New York Life Ins. Co. v. Nashville Trust Co.

• Citation: 4 McCanless 513,292 S.W.2d 749,200 Tenn. 513
• Parties: , 200 Tenn. 513, 59 A.L.R.2d 1086 NEW YORK LIFE INSURANCE COMPANY v. NASHVILLE TRUST COMPANY et al.
• Decision Date: 27 April 1956
• Court: Supreme Court of Tennessee

Page 749

292 S.W.2d 749

4 McCanless 513, 200 Tenn. 513, 59

A.L.R.2d 1086

NEW YORK LIFE INSURANCE COMPANY v. NASHVILLE TRUST COMPANY et al.

Supreme Court of Tennessee.

April 27, 1956.

Rehearing Denied July 20, 1956.

J. C. Edwards, Nashville, Chambliss, Chambliss & Brown, Chattanooga, for appellant.

Hooker, Keeble, Dodson & Harris, Howard, Davis, Boult & Hunt, James A. Newman and Norvell & Minick, Nashville, for appellees.

BURNETT, Justice.

The bill in this cause was filed by the Insurance Company against the Trust Company and others, as defendants, seeking to recover of the Trust Company certain funds which it holds as successor trustee to the Nashville Trust Company, which was the beneficiary under two life insurance policies, as described in the bill, issued on the life of Thomas C. Buntin and payable to the Nashville Trust Company as trustee under a trust instrument dated February 16, 1928.

The beneficiaries under the trust agreement are made individual defendants to this suit and are the former wife of Thomas C. Buntin and their three children.

Thomas C. Buntin, the insured, who was likewise an insurance man, disappeared from his home in Nashville, Tennessee, and subsequently a suit was brought by the Nashville Trust Company against the complainant Insurance Company, appellant, in which a judgment was rendered against the Company for the full amount of the policies. This case is reported in 178 Tenn. 437, 159 S.W.2d 81, and is styled, New York Life Insurance Company v. Nashville Trust Company. As a result of this suit, on March 10, 1942, the Insurance Company paid to the trustee $59,438.40, from which certain expenses and costs were paid and the net balance paid to the trustee and later turned over to the successor trustee, defendant in the present suit.

Thomas C. Buntin, the insured upon which that money was paid, was found alive on June 3, 1953, and his identity verified June 12, 1953. This suit was brought immediately thereafter and is for the purpose of recovering the net balance of the funds in the hands of the successor trustee.

The relief sought in this suit is based on five grounds: (1) mistake, (2) fraud, (3) that the defendants have been unjustly enriched, (4) newly discovered evidence and (5) that the defendant trustee holds the funds in its hands as constructive trustee for the Insurance Company.

To this bill the defendants demurred which with the original and amended demurrers substantially raise these points, to wit:

1. That whatever right of action the complainant has is barred either by the six or ten year statute of limitations;

2. That the judgment in the Circuit Court action between the same parties is res judicata on the merits;

3. That no actionable mistake has been made;

4. That all facts as to fraud were in the original proceeding and cannot be attacked in this proceeding;

5. That there are not sufficient allegations of fraud pleaded;

6. That no facts are pleaded which show a mistake;

7. That there is no charge of fraud against either the trustee or beneficiary.

The Chancellor sustained the defendant's demurrers and dismissed the bill. He kept in force an injunction to enjoin the successor trustee from paying out the money pending this litigation. An appeal has been seasonably perfected, able and excellent briefs have been filed and arguments heard. We now have the matter for determination.

In this case, after much study and thought, we think the demurrers should have been overruled. We think that the fraud committed here by Buntin is extrinsic. True, it is very closely allied to what is known as intrinsic fraud wherein all the courts, insofar as we have been able to find, have followed U. S. v. Throckmorton, 98 U.S. 61, 25 L.Ed. 93; Pico v. Cohn, 91 Cal. 129, 25 P. 970, 27 P. 537, 13 L.R.A. 336. We are committed to this rule if the fraud is intrinsic as is shown by Keith v. Alger, 114 Tenn. 1, 85 S.W. 71. We feel though that fraud in the instant case, for the reasons hereinafter stated, more or less brings it within the rule of Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 64 S.Ct. 997, 88 L.Ed. 1250, wherein the well-recognized rule of the Throckmorton case and others was recognized again by the Supreme Court of the United States.

