Fargason v. Edrington
| Decision Date | 04 June 1887 |
| Citation | 4 S.W. 763 |
| Parties | FARGASON <I>v.</I> EDRINGTON. |
| Court | Arkansas Supreme Court |
U. M. & G. B. Rose and H. M. McVeigh, for appellants. O. P. Liles, for Mrs. Edrington. E. F. Adams, for Edrington heirs and executors.
On the twelfth day of June, 1874, James H. Edrington and his wife, Nancy A., executed a deed of trust, and thereby mortgaged certain land to secure his indebtedness to Brooks, Neely & Co., of Memphis, Tennessee. He died in 1874, and on March 12, 1877, the trustee appointed to execute the trust, after advertising the same, sold 62 acres of the land at public sale, pursuant to the authority vested in him as such trustee. John Mathews, paying for the land the sum of $3,951.02, became the purchaser thereof, and received a deed therefor on the same day. On March 16th, four days after, he conveyed this land and certain personal property to Dan Mathews, as trustee, to secure an indebtedness of $16,000 he owed to J. T. Fargason & Co. John Mathews failed to pay this indebtedness when it became due; and on the twentieth of May, 1879, Dan Mathews sold the land, under the deed of trust executed to him, at public sale, and J. T. Fargason & Co. became the purchasers. On the fifth of May, 1881, J. T. Fargason & Co. sold the land to W. P. Hale. On the twelfth of the same month, Nancy A. Edrington filed a complaint in the Mississippi circuit court, asking a cancellation of the deed to Mathews, to J. T. Fargason & Co., and to Hale, and that the title to the same be vested in herself. She alleges in her complaint that John Mathews purchased the land for her; that on the eleventh of May, 1877, he executed a declaration of trust, acknowledging that he had purchased the land at her instance, and agreed to convey it to her upon the payment by her of $6,400, with interest at 12½ per cent. per annum, saying that that was what he had to give for the land, and the rate of interest he had to give to raise the money; that J T. Fargason & Co. had notice of her rights when the deed of trust to secure them was executed; that the deed of trust to secure them had been paid off by Mathews, and that the sale under it was a fraudulent device to cheat her out of her equities; that Hale purchased with knowledge of her rights; and that she was willing to pay Mathews whatever amount should be found due him on an account stated.
John Mathews answered, in effect, that he purchased the land on his own account, and not as agent for Mrs. Edrington; that he borrowed the money from J. T. Fargason & Co. to make the purchase,—they exacting, as a condition of the loan, that he should convey the land in controversy, if he became the purchaser thereof, and other property, to a trustee to secure them in the payment of the sum advanced to purchase the land, of $5,191.05, before then advanced by them to him under a deed of trust executed by him on February 11, 1877, and of another debt of $7,334.98 he owed them; that he accepted these terms, borrowed the money, and made the purchase; that, pursuant to his agreement, he executed the deed of trust to secure the $16,000; that from kindness and good feeling for Mrs. Edrington he agreed to let her have the benefit of his purchase, as evidenced by the declaration of trust of May 11, 1877; that she, at the time, knew of the existence and record of the trust deed for $16,000; that, at the time of the sale under the deed of trust made to secure J. T. Fargason & Co., there was due to them, on the indebtedness secured thereby, the sum of $13,659.03; that the purchase made by them was a fair and bona fide purchase; and that he was closed out because he could not pay up. J. T. Fargason & Co. answered to the same effect as John Mathews; and further stated that they knew nothing of the declaration of trust until long after the trust deed to secure them in the payment of the $16,000 had been executed and recorded, and that they took this trust deed in good faith, with the understanding that John Mathews was the sole and absolute owner of the property, and without notice that plaintiff had any claim whatever upon it, and that they sold the land to W. P. Hale in good faith, on their own account, and for their own exclusive use and benefit.
The administrator and heirs of J. H. Edrington, Mrs. Edrington's deceased husband, were on their motion made parties defendant, and filed an answer and cross-bill. They admit the allegations of the complaint, but allege that the plaintiff was the executor, and Mathews her agent, and that neither of them could legally purchase at the sale of any part of the property of decedent's estate; that the purchase by them simply amounted to a redemption, and the land reverted back to the estate, subject to the widow's right of dower; that Mathews' advances in making the purchase have long since been repaid by way of rents and profits; that the estate of J. H. Edrington is hopelessly insolvent. The prayer was for an accounting, a cancellation of the conveyances between Fargason & Co. and Mathews and Hale, a sale of the property to pay the debts of the Edrington estate, and for general relief. Fargason & Co. answered the cross-complaint, making the same denials and allegations as in the answer to the original complaint. W. P. Hale answered, alleging that he had purchased all the property, except certain lots specifically described, in good faith, and without notice of any defect in the title, and that Fargason & Co. had conveyed the property to him by a warranty deed.
The court, after hearing the evidence, found "that the purchase of the land by John Mathews was a fraud upon the estate of James H. Edrington, and that the benefit of said purchase inured in equity to the said estate, and that John T. Fargason & Co. and the other holders were affected with notice, at and before their several purchases, of the equities of said estate, and of Nancy A. Edrington; that John Mathews and John T. Fargason & Co. had been fully paid for the purchase money;" and set aside the conveyance to Mathews, and the conveyance of Matthews to J. T. Fargason & Co., and the sale of J. T. Fargason & Co. to Hale, and vested the property in the estate of J. H. Edrington, deceased, and referred the cause to a master to state an account. Mrs. Edrington and J. T. Fargason & Co. appealed.
The record in this case is voluminous, and many questions are involved. But it is only necessary to decide one of these questions, and that is, were J. T. Fargason & Co. innocent purchasers? A bona fide purchaser has been defined to be one who, at the time of his purchase, advances a new consideration, surrenders some security, or does some other act which leaves him in a worse position if his purchase should be set aside, and purchases in the honest belief that his vendor had a right to sell, without notice, actual or constructive, of any adverse rights, claims, interests, or equities of others in and to the property sold. 1 Perry, Trusts, § 239; Merritt v. Northern R. Co., 12 Barb. 605; Sanders v. McAffee, 42 Ga. 250.
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