Case Name: JOSEPH TELESPHORE MILLER, JR., v. FIRST NATIONAL BANK OF CATAWBA COUNTY
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1951-10-31
Citations: 234 N.C. 309
Docket Number: 
Parties: JOSEPH TELESPHORE MILLER, JR., v. FIRST NATIONAL BANK OF CATAWBA COUNTY.
Judges: 
Reporter: North Carolina Reports
Volume: 234
Pages: 309–321

Head Matter:
JOSEPH TELESPHORE MILLER, JR., v. FIRST NATIONAL BANK OF CATAWBA COUNTY.
(Filed 31 October, 1951.)
1. Executors and Administrators § 13a—
A court of equity bas jurisdiction of an action by the personal representative to obtain approval of the court for the sale of assets of the estate to pay debts and to effectuate the purposes of the trust set up by the will, all beneficiaries of the estate being made parties.
2. Judgments § 25—
Mere irregularities in the rendition of a judgment within the jurisdiction of the court does not subject the judgment to collateral attack by independent action, the remedy being by motion in the cause.
3. Fraud § 1—
Constructive fraud is based upon breach of a fiduciary obligation, and intent to deceive and actual dishonesty are not requisite.
4. Judgments § 27e—
In order to be ground for collateral attack of a judgment, fraud must be extrinsic and relate to the manner in which the judgment was procured and be such fraud as prevents the court from considering the cause on its merits.
5. Executor’s and Administrators § 31: Judgments § 27e — Allegations held insufficient to show extrinsic fraud in obtaining judgment authorizing sale of assets of estate.
It appeared from the complaint and the judgment rolls attached thereto that the judgment authorizing the executor to sell to the issuing corporation certain stock constituting personal assets of the estate was entered in an action in which the minor beneficiary was represented by a competent guardian ad litem, who made full investigation, that the sale of the assets was necessary to pay debts of the estate and to effectuate the purposes of the trust set up by the instrument, that interested persons sui juris sold their stock upon identical terms, that the stock at that time was not marketable, and that a comparable sum could not be obtained by forced liquidation of the corporation. The complaint further alleged that the trustee negligently failed to sell the stock at an earlier date when the stock had a ready market, that the later sale was made necessary by the trustee’s own mismanagement, that the trustee was interested in the corporation purchasing the stock by reason of interlocking directorates and business associations, and that such sale was for less than the value of the stock and against the interest of the minor. Held: Even though the complaint be sufficient to allege constructive fraud it is insufficient to allege extrinsic fraud in the procurement of the judgment so as to render the judgment subject to collateral attack.
6. Judgments § 32—
While ordinarily estoppel by judgment must be pleaded, where all the facts necessary to constitute the estoppel are set out in the complaint for the purpose of attack, and defendant moves to strike the allegations on the ground that the matters alleged were precluded by the judgment, the question of estoppel by judgment is properly presented.
7. Pleadings § 31—
While the insufficiency of the complaint to state a cause of action must be raised by demurrer, where certain paragraphs thereof are precluded by prior judgment between the parties, objection to such portions may be raised by motion to strike, since in such case they are “irrelevant” for the purpose for which they were inserted. G.S. 1-153.
Appeal by defendant from Gwyn, J., May Term, 1951, of Catawba.
Reversed.
Plaintiff's action is to surcharge and falsify the accounts of First Security Trust Company (now merged with defendant Bank) as executor and trustee of the estate of plaintiff’s father, Joseph Telesphore Miller, and to recover amounts alleged to be due by reason of negligence and mismanagement by the fiduciary.
The case comes up on defendant’s appeal from the ruling of the trial judge denying its motion to strike certain portions of the complaint hereinafter set out.
