Opinion ID: 2229012
Heading Depth: 1
Heading Rank: 6

Heading: fraud and collusion

Text: In her third assignment of error, the personal representative contends that the county court erred in determining that the Tax Commissioner had proved fraud to justify vacating the inheritance tax order, as authorized by § 25-2001(4). In the petition to set aside the inheritance tax order, the Nebraska Tax Commissioner alleged that there was actual or intentional fraud and collusion which produced the inheritance tax order and eliminated the potential Nebraska estate tax. The personal representative contends that, to prevail in the action to set aside the inheritance tax order, the Tax Commissioner must present proof suitable to sustain a cause of action for fraud (misrepresentation of a material fact). As we expressed in Alliance Nat. Bank v. State Surety Co., 223 Neb. 403, 407-08, 390 N.W.2d 487, 491 (1986): To recover on a claim for fraud, [a plaintiff] must show (1) that a representation was made; (2) that the representation was false; (3) that, when made, the representation was known to be false, or made recklessly without knowledge of its truth and as a positive assertion; (4) that it was made with the intention that the plaintiff should rely upon it; (5) that the plaintiff reasonably did so rely; and (6) that he or she suffered damage as a result. The personal representative asks, What business man wants to expose his books to public scrutiny if he can avoid it? Brief for Appellant at 25. Later, the personal representative points out that [t]here are three parties to the Inheritance Tax Determination. They are the county, the State of Nebraska, and the estate, and then asks another rhetorical question: Did the State rely upon the representations made by the estate's attorney? Brief for Appellant at 30. The State did not rely on the overstated and misrepresented amount of inheritance tax reflected on the inheritance tax worksheet, but such absence of reliance does not prevent vacating the inheritance tax order. Collude means to connive with another: conspire, plot. Collusion is a secret agreement: secret cooperation for a fraudulent or deceitful purpose ... as... a secret agreement between two or more persons to defraud a person of his rights often by the forms of law. Webster's Third New International Dictionary, Unabridged 446 (1981). See, also, Tomiyasu v. Golden, 81 Nev. 140, 400 P.2d 415 (1965); Clinton Coop. F.E. Assn. v. Farmers U.G.T. Assn., 223 Minn. 253, 26 N.W.2d 117 (1947); Colegrove v. John Hancock Mut. Life Ins. Co., 153 S.W.2d 750 (Mo. App.1941). As the U.S. Supreme Court stated in Dickerman v. Northern Trust Company, 176 U.S. 181, 190, 20 S.Ct. 311, 314, 44 L.Ed. 423 (1900): Collusion is defined by Bouvier as an agreement between two or more persons to defraud a person of his rights by the forms of law, or, to obtain an object forbidden by law, and in similar terms by other legal dictionarians. It implies the existence of fraud of some kind, the employment of fraudulent means, or lawful means for the accomplishment of an unlawful purpose.... As a general rule, if a judgment has been obtained through fraud and collusion, the judgment may be vacated or set aside in a subsequent action, especially where the court was imposed upon thereby and the complaining party was prevented from having his interest fairly presented or fully considered by the court. 46 Am. Jur.2d Judgments § 16 at 323 (1969). See, also, Hargo v. Johnston, 187 Okla. 561, 104 P.2d 985 (1940); Abernathy v. Huston, 166 Okla. 184, 26 P.2d 939 (1933); Ferguson v. Ferguson, 98 S.W.2d 847 (Tex.Civ.App. 1936); 49 C.J.S. Judgments § 269 (1947). As expressed by the Iowa Supreme Court in Scheel v. Superior Mfg. Co., 249 Iowa 873, 883, 89 N.W.2d 377, 383-84 (1958): It has been said that all deceitful practices in depriving or endeavoring to deprive another of his known rights by means of some artful device or plan contrary to the plain rules of common honesty constitute fraud sufficient to warrant interference with a judgment by a court of equity. It matters little how the fraud is effected; a court looks to the effect, and asks if the result is a consequence of fraud. . . . . . . . . . ...     