In the first place it is conceded by all that the money now sought by the appellant is money being held by a successor trustee growing out of a lawsuit of New York Life Insurance Company v. Nashville Trust Company as reported in 178 Tenn. 437, 159 S.W.2d 81. This money was paid on a contract that Thomas C. Buntin had with the Life Insurance Company wherein they agreed to pay the principal amount of these policies 'upon receipt of due proof of the death of Thomas C. Buntin'. As is shown by the reported opinion, which was prepared by the late Chief Justice Grafton Green, the proof in that lawsuit and the inferences there along with the seven-year presumption statute, (which is simply the common-law rule of evidence and has no more force than any other evidence which might turn out to be untrue, D'Arusment v. Jones, 72 Tenn. 251) warranted this Court, in that case, in finding under such circumstantial evidence that the insured died prior to March 8, 1933, the expiration date of the insurance. In that case great weight and great store was put on the fact of the wills being sent home from St. Louis to two of his relatives; the unstability of Buntin himself; the suicide of Buntin's father and things of that kind which clearly convinced this Court, in that lawsuit, that Buntin was dead.

It now, twenty years after the policies had matured in 1933, turns out that Buntin is alive, is married again and is raising another family. The trial court in the reported case did not consider that Buntin was committing any fraud on them. The question there was whether or not Buntin was dead. Under the facts and circumstances introduced in that case the court and jury, affirmed by the appellate courts as was shown by the reported opinion, concluded that he was dead. It is true that the Insurance Company offered certain proof to the effect that he had been seen here and there (all of which later turned out to be incorrect), but this was not a showing of fraud, it was merely a showing or an attempt to show, that subsequent to the time that the policies lapsed, Buntin was seen alive. It now turns out that he has committed a gross fraud upon the Court as well as upon the Insurance Company. By his acts then, which no one knew anything of until twenty years later and after this judgment became final, he fooled this Court and caused it to reach a mistake of fact (that Buntin was dead) when as a matter of fact he was alive.

In 31 Am.Jur., Sec. 654, page 232, it is said:

'Fraud which induces an adversary to withdraw his defense, or prevents him from presenting an available defense or cause of action in the action in which the judgment is obtained, has been regarded as a proper ground for equitable relief against the judgment.' (Emphasis ours.)

There are then cited a number of cases from many jurisdictions in the United States. In this instant case Buntin by hiding out committed a fraud on this Court and by his action prevented the available defense to the Insurance Company that he was actually alive. This was not discovered until 1953.

The United States Supreme Court has very recently, in Hazel-Atlas Glass Co. v. Hartford-Empire Co., supra [322 U.S. 238, 64 S.Ct. 1000], said:

'But where the occasion has demanded, where enforcement of the judgment is 'manifestly unconscionable', Pickford v. Talbott, 225 U.S. 651, 657, 32 S.Ct. 687, 689, 56 L.Ed. 1240, they have wielded the power without hesitation. [This statement in the opinion which is now quoted follows a recognition of the rule of the Throckmorton case and other related cases.] * * *

'Every element of the fraud here disclosed demands the exercise of the historic power of equity to set aside fraudulently begotten judgments. This is not simply a case of a judgment obtained with the aid of a witness who, on the basis of after-discovered evidence, is believed possibly to have been guilty of perjury. Here, even if we consider nothing but Hartford's sworn admissions, we find a deliberately planned and carefully executed scheme to defraud not only the Patent Office but the Circuit Court of Appeals. Cf. Marshall v. Holmes, [141 U.S. 589, 12 S.Ct. 62, 35 L.Ed. 870] supra. Proof of the scheme, and of its complete success up to date, is conclusive. Cf. United States v. Throckmorton, supra. And no equities have intervened through transfer of the fraudulently procured patent or judgment to an innocent purchaser. Cf. Ibid; Hopkins v. Hebard, 235 U.S. 287, 35 S.Ct. 26, 59 L.Ed. 232.

'* * * Furthermore, tampering with the administration of justice in the manner indisputably shown here involves far more than an injury to a single litigant. It is a wrong against the institutions set up to protect and safeguard the public, institutions in which fraud cannot complacently be tolerated consistently with the good order of society. Surely it cannot be that preservation of the integrity of the judicial process must always wait upon the diligence of litigants. The public welfare demands that the agencies of public justice be not so impotent that they must always be mute and helpless victims of deception and fraud.' (Emphasis ours.)

This was a suit wherein the Supreme Court of the United States set aside a judgment, or authorized the Circuit Court of Appeals to or directed them to, which judgment had been entered by them some ten years prior thereto and the term had expired, etc., which brought the judgment as contended under the rules of the Throckmorton case and others. The bill was filed to set aside the judgment as having been obtained by fraud. The fraud consisted of a conspiracy entered into by the attorneys and officials of one of the companies to have published in a trade journal an article which...