It is alleged in the complaint that defendant First National Bank of Catawba County is successor of First National Bank of Hickory, and that by merger or consolidation a subsidiary corporation, First Security Trust Company, was taken over and its operations and fiduciary business continued, defendant acquiring its assets and assuming its liabilities; that First Security Trust Company was made executor and trustee under the will of Joseph T. Miller, who died in 1935, and took possession of all the real and personal property of his estate, of which the plaintiff, the only son of the testator, was the principal beneficiary. It was further alleged that the named Trust Company was grossly negligent and mismanaged the estate, particularly in respect to dealing with the shares of stock of Hutton & Bourbonnais Company, which it failed to dispose of advantageously; that 754 shares of par value of $100 which would have belonged to plaintiff were wrongfully disposed of. In section 10 of the complaint it is alleged the First Security Trust Company as executor in 1939 instituted action against the plaintiff, then 17 years of age, alleging there was no ready market for these shares and asked that the real estate devised to plaintiff he sold to prevent sacrifice of values, though the personal estate was more than sufficient, and it is alleged this was done to extricate itself from the results of its own negligence. It was alleged that the Superior Court was without jurisdiction to entertain this action.
Defendant moved to strike section 10 of the complaint, and also sections 11, 12, 13 and 14, which are quoted in full as follows:
(11) “Following the commencement of the said suit the plaintiff’s mother employed counsel for the purpose of preventing the sale of the real estate belonging to him, and for the further purpose of trying to protect his and her interests in the estate and the administration thereof. Counsel so employed endeavored to get the cooperation of First Security Trust Company and of Hutton & Bourbonnais Company in making an appraisal of the assets of Hutton & Bourbonnais Company for the purposes of determining the true value of the stock of Hutton & Bourbonnais Company, and for the further purpose of attempting to work out some plan which would conserve the value of the said stock and enable the First Security Trust Company, as Executor under the will of the plaintiff’s father to obtain enough cash to settle the estate. During 1939, and particularly after the invasion of Poland by Germany in September 1939, business began to improve rapidly, and there was substantial improvement in the lumber business, in which Hutton & Bourbonnais Company was engaged. These facts were well known to the First Security Trust Company and to its attorney. Notwithstanding the general improvement in business, and the specific improvement in the affairs of Hutton & Bourbonnais Company which increased the value of its stock, the First Security Trust Company failed to cooperate with counsel employed by plaintiff’s mother or to act on its own account to the extent that it virtually abdicated the duties of its office as Executor under the will of the plaintiff’s father in connection with the stock of Hutton & Bourbonnais Company. By its wrongful conduct, it created a situation in which the sale of the stock at a fair price was rendered impossible, and in which there were only two choices; first, to sell the stock at what could be obtained for it without resorting to an attempt to force a liquidation, or, second, to attempt to force a liquidation and reorganization of Hutton & Bourbonnais Company through a receivership, the outcome of which was doubtful both as to whether the Court would appoint a receiver, and as to the amount which could be finally derived from the liquidation. The plaintiff is informed, believes and alleges that this situation was produced by the negligence and misconduct of the First Security Trust Company as herein alleged. Counsel employed by plaintiff’s mother finally agreed to a sale of the stock upon the terms hereinafter set forth, but plaintiff is informed, believes and alleges that such agreement was made because of the situation then existing, and not because it was believed that the purchase price represented the actual and true value of the said stock.”
