24 F.2d 951 (8th Cir. 1928), 7713, Mathis v. Hemingway

Docket Nº:7713.
Citation:24 F.2d 951
Party Name:MATHIS et al. v. HEMINGWAY.
Case Date:March 06, 1928
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 951

24 F.2d 951 (8th Cir. 1928)

MATHIS et al.



No. 7713.

United States Court of Appeals, Eighth Circuit.

March 6, 1928

Ross Mathis, of Cotton Plant, Ark., and W. G. Dinning, of Helena, Ark., for appellants.

H. M. Trieber and P. A. Lasley, both of Little Rock, Ark., for appellee.

Page 952

This appeal was taken from a decree ordering a distribution of the proceeds of a sale made under a decree of foreclosure of trust deeds on real estate. By consent of the parties the decree had fixed the validity of four deeds of trust as liens upon the lands, and had ordered a sale of the lands in satisfaction of the decree. The decree provided for the payment into the registry of the court of the sum to be received as the purchase price of a tract of 40 acres of the lands, and had ordered a sale of the lands, and as to this sum the decree stated that it reserved for future consideration the questions of the jurisdiction of the court, as asserted in three answers to the complainant's bill, and of the priority of the several deeds of trust. The sum received as the purchase price of this 40 acres of land was $10,000. The decree of foreclosure was entered July 13, 1926. A trial was had on October 23, 1926 upon the questions reserved in the prior decree and the final decree from which these appeals were taken was entered on October 23, 1926.

On and before February 2, 1920, R. B. Campbell, John L. Turner, and D. J. Williams owned a tract of farm land of about 5,200 acres and located in Prairie and Woodruff counties, Arkansas. It was known as the Dixie Plantation. The three owners acted as a partnership in managing this plantation for agricultural purposes, but Mr. Turner owned a one-half interest in it, and Mr. Campbell and Mr. Williams each owned a one-fourth interest. The partnership owed its creditors a large sum of money.

On February 2, 1920, the three partners and their wives executed a deed of trust in favor of Moorhead Wright, a trustee for the Union & Mercantile Trust Company of Little Rock, Ark., to secure an indebtedness to the trust company of $125,000. This trust deed covers all of the lands, except the 40 acres mentioned, 40 acres adjoining it, and a few other small tracts. The 40 acres now in controversy was known as the 'headquarters 40' and was described as the southeast quarter of the northeast quarter of section 12, township 5 north, of range 4 west. The adjoining 40 acres, which was omitted, was the northeast quarter of the southeast quarter of that section. These lands were intentionally omitted from the trust deed at the request of the partnership, because they planned to plat the 80 acres as a town site and to sell portions of it from time to time, and because contracts had been made on behalf of the partnership to sell the other small tracts. These contracts of sale were afterwards released to the partners.

In the autumn or early winter of 1921 the partnership debts had increased. It was owing $25,750 under this trust deed for overdue interest and for taxes and assessments levied on the lands which the cestui the trust had paid. It also owed about $120,000 to various banks and other creditors for money loaned or for supplies furnished to the plantation. On November 1, 1921, the partners and their wives executed the second trust deed to Moorhead Wright, as trustee for the Union & Mercantile Trust Company, to secure the debt of $25,750. This deed purported to convey, as a first and prior lien, the small tracts which had been omitted from the first trust deed and also the east half of the southeast quarter of section 12, township 5 north, or range 4 west, and to convey, subject to the first trust deed, the lands mentioned in that deed, and it again included the southeast quarter of the southeast quarter of section 12 (which had been conveyed in the above description of the east half of the southeast quarter), but did not include the 'headquarters 40.'

On January 12, 1922, the partners and their wives executed a third deed of trust to Ross Mathis, as trustee for a number of creditors, inconsideration of an extension of a pre-existing indebtedness of about $128,000. This deed properly described all of the lands of the partnership, including the 'headquarters 40,' but it contained the following clause,

Page 953

immediately following the habendum clause: 'It is understood that first parties are intending to include all the property owned by Dixie Plantation, aggregating to fifty-two hundred (5,200) acres, subject, however, to a prior incumbrance to the Union & Mercantile Trust Company, of Little Rock, Arkansas, in the aggregate sum of one hundred fifty thousand dollars ($150,000). ' All of these trust deeds were properly recorded very soon after execution.

After the making of these three trust deeds Mr. Campbell died, and his interest in the plantation was afterwards conveyed to Mr. Turner and Mr. Williams. On November 7, 1924, they quitclaimed one-fourth interest to Gordon Armitage for services rendered by him in 1921, 1922, 1923, and 1924, in checking the taxes due on the plantation, and for some services rendered about the plantation. After the deeds of trust were executed, Mr. Turner became a bankrupt, and Dale Welsh was appointed as his trustee in bankruptcy.

Moorhead Wright, named as the trustee in the first and second deeds of trust, was a citizen of Arkansas. On March 20, 1926, he resigned as trustee and refused to act under the trust deeds. The second trust deed contained a provision that, if the trustee should from any cause be incapable of or unwilling to act in the execution of the trust, or should resign or refuse to act, the cestui que trust, or the legal holder or holders of the indebtedness secured by the trust deed, might appoint a trustee to execute the trust and exercise the powers conferred on the trustee with like effect. There was a similar provision in the first deed of trust. Following the resignation of Mr. Wright as trustee, the trust company, the beneficiary in the first and second trust deeds, appointed the complainant, W. L. Hemingway, a citizen of Missouri, as trustee in the trust deeds, in...

To continue reading