceedings was for the payment of the testatrix’s debts.

In Carter v. Rountree, 109 N. C., 29, it is said: “It is well settled, that pending an action before the final judgment, an interlocutory order or judgment may be attacked for fraud by a motion or proceeding in the action, but after the final judgment the remedy for fraud is by an independent action brought for the purpose. See the cases cited, supra, and other cases cited in Seymour’s Digest (7th), p. 281 et seq.”

In Moody v. Wike, 170 N. C., 544, citing a wealth of authorities, it is said: “When a cause is closed by a final judgment, a proper remedy is to proceed by an independent civil action to set it aside if it was procured by fraud.”

In Fowler v. Fowler, supra, p. 541, it is held: “It is well settled that for fraud perpetrated on a party to the action the judgment must be attacked by an independent action, citing authorities.

The action of plaintiffs is a novel procedure. We can find no precedent like it, or to sustain it. The order appointing a commissioner in the ex parte proceeding is interlocutory and not a final judgment, and therefore an independent civil action could not be brought if the interlocutory order was procured by fraud. Plaintiffs do not attack the ex parte proceeding, but attack the validity of a note which, if paid, would diminish the estate of W. E. Mitchell, devised to him by his mother Mary Mitchell, and thus effect the quantum of plaintiffs’ interest in the land, they being judgment creditors of W. E. Mitchell. They have a lien as judgment creditors of W. E. Mitchell on the land willed him, subject to all valid claims against the estate of Mary Mitchell and subject to his homestead rights.

Part of C. S., 614, defining rights of judgment creditors, is as follows : “And is a lien on the real property in tbe county where the same is docketed of every person against whom any such judgment is rendered, and which he has at the time of docketing thereof in the county in which such real property is situated, or which he acquires at any time thereafter,” etc.

Under C. S., 56, supra, the surplus of realty sold for debts is real assets, and paid to such person as would have been entitled to the land had it not been sold.

C. S., 456, in part, is as follows: “Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff or who is a necessary party to a complete determination or settlement of the questions involved,” etc.

Under our liberal practice, and the facts and circumstances of this case, we think the language of the statute broad and comprehensive enough to permit plaintiffs in the present action to intervene as parties in the ex parte proceedings. The settlement of the only question involved is the validity of the $4,000 note. When they become parties and the pleadings raise an issue of fact as to the validity of the note it can be tried out by a jury at term. This does not interfere with the orderly procedure of the sale of the land, but settles the controversy as to the validity of the alleged spurious $4,000 note, and fixes the duty on the executor, W. E. Mitchell, to whom payment, should be made out of proceeds derived from the sale of the land. Jones v. Asheville, 116 N. C., p. 817.

30 Cyc., p. 127, says: "Under American Codes. In other cases, however, and notably in recent cases, these enactments have been interpreted as permitting a very full joinder of defendants. This tendency is especially marked in actions seeking equitable relief. The provisions of The Code, it is declared, adopted the rule of equity joinder in its most liberal form. A community of interest among defendants is necessary, but it is community of interest in something wider than a precise ‘subject of action’ between plaintiff and each defendant — it is a community of interest ‘in the controversy.’ There is a noticeable tendency under The Code, as in equity pleading, to treat the rule, not as an inflexible rule of practice or procedure, but as a rule founded in general convenience, which rests upon a consideration of what will best promote the administration of justice without multiplying unnecessary litigation on the one hand or drawing suitors into needless and unnecessary expenses on the other.” Oyster v. Mining Co., 140 N. C., 135.

For the reasons given, the judgment of the court below is

Affirmed.