Grayson v. Hughes

Hart, J., (after stating the facts). The chancellor found that the quitclaim deed from Maria Hughes, Charlie Hughes, and Ada Bell to Jim Hughes, executed on the 9th day of January, 1919, was for'the purpose of enabling him to pay off a mortgage which his father had given on the lands to secure an indebtedness which he owed to Lester & Haltom, in the sum of $1,286.41. After Sam A. Hughes died, in August, 1918, Lester & Haltom began to press his heirs for the payment of their mortgage indebtedness. In order to discharge this indebtedness, Jim Hughes was requested by his mother, brothers and sisters to take charge of his father’s affairs. He did so, and induced P. C. Grayson to take up the mortgage of Lester & Haltom. On the 9th day of January, 1919, the quitclaim deed from his mother and brother and sister was executed to him, and it recites that it is in consideration of the -balance due on the mortgage. All three of the grantors named in the deed testified that it was given by them to enable Jim Hughes to raise money with which to pay off the mortgage indebtedness. The husband of another sister testified that Jim Hughes told him that he had sold some mineral rights on the lands for $2,000, and had paid off the mortgage. Jim Hughes himself testified that he procured Grayson to sell the lands under the power of sale contained in the deed of trust, and became the purchaser at the sale in order to get the title in himself. This sale was after the quitclaim deed had been executed to him. Thus it will be seen that his own testimony shows that there was no intention to give him an absolute title to the lands when the quitclaim deed was executed to lfim by his mother, brother and sister. Mrs. Bell testified that he gave her a contract to convey the lands back to her after the mortgage indebtedness had been paid. The mother and brother testified that Jim Hughes promised them that they should have back their interest in the lands after the mortgage indebtedness was satisfied. It is true that Jim Hughes purchased the lands at the mortgage foreclosure sale, and received a deed to the lands from the trustee making the sale; but this was in violation of the terms of the trust, and conferred no greater title than he already possessed by virtue of the quitclaim deed. Under the evidence just recited, the chancellor was right in holding that Jim Hughes’ mother, brother and sister still retained their beneficial interest in the lands, and that he merely became a trustee for them under their agreement at the time the quitclaim deed was executed. Jim Hughes became the purchaser at the mortgage foreclosure sale on May 17,1919, for $1,500. He gave P. C. Grayson a mortgage on the lands to secure this sum. Before the period of redemption had expired he had sold some oil and gas rights in the lands for $2,000 and paid back the $1,500 which he had borrowed from Grayson. Thus it will be seen that, having carried out the terms of the trust by paying the mortgage indebtedness, Jim Hughes held the legal title to the interest of Maria Hughes, Charlie Hughes and Ada Bell in trust for them. Therefore he had no right to convey their interest in the lands to P. C. Grayson, and the latter should not acquire any greater rights under the deeds given to him by Jim Hughes, unless he is an innocent purchaser for value without notice of their equities. This brings us to a consideration of that question. It is strongly urged by counsel for Grayson that he is an innocent purchaser for value in all of said lands, both as to the oil and gas rights in all the lands, and 120 acres of the lands in question purchased by him from Jim Hughes. Both Mrs. Maria, Hughes and Jim Hughes lived on the lands' in question at the time of the execution of the quitclaim deed, and Maria Hughes has continued to live there since that time. To sustain the decree, counsel for appellees invoke the rule that one who purchases land in another’s possession takes with notice of the latter’s rights and equities, as held in Sproull v. Miles, 82 Ark. 455; Crawley v. Neal, 152 Ark. 323, and other decisions of this court. It will be noted that Mrs. Hughes, one of the grantors in the quitclaim deed, and Jim Hughes, ' the grantee therein, both lived on the lands at the time of the execution of the said deed. We do not deem it necessary to decide whether, under these circumstances, her continued possession of the lands would be notice of her equities to Grayson, who purchased from her son, Jim Hughes. We deem it sufficient to say on this point that her continued possession, under the circumstances, was a fact to be considered in determining whether or not Grayson was an innocent purchaser for value of the lands. Grayson admitted that he lived within two or three miles of the lands. He knew Sam A. Hughes in his lifetime, and he knew that Hughes had executed a mortgage on the lands to secure an indebtedness of $1,286.41 which he owed Lester & Haltom. He admits that he paid off the Lester & Haltom mortgage on February 1, 1919, and it appears from other testimony that the mortgage was transferred to him. Grayson also admitted that Jim Hughes asked him to pay off the Sam Hughes mortgage until he could see the heirs and get them to take the matter up. He testified further that he took up the Lester & Haltom mortgage, and that they (referring to the heirs of Sam Hughes, deceased) failed to raise the money with which to satisfy the mortgage. The fact that Jim Hughes asked him to pay the mortgage off until he could see the heirs tends to show that he recognized their interest in the lands as still existing. A short time after this Jim Hughes asked Grayson to foreclose the mortgage, so that he could buy the lands in at the sale and thereby get title to them. Grayson lived only two or three miles from the lands, and it is inferable that he knew that Mrs. Hughes continued to reside on the lands after the execution of the quitclaim deed. She and Jim Hughes lived in separate houses, and this tended to show that she was living there in her own right. To overcome Grayson’s plea of innocent purchaser, it was only necessary for appellees to show by a preponderance of the evidence that he had actual knowledge of their equities, or that he had notice of such facts and circumstances as would lead to knowledge by inquiries made by a man of ordinary intelligence. Krow & Neumann v. Bernard, 152 Ark. 99. It is next insisted that, in any event, the interest of Charlie Hughes and Ada Bell should be charged with their part of the value of the improvements made on the place by Jim Hughes, which amounted to $1,800. In the first place, it may be said that Jim Hughes makes no claim, in his answer, for the value of the improvements; and the testimony on this point was brought out in an incidental way. Jim Hughes was asked if he had not told Charlie Hughes and Ada Bell that they were to have back their interests in the lands, and answered, “Whenever I have made enough to pay off the debts of the estate. ’ ’ He was then asked if he did not get enough to pay the money back he had borrowed, and was further asked what expenses he was out. He answered that he built four houses and cleared forty or fifty acres. Further along in his testimony he stated, in a general way, that the cost of these improvements amounted to $1,800. He did not enter into any particular statement as to his reasons for building the houses and the cost of each one. He does hot state what value they would add to .the lands. In this connection it may be stated that he admitted that he was to let his brother and sister have their interests in the lands back when he paid off the debts. According to his own admission, he did not have the right to make these improvements under his agreement with them. His only right to the possession of the lands was to mortgage or otherwise incumber them for the purpose of paying off the mortgage indebtedness of his father. In this connection it may also be stated that he received $500 in excess of the amount borrowed to pay off the mortgage debt. Therefore we hold that no issue was made as to his recovery of the value of his improvements, and no error can be predicated upon the failure or refusal of the chancellor to allow them. It follows that the decree must be affirmed.