Robley v. Withers

Smith, J., delivered the opinion of the court. On October 31, 1899, Austin Miller, who was the then owner of the land in controversy, being indebted to the Memphis Trust Company in an amount in excess of $25,000, and desiring to secure the payment of same, executed and delivered to O. B. Polk, Jerome Hill, and T. B. Turley a deed to said land for the consideration of $25,000, evidenced by their two promissory notes, of $12,500 each, payable at one and two' years from date, respectively. It was understood and agreed that these notes332 were to be indorsed and delivered to the Memphis Trust Company, and they were accordingly so indorsed and delivered. By a separate agreement the grantees in this deed agreed to reconvey the property to Miller upon the payment by him of the sum of $25,000 within two years. This arrangement, although in this form, was understood by all parties to bé a mortgage, securing the sum of $25,000 to the Memphis Trust Company. At the time of this conveyance this property was occupied by W. Q. Robley, who had leased same from Miller. On January 15th Miller sold and conveyed same to said Robley for the sum of $32,700, of which $2,700 was alleged to have been paid in cash and the balance was evidenced by Robley’s six notes, for $5,000 ■each, due one, two, three, four, five,, and six years after date, respectively. Miller, at the time of conveying to Robley, acquainted him with the facts attending his conveyance to Polk and others, and promised to secure a quitclaim deed from them, and to substitute Robley’s six $5,000' notes held by the Memphis Trust Company. This deed was recorded on January 17, 1900. Robley thereupon executed a deed of trust conveying said land to Calvin Perkins, trustee, to secure the payment of the notes and this deed of trust, and the notes thereby secured were by Miller delivered to the Memphis Trust Company, and this company afterward placed this deed of trust on record. As other ■creditors of Miller were pressing him, and fearing that bankruptcy proceedings would be instituted, thereby endangering its security, Miller, at the suggestion of the Memphis Trust Company, borrowed from the First National Bank of Memphis the sum of $12,000, attempting to secure the same by a deed of trust on the land in controversy. This deed of trust was executed on the 27th day of January, 1900, and duly recorded. Robley had no notice of the execution of this deed of trust, or that Miller had borrowed this money from the bank. The payment of this debt was also guaranteed to the First National Bank by the Memphis Trust Company. Nine thousand dollars of this money was used in the payment of debts due by Miller [333] .to various parties, and the remaining $3,000 was paid to the First National Bank, and by it credited on Miller’s note, which note was afterwards purchased from the bank by the Memphis Trust Company. On August 3, 1900, Polk and others, to.whom Miller had conveyed the land, executed a deed conveying the same to John T. Fargason and John H. Watkins. This deed recited that the lands were held by the grantors to secure the $25,000 debt of the Memphis Trust Company evidenced by the two notes of $12,500 each, and conveyed the lands to Fargason and Watkins as trustees, to be by them held, conveyed, and disposed of as the trust company might direct. This conveyance was not recorded until June 3, 1903, nearly three years after its date, and after the foreclosure of the Miller ’deed of trust as hereinafter set out. Fargason was president and Watkins vice president and general manager of the Memphis Trust Company. Miller having failed to obtain the quitclaim deed from Polk and others, Eobley several times endeavored to obtain from the Memphis Trust Company either this quitclaim deed or the return of his notes from the Memphis Trust Company, which knew of his agreement with Miller. The trust company declined to do either, stating, through its attorney, that it had not' yet decided what course it would pursue in the matter. In November, 1900, just prior to his death, Bobley put the property in the hands of a real estate agent for sale, but no sale was effected. Later in the same month, November, 1900, Bobley died" in posession of the land, leaving in addition thereto a small personal estate. During the course of the administration of Bobley’s. estate, the attorney representing Mrs. Mabel Virginia Bobley,. his administratix, stated to the Memphis Trust Company that-if any attempt was made to collect these notes their payment would be resisted, and thereupon the company agreed to, and did not, probate said notes. After the death.of Bobley the trust company rented the land to S'. A. Withers, one of the appellees herein. Calvin Perkins, the original trustee in the Bobley deed [334] ■of trust, 'having declined to act, J. O. Adams, an employe of the Memphis Trust Company, was by this company appointed as substituted trustee, who, at the request of said company, advertised the land for sale on November 30, 1901, under said trust ■deed. On the 4th day of November this company agreed in writing with appellee Withers that, if it became the purchaser ■of this land at the foreclosure sale, it would convey same to Withers at and for the sum of $27,500, $2,500 to be in cash, and the remainder to be paid in annual installments of $2,500 ■each, each installment to bear interest at the rate of 6 per cent, per annum. At the sale the trust company became the purchaser thereof, at and for the sum of $15,000, and thereafter executed a deed to Withers pursuant to its1 said contract. At this sale the attorney for the Memphis Trust Company caused the trustee “to give notice that the title made under the sale then being made would be free of any prior claims of the Memphis Trust Company.”