(12) “In the meantime, on September 11, 1939, counsel employed by plaintiff’s mother had been appointed his guardian ad litem, in the action then pending and there had been several extensions of time to file answer therein. The plaintiff’s mother was not made a party to said action until the May Term in 1940. On June 17, 1940, First Security Trust Company filed in said action a purported pleading, described as an amended petition, in which it sought the authority of the Court to transfer 1171 shares of the stock of Hutton & Bourbonnais Company to that corporation in exchange for the stocks described in Paragraph 11 of the petition, $6,500.00 in cash, $6,500.00 in real' estate and $21,500.00 payable at the rate of $5,000 twelve months after date, $5,000 two years after date and $11,500 three years after date. The said amended petition among other things alleges that Alice Williamson Miller, the decedent’s widow, Mary Alice Coyle Carter and Natalie Coyle desire that their shares of the stock of Hutton & Bourbonnais Company be sold and that they accept in lieu thereof their proportionate part of the net proceeds of the sale. It further alleges that the petitioner has made a careful investigation of the affairs of Hutton & Bourbonnais Company and that it is convinced that the offer is a fair and reasonable one and that fit is far more than your petitioner can hope to secure by a public sale of said stock and that it is as much as your petitioner could realize by a forced liquidation of Hutton & Bourbonnais Company.’ Nowhere in the said petition is there any allegation as to the true value of the said stock nor as to the true value of the stocks, real estate and notes for which the said stock was exchanged. One of the conditions imposed upon the acceptance of the offer by the First Security Trust Company was the consent of all of the stockholders of Hutton & Bourbonnais Company and the plaintiff’s Guardian Ad Litem imposed an additional condition that it be consented to by all the creditors of Hutton & Bourbonnais Company, and that the Court in its judgment finds that the offer made by Hutton & Bourbonnais Company was made with the approval of its creditors and the consent of all its stockholders. Answers to the amended petition were filed by the Guardian Ad Litem of the plaintiff and by the other defendants on June 17, 1940, the same day on which the said amended petition was filed. Counsel for First Security Trust Company in the action above referred to was Charles W. Bagby, and the plaintiff is informed and alleged that the said Charles W. Bagby represented the First Security Trust Company, Executor under the Will of Joseph Telesphore Miller, at the time of the commencement of said action, and throughout all the negotiations and proceedings in said cause.”
(13) “The plaintiff is informed, believes and alleges that Hutton & Bourbonnais Company was a debtor of First National Bank of Hickory at the time of the said proceedings, that it was a depositor in said bank, and that it had other business relations with said bank; that one or more of the officers and directors of Hutton & Bourbonnais Company were directors of the First National Bank of Hickory and also of First Security Trust Company; that officers and directors of Hutton & Bour-bonnais Company also had private business transactions with First National Bank of Hickory, and also with First Security Trust Company; that First Security Trust Company and Charles W. Bagby, with others, were Executors and Trustees under the will of A. B. Hutton, deceased, and as such Trustees they owned 505 shares in a trust for A. B. Hutton, Jr. and 195 shares in a trust for Doris Hutton Councill, making a total of 700 shares of the stock of Hutton & Bourbonnais Company owned by them as such Trustees. During the month of June 1940 about the same time that the amended petition and answers were filed in the action brought by First Security Trust Company, Charles ~W. Bagby and others through their attorney, C. David Swift, who was partner of Charles W. Bagby, commenced a civil action in the Superior Court of Catawba County as Executors and Trustees under the will of A. B. Hutton for the purpose of obtaining the authority of the Court to consent to the purchase by Hutton & Bourbonnais Company of the Miller stock. The complaint in said action is verified by Donald Hutton, Charles W. Bagby and by George D. Taylor, an officer of First Security Trust Company. The answer of one guardian ad litem in said action was filed on July 3, 1940 and answer of another guardian ad litem on July 10, 1940. Judgment in said cause was entered on July 10, 1940, the same day on which the judgment was entered in the case involving the Miller estate. All of the summonses, complaints, answers, orders, judgments and other documents constituting the judgment roll in the two civil actions are hereby referred to and made a part of this complaint, and will be offered in evidence at the trial of this cause, not for the purpose of proving the truth of the contents thereof, but for the purpose of showing the irregularities, inconsistencies, contradictions and omissions therein. The plaintiff had no knowledge of the irregularities in the civil actions referred to in paragraphs 12 and 13 of this complaint nor of the inconsistent positions of the First Security Trust Company and Charles W. Bagby therein until about June 1950.”
