Kersh Lake Drainage District v. Johnson , 203 Ark. 315 ( 1941 )

I cannot agree with the majority opinion. It is my view that the questions and issues presented on these two appeals were finally determined and adjudicated in the opinion of this court in Johnson, et al., v. Kersh Lake Drainage District, 198 Ark. 743,131 S.W.2d 620, 132 S.W.2d 658, and later affirmed by the Supreme Court of the United States in Kersh Lake Drainage District v. Johnson, 309 U.S. 485,60 S. Ct. 640, 84 L. Ed. 881, 128 A.L.R. 386. The defense bet up by Johnson in that case, for himself and all other landowners in the district similarly situated, was one of res judicata. The doctrine of res judicata clearly applies on these appeals.

Appellant creditors and bondholders of the district in case No. 6474 attempt here, after waiting more than nine years, to set aside the Fish decree rendered in 1932 on the ground of fraud on the part of the commissioners.

In case No. 6332 appellants attempt to set aside this same decree after a lapse of nine years on the grounds "(b) that many of the descriptions in the suit of Fish v. Drainage District were void from uncertainty and (c) that by the express terms of that decree certain lands were excluded from its benefits."

All of these alleged defenses were available to appellants at the time the cases were tried below. Appellants having failed to appeal from the Johnson decree in 1931 and from the Fish decree in 1932 concede that any rights that they might have had to question these decrees were lost and were terminated by their failure to appeal within apt time, unless they can show fraud in the procurement of these decrees. Appellants admit that the decree in favor of Johnson against the district in 1931 is binding upon the district and bondholders and is without fraud in its procurement. They question only the Fish decree. Although Johnson sued for himself alone as a property holder in the district, and Fish, less than a year after the Johnson decree, sued the commissioners of the district for himself and all other property owners similarly situated, I am unable to see how there can possibly be fraud in the Fish case and none in the Johnson case. The sole purpose of the Johnson suit was to establish that he had paid all assessments of benefits against his 160-acre tract over a 20-year period and therefore that he owed the district nothing. The purpose of the Fish suit was to ascertain what landowners had paid all assessed benefits, who had overpaid, and who had failed to pay the assessments due. The purpose of the Fish suit was an attempt of the landowners in the district to establish their legal rights on the assessment of benefits in accordance with the decree of the court in the Johnson case.

The contention of appellants that they were not parties to either the Johnson suit in 1931 or the Fish suit of 1932, and knew nothing of these proceedings, is without merit. The Supreme Court of the United States in its opinion in Kersh Lake Drainage District v. Johnson,309 U.S. 485, 60 S. Ct. 640, 84 L. Ed. 881, 128 A.L.R. 386, held squarely against this contention of appellants, using this language: "These certificate holders were not entitled to be made parties in the Lincoln chancery proceedings just as in practice creditors of a corporation are not, unless otherwise provided by statute, made parties in a suit between a stockholder and the corporation to determine liability on a stock subscription, between the corporation and a third person to recover corporate assets, or in a suit brought against the corporation by creditors, stock holders or officers. It has been held that bondholders are not necessary parties to and are bound by the decree — even if adverse to their interests — in litigation wherein an indenture trustee under a bond issue is a party and exercises in good faith and without neglect his contractual authority to represent and assert the lien securing the issue. And so are these petitioners bound by the decrees in the chancery suit in which the commissioners as parties appropriately asserted the lien for benefit of certificate holders — unless there was fraud or collusion."

Appellants in substance and in fact were really the only parties upon one side of the issues. The textwriter in 15 R.C.L. 1010, 483, says:

"The courts look beyond the nominal parties, and treat all those whose interests are involved in the litigation and who conduct and control the action or defense as real parties, and hold them concluded by any judgment which may be rendered, as, for example, those who employ counsel in the case, assume the active management of the proceeding or defense, or who pay the costs and do such other things as are generally done by parties. . . .

"Similarly, where a suit is prosecuted or defended by one person at the instance of another, and for the latter's benefit, the judgment will be binding and conclusive upon the latter. In all such cases the strict rule that a judgment operates as res judicata only in regard to parties and privies expands to include such persons as parties, or at least as privies."

Unless appellants have established fraud practiced on the court in the procurement of the Fish decree, it must stand and is binding on them. I am clearly of the view that neither fraud nor what could amount to constructive fraud appears in the record before us. The undisputed facts show that this drainage district was in default, at least on the principal of its bonds, as early as 1929. The creditors knew this. The Supreme Court of the United States has said that the creditors were parties to the Johnson and Fish suits, and in effect, knew everything that was taking place. Any defenses that they had to those suits, which they interposed, or could have interposed, were barred by their failure to appeal from those decrees within the statutory period of six months. 6274, Pope's Digest. Any alleged fraudulent conduct of the commissioners was as well known to the appellants (creditors of the district) when these chancery suits were tried in 1931 and 1932 as later.

Appellants say that the fact that the commissioners of the district were large landowners therein, and would necessarily benefit by the Johnson and Fish decrees, and that this, if not evidence of actual fraud, was constructive fraud. The law governing the creation of this and all other similar districts, requires that each commissioner own land within the district before he can qualify as a commissioner. This is a prerequisite to qualification. Of course, any suit against the commissioners who represent the creditors would directly or indirectly result in a benefit or injury to the commissioners. How fraud on the court can be imputed to them in such circumstances, I am unable to see. There is no evidence in this record that the court was ignorant of the fact that the commissioners would be benefitted by the Fish decree or that the commissioners concealed from the court any material facts leading up to the Fish decree. The evidence clearly shows that the trial court knew how the Fish suit originated, why it as brought and what was expected to be accomplished by it. There is nothing in the record to show that the commissioners did not make a full defense or that any fraud was practiced upon the court. The most that can be said about the Johnson decree and the Fish decree is that the court made a mistake as to the law.

