IN THE SUPREME COURT OF MISSISSIPPI
NO. 1999-CA-01799-SCT
MEMPHIS HARDWOOD FLOORING COMPANY
v.
JAMIE SWANN DANIEL
DATE OF JUDGMENT: 09/30/1999
TRIAL JUDGE: HON. DONALD B. PATTERSON
COURT FROM WHICH APPEALED: UNION COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: LAWRENCE D. WADE
LESTER F. SUMNERS
ATTORNEYS FOR APPELLEE: THOMAS HENRY FREELAND, III
JAK McGEE SMITH
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED - 11/22/2000
MOTION FOR REHEARING FILED:
MANDATE ISSUED: 12/13/2000
BEFORE PITTMAN, P.J., MILLS AND WALLER, JJ.
MILLS, JUSTICE, FOR THE COURT:
STATEMENT OF THE CASE
¶1. On January 26, 1996, the Union County Chancery Court issued a temporary restraining order against
Northern Hardwood, Inc. (Northern); Lucky Easley, its vice-president and secretary; and Memphis
Hardwood Flooring Company (Memphis) to stop the cutting and removal of timber from the property of
Jamie Swann Daniel. This T.R.O. was subsequently dissolved, and a motion for preliminary injunction was
denied; however, upon reconsideration, the chancellor granted the preliminary injunction. In addition to the
injunction, Daniel initially sued to set aside for fraud a November 1995 timber deed from Daniel to
Northern and one from Northern to Memphis and for statutory damages for the cutting of her timber
without her consent. Memphis cross-claimed against Northern, Easley, and William Heppler, Northern's
president, for breach of warranty of its timber deed and indemnity for any sums awarded Daniel.
¶2. On January 30, 1997, Northern, Easley, and Heppler were indicted by a Union County grand jury for
the alleged embezzlement of $133,347.40 from Daniel. Daniel subsequently amended her complaint, adding
a claim against Heppler, Easley, and Northern for actual and punitive damages for breach of her May 1994
timber contract with Northern. Easley filed for bankruptcy, and the proceedings were stayed as to him.
¶3. Following a trial, the chancellor ultimately found that Memphis, Northern, and Heppler had committed
fraud in the procurement of the November 1995 timber deeds from Daniel and that she was entitled to
cancellation of both timber deeds. For Memphis, Northern, and Heppler's wrongdoings surrounding these
November 1995 timber deeds, Daniel was awarded statutory damages as provided in Miss. Code Ann.
§ 95-5-10(1) (1994) in the amount of $573,906.42; attorneys' fees in the amount of $118,885.46; expert
witness fees in the amount of $21,325; reforestation costs in the amount of $25,000; damages for injuries to
her land in the amount of $71,100; and interest at 6% per annum from the date of judgment. Thus, the
award to Daniel for her claim surrounding the November 1995 timber deeds totaled $810,216.88. The
preliminary injunction was made permanent, and Memphis' cross-claim was dismissed with prejudice.
¶4. Judgment was entered May 3, 1999. Heppler and Easley entered into a non-adjudication agreement
with the State of Mississippi on the criminal charges brought against them dealing with these proceedings.
They pled guilty to the crime of embezzlement and agreed to make restitution in the amount of $250,000 to
Daniel for damages related to the May 1994 timber deed. Daniel then settled with Heppler, Easley, and
Northern. The parties agreed that if the restitution order as to the May 1994 timber deed is satisfied,
payment of the additional sum of $100 will release Heppler, Easley, and Northern from any obligations as
to the November 1995 timber deeds. An amended judgment reflecting this agreement and correcting an
error in calculations was entered on September 30, 1999. Memphis timely perfected this appeal.
STATEMENT OF FACTS
¶5. Jamie Swann Daniel, a retired schoolteacher who was eighty-five years old at the time of the trial of this
case, owns approximately 800 acres in Union County. The land is divided by Wilhite Creek into a north
tract and a south tract. She lives on the north tract. The tract immediately south of Wilhite Creek, where her
best timber was found, contains about 243 acres. A third tract, known as "Darling Crossroads," lies about
six miles south of the south tract and contains approximately 140 acres. A large part of this land, particularly
the 243 acres and Darling Crossroads, was in timber.
