Court Opinion

ID: 9602670
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:58:44.482285+00
Date Added: 2024-06-11T18:02:05.608727
License: Public Domain

Chief Justice EXUM
dissenting.
The majority views this case as an attack on the consent judgment settling the marital claims between plaintiff and her former husband, Wayne Smith. Concluding that this judgment may not be collaterally attacked and can be set aside, if at all, only by a Rule 60 motion in the cause, it holds the trial court properly allowed defendants Durwood Smith and wife’s motion for summary judgment and reverses the Court of Appeals’ contrary decision.
I view this action not as an attack upon the consent judgment but as an action which, in effect, seeks to require the estate of Wayne Smith to comply with the terms of that judgment. The action seeks, first, to impress the property conveyed pursuant to the judgment by the plaintiff to Durwood Smith with a constructive trust in favor of Wayne Smith’s estate and, second, to impress the estate’s beneficial interest with an equitable lien to secure her former husband’s, and now his estate’s, obligations under the judgment. Plaintiff does not seek to set aside or alter the essential terms of the judgment. She is satisfied with the judgment. She is simply trying to enforce it according to its terms.
The case, therefore, should not be analyzed in terms of whether plaintiff can attack the judgment in a collateral action. It should be analyzed in terms of whether, under plaintiff’s allegations and the evidentiary showing made at the summary judgment hearing, she may be able to establish at trial her entitlement to the equitable lien. Whether she will ultimately be so entitled depends upon what her evidence shows at trial. I think the allegations of her complaint *88and the evidentiary showing are sufficient to enable plaintiff to survive defendants Smiths’ motion for summary judgment. I vote, therefore, to affirm the decision of the Court of Appeals.
The complaint, to which a copy of the consent judgment is attached, alleges that Wayne Smith refused to make the payment to plaintiff required by the judgment despite numerous demands upon him and that the amount due plaintiff under the terms of the judgment is $13,805.96. While there is no such language in the judgment itself or in the deed from plaintiff to Durwood Smith, plaintiff alleges that she conveyed the property in question to Durwood Smith “in trust for the use and benefit of Wayne Smith.” She alleges that Wayne Smith never intended to pay the plaintiff according to judgment “knowing that with [the property] being put in his brother’s name ... he [Wayne Smith] had no other real property and no personal property against which execution could be levied to collect this money.” The complaint prays the court for an order restraining Durwood Smith from alienating or encumbering the property, declaring that Durwood Smith holds the property in trust for Wayne Smith and declaring the $13,805.96 owed plaintiff under the judgment to be an “specific lien against” Wayne Smith’s beneficial interest in the property.
This Court has described a constructive trust as follows:
A constructive trust is a duty, or relationship, imposed by courts of equity to prevent the unjust enrichment of the holder of title to, or an interest in, property which such holder acquired through fraud, breach of duty, or some other circumstance making it inequitable for him to retain it against the claim of the beneficiary of the constructive trust. Unlike the true assignment for benefit of creditors, which is an express trust, intended as such by the creator thereof, a constructive trust is a fiction of equity, brought into operation to prevent unjust enrichment through the breach of some duty or other wrongdoing. It is an obligation or relationship imposed irrespective of the intent with which such party acquired the property, and in a well-nigh unlimited variety of situations. Nevertheless, there is a common, indispensable element in the many types of situations out of which a constructive trust is deemed to arise. This common element is some fraud, breach of duty or other wrongdoing by the holder of the property, *89or by one under whom he claims, the holder, himself, not being a bona fide purchaser for value.
Wilson v. Development Co., 276 N.C. 198, 211-12, 171 S.E.2d 873, 882 (1969) (citations omitted) (emphasis added).
Plaintiff does not seek title to the property in question. She seeks only to charge Wayne Smith’s estate’s beneficial interest in the property with an equitable lien to the extent of the money due her under the terms of the judgment.
An equitable lien, or encumbrance, is not an estate in land, nor is it a right which, in itself, may be the basis of a possessory action. It is simply a charge upon the property, which charge subjects the property to the payment of the debt of the creditor in whose favor the charge exists. “It is the very essence of this conception, that while the lien continues, the possession of the thing remains with the debtor or person who holds the proprietary interest subject to the encumbrance.” 1 Pomeroy’s Equity Jurisprudence § 165 (5th Ed., 1941). “[T]he doctrine of ‘equitable liens’ was introduced for the sole purpose of furnishing a ground for the specific remedies which equity confers, operating upon particular identified property, instead of the general pecuniary recoveries granted by courts of law.” Id. § 166. In other words, an equitable lien, by charging specific property, provides an enforcement of the obligation more effective than that provided for the enforcement of the ordinary money judgment.
‘An equitable lien arises either from a written contract which shows an intention to charge some particular property with a debt or obligation, or is declared by a court of equity out of the general considerations of right and justice, as applied to the relations of the parties and the circumstances of their dealings.’ Garrison v. Vermont Mills, 154 N.C. 1, 6, 69 S.E. 743, 744, 31 L.R.A. (N.S.) 450, 453, modifying on rehearing, 152 N.C. 643, 68 S.E. 142; accord, Burrowes v. Nimocks, 35 F.2d 152 (4th Cir.); Jones v. Carpenter, 90 Fla. 407, 106 So. 127, 43 A.L.R. 1409. See Stanley v. Cox, 253 N.C. 620, 630-631, 117 S.E.2d 826, 833-834.