(14) “The plaintiff is informed, believes and alleges, as hereinbefore alleged, that the Superior Court of Catawba County had no jurisdiction in the action commenced on May 1, 1939, above referred to, that having no jurisdiction, the filing of the amended petition and answers thereafter conferred no jurisdiction; that plaintiff’s guardian ad litem also represented his mother and two sisters in the said action; that the court did not bear evidence relating to tbe true value of tbe stock of Hutton & Bourbonnais Company or as to tbe value of tbe assets of Hutton & Bour-bonnais Company so tbat tbe Court could arrive at an independent judgment as to tbe value of tbe said stock, but tbat tbe court’s order approving tbe sale was based upon tbe alternative of a forced liquidation. Tbe plaintiff is informed, believes and alleges tbat First Security Trust Company by reason of conflicts of interest bad been wholly disqualified to act as executor and trustee under bis father’s will from tbe date of its qualification on August 1, 1935, until tbe sale of said stock of Hutton & Bourbonnais Company in 1940, such conflict of interest arising out of tbe facts hereinafter set forth. First Security Trust Company was a wholly owned subsidiary of tbe First National Bank of Hickory, and, by reason of stock ownership and common officers and directors, was under tbe domination of, and in fact, was tbe alter ego of said bank. Tbe First National Bank of Hickory was, as plaintiff is informed, believes and alleges, directly or indirectly a creditor of Hutton & Bourbonnais Company. Tbe relationship between First National Bank of Hickory and Hutton & Bourbonnais Company and its officers and directors and with members of tbe Hutton family bad been very close for many years. Some of tbe officers and directors of Hutton & Bourbonnais Company were directors of tbe said bank. Gr. N. Hutton, one of tbe founders of Hutton & Bourbonnais Company, was, until bis death, a director of First National Bank of Hickory, and was one of tbe incorporators and a director of First Security Trust Company. Hutton & Bourbonnais Company and its officers and directors were depositors in the First National Bank of Hickory. First Security Trust Company and its attorney, Charles W. Bagby, were executors and trustees under tbe will of A. B. Hutton, and as such owned Y00 or more shares of tbe stock of Hutton & Bourbonnais Company. Tbe will of A. B. Hutton prohibited bis executors and trustees from selling bis stock in Hutton & Bourbonnais Company at a sacrifice. In view of tbe fact tbat tbe sale of tbe Miller stock to Hutton & B.ourbon-nais Company was conditioned upon tbe consent of all of its stockholders and creditors, tbe executors and trustees of A. B. Hutton were, in effect, buyers of tbe Miller stock to tbe extent of their interest in Hutton & Bourbonnais Company so tbat First Security Trust Company and its attorney on tbe same day, in tbe same Court, and before tbe same judge were representing a buyer and a seller, or were at least representing such conflicting interests as to totally disqualify them from acting as executor and trustee or as attorney for tbe executor and trustee in the action relating to tbe sale of tbe Miller stock. Tbe plaintiff is informed, believes and alleges tbat tbe attention of tbe court was not called to these inconsistencies and conflicts of interest, and tbat there was no disclosure to tbe court of tbe conflicts of interest arising out of tbe other facts here-inbefore alleged. Tbe plaintiff is further informed, believes and alleges tbat the facts herein alleged disqualified First Security Trust Company from acting as Executor or as Trustee under the will of Joseph Tele-sphore Miller either under the judgment or under the will of Joseph Telesphore Miller or by virtue of its qualifications as executor or trustee.”
Defendant also moved to strike the following portion from section 16:
“The plaintiff is informed, believes and alleges that throughout the year 1940 and continuously since that time the stock of Hutton & Bour-bonnais Company had a fair market value and an intrinsic value much higher than the amount for which said stock was disposed of or which was actually derived therefrom by the First Security Trust Company. The plaintiff is further informed, believes and alleges that on March 25, 1947, the said stock had a fair market value of not less than $100.00 per share.”
Defendant’s motion to strike, except as to a small portion of paragraph 12 of the complaint, was denied and defendant appealed.