¶6. A January 1994 ice storm in North Mississippi damaged some of Daniel's timber. After the ice storm,
Lucky Easley contacted Daniel about cutting her timber. He and William Heppler made a video tape of the
damaged timber on the 243 acres south of Wilhite Creek, showed the tape to Daniel, and convinced her to
allow some cutting of the storm-damaged timber. Easley and Daniel reached an unrecorded written
agreement on May 19, 1994, allowing Northern to cut the "disaster hardwood timber" on the 243 acres
which was 20 inches in diameter and up. Eventually this agreement was verbally extended to include the
same width of trees on the Darling Crossroads tract. Regarding that part of the litigation surrounding the
May 1994 contract the chancellor found:
In summary the evidence is overwhelming that (1) Northern sold $498,905 worth of timber cut from
plaintiff's property under its May 19, 1994 contract; (2) plaintiff's 60% share was $299,343; (3)
Heppler and Northern paid plaintiff $134,000; (4) $165,343 that belonged to plaintiff was wrongfully
and fraudulently appropriated and converted by Easley, Heppler, and Northern.
As mentioned above, Daniel ultimately settled with Northern, Easley, and Heppler as to their liability on this
May 1994 timber contract. That settlement provided for satisfaction of Daniel's claim against all parties but
Memphis regarding the November 1995 timber deeds.
Negotiations Surrounding the November 13, 1995, Timber Deeds
¶7. Sometime before November 1995 Easley approached Daniel about cutting more of her timber. Daniel
agreed to the cutting of the timber remaining on the south tract and Darling Crossroads. This is the area
which had previously been cut down to 20 inches. Daniel now agreed to have it cut down to 16 inches.
Easley testified that Daniel told him to cruise the entire 800-acre farm. Daniel's testimony was that Easley
was not to cruise any timber north of Wilhite Creek except twenty acres which she intended to sell to a
neighbor but did not intend to cut.
¶8. Rome Yarbrough and Robert Luther were Memphis' timber buyers at its Potts Camp mill and the
agents who dealt with Easley regarding the timber purchases in question. Easley, Luther, and Yarbrough
met on Daniel's land in late October or early November 1995. Memphis contends that Easley told
Yarbrough that he had bought all of Daniel's timber and had a deed to it. To the contrary, Easley claimed he
only told them that he had an agreement but "didn't have anything on paper." Luther's testimony supports
Easley's assertion by acknowledging Luther's awareness that "[Easley] didn't have it bought."
¶9. Contrary to the chancellor's findings, Memphis denies that Luther and Easley agreed that Easley would
act for both Northern and Memphis to buy Daniel's timber for Northern while concealing from Daniel that
Northern was actually buying for Memphis.
¶10. Luther volunteered the following testimony in his deposition and acknowledged in his trial testimony
that he had so testified:
Q: In other words, you wanted to get together with Mr. Easley, and between the two of you, you
hoped you could buy her timber?
A: Well that's right.
Q: Mr. Easley was making the deal for you and for Memphis Hardwood.
A: Right.
Q: You didn't tell him you wanted to buy all of the timber.
A: Well, I told him I wanted to buy a whole tract of timber that she owned.
Q: That's all of the timber.
A: Down to a stump size and merchantable pine.
Q: Down to a stump size of 16 inches.
A: And merchantable pine.
***
Q: I'm asking you what you and Mr. Easley agreed on and y'all agreed he was going out and buy the
timber in the name of Northern Hardwood and what was your answer?
A: Yep.
Q: Next question: Not Memphis Hardwood?
A: That's right.
Q: Question: and the whole idea was she would think she was selling the timber to Memphis
Hardwood-I'm sorry, I mean to Northern Hardwood not Memphis Hardwood; that was the whole
idea and your answer?
A: Yep.
¶11. Easley testified in deposition that he told Luther the title had to first go from Daniel to Northern and
then from Northern to Memphis.
Q: And Mr. Luther was asked this question, the whole idea was she would think she was selling the
timber to Northern Hardwood, and he responded that was the idea. Was that your idea too, she was
to think she was selling this timber to Northern Hardwood?
A: No.
Q: She wasn't to think that?