Fulp v. Fulp, 264 N.C. 20, 24, 140 S.E.2d 708, 712 (1965). ‘‘An equitable lien on real property is an equitable encumbrance [citation *90omitted] which may arise either out of contractual obligations, or whenever the court declares it necessary under the circumstances of the case from considerations of justice.” Brinkley v. Day, 88 N.C. App. 101, 105, 362 S.E.2d 587, 590 (1987) (Property devised in fee may be impressed with equitable lien to pay certain maintenance and other expenses which testator directed be paid out of rental income during occupancy of life tenant.).
At the summary judgment hearing the forecast of evidence tended to show that while plaintiff and Wayne Smith were married, the Internal Revenue Service filed tax liens against Wayne Smith. Wayne Smith conveyed property which he owned to others to be held in trust by them for the benefit of Wayne Smith. One of these tracts included the property conveyed by plaintiff to Durwood Smith pursuant to the judgment. Wayne Smith conveyed this property to plaintiff by deed dated 5 June 1974. After Wayne Smith filed for divorce against plaintiff in February 1983 he had several discussions with his brother, Durwood Smith, regarding the disposition of his marital interest in this property. He asked Durwood Smith on several occasions if he would take title to the property in trust for Wayne Smith. “Durwood Eugene Smith agreed to do so and to do with the land whatever Wayne Red Smith directed.” Wayne Smith “speculated on numerous occasions that he would have trouble getting Gatsy Newsome Smith to convey the marital interest of Wayne Red Smith to any third party.” Wayne and Durwood Smith continued to discuss their intentions that plaintiff “convey the marital interest of Wayne Red Smith to Durwood Eugene Smith for the use and benefit of Wayne Red Smith to avoid a tax lien attaching to the said land.” At the time of the divorce plaintiff agreed to convey the interest of Wayne Smith to Durwood Smith.
While plaintiff’s claims might have been more artfully alleged and the forecast of evidence somewhat more precise, her allegations and the evidentiary showing at the hearing on summary judgment boil down to this: Her former husband, Wayne Smith, agreed to pay and now owes her $13,805.96 pursuant to the terms of the consent judgment. In consideration for Wayne Smith’s agreement to pay this sum she conveyed property which she owned and in which Wayne Smith held a marital interest to Wayne Smith’s brother, Durwood Smith, for the benefit of Wayne Smith. Wayne Smith never intended to pay her pursuant to the judgment and persuaded her to convey the property to his brother rather than to him to *91shield him not only from his other creditors but also from plaintiff, who became his creditor under the terms of the consent judgment.
This showing, as the Court of Appeals concluded, is enough to demonstrate that plaintiff may be able to establish at trial that Durwood Smith holds the property in trust for the estate of Wayne Smith. She may then be able to charge the estate’s beneficial interest in the property with an equitable lien to the extent of $13,805.96, the amount the estate owes her under the judgment. The evidentiary showing coupled with the allegations in the complaint are, therefore, enough to permit plaintiff to survive defendants Smiths’ motion for summary judgment.
Another theory upon which plaintiff might be able to establish an equitable lien in her favor rests on her being a judgment creditor of Wayne Smith’s estate. She contends there is no property in the estate from which she can be paid because Wayne Smith fraudulently induced her to transfer property in which he had a marital interest, and which ordinarily would have been transferred to him, to his brother so as to shield Wayne Smith from his creditors, including plaintiff. Plaintiff’s claim is thus analogous to that of a judgment creditor who seeks to impress an equitable lien on property transferred in defraud of creditors by a judgment debtor to third parties.
In Michael v. Moore, 157 N.C. 462, 73 S.E. 104 (1911), plaintiff obtained a judgment against Moore for $300 in Catawba County. Moore appealed. Before time for perfecting appeal expired and before plaintiff caused the judgment to be docketed in Alexander County where Moore owned real property, Moore mortgaged the Alexander County property to secure the payment of $2,000 which he borrowed from the mortgagee. With this $2,000 Moore erected a house on a lot owned by his wife in Catawba County. At the time of these transactions Moore was insolvent. After plaintiff had exhausted his legal remedies to enforce the judgment against Moore, he filed an action for equitable relief against Moore and his wife. This Court concluded on these facts that plaintiff was entitled in equity to “follow the fund invested by his debtor in improvements upon his wife’s land.” Id. at 465, 73 S.E. at 105. The Court said, further,
No principle is better settled by our decisions than the one that an insolvent debtor cannot withdraw money from his own estate and give it to another to be invested by him in the *92purchase or improvement of his property, and when it is done, creditors may subject the property so purchased or improved to the payment of their claims.

Id.

Had plaintiff conveyed the property to Wayne Smith and if the property was in the same county in which the consent judgment was entered, the amount owed by Wayne Smith to plaintiff under the judgment would have, upon the judgment’s being docketed, become a lien against the property. If Wayne Smith, being insolvent, had conveyed the property to his brother, Durwood Smith, before the judgment could have been docketed in the county where the land lay, then, under the doctrine expressed in Michael v. Moore, plaintiff could have obtained an equitable lien against the property in the hands of Durwood Smith to the extent of her claim against Wayne Smith. That Wayne Smith may have accomplished the same result, as plaintiff alleges and which the evidentiary forecast indicates she may be able to prove, by fraudulently inducing plaintiff to convey the property directly to Durwood Smith would seem to entitle plaintiff to an equitable lien under the Michael v. Moore doctrine. “The lien assures the claimant that the asset will be devoted to satisfying” her claim. Restatement (Second) of Restitution § 30, cmt a. (Tent. Draft #2, 1984).
Justices Frye and Parker join in this dissenting opinion.