The rule is that fraud of the kind to authorize the setting aside of a judgment must be fraud extrinsic of the matter tried in the cause and a fraud practiced upon the court in procuring a judgment and not a fraud practiced upon the parties to the litigation. In Dent v. Adkisson,191 Ark. 901, 88 S.W.2d 826, this court, referring to Crawford Moses' Digest, 6290, subdivision 4 (now Pope's Digest, 8246, subdivision 4), said: "This subdivision provides: `For fraud practiced by the successful party in the obtaining of the judgment or order,' such judgment or order may be vacated. We have always held that the fraud referred to in this subdivision was fraud practiced upon the court in the procurement of the judgment or order and not upon the party or parties to the litigation. See Holland v. Wait, 191 Ark. 405, 86 S.W.2d 415, and cases there cited."

Certainly a judgment cannot be impeached for fraud by showing that the judge had all the facts before him but decided the case wrong.

In Pattison v. Smith, 94 Ark. 588, 127 S.W. 983, this court said: "`But the fraud which entitled a party to impeach a judgment must be a fraud extrinsic of the matter tried in the cause. It must not consist of any false or fraudulent act or testimony the truth of which was or might have been in issue in the proceeding before the court which resulted in the judgment that is thus assailed. It must be a fraud practiced upon the court in the procurement of the judgment.' Bank of Pine Bluff v. Levi,90 Ark. 166, 118 S.W. 250."

And in Estes v. Lucky, 133 Ark. 97, 201 S.W. 815, this court said: "It is said that the judgment was fraudulent because the order made by the probate court for the administrator to borrow the money with which to pay the lien indebtedness against the land was void. It is not shown that this fact was suppressed or withheld from the court rendering the original judgment. It was a matter that was or might have been presented in the original suit and is now excluded from consideration under the doctrine of res adjudicata."

In Cabell v. Board of Improvement, 124 Ark. 278,187 S.W. 666, we quote from the opinion as follows: "It is contended by counsel for appellants that the decree was procured by fraud because the complaint in the statutory proceeding to collect the delinquent assessments alleged that the owners of the lots in controversy were unknown when it was well known to the commissioners that appellants were the owners of the lots. This contention was settled adversely to appellants in the case of Cassady v. Norris, 118 Ark. 449, 177 S.W. 10. There Cassady, who was a non-resident of the state of Arkansas, owned property in Mena, Arkansas. . . .

"`But these allegations were not sufficient to constitute a fraud practiced by the successful party in obtaining the judgment. The allegation in the complaint, in the suit to condemn, that the owner was unknown was sufficient to give the court jurisdiction to proceed against the property. It was not a fraud on the court to make this allegation, although it was untrue; for the court had the power to inquire into its jurisdiction and to determine whether or not it was true. The recitals of the decree condemning the lot in controversy to be sold were, in effect, that the owners of the lots were designated as unknown, and that they were unknown to the board of improvement. We must presume, in the face of these allegations, that the court did make inquiry as to its jurisdiction to proceed against the property, and found that it had jurisdiction. In other words, that the complaint alleged that the owners of the lots were unknown, and that such was the fact.'

"(1) The court held that, since a decree of sale of real estate for nonpayment of taxes may be impeached for fraud only where such fraud is extrinsic of the matter tried in the cause, such decree may not be set aside because the owner of the lot was proceeded against as an unknown owner, when in fact he was known to the plaintiff."

Litigation must sometime be brought to an end. As indicated, it seems to me that every issue raised on these appeals has been finally determined and that appellants should not be allowed again to litigate the same questions, although some defense might have been interposed in the Johnson and the Fish cases which might have changed the result.

The meaning and application of res judicata was clearly announced by this court in Howard-Sevier Rd. Imp. Dist. No. 1 v. Hunt, 166 Ark. 62, 265 S.W. 517, in this language:

"The rationale of the doctrine of res judicata is well expressed by Judge MITCHELL, in State of Wisconsin v. Torinus, 28 Minn. 175, 9 N.W. 725. `The doctrine of res judicata' says he, `is founded upon two maxims of law, one of which is that "a man should not be twice vexed for the same cause," the other that "it is for the public good that there be an end of litigation"; and it is undoubtedly true that, if there be any one principle of law settled, it is that, whenever a cause of action, in the language of the law, "transit in rem adjudicatum," and the judgment thereupon remains in full force and unreversed, the original cause of action is merged and gone forever. After judgment on the merits, a party cannot afterwards litigate the same question in another action, although some argument might have been urged on the first trial that would have led to a different result. Such a judgment is final and conclusive, not only as to matters actually decided, but as to every other matter which the parties might have litigated and had decided as incident to and essentially connected with the subject-matter of the litigation, as the facts then existed. The discovery of new evidence, not in the power of the party at the former trial, forms no exception to the rule. The doctrine is so just, and so necessary to the peace and good order of society, that we have no desire to either modify it or unreasonably limit its application.'"

And in the recent case of McCarroll v. Farrar,199 Ark. 320, 134 S.W.2d 561, we said: "The doctrine of res judicata is not only to protect the individual, but it is a matter of public policy."

It is my view that the majority opinion is wrong, is not sustained by the record, and that the decrees should in all things be affirmed.

I am authorized to say that Mr. Justice HUMPHREYS and Mr. Justice GREENHAW concur in this dissenting opinion.