A: She did. . .
Q: Who?
A: She did sell it to Northern Hardwood.
Q: Right. And that's what you wanted her to think she was doing. That's why you had the deed made
out that way, correct?
A: Yes. Yes. Yes.
¶12. After Luther and another Memphis employee cruised the timber on all of Daniel's land, Luther offered
Easley $400,000 for the timber. Easley countered with $410,000, and Luther accepted. Easley testified
that when Luther agreed to pay $410,000 for Daniel's timber, Daniel had already agreed to sell it to Easley
for $150,000. Easley admitted he told Daniel nothing about the fact he was going to sell the timber to
Memphis that very same day for more than double what he was paying her.
Execution of the November 13, 1995, Timber Deeds
¶13. The deed conveyed, against Daniel's instructions, the timber down to a stump size of 16 inches on all
of her land as opposed to only that land south of Wilhite Creek. In addition to conveying more timber than
Daniel intended, the deed failed to include a non-assignment clause. Though she signed the deed without
reading it, Daniel testified that she would not have done so had she known that there was not a provision
preventing assignment. Daniel drove to Baldwyn to have the deed notarized, returned to her home where
Easley was waiting, and gave the signed deed to him. Easley traveled to Memphis' Potts Camp office where
he signed the second deed and gave both deeds to an employee. He was given two checks: one to
Northern for $400,000 and one to himself for $10,000.
¶14. Memphis sold Stan Wilson, a timber buyer specializing in white oak who was familiar with the Daniel
timber, $41,511 of veneer logs on December 29, 1995, and began cutting Daniel's other timber the first
week of January 1996. The cutting continued until the preliminary injunction was granted on April 1, 1996.
¶15. Memphis asserts that prior to the November 13, 1995, timber deeds, which are the primary subjects
of this appeal, Daniel agreed to sell all of her timber to Northern. This contention is based on a series of
contracts between Northern and Wilson. In the last of these contracts, Northern sold to Wilson additional
timber off Daniel's property south of Wilhite Creek. Memphis alleges that on this contract is evidence that at
the time of the agreement (March 1995) Northern had contracted to buy the timber on Daniel's entire 800-
acre property. The second paragraph of this document states, "Plus all veneer w.o. [white oak] starting fall
1995 on bal. of property of Ms. Jamie Daniel. Price to be arrived to this fall in case of marked change."
Memphis asserts that "bal." refers to the balance of Daniel's 800 acres, not just the balance of the three
tracts which had been previously cut.
¶16. Further, Memphis asserts that in a document dated October 3, 1995, Daniel agreed to sell Easley the
timber on her entire 800-acre farm. Daniel denies signing the document in question which was offered into
evidence by Northern. A document expert testified that the signature and initials on this copy matched the
exemplars written by Daniel. However, the expert also testified that for various reasons, including that this
was a multi-generation Xerox copy, he could not say that Daniel actually signed the document; nor could he
say that her signature was not traced. The court ruled that the exhibit was admissible on behalf of Memphis.
The court noted, however, that in any event, this exhibit was obviously not the final agreement since it called
for a percentage payment, whereas the agreement reached by Easley and Daniel was for a lump sum
payment of $150,000. Thus, assuming arguendo the instrument is authentic, it is not the instrument Memphis
seeks to enforce here. Rather, those instruments are the November 13, 1995, timber deeds.
¶17. The chancellor found a confidential relationship existed between Easley and Daniel; that Easley thus
owed fiduciary duties to Daniel with reference to the timber deeds; and that Easley was guilty of fraud, even
if there was no confidential relationship. The court further found that the consideration of $150,000 which
Easley paid Daniel for her timber was grossly inadequate and in and of itself proof of fraudulent intent. The
chancellor also found that Memphis participated in the perpetration of frauds on Daniel and is equally guilty
of defrauding her. In so holding the chancellor stated, "Memphis' claim that it was not astride the horse of
fraud may be so, but the evidence is clear that its left foot was in the stirrup, and that's sufficient to destroy
its claim of innocent purchaser without notice." He determined that Daniel was entitled to a cancellation of
both the deed from Daniel to Northern and the deed from Northern to Memphis. Judgment was entered,
and Memphis timely perfected this appeal, assigning the following points of error:
I. THE CHANCELLOR ERRED IN AWARDING DOUBLE DAMAGES UNDER § 95-5-
10 OF THE MISS. CODE ANN. WHERE PLAINTIFF CONSENTED TO SELL THE
TIMBER IN QUESTION BY THE EXECUTION OF A TIMBER DEED AND APPLYING
§ 95-5-10 TO THOSE TREES HARVESTED BY MEMPHIS HARDWOOD WHICH
PLAINTIFF ADMITTED SHE INTENDED TO SELL LOCATED ON HER LANDS
SOUTH OF WILHITE CREEK.