Wade Lefler and Ratcliff, Vaughn, Hudson & Ferrell for plaintiff, appellee.
T. P. Pruitt and Willis & Geitner for defendant appellant.

Opinion:
DbviN, C. J.
The defendant Bank appealed from the denial of its motion to strike certain paragraphs from the complaint filed in the suit instituted by the plaintiff to surcharge the accounts of First Security Trust Company as executor and trustee of his father's estate. It is alleged the defendant Bank had absorbed by consolidation or merger the named Trust Company and assumed its liabilities. The gravamen of the charge in the complaint is negligence and mismanagement on the part of the Trust Company constituting a breach of trust, particularly in respect to the sale of 754 shares of stock of the Hutton & Bourbonnais Company which had been bequeathed in trust for the plaintiff under his father's will. Plaintiff, now of full age, seeks to recover damages for the loss alleged to have resulted. He alleges that the conduct of the Trust Company, for which the defendant Bank is now liable, under the circumstances set out at length, amounted to a constructive fraud upon his rights. In order to present the entire matter plaintiff has also set out in his complaint the fact that a judgment of the Superior Court was rendered in a proceeding instituted by the Trust Company as executor in which all interested persons were made parties, including the present plaintiff, approving the sale of the shares of stock now complained of. The judgment roll, including the pleadings, findings and judgment, is attached to the complaint and for the purpose of attack made part of it.
Plaintiff's allegation that the sale of the shares of stock complained of was approved by a judgment of the Superior Court in an adversary action in which the plaintiff here was party defendant and appeared by a guardian ad litem and answered, nothing else appearing, would raise a complete defense to bis complaint on that ground, and bis allegations of negligence and mismanagement in respect to tbe sale of tbis stock would not avail against a valid judgment rendered by a court having jurisdiction of tbe parties and of tbe subject matter.
It is alleged tba't tbe Superior Court wbicb rendered tbe judgment was without jurisdiction of tbe subject matter, but we do not think tbe judgment is open to attack on tbis ground, as a court of equity has power to entertain a petition to sell land to pay debts, though personal property remains undisposed of, in order to preserve tbe personal property from being sacrificed (Settle v. Settle, 141 N.C. 553, 54 S.E. 445; King v. R. R., 184 N.C. 442, 115 S.E. 172). However, no action was taken on tbis petition, and some time later an amended petition was filed, wbicb tbe present plaintiff's guardian ad litem and tbe adult defendants answered, presenting a proposal for tbe sale of tbis stock and asking tbe court's approval and authority to tbe executor to conclude tbe sale for tbe reasons assigned.
Tbe facts set out would seem to indicate tbe court bad jurisdiction both of tbe parties and of tbe subject matter. Hence mere irregularities in tbe rendition of tbe judgment would not justify an independent action to avoid its effect. Irregularities may be corrected by motion in tbe cause. McIntosh, sec. 652; Simms v. Sampson, 221 N.C. 379, 20 S.E. 2d 554; Carter v. Rountree, 109 N.C. 29, 13 S.E. 716.
Tbe remaining ground left tbe plaintiff upon wbicb to maintain his action, in tbe face of tbe judgment wbicb would otherwise bar bis access to tbe relief demanded, is that of fraud. He alleges tbe judgment was void for constructive fraud on tbe part of tbe Trust Company wbicb entered into tbe rendition of tbe judgment.
Constructive fraud differs from active fraud in that tbe intent to deceive is not an essential element, but it is nevertheless fraud though it rests upon presumption arising from breach of fiduciary obligation rather than deception intentionally practiced. 23 A.J. 756; Rhodes v. Jones, 232 N.C. 547, 61 S.E. 2d 725; Hatcher v. Williams, 225 N.C. 112, 33 S.E. 2d 617; City Bank Farmers Trust Co. v. Cannon, 291 N.Y. 125; Ryan v. Plath, 18 Wash. (2) 839.
