Foster v. Allison Corp.

• Decision Date: 17 February 1926
• Docket Number: 220.
• Citation: 131 S.E. 648,191 N.C. 166
• Parties: FOSTER v. ALLISON CORPORATION ET AL.
• Court: North Carolina Supreme Court

131 S.E. 648

191 N.C. 166

FOSTER v. ALLISON CORPORATION ET AL.

No. 220.

Supreme Court of North Carolina

February 17, 1926

Appeal from Superior Court, Onslow County; Devin, Judge.

Action by Jesse C. Foster against the Allison Corporation and another. Judgment for plaintiff entered by default. From an order setting aside the judgment under C. S. § 492, rather than section 600, and affirming a judgment of the clerk setting aside the same judgment, defendants appeal. Affirmed. This was an action brought by plaintiff against defendant Allison Corporation to set aside certain conveyances of land in North Carolina, made by plaintiff to it for fraud. The Newton Trust Company, the other defendant, had mortgages on the lands given by the Allison Corporation, and it is alleged by plaintiff that the mortgages of defendant Newton Trust Company were taken with full knowledge, and that it was party to the fraud of the Allison Corporation.

The plaintiff prayed:

"That the conveyance from him to the defendant Allison Corporation be declared null and void, set aside, and duly canceled of record in Onslow county, state of North Carolina. That the conveyance from the defendant Allison Corporation to the defendant Newton Trust Company be declared null and void, set aside, and canceled of record in the county of Onslow, state of North Carolina. That this plaintiff be declared the owner of and entitled to all the property, interest, and estate described in the conveyances from him to the said defendant Allison Corporation, free and clear of any and all incumbrance or incumbrances and in fee simple."

The defendants were foreign corporations. The plaintiff issued its summons against defendants and had it served by publication. On January 19, 1925, the clerk rendered judgment in favor of the plaintiff, in accordance with prayer of the complaint.

The defendants, on March 31, 1925, through its counsel, by "special appearance," gave notice to plaintiff and his counsel that on Saturday, April 11, 1925, setting hour of day, a motion would be made before the clerk "to quash process and to set aside the judgment rendered herein as of the 19th day of January, A. D. 1925, under section 600 of the Consolidated Statutes, on the ground that the defendants were taken by surprise and were guilty of no neglect whatever in failing to defend the action because of the fact that the pendency of the action had not come to their attention directly or indirectly, until after the 19th day of January A. D. 1925." Accompanying this motion was a verified petition of defendants fully setting forth the grounds of its motion. The clerk found the facts, and among them:

"That this action was begun by summons which was returned by the sheriff with the notation as herein found, and service was thereupon had by publication, and that said return, affidavit, order of publication, and notice of publication were regular and complete in every respect and as required by law. That the motion to quash process and petition to set aside judgment on account of surprise and excusable neglect was filed by the defendants' counsel within twelve months from the actual notice of the judgment entered on the 19th day of January, 1925, and within five years of the rendition of said judgment. That the petition and affidavit of the defendants show that they have a meritorious defense to the action. And upon findings of fact, ordered and adjudged: That the motion to quash process filed by counsel for the defendants be and the same is hereby denied and dismissed. That the judgment entered in this cause on the 19th day of January, 1925, be, and the same is, set aside under section 492 of the Consolidated Statutes, and the defendants are allowed 60 days within which to file answer or other pleadings as they may be advised."

Defendants tendered an order finding certain facts which the clerk refused to sign, and the counsel specially appearing appealed to the judge of the superior court from the judgment signed by the clerk. The matter having been heard, the judge made the following order:

"This cause coming on for a hearing upon appeal of the defendants, and being heard by his honor, W. A. Devin, judge, during April term, 1925, of the superior court of Onslow county, said appeal of the defendants having been taken upon the refusal of the clerk to find facts and sign order as contended for by the defendants under section 600 of the Consolidated Statutes (the clerk having found facts and entered an order under section 492 of the Consolidated Statutes setting aside the judgment formerly entered in this cause by the clerk), and the court being of opinion that the motion of the defendants is controlled by section 492 of the Consolidated Statutes, hereby affirms the findings of fact and the order heretofore signed by the clerk, with the following modifications, viz.:

(1) That the following finding of fact be added to those found by the clerk in said former order and inserted after paragraph 10: '10a. That neither of these defendants had any actual knowledge, notice, or information whatever of the institution or pendency of this suit, nor of the publication of summons, until the 27th day of January, A. D. 1925.'