II. THE CHANCELLOR ERRED IN FINDING MEMPHIS HARDWOOD WAS NOT A
BONA FIDE PURCHASER FOR VALUE, AND THE JUDGMENT OF THE COURT IS
CONTRARY TO THE OVERWHELMING WEIGHT OF THE CREDIBLE EVIDENCE.
III. THE CHANCELLOR ERRED IN FINDING THAT MEMPHIS HARDWOOD AND
NORTHERN HARDWOOD, INC., WERE INVOLVED IN A JOINT VENTURE
JUSTIFYING THE DISMISSAL OF MEMPHIS HARDWOOD'S CROSS-CLAIM.
STANDARD OF REVIEW
¶18. The findings of a chancellor will not be disturbed or set aside on appeal unless the decision of the trial
court is manifestly wrong and not supported by substantial credible evidence or unless an erroneous legal
standard was applied. Carrow v. Carrow, 741 So. 2d 200, 202 (Miss.1999). Where there is substantial
evidence to support the chancellor's findings, this Court is without the authority to disturb his conclusions,
although this Court might have found otherwise as an original matter. Dew v. Langford, 666 So. 2d 739,
742 (Miss. 1995) (citing In re Estate of Harris, 539 So. 2d 1040, 1043 (Miss. 1989)).
ANALYSIS
I. THE CHANCELLOR ERRED IN AWARDING DOUBLE DAMAGES UNDER § 95-5-
10 OF THE MISS. CODE ANN. WHERE PLAINTIFF CONSENTED TO SELL THE
TIMBER IN QUESTION BY THE EXECUTION OF A TIMBER DEED AND IN
APPLYING § 95-5-10 TO THOSE TREES HARVESTED BY MEMPHIS HARDWOOD
WHICH PLAINTIFF ADMITTED SHE INTENDED TO SELL LOCATED ON HER
LANDS SOUTH OF WILHITE CREEK.
¶19. Memphis contends that under the facts of this case § 95-5-10 does not apply. This section applies
only "if any person cuts, deadens, destroys, or takes away any tree without the consent of the owner. . . ."
Miss. Code Ann. § 95-5-10 (1994). Pointing to this language, Memphis asserts that it harvested Daniel's
timber under the properly-documented consent of the former timber owners. Daniel asserts that fraud in the
procurement of the timber deeds vitiates her consent and renders the deed voidable.
¶20. The chancellor found that both timber deeds were void as the result of fraud in their procurement. To
arrive at this result, the court found that Easley was acting as agent for both Northern and Memphis, that he
had developed a fiduciary relationship with Daniel, that he breached that relationship, and that Memphis
was equally guilty of fraud. The court further held that, even in the absence of a fiduciary relationship,
Easley committed fraud upon Daniel.
¶21. A fiduciary relationship may arise between parties to a contract where the parties share a mutual
interest in obtaining the results called for in the contract. Parker v. Lewis Grocer Co., 246 Miss. 873, 153
So. 2d 261, 276 (1963). Easley and Daniel's fiduciary relationship arose from the fact that both Northern
and Daniel had a mutual interest in the performance of the May 19, 1994, timber contract. This fiduciary
relationship did not end there, however. The evidence supports the chancellor's finding that Daniel had
placed trust in Easley, that she was well-satisfied with the manner in which her timber had been previously
harvested, and that she was not willing for any other timber to be cut except under Easley's supervision. Her
attitude and Easley's deception are summed up in their parting words on November 13, 1995, when she
told him he had done a good job in taking care of her land and trees and that she was expecting the same
under the new contract. Easley responded, "Yes, Mrs. Jamie, I'm going to do it." As noted by one
authority,
It is a well-settled principle of the law of fraud, applied particularly by courts of equitable jurisdiction,
that it is the duty of a person in whom confidence is reposed by virtue of the situation of trust arising
out of a confidential or fiduciary relationship to make a full disclosure of any and all material facts
within his knowledge relating to a contemplated transaction with the other party to such a relationship,
and any concealment or failure to disclose such facts is a fraud.