- After the sale by Adams, under the Robley deed of trust, the Memphis Trust Company caused the land to be sold under the deed of trust giveñ by Robley to the First National Bank, and it (the trust company) became the purchaser of the land. On April 18, 1905, a bill was filed in the court below by appellants, the heirs of W. Q. Robley, deceased, against the appellees, seeking the- cancellation of the -deed from J. O. Adams, trustee, and an accounting. From a ■decree dismissing this bill this appeal is taken. It is sought to uphold the decree of the chancellor on four grounds: First, because the deed from Miller to Robley was a part of a fraudulent scheme entered into between Miller and Robley to hinder, delay,' and defraud the creditors of Miller, ■and a court of equity will not aid in the enforcement of a fraudulent transaction; second, because the title derived under the ■deed of trust executed in favor of the First National Bank and the sale thereunder was a valid title-; third, because the sale under the Robley deed of trust was in any event a valid one; jfourth, because Withers, one of the appellees, is a botm fide pur [335] chaser of this property from the Memphis Trust Company, as against whom this court will, on this record, refuse bo intervene. There is no evidence which could be said to amount to proof that Robley’s purchase from Miller was not made in good faith. The evidence relied on to show the contrary is that, prior to the sale by Miller to Kobley, Miller requested one Kyle to permit him to convey the land to him (Kyle) in order to save it for his (Miller’s) wife, and that he (Kyle) would not have to pay for it; that Kyle suggested to Miller that he see Kobley, who would probably help him out of his trouble. All of this was unknown, or rather not shown to be known, to Kobley. After the purchase by Kobley, Mr. Norfleet, Robley’s commission merchant, asked him about the matter, and he (Kobley) told him (Nor-fleet) not to worry about it; that he had not bought the place, but that he had given the notes to help him (Miller) out of his financial difficulties, and that at the time of 'the purchase Robley had no money with Norfleet with which to pay the $2,500 recited in the deed to have been paid, and that Norfleet did not know of Robley’s having any money at the time with which to have made this payment; that Kobley was a man of moderate means, and was at the time indebted to Norfleet’s firm. This evidence falls far short of proof. As Kobley’s purchase antedated the deed of trust to the First National Bank, and as he knew nothing of it, and did not participate in any of the transactions leading up to its execution, his title was not affected thereby. The--Memphis Trust Company having by its conduct ratified the agreement made by Miller with Kobley, it became its duty to comply therewith. Its failure to do so, and the foreclosure of the deed of trust, under the circumstances, regardless of intent, could have but one result, and that was that the trust company would become the purchaser at practically its own price. This being true, it is useless to speculate upon whether the property would have brought more or less than the amount secured by the deed of trust, had this agreement been complied with. [336] The announcement at the sale, “that the title made under the sale then being made would be free of any prior claims of the Memphis Trust Company,” could not have changed this result. We cannot say that prospective bidders would be satisfied to act on this promise. And, moreover, it did not appear from the recorded deeds, of which all parties are presumed to have notice, that the trust company was in position to cany out this promise. In addition, any person examining the title prior to the sale, with the view of purchasing the property, would necessarily have arrived at the conclusion’ that no title would be obtained by the purchaser at the sale, and that consequently it would be useless to appear at the sale for the purpose of bidding on the land. But it is said that appellee Withers is a bona, fide purchaser without notice. .It is clear, however, from the evidence, particularly the recitals in the written contract between him and the trust company, and the statements made to him by Mrs. Robley, that Withers, at the time of his purchase, either had full knowledge of the true situation, or was in possession of such information and warning as charged him with the duty of investigating the matter, and the slightest investigation would have enabled him to have acquired full knolwedge. The decree of the court below is reversed, and the cause remanded.