Constructive fraud has been frequently defined as "a breach of duty wbicb, irrespective of moral guilt, tbe law declares fraudulent because of its tendency to deceive, to violate confidence or to injure public interests. Neither actual dishonesty nor intent to deceive is an essential element of constructive fraud." 37 C.J.S. 211; Greene v. Brown, 199 S.C. 218.
Tbe plaintiff alleges in substance that tbe sale of tbe shares of stoek by tbe trustee, to tbe injury of plaintiff, under tbe circumstances set out in tbe complaint, constituted a breach of tbe fiduciary obligation im posed upon tbe Trust Company in good conscience to guard tbe interests of tbe infant beneficiary, and was bence constructively fraudulent.
Eut if plaintiff's complaint be sufficient to allege constructive fraud, b.e is confronted by another burdle.
In order to sustain a collateral attack on a judgment for fraud it is necessary that tbe allegations of tbe complaint set forth facts constituting extrinsic or collateral fraud in tbe procurement of tbe judgment. It is well settled that tbe fraud for which a judgment may be vacated or enjoined in equity must be in tbe procurement of tbe judgment. Horne v. Edwards, 215 N.C. 622, 3 S.E. 2d 1; McCoy v. Justice, 199 N.C. 602, 155 S.E. 452; Mottu v. Davis, 153 N.C. 160, 69 S.E. 63; U. S. v. Throckmorton, 98 U.S. 61; Freeman on Judgments, sec. 1233. "Extrinsic or collateral fraud operates not upon matters pertaining to tbe judgment itself but relates to the manner in which it is procured." Freeman on Judgments, sec. 1233.
In McCoy v. Justice, supra, Justice Adams quotes with approval from Freeman on Judgments: "For judgments are impeachable for those frauds only which are extrinsic to tbe merits of tbe case, and by which tbe court has been imposed upon or misled into a false judgment. They are not impeachable for frauds relating to tbe merits between tbe parties. All mistakes and errors must be corrected from within by motion for a new trial, or to reopen the judgment, or by appeal." Where the fraud is extrinsic or collateral, operating without, the remedy also is without, and the judgment may be collaterally attacked or set aside by an independent action. McIntosh 745; Carter v. Rountree, 109 N.C. 29, 13 S.E. 716.
To avoid a judgment on this ground there must be shown extrinsic fraud, or fraud collateral to the matters in issue and heard by the first court, and not fraud in the matter on which the judgment was rendered. U. S. v. Throckmorton, supra. "The fraud which warrants equity in interfering with such a solemn thing as a judgment must be such as is practiced in obtaining the judgment and which prevents the losing party from having an adversary trial of the issue." Mottu v. Davis, supra.
The question here is whether the fraud charged relates to inequitable conduct on the part of the trustee which prevented the court from considering the plaintiff's case, or whether the court was imposed upon to the extent that facts material to the present plaintiff's case and in his interest were concealed or were not presented. McLean v. McLean, 233 N.C. 139, 63 S.E. 2d 138.
The plaintiff's position is that the allegations of his complaint considered in the light favorable for him are sufficient to make out a case of constructive fraud. He contends the facts alleged show that the Trust Company, executor and trustee under the will, in breach of its trust negligently failed in 1938 to sell a portion of the shares of stock referred to at a time when a price of $50 per share was obtainable, and that in the suit it instituted in 1939 it was seeking to extricate itself from the consequences of its mismanagement; that in the proceeding now attacked it occupied inconsistent positions, and that in consequence of interlocking directorates and close business associations among those who controlled the defendant Bank, its subsidiary the Trust Company, and the Hutton & Bourbonnais Company, the corporation whose stock was the subject of negotiation and sale, interests represented by the executor and trustee were conflicting, and that the trustee in breach of the trust did not act in the interest of the plaintiff who was then 18 years of age; that as result of negligence valuable shares of stock were sold for an inadequate price; that at the same time the sale of 700 shares of stock in the same corporation were being negotiated and sold by the Hutton Estate of which the Trust Company was one of the executors and trustees; that some of the officers and directors of Hutton & Bourbonnais were also directors of the defendant Bank, and the Bank was a creditor of Hutton & Bourbonnais Company.