37 Am. Jur. 2d Fraud & Deceit § 149, at 205 (1968) (footnote omitted). Easley had a fiduciary duty to
disclose fully to Daniel the following: (1) that the November 13, 1995, deed included the timber on all her
land; (2) that once the deed was signed, Northern was free to convey the timber to any third party it chose;
(3) that he would have nothing to do with supervising the cutting of her timber; (4) that he already had
sealed a deal with Memphis and would convey the timber to Memphis that very day; and (5) that, although
he was paying her only $150,000 for the timber, he would receive $410,000 for it later that day. Easley
accomplished none of these requirements and, in failing to do so, breached the relationship and was guilty
of fraud. Further, he was guilty of fraud even in the absence of a fiduciary relationship because he
misrepresented that the deed was similar to the May 1994 agreement, which prohibited an assignment, and
because he misrepresented that he would supervise the cutting.
¶22. The fact that Daniel signed the contract without reading it is of no consequence under the facts of this
case. We held in Baggett v. Furst Corp., 357 So. 2d 321, 322-23 (Miss. 1978), that where grantors are
deceived into signing a conveyance without having read it due to the fraudulent representations of the agent
for the grantee as to the contents and effect of the instrument, the conveyance may be canceled by the
grantor.
¶23. Memphis argues that the parol evidence rule prohibits Daniel from testifying to what Easley told her
regarding the timber deed because such testimony is contrary to the deed's language. This argument is
misplaced. In Brown v. Ohman, 42 So. 2d 209, 213 (Miss. 1949), we found that there is an exception to
the parol evidence rule in actions alleging fraud and deceit. We distinguished two situations in which fraud
may arise in the procurement of a contract and held that parol evidence is admissible to prove either
instance. Id. at 212. We stated:
Actions for the recovery of damages for fraud and deceit are usually based upon misrepresentations
which amount to fraud in inducing a party to enter into a contract as contrasted with fraud in procuring
a signature to and thereby completing the execution of the contract, and the law is well-settled that
parol evidence is admissible to prove fraud and misrepresentations in either instance.
Id.
¶24. The record in the present case supports the finding that Daniel was the victim of both instances of
fraud. Easley induced Daniel to enter into the contract by misrepresenting to her that she was selling to
Northern. He admitted that he told her nothing about the fact that he was going to sell the timber to
Memphis the same day for more than double what he was paying her. Easley knew of Daniel's wishes
regarding her property, her timber, the cutting, and the deed. He knew she wanted no assignment. He knew
she did not intend to cut any timber north of Wilhite Creek. He disregarded her intentions and
misrepresented that he had honored them. To procure a signature from Daniel, Easley presented her with
the document folded over to its back page where she was to sign. She testified that he hurried her through
this process and told her that the document was similar to the May 1994 agreement with which she had
been pleased. Daniel had been dealing with Easley since late February 1994. She testified that he had taken
care of her property and that she was satisfied with the previous cutting. She told him, "I'm expecting the
same thing out of you this time," to which he replied, "Yes, Ms. Jamie, I'm going to do you a good job."
¶25. Also supported by the record is the chancellor's finding that the defrauding of Daniel was a combined
effort of Northern, Easley, and Memphis. In Woodruff v. Bates, 210 Miss. 894, 904, 50 So. 2d 559, 563
(1951), Wanete Oil Company and Nathan Kalvin agreed to combine efforts to obtain a mineral interest in
certain property through the activities of Wanete's agent, Woodruff. Woodruff subsequently defrauded the
grantors of the interests involved. Id. at 903, 50 So. 2d at 562. We held that Woodruff acted for both
Wanete and Kalvin and, therefore, affirmed the chancellor's decree against both parties, even though Kalvin
contended to be an innocent purchaser for value without notice. Id. at 904, 50 So. 2d at 563.
