In Re Trusteeship Under Last Will of Melgaard

1. The pleadings have been misconstrued by this court. Defendants asked leave upon the trial to amend the answer so as to grant affirmative relief, vacating and setting aside all the orders allowing the annual accounts and the consents upon which such orders were based, and the court expressly granted the motion to amend the pleadings in this respect. This being true, the answer as amended set up a counterclaim to vacate and set aside the orders and consents and to surcharge the trustees. A defendant who pleads a counterclaim is, as to the counterclaim, considered as if he had brought an action. The counterclaim is in the nature of a complaint by the defendant against the plaintiff. 5 Dunnell, Minn. Dig. (2 ed.) § 7598, and cases cited in note 15. The rule is that a cross complaint or cross bill asking affirmative relief against a judgment is a direct, not a collateral attack, on the judgment. 34 C. J. p. 524, § 829, notes 82 and 83; Northwestern P. H. Bank v. Ridpath, 29 Wn. 687, 70 P. 139; Wilson v. Hawthorne,14 Colo. 530, 24 P. 548, 20 A.S.R. 290. This came is one involving a direct attack upon the orders and should be so considered.

2. That a judgment or order allowing or confirming a trustee's account may be attacked by a beneficiary upon the grounds of fraud or mistake is settled by prior decisions of this court. In Wann v. Northwestern Trust Co. 120 Minn. 493,497, 139 N.W. 1061, it was held that a decree discharging a trustee is conclusive, "in the absence of fraud," and that it may be attacked for fraud. Other cases sustaining this rule are Kittson v. St. Paul Trust Co. 78 Minn. 325, 81 N.W. 7; Bruski v. Bruski, 148 Minn. 458, 182 N.W. 620. In In re Will of Rosenfeldt, 185 Minn. 425, 432, 241 N.W. 573, 576, the court said: "The findings are that fraud or mistake of fact induced the consent of the beneficiaries and the orders referred to of the probate court. Such being the fact, the orders would be vulnerable to a direct attack." That case involved a direct attack on the orders. The authorities generally lay down the rule that a decree settling the accounts between a trustee and a beneficiary may be attacked for fraud, accident, or mistake. 65 C. J. p. 941, § 862; 4 Bogert, Trusts Trustees, p. 2841, § 973; Pinckney v. Hudson County Nat. Bank, 112 N.J. Eq. 376,164 A. 269. In In re Willing's Estate, 288 Pa. 337, 343,135 A. 751, 752, the court said: "Irrespective of any legislation, the orphans' court possesses an inherent discretionary power 'to correct its own records in the interest of justice, even to protect parties from the effect of their own mistakes and blunders.' " To same effect, Withington v. Fidelity Casualty Co. 237 Mass. 73, 129 N.E. 418; Johnson v. Eicke, 12 N.J.L. 316; In re Baker, 61 N.J. Eq. 592, 47 A. 1046; Boyd v. Caldwell, 95 Ind. 392; Barnes v. Gardiner, 140 App. Div. 395,125 N.Y. S. 433; Aldrich v. Barton, 138 Cal. 220, 71 P. 169,94 A.S.R. 43; In re Lawson, 215 Iowa, 752, 244 N.W. 739,88 A.L.R. 316. Assent to the allowance of the account given by a beneficiary under mistake of fact or procured by fraud does not prevent the beneficiary from attacking the order or judgment upon the grounds of fraud or mistake. Withington v. Fidelity Casualty Co. 237 Mass. 73,129 N.E. 418.

A sufficient reason for permitting such attack upon such orders and judgments is that all the matters between the trustee and the beneficiaries are disposed of by the order or judgment except the fraud or mistake. The latter are not raised in the accounting proceeding and present new controversies to be determined by the courts. The rule is well stated by Circuit Judge Walter H. Sanborn in Horton v. Stegmyer (C.C.A.) 175 F. 756, 758, 20 Ann. Cas. 1134, at page 1135:

"A federal court sitting in equity has jurisdiction to disregard or to enjoin the enforcement of an unconscionable judgment of a state or of a national court for new causes, such as fraud, accident, or mistake, which deceive the court into a wrong decree, or which prevent the judgment defendant from availing himself of a meritorious defense that was not fairly presented to the court which rendered the judgment. But it has no power to take such action on account of errors or irregularities in the proceedings on which the judgment or decree is founded, or on account of erroneous or illegal decisions by the court which rendered the judgment or decree. The reason of this rule is that cases of the former class present new controversies, which have never been raised in other courts, while cases of the latter class invoke a jurisdiction which does not exist, a jurisdiction in a federal court to review and revise the acts and decisions of courts of co-ordinate jurisdiction upon questions which they have lawfully considered and adjudged."

The consents and the orders based thereon were subject to the attack which was made on them in the court below. If they were procured by fraud or were due to the mistake of the beneficiary, they should be set aside.

In stating the rule as to the grounds upon which a decree discharging trustees may be set aside, where it was claimed that a release was obtained from the beneficiary by fraud, Lindley, L.J., in In re Webb, [1894] L. R. 1 Ch. 73, 80, used language applicable to the instant case:

"It is essential to shew that there has been some injustice done — to shew that there has been some fraud, some pressure, some overcharge, something wrong to cloak up which the release has been obtained. Prove that, and the release cannot stand."

It is not necessary at this time to decide whether a trustee's intermediate account allowed and confirmed by the court prior to L. 1933, c. 259, is conclusive or is prima facie correct only, subject to review and revision in connection with the final account, or under what circumstances and conditions such review and revision may be had in the absence of fraud or mistake. In this case the intermediate accounts and orders allowing and confirming them are voided by direct attack upon grounds of fraud and mistake, which are recognized grounds for the voidance even of a final account of a trustee. Thus the intermediate character of the annual accounts and orders allowing and confirming the same is eliminated from the case.

3. The findings of the court below on the issues involved are entitled to the same weight as the verdict of a jury. Wann v. Northwestern Trust Co. 120 Minn. 493, 497, 139 N.W. 1061. We are trying cases de novo instead of exercising the appellate function unless findings of fact supported by adequate evidence are final here. This is not the function of this court. Even in cases in which we might have found the facts differently had this court been the trier of fact, we are bound to accept findings as final. Sommers v. City of St. Paul, 183 Minn. 545,551, 237 N.W. 427, 430, in which it was held that the rule applied "even if this court might be inclined to draw different inferences." Haedge v. Gaver, 173 Minn. 207, 217 N.W. 109; Waldron v. Page, 191 Minn. 302, 253 N.W. 894; S. Bader Sons v. Gensler, 191 Minn. 571, 255 N.W. 97.

The order should be affirmed.

MR. JUSTICE HOLT took no part in the consideration or decision of this case.