Plaintiff further alleged that no evidence was presented to the court which rendered the judgment in 1940 as to the true value of the shares of stock; that while judgments were rendered by the court in this case and the Hutton Estate case on the same day, the attention of the court was not called by the trustee to the conflict of interest among the parties in the purchase and sale of this stock. Plaintiff cites as authority for his position, among others: Graham v. Floyd, 214 N.C. 77, 197 S.E. 873; Hatcher v. Williams, 225 N.C. 112, 33 S.E. 2d 617; McNinch v. Trust Co., 183 N.C. 33, 110 S.E. 663; City Bank Farmers Trust Co. v. Cannon, 291 N.Y. 125; City Bank Farmers Trust Co. v. Taylor, 69A (2) 234 (R.I.); Ryan v. Plath, 18 Wash. (2) 839; G.S. 36-28.
On the other hand, the defendant's motion to strike as irrelevant the allegations in the complaint which relate to the sale of these shares of stock, was based on the ground that according to the complaint and the exhibits attached the sale was approved by a valid judgment of the Superior Court, and that any irregularities alleged are insufficient to justify a collateral attack on this judgment.
It appears from the complaint and the judgment rolls attached thereto that plaintiff's father died testate in 1935, and that at the date of the judgment referred to, July 10, 1940, there was no personal property, except the shares bequeathed in trust for the plaintiff, with which to pay the balance of the debts of the estate and to provide for the maintenance of plaintiff, testator's son; that it had been necessary to ask for orders of court authorizing the executor to borrow money to pay for the education of the plaintiff. In 1939 the executor instituted an action to sell real property for this purpose rather than sacrifice the shares of stock for which it was alleged there was no market. In that suit the court appointed as guardian ad litem of tbe present plaintiff L. P. McLendon, an experienced and reputable lawyer of tbe G-uilford bar, wbo bad no connection or association with any of tbe parties interested. Tbe petition to sell land was not prosecuted, but in 1940, a year later, tbe executor filed an amended petition asking for authority to sell tbe shares of stock to tbe issuing corporation tbe Hutton & Bourbonnais Company upon tbe terms therein set out. Tbe guardian ad litem filed an answer in which be set out that since bis appointment as guardian ad litem be bad personally attended meetings of tbe stockholders of Hutton & Bourbonnais Company and bad repeatedly conferred with officials of tbe Trust Company, with tbe mother of the present plaintiff, and with tbe attorneys representing all parties; that be bad familiarized himself with tbe financial affairs of Hutton & Bourbonnais Company and obtained all information available with respect to that company's assets and liabilities ; that be was convinced that there bad been and was then no market for tbe stock owned by tbe Miller Estate, and that it would be necessary to liquidate this Company in order to realize tbe present value thereof; that as result of discussions with stockholders and other interested parties tbe guardian ad litem was instrumental in securing an offer for this stock $6,500 in cash, $6,500 in real estate conveyance, and $21,500 endorsed notes of tbe Company, and tbe proportionate share of tbe investment of Hutton & Bourbonnais Company in various local corporations. Tbe guardian ad litem expressed tbe view that funds to be derived from tbe contemplated sale were presently needed for tbe education and maintenance of plaintiff, then about to enter college
Tbe guardian ad litem incorporated in bis answer tbe following recommendation: "After tbe most careful consideration of all tbe circumstances involved this defendant is convinced that it is to tbe best interest of tbe minor, J. T. Miller, Jr., that tbe offer for tbe purchase of tbe stock of tbe J. T. Miller Estate, as set forth in tbe amended petition, should be accepted and approved by tbe Court, and in reaching this conclusion this defendant has been influenced by the fact that the acceptance of said offer will enable tbe executor to close, with reasonable promptness, tbe administration of tbe estate and to set up tbe trust fund provided by tbe will of tbe minor's father and thereby carry out tbe purpose and intention of tbe testator to insure tbe existence of a fund sufficient to support, maintain and educate said minor, and secondly, this defendant believes that a liquidation of tbe Hutton & Bourbonnais Company, either voluntarily or by a receiver, would in all probability produce less money for tbe use of said minor than will be obtained by tbe acceptance of this offer." Tbe adult defendants, tbe widow and legatees of tbe testator, wbo together owned more than 400 shares of this stock filed answer asking that tbe sale be made as proposed, and elected to sell their own shares on tbe same terms.
