McNeil v. Gates

OPINION. The theory of the defendants that Gates continued to be the creditor of McNeil, after receiving from Meyer the-amount of his debt, is not readily comprehended and is besides totally irreconcilable with the facts proved. If it was true, then it would seem to follow- that Meyer has been lending money to Gates at an usurious rate of interest. For the constitution and laws in force when this transaction was had, unlike those under which Gates and McNeil contracted, avoid all contracts that are tainted by usury,, and the lender can recover neither principal nor interest. But we are satisfied that the transaction between Gates and Meyer is not a loan, but a sale of the debt due by McNeil. The full amount of principal and interest to that date was-paid. Gates made no note or other promise in writing to-refund. The papers were surrendered to Meyer, and he thenceforward received whatever McNeil had to pay, controlled the collection of the debt and conducted all negotiations relating thereto. On another point also the testimony is very persuasive. 'Meyer and not Gates bought the land at the trustee’s sale. It was Meyer who managed the whole affair, and employed counsel to conduct the sale. No moneys passed, and Gates ■very soon afterward quit-claimed to Meyer. And it was 'Meyer who made the agreement with McNeil for redemption. trustee: His dealmgs with trustpropof&imesf Now, the dealings of a trustee with the trust property , . . „ . _ J ■are narrowly scrutinized by courts of equity. If impugned, J J l j i. © 7 they cannot stand unless characterized by the utmost good ■faith and candor. And the burden is upon the trustee to -show their entire fairness. In particular, it is an inflexible rule in these courts that a trustee to sell for others cannot, •either directly or indirectly, purchase for his own bentit. In Adams’ Doctrine of Equity, 60, it is said : “ The most •obvious instance of the abuse of a fiduciary character is -where a trustee for sale or purchase attempts to buy from •or sell to himself. The permitting of such a transaction to •stand, however honest it might be in the particular case, would destroy all security for the conduct of the trustee. ” See also Sto. Eq. Jur., secs. 321—2; Lenox v. Notrebe, Hempstead’s Rep., 151; Brittin v. Hanly, 20 Ark., 381; Imboden v. Hunter 23 Ark,. 622. In such cases there is a conflict of duty and of interest. -As trustee it is his duty to sell for the highest price that •canbe obtained, while as purchaser his interest is to buy .as cheaply as possible. McNeil may set aside the sale of the trustee to himself, if he has not confinnedit with full knowledge of the facts. But it appears that he did acquiesce in the sale, stipulating •only for the privilege of redeeming. ^ Paroi f demption. Here again the decided preponderance of the testimony is that Meyer, on the day of sale and before, agreed that McNeil might redeem within twelve months upon payment •of a sum of money equal to that for which the land should .-sell and interest at the rate of 10 per cent, per annum. ^ objected that a parol agreement of this sort is void by the statute of frauds ; certainly it does not fall within, sixth clause of sec. 2951 of Gantt’s Digest, because* eyen agreement antedated the sale, it might have been performed within the year. Brown on Statute of Frauds, sec. 274, et seq. Nor is it entirely clear that it was such a contract for the sale of lands, or any interest in or concerning them, as is required by the fourth clause to be in writing. In Griffin v. Coffee, 9 B. Mon., 452, where land sold under execution was subject to redemption, for a limited time, the Court of Appeals of Kentucky decided that the time might be extended by parol contract without interfering with the statute. Waiving this question, the case falls within the principle of Trapnall v. Brown, 19 Ark., 39, that it would be a. fraud in a purchaser, who has obtained property at a price greatly below its value by means of a verbal agreement, to. keep the property in violation of the agreement. Reversed, and remanded with directions to the court below to enter up a decree that upon the payment into court of $346.70, with interest at 10 per cent, per annum from the third day of March, 1879, to the twentieth day of January* 1880, the plaintiff be permitted to redeem, and if the money is not paid in, to set aside the trustee’s sale and order a resale, the property to be set up at Meyer’s bid. The court, will make the necessary orders for setting aside deeds, re-conveyance or divesting title out of the defendants, and theappellees are to pay all costs of both courts.