¶26. In the case sub judice the record reveals that Memphis agreed specifically that Easley would act in its
behalf in representing to Daniel that Northern was the ultimate purchaser of her timber, though in truth the
purpose of the scheme was to acquire the timber for Memphis. Thus, Easley became the joint agent-the
"Woodruff"-for Northern and Memphis. Further, because Memphis agreed specifically that Easley would
act in its behalf, an even stronger case exists against Memphis than was present against Kalvin in Woodruff.
In Woodruff, Kalvin's role was entirely passive in that he had no involvement with the agent's procurement
of the deed from the grantors. The fraud found there could, thus, be characterized as "constructive fraud."
See, e.g., Tyson v. Moore, 613 So. 2d 817, 823 (Miss. 1992).
¶27. The record in the present case, however, supports a finding of fraud in fact. Luther's and Easley's
testimony reveals that Memphis agreed to allow Easley to act in its behalf in acquiring Daniel's timber by
whatever means necessary. Luther testified as follows:
Q: Mr. Luther, did you place any restrictions on Mr. Easley as to what representations he could make
to Mrs. Daniel?
A: No, sir, it was his deal.
Q: Anything he wanted to say to her was okay with you; is that true?
A: I guess so. I mean, I don't know.
Q: Well, let's be sure now. Do you have any question in your mind about that, that whatever he said
to her would be okay with you? Do you have any question in your mind about that now?
A: No.
When Yarbrough and Luther met Easley on Daniel's land prior to the purchase, Easley did not show them a
deed or any other written agreement evidencing that he or Northern owned Daniel's timber. They were
instructed of the necessity that there be two deeds-one from Daniel to Northern and one from Northern to
Memphis. Further, Memphis provided for the drafting of these documents which were used to perpetrate
the fraudulent scheme. Both deeds were drawn by Memphis' attorney, and Memphis paid for the drafting.
Clearly, Memphis had constructive notice, but more likely Memphis had actual notice of the intended fraud
and agreed to participate in that fraud.
¶28. Furthermore, the purchase price of $150,000 strongly supports Daniel's contention that she did not
intend to sell all of her timber but was defrauded into doing so. We find that the vast gap between $150,
000 and $410,000 shocks the conscience under these facts and could stand alone as evidence of bad faith
and fraudulent dealing. Memphis denies prior knowledge of the amount Easley paid Daniel. This fact is of
no relevance, however, in light of Luther's testimony revealing Easley's authority to act as Memphis' agent
and Memphis' agreement that Easley acquire Daniel's timber by any means necessary.
¶29. Daniel is correct in her assertion that fraud in the procurement of the deeds vitiates her consent and
renders the deeds voidable. See, e.g., Mullins v. Merchandise Sales Co., 192 So. 2d 700, 704 (Miss.
1966) ("[F]raud vitiates everything tainted by it."). The chancellor's decision to cancel the deeds is
supported by substantial evidence and is manifestly correct. Therefore, § 95-5-10 is appropriately applied,
and double damages are in order.
¶30. The second part to this assignment of error is without merit. Memphis argues that it is error to apply
§ 95-5-10 to those trees harvested by Memphis which Daniel admitted she intended to sell located on her
lands south of Wilhite Creek. Daniel did, in fact, intend to sell some of her timber. However, the fraud
committed on her vitiated both her knowing consent to sell the south tract timber as well as her unknowing
consent, through the timber deed, to sell all of her timber. The deeds are void. Her consent is gone.
II. THE CHANCELLOR ERRED IN FINDING MEMPHIS HARDWOOD WAS NOT A
BONA FIDE PURCHASER FOR VALUE, AND THE JUDGMENT OF THE COURT IS
CONTRARY TO THE OVERWHELMING WEIGHT OF THE CREDIBLE EVIDENCE.
¶31. Memphis claims that it was a bona fide purchaser for value because it paid a valuable consideration for
timber in good faith and in the absence of any notice of Easley's fraudulent acts. To the contrary, the
chancellor determined that Memphis did not act in good faith and charged it with notice of the plan to
defraud Daniel. This finding is supported by substantial evidence and is, therefore, upheld by this Court.