Judge Phillips, who- was presiding at July Term, 1940, of Catawba Superior Court, had all the parties before him, and in his judgment set out his findings fully and, among other things, found that the shares of stock were not now marketable, that the trustee had repeatedly endeavored to sell them but was unable to secure an offer; that Hutton & Bourbonnais Company had made no profit since 1926, paid no dividend since 1930, and had a substantial deficit, and entered his conclusion as follows: "The Court, after careful inquiry and investigation, is of the opinion and finds that in order to carry out the purpose of the trust created by the testator, it is now advisable that the offer for the purchase of said stock be accepted and the executor and trustee be authorized to do and perform all things necessary for the consummation of said sale and purchase."
It also appeared that on the same day a similar judgment was rendered authorizing the trustees of the Hutton Estate to sell the shares of stock of Hutton & Bourbonnais Company belonging to that estate upon identical terms. All these facts are set forth in the exhibits which plaintiff has attached to his complaint. Thus it appears from the answer of the guardian ad litem and the findings of the court, incorporated in the complaint, that the charge that the judgment was rendered without information as to the value of the shares, and without knowledge of the alleged conflicting interests, is not borne out.
After examination of the complaint and of the judgment rolls attached thereto and made a part thereof, we conclude that insufficient facts are alleged to show extrinsic fraud in procuring the judgment rendered 10 July, 1940. It follows that -the judgment would constitute g bar to an action to surcharge the executor's accounts on account of the sale of the shares of stock authorized and approved by that judgment.
Estoppel by judgment is a matter of defense and ordinarily must be pleaded, but this rule does not apply where all the facts necessary to constitute an estoppel are set out in the complaint for the purpose of attack. Alston v. Connell, 140 N.C. 485 (494), 53 S.E. 292; 120 A.L.R. 110n. Here the plaintiff in order to raise the question has inserted the judgment roll in his complaint and a,t the same time set out allegations attacking the validity of the judgment in the effort to have it declared void and -of no effect. The defendant has moved to strike these allegations on the ground that the matters alleged have been determined by the judgment. Thus both parties have squarely presented the question for our decision whether the allegations sought to be stricken are sufficient for the purpose intended.
The case is here on motion to strike. The statute G.S. 1-153 -authorizes the court to strike from a pleading irrelevant or redundant matter. Rhodes v. Jones, 232 N.C. 547, 61 S.E. 2d 725; Poovey v. Hickory, 210 N.C. 630, 188 S.E. 78. See 29 N. C. Law Review 1, where this statute is discussed and pertinent decisions cited. And the right of the defendant to strike portions of a complaint which are insufficient to state a cause of action attempted to be set up is upheld in Development Co. v. Bearden, 227 N.C. 124, 41 S.E. 2d 85, upon the view that such allegations are in fact "irrelevant." If the complaint be wholly insufficient to state a cause of action, objection should be raised by demurrer; but when only a portion of the pleading or certain paragraphs are insufficient for the purpose for which they are inserted, relief may properly be had by motion to strike the objectionable paragraphs. Thalhimer v. Abrams, 232 N.C. 96, 59 S.E. 2d 358.
For the reasons stated we think the motion to strike from the complaint the portions designated should have been allowed, with right to the plaintiff to amend his complaint or file an amended complaint if so advised.
Reversed.