in the final analysis each case must be judged on its own facts in determining whether the circumstances amount to fraud so as to justify equitable relief against a judgment. Broadly speaking, if the result complained of is a consequence of fraud, the mode or manner in which the fraud was effected is immaterial. See, also, 46 Am.Jur.2d, supra at § 832. In the present case, the State seeks to set aside a judgment procured through collusive misrepresentation by its attorney. Setting aside or vacating a judgment may be an appropriate remedy where a judgment was obtained against a litigant by collusion between the attorney for a litigant and the adversary of the litigant. Mercantile Comm. Bank v. Southwestern, etc., Corp., 93 Ind.App. 313, 169 N.E. 91 (1929); Sturm v. School-District No. 70, 45 Minn. 88, 47 N.W. 462 (1890). As noted in 46 Am.Jur.2d, supra at § 827 at 984: [E]quitable relief from a judgment exist[s] where an attorney fraudulently pretended to represent a party but actually connived at his defeat, or, being regularly employed, corruptly sold out his client's interest. Sir Walter Scott must have foreseen counsel's conduct in the present case, when he wrote: Oh, what a tangled web we weave, When first we practice to deceive! While both Roubicek and Thomas offered various afterthoughts as methods for arriving at valuations different from, and greater than, the valuations actually used for inheritance tax purposes, the evidence, stripped of all verbal veneer, presents the crystallized fact that the attorneys, through their stipulated inheritance tax worksheet, jointly and deliberately overstated the amount of inheritance tax due Knox County, thereby carrying out their surreptitious agreement to eliminate the potential Nebraska estate tax on the West estate. The inheritance tax of $48,375, reflected on the worksheet, was absolutely impossible on the basis of the valuations reported in that document filed with the county court. Through the deceitful stipulation, each party interested in death tax liability relative to the West estate gained a very real advantage, except the State of Nebraska. For the West devisees, silence was acquired and nondisclosure assured, for, as acknowledged by the personal representative: The heirs were anxious to avoid producing their books of account, and so on, in a county court inheritance tax hearing. Brief for Appellant at 24. For Knox County, there was the all-too-obvious exaggerated inheritance tax collected by the county. For the State of Nebraska, the attorneys' stipulation produced only injury loss of the state estate tax. Roubicek and Thomas spawned the inheritance tax worksheet and its collusive misrepresentation, which was an integral and causative element in the production of an inheritance tax determination effectively eliminating payment of a Nebraska estate tax. Although it is true that the State of Nebraska did not rely on any factual misrepresentation by Roubicek and Thomas, it is also equally true that the State of Nebraska, through its attorney's connivance with the attorney for the personal representative, was prevented from having its interests fairly presented in the matter of the inheritance tax, which ultimately became crucial in determining whether an estate tax was due the State of Nebraska. The inheritance tax worksheet was an intentionally fraudulent device to eliminate the Nebraska estate tax and was an artful scheme condemned by fundamental rules of honesty applicable to a lawyer representing the interests of a client. With respect to the interests of a client, a lawyer is expected to display dedicated protection, not deliberate damage. Consequently, we disagree with the personal representative, who suggests that the absence of the State's reliance on a factual misrepresentation, otherwise required to sustain a cause of action for civil fraud, precludes vacating a judgment which is the product of fraud and collusion by the county attorney, as the attorney for the State of Nebraska under § 77-2018.03. Therefore, we hold that if a party's lawyer colludes in a material and factual misrepresentation which otherwise constitutes intentional fraud or deceit and results in a judgment adverse to the interests of the party represented by such collusive lawyer, relief by vacating such fraudulently obtained judgment is available under § 25-2001(4) to the injured party. In that manner, we not only avoid relegating a party injured through collusion by that party's lawyer to another action outside the proceedings which produced the fraudulent judgment, that is, an action against the collusive lawyer, but we also avert time-consuming and expensive additional litigation to rectify the inequity caused by a lawyer's deceit toward the client. The evidence presented to the county court supports, if not compels, the finding of fraud and collusion detrimental to the State of Nebraska. A judicial abuse of discretion does not denote or imply improper motive, bad faith, or intentional wrong by a judge, but requires the reasons or rulings of a trial judge to be clearly untenable, unfairly depriving a litigant of a substantial right and denying a just result in matters submitted for disposition through a judicial system. Bump v. Firemens Ins. Co., 221 Neb. 678, 689, 380 N.W.2d 268, 276 (1986). Tested by a factual foundation and the plain rules of common honesty, the county court's judgment setting aside the inheritance tax order does not constitute an abuse of discretion.