(2) That the defendants be given till August 1, 1925, within which time to file answer to the complaint heretofore filed in this cause or within which time to file such other pleadings as they may be advised.

The defendants, through counsel, requested the court to include, in the finding of fact above set out, the following: 'And the defendants were guilty of no laches or neglect in failing to file answer, but were, in fact, taken by surprise when they learned that the service of summons had been completed by publication and the clerk was about to sign the judgment,' which was declined by the court.

To the foregoing order affirming the former order of the clerk on the ground that section 600 does not apply, and the adjudging that relief can only be given the defendants under the terms of section 492 of Consolidated Statutes, the defendants except, assign error, and appeal to the Supreme Court."

Stacy, C.J., dissenting in part, but concurring in result.

Rountree & Carr, of Wilmington, and Nere E. Day, of Jacksonville, for appellants.

I. M. Bailey, of Raleigh, and John D. Warlick, of Jacksonville, for appellee.

CLARKSON J.

The defendants contend:

"The court should have set aside this judgment for excusable neglect, under section 600 of the Consolidated Statutes. That any party to a suit, in the courts of North Carolina, whether personal or corporate, whether resident or nonresident, who has a judgment entered against him by default, had a right, when he has a meritorious defense and has been guilty of no inexcusable neglect, to have said verdict set aside if such motion is made in apt time."

This brings us to consider C. S. § 492 and C. S. § 600. Under C. S. art. 8, "Civil Procedure," the procedure of obtaining service on foreign corporations by publication, manner, etc., is fully set forth; then the manner of personal service on nonresidents; then C. S. § 492, which is as follows:

"The defendant against whom publication is ordered, or who is served under the provisions of the preceding section, or his representatives, on application and sufficient cause shown at any time before judgment, must be allowed to defend the action; and, except in an action for divorce, the defendant against whom publication is ordered, or his representatives, may in like manner, upon good cause shown, be allowed to defend after judgment, or at any time within one year after notice thereof, and within five years after its rendition, on such terms as are just; and if the defense is successful and the judgment or any part thereof has been collected or otherwise enforced, such restitution may be compelled as the court directs. Title to property sold under such judgment to a purchaser in good faith is not thereby affected. No fiduciary officer or trustee who has made distribution of a fund under such judgment in good faith is personally liable if the judgment is changed by reason of such defense made after its rendition; nor in case the judgment was rendered for the partition of land, and any persons receiving any of the land in such partition sell it to a third person; the title of such third person is not affected if such defense is successful, but the redress of the person so defending after judgment shall be had by proper judgment against the parties to the original judgment and their heirs and personal representatives, and in no case affects persons who in good faith have dealt with such parties or their heirs or personal representatives on the basis of such judgment being permanent."

It will be noted that in C. S. § 492, is the following:

"Title to property sold under such judgment to a purchaser in good faith is not thereby affected."

Counsel for defendants earnestly contends that in setting aside a judgment under section 492, a bona fide purchaser may obtain title and property be taken without due process of law or a day in court, and argues that this would not be the case under C. S. § 600. The contention is not tenable as to due process. When defendant Allison Corporation acquired land in this state, and when the Newton Trust Company took a mortgage on the land, they took it with the law in force at the time in reference to foreign corporations.

It is said in 6 R. C. L. part § 445:

"It is the duty of the owner of real estate, who is a nonresident, to take measures that in some way he shall be represented when his property is called into requisition, and if he fails to do this, and fails to get notice by the ordinary publications which have usually been required in such case...