New Amsterdam Casualty Company v. Waller
| Decision Date | 16 September 1963 |
| Docket Number | No. 8889.,8889. |
| Citation | 323 F.2d 20 |
| Parties | NEW AMSTERDAM CASUALTY COMPANY, Appellee and Cross-Appellant, v. Gladys N. WALLER, Appellant and Cross-Appellee. |
| Court | U.S. Court of Appeals — Fourth Circuit |
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Charles B. Nye, Durham, N. C., for appellant and cross-appellee.
C. K. Brown, Jr. and Willis Smith, Jr., Raleigh, N. C. (Smith, Leach, Anderson & Dorsett, Raleigh, N. C., on brief), for appellee and cross-appellant.
Before HAYNSWORTH and BRYAN, Circuit Judges, and HARRY E. WATKINS, District Judge.
Cross appeals bring this case before us once again, each of the parties tendering a variety of questions.
Upon instructions of the judgment debtor, Waller, his employer mailed all of his salary checks to Mrs. Waller or to her agent. Out of the funds thus coming into her hands, Mrs. Waller accumulated some $12,000, which she used to construct a house at a cost of approximately $34,000 upon a lot which she had acquired in her name. The construction cost in excess of the $12,000 cash she had accumulated, was financed through a mortgage loan. Thereafter, largely out of her husband's funds coming into her hands, she regularly made payments upon the mortgage. At all relevant times, she knew of the existence of the unsatisfied judgment against her husband.
The judgment creditor instituted this action against Mrs. Waller to subject the equity in her house to its judgment against the husband. The action was commenced more than three years after the construction of the house and the disbursement of the $12,000.
Originally, the District Court held that there had been a fraudulent transfer of the $12,000, and that the house should be subjected to the payment of the judgment. It held that the applicable period of limitations was not the three years governing actions founded upon fraud, but ten years governing actions to enforce resulting trusts.1
On appeal, we took a different view of the limitations question, holding that the applicable limitations period was three years, but we remanded the case for further consideration since it appeared on the record that the wife, within the period of limitations, had made a number of payments on the principal of the mortgage out of the funds of her husband.2
Upon the remand, the District Court found that during the 3-year period immediately preceding the filing of this action, the sum of $6,075.06 had been paid upon the principal of the mortgage, of which $2,000 had been paid by a son of the Wallers, while the remaining $4,075.06 had been paid by Mrs. Waller out of funds supplied her by her husband. In addition, there had been paid to the mortgagee some $2,188.94 in interest. The District Court subtracted from the $4,075.06 paid by Mrs. Waller upon the principal of the mortgage debt the sum of $500, being the amount of the personal property exemption of a judgment debtor under Article X, § 1 of the North Carolina Constitution. Judgment was thus entered for the judgment creditor in the amount of $3,575.06, with interest from the date upon which the complaint was filed.
The defendant, on her appeal, contends that the plaintiff should recover nothing, for it should not have been allowed to shift the theory of its case. She also contends that no interest should have been allowed. On its appeal, the plaintiff contends that it had insufficient notice of the fraudulent transfers to start the running of the Statute of Limitations until shortly before the action was commenced, and that it is thus entitled to recover the $12,000 cash fund expended by the defendant, as well as the mortgage payments made more than three years before the action was commenced. It contends it is entitled to recover the interest paid by Mrs. Waller to the mortgagee and should be allowed interest on all payments made on the mortgage from the date of payment. It objects to the reduction of the judgment by the amount of the personal property exemption, and contends it should have been allowed to file a supplemental complaint bringing into question all payments on the mortgage subsequent to the filing of the complaint and up to the date of the hearing.
Generally, we affirm the rulings of the District Court, though we think the judgment should not have been reduced by the amount of the personal property exemption, and that leave to file a supplemental complaint should have been granted.
