Ferguson v. Little Rock Trust Co.

• Decision Date: 17 April 1911
• Citation: 137 S.W. 555
• Parties: FERGUSON et al. v. LITTLE ROCK TRUST CO.
• Court: Arkansas Supreme Court

137 S.W. 555

FERGUSON et al. v. LITTLE ROCK TRUST CO.

Supreme Court of Arkansas.

April 17, 1911.

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor.

Action by the Little Rock Trust Company against W. B. Ferguson and others. From a decree for plaintiff, defendants appeal. Reversed and remanded, with directions.

Appellee on August 27, 1908, sued the Ferguson Lumber Company and W. B. Ferguson in the Pulaski circuit court on his note to it, and attached lots 3, 4, 5, 6, 7, and 8, block 4, Marshall & Wolf's addition to Little Rock, Ark., charged to have been fraudulently transferred by him to his daughter, Mary Louise Ferguson. The case was transferred to equity, and consolidated with one brought in that court by appellee against W. B. Ferguson, Mary E. Ferguson, Mary L. Ferguson, Chas. E. Ferguson, as trustee and individually, and others, all of whom were duly served with process, or answered, except Mary E. Ferguson, to set aside the conveyance of said lots by said W. B. Ferguson to his daughter Mary Louise Ferguson as fraudulent, and also certain mortgages therein claimed to be fraudulent, and long held from record and recorded in fraud of creditors. W. B. Ferguson answered, denying all the allegations of fraud, and alleged that the deed was executed to his daughter for a fair consideration, without fraud, and that the mortgages were recorded by his brother without his knowledge or consent, but that they were valid and given in good faith to secure the amount of money borrowed which was unpaid, as shown by them. C. E. Ferguson, as trustee and individually, answered admitting the filing of said mortgages for record on August 20, 1908, denied that it was done fraudulently, or as the tool of W. B. Ferguson, and says it was done without the knowledge or consent of the said W. B. Ferguson, and that only the one given to the trustees of his brother Walter covered the lots in this suit. Mary Louise Ferguson answered, denying all charges of fraud in purchasing said lots from her father, and alleged that the consideration was a deed from her to her father to a lot and improvements thereon of about equal value, which she inherited from her mother; denied her deed was withheld from record; stated it was acknowledged by her stepmother in Detroit, Mich., on August 17th, and filed for record soon thereafter; admitted she executed a mortgage for $10,000 on said lots to be expended in building four houses on same, as she had a right to do, and that she intended to buy lumber to build them from the Ferguson Lumber Company, and did put some on the ground therefor; that her father was acting for her in whatever she did in that regard, and that there was no collusion or fraud in the matter; that it was untrue that any mortgage in favor of her grandmother, Mary E. Ferguson, was filed for record on said lots; that a mortgage for $5,000 was executed on them by her father prior to his transfer of them to her, but that same was owned by her said grandmother, and was willed to her in part and was expected to be paid off by her father at any time.

The record in this case is voluminous, the testimony on the one hand showing the organization of corporations by W. B. Ferguson and increase and inflation of their capital stock on a large scale, with little actual capital, and for the purpose of securing credit and creditors unpaid, if not defrauded, and is replete with transactions showing the tortious course of said Ferguson, unscrupulous in securing his own individual interest and benefit, in disregard of the rights of some of his creditors, and not consistent with that honesty and fair dealing that the appellee had the right to expect of him; he, insisting that his actions were entirely in good faith, and compelled by the stress of circumstances caused by the panic and the refusal of appellee to extend him further credit, and its insistence upon the payment, or further security of the amount already due and owed to it, by his said corporation and himself. It is only necessary, however, in our review of the law of the case to set out such portions of the testimony as relate to the conveyance of the lots to the daughter and the considerations therefor, with the circumstances surrounding the transaction. Mary Louise Ferguson was his daughter by a former marriage and had been residing with his family. She came of age in 1907, and was at the time of the execution of the said deed staying with her grandmother in Detroit, Mich., attending school. She inherited the family homestead from her mother, to whom it had belonged, and which was of about the same value as the lots conveyed to her by her father in exchange therefor. She had not been at home with the family for more than a year, and was not expected to return in the summer of 1908. Disaster came upon the Ferguson corporations, caused, he states, by the panic and appellee's persistent insistence upon his paying the amount due it, and failure and bankruptcy was impending and inevitable. He sent his wife to Detroit with the deed to be executed by his daughter for the homestead upon which he lived, and also with the deed conveying the six lots in controversy in exchange therefor, already acknowledged by himself, together with a mortgage to be executed by Mary Louise Ferguson upon the lots which were conveyed to her by her father to secure the payment of a loan of $10,000 to her from the Citizens' Investment Company of Little Rock. Her statement of the transaction was as follows: "I live with my parents at 808 Battery Street, Little Rock; was 19 years of age in June, 1909; was with my father's mother in Detroit on August 1, 1908, and had been with her for two years; during that time I visited in Little Rock two months, June and July, 1907, and two weeks at Christmas. Was attending school there; came home during vacation. Father did not visit me in 1907, but did in May and September, 1908. In August or September those papers concerning the transfer of the homestead for the lots were presented to me. I haven't got them. They are in my father's keeping. I deeded them the homestead, and then my father deeded me the lots. Then I signed the mortgage on the lots, all at one time. Father sent them to me by my mother. I signed them at the officer of Jas. H. McDonald, the family counsel in Detroit. Mother told me exactly what the papers meant, and said I must decide for myself whether I wanted to make the exchange, just as father had written me. He said he thought that it would be better all around if he owned the homestead, and I the lots, because in that way I could get an income from the lots, and I could not from the homestead. Mother told me that, and said I could simply be exchanging the homestead for the eight lots. The letter was written just before she came. I destroyed it with my other letters in Detroit in December of that year; had no talk with father or mother before doing so. I read the deed I signed and handed it back to her. Mother sent the papers by mail for record; came back to Little Rock in June, and have been here ever since with father. He wrote me about building on the lots about the time he did about the deed, and mother explained that, to build on them, I could get an income to put me through school. At that time I had not seen father to talk with him about it, but did in September. The mortgage was for $10,000, and I think it was to be paid at a specified time, and do not remember how it was to be paid. Father was attending to that; didn't think much about how it was to be paid back; was going to school, and my mind was not on such subjects. I left that to my father." On cross-examination: "The lawyer went over the transaction thoroughly with me, explaining it and made me understand all before I signed, and my stepmother explained them to me. I suppose deeds have to be recorded and it had to be recorded in this county. The mortgage was sent at the same time. My father wrote me fully and mother explained it more fully when she came. I intend to go to some other school, but my home is still with my father here. I destroyed all my letters in Detroit,...