¶32. Memphis' plea that it was a bona fide purchaser for value without notice constitutes an affirmative
defense and must be sustained by competent proof. Woodruff, 50 So. 2d at 563. The elements the
innocent purchaser must prove are a valuable consideration, the presence of good faith, and the absence of
notice. Mayes v. Thompson, 128 Miss. 561, 91 So. 275, 276 (1922). The record supports the
chancellor's finding that Memphis failed to establish its bona fide purchaser status.
¶33. The first element is established in favor of Memphis. The record reveals that Memphis paid $410,000
to Northern for the timber.
¶34. The second element, the presence of good faith, was not adequately shown by Memphis. The fact that
Easley made the deal with Daniel on behalf of both Northern and Memphis and that Memphis was a
knowing participant in this scheme is supported by the testimony of Luther and Easley. Such actions reveal
the absence of good faith. Even the circumstances surrounding the drafting of the deeds indicate the joint
nature of the scheme and Memphis' lack of good faith. Luther, at the request of Easley, had Memphis'
lawyer draft Northern's deed as well as Memphis'. Memphis paid for the drafting of the deed from Daniel
to Northern. The closeness in time of the two transactions is a further indication of bad faith.
¶35. The third element is the absence of notice. Constructive notice of the intended fraud suffices. See, e.g.,
Crawford v. Brown, 215 Miss. 489, 503-04, 61 So. 2d 344, 350 (1952) (holding that whatever fairly
places a person on inquiry is sufficient notice, where the means of knowledge are at hand, and one who fails
to inquire is then chargeable with all the facts which, by proper inquiry, he might have ascertained); First
Nat'l Bank v. Johnson, 177 Miss. 634, 171 So. 11, 14 (1936) (holding same). Even so, in the case sub
judice, Memphis was not only on actual notice, it was a knowing and willing participant in the defrauding of
Daniel. Thus, Memphis fails to establish the third element. The record supports the chancellor's finding that
Memphis was not a bona fide purchaser.
¶36. Under this assignment of error, Memphis chooses to address the case of Gray v. Baker, 485 So. 2d
306 (Miss. 1986). There we held:
Where a vendor would not have made a conveyance of land had he known of a prior agreement by
the vendee to convey to another the vendor found objectionable, that vendor is entitled to a judicial
recision [sic] of the instrument of conveyance. . . . The vendor's rights in his property extend to the
right to refuse to sell to such third party for good reason, for bad reason or for no reason at all-so
long as he does not act for some legally impermissible reason. . . .
Id. at 308. Memphis contends that if neither Easley, Northern, or Memphis had knowledge that Memphis
was an unacceptable or "obnoxious" buyer to Daniel, the rule in Gray has no application. Gray held, "What
may render that sale voidable is the original purchaser's act of deceit, his failure to disclose to the original
seller plans that the property or part thereof will be ultimately conveyed to the obnoxious third party." Id. at
308. Memphis asserts that the actionable deceit lies in the initial buyer's knowledge of the obnoxiousness of
the subsequent buyer. Nowhere in Gray did this Court state that proposition; nor, would there be any
consequence in the present case if we had done so. The record reveals that Easley was aware that Daniel
did not want the timber deed transferred. Daniel testified as follows:
A: Mr. Easley knew that he wasn't to be a middleman. When I sold, I thought it was thoroughly
understood that he would work the timber himself.
Q: All right.
A: And as he went out the door when he left with the contract that day and didn't leave me the
contract, I said, "Lucky, you've done me a good job in taking care of my roads, my land, and my
trees. Now I'm expecting the same thing out of you this time." "Yes, Ms. Jamie, I'm going to do you a
good job."
Easley revealed in his deposition testimony that he and Luther, Memphis' agent, had knowledge that
Memphis was unacceptable to Daniel. He admitted that he told Luther the title had to first go from Daniel to
Northern and then from Northern to Memphis.
¶37. Thus, contrary to Memphis' assertion, Gray ultimately stands in favor of Daniel. Evidence is found
throughout the record that Easley, Northern, and Memphis knowingly practiced deception on Daniel.
Memphis has failed to show its bona fide purchaser status. Further, Memphis fails to escape the