In Michael v. Moore, 157 N.C. 462, 73 S.E. 104, the Supreme Court of North Carolina held on comparable facts that the judgment creditor was entitled to recover the value of the improvements notwithstanding a jury's finding that there was no actual intent to defraud when the husband's funds were used to improve the wife's property. It held that the wife was a constructive trustee and held her to account as such. The Court in Michael v. Moore was not concerned with the question of limitations, but the plaintiff here, in an effort to avoid the shorter 3-year limitations period, insisted that it was not claiming any actual fraud, that it was entitled to judgment even though there was no actual fraud, and that the limitations period applicable to actions founded upon fraud did not govern the case. It stipulated that it was "not depending upon" the North Carolina statutes governing fraudulent conveyances.3
In disposing of the limitations question, we held that the cause of action was based upon fraud. It is dependent upon the statutes, though the North Carolina statutes are substantially a reenactment of 13 Eliz. c. 5 § 2,4 which, with respect to the rights of existing creditors, was declarative of the common law.5 The defendant, therefore, insists that a judgment may not now be entered for the plaintiff when it is supportable only upon a theory which the plaintiff had disclaimed in its formal stipulation.
A judicial admission is usually treated as absolutely binding, but such admissions go to matters of fact which, otherwise, would require evidentiary proof. They serve a highly useful purpose in dispensing with proof of formal matters and of facts about which there is no real dispute. Once made, the subject matter ought not to be reopened in the absence of a showing of exceptional circumstances, but a court, unquestionably, has the right to relieve a party of his judicial admission if it appears that the admitted fact is clearly untrue and that the party was laboring under a mistake when he made the admission.6
The doctrine of judicial admissions has never been applied to counsel's statement of his conception of the legal theory of the case. When counsel speaks of legal principles, as he conceives them and which he thinks applicable, he makes no judicial admission and sets up no estoppel which would prevent the court from applying to the facts disclosed by the proof, the proper legal principles as the Court understands them.
This is the whole theory of modern developments in rules of pleading and procedure. Under the Federal Rules of Civil Procedure, which govern here, a plaintiff in his complaint is required only to set forth "a short and plain statement of the claim."7 He need not set forth any theory or demand any particular relief for the court will award appropriate relief if the plaintiff is entitled to it upon any theory.8 Under this liberalized practice, a party's misconception of the legal theory of his case does not work a forfeiture of his legal rights.9
The defendant's suggestion, that counsel's adherence to an insupportable legal theory is an irrevocable judicial admission, is a reversion to an earlier day when claims and defenses of merit were forfeited by a misstep in the negotiation of tortuous procedural paths. Then, in many contexts, misconception of the substantive right could lead to procedural mistakes which controlled the court's decision. The present rules, however, have relegated such perils to the past. The purpose of their adoption was broader than the simplification of procedures for the convenience of lawyers and judges. They were designed for the protection of the diligent litigant who has a just cause, but who, during some stage of the proceedings, misconceived the nature of his cause or mistook his remedy. In this day, a party ought not and does not lose his right when his counsel, however formally, advances an erroneous legal theory. If, on the facts disclosed, the party is entitled to some relief, it is the duty of the court to award it.
The question with which we dealt on the previous appeal had not been considered in any illuminating opinion by the Supreme Court of North Carolina. If its answer was not obscure, there was more than superficial support for the plaintiff's theory in isolated statements of that court that a constructive trust might arise in the absence of fraud, actual or constructive. The very fact that the District Court, in the first instance, agreed with the plaintiff on the limitations question attests the fact that the plaintiff's original legal position was not beyond the range of arguability. But whatever may now be said of its merit or demerit, it was simply the plaintiff's notion of a legal theory which would support its recovery of all that it claimed. The fact that we refused to accept its theory, is no basis for withholding the more limited relief available on the legal theory that the court does approve, though the theory which the court was persuaded to accept had been disclaimed by the plaintiff when it sought the whole loaf.
The plaintiff contends that it did not have sufficient notice of the fraudulent transfers until shortly before commencement of this action on December 28, 1959. In proceedings supplemental to the original action in which it obtained its judgment, however, the plaintiff had examined Mr. Waller on August 27, 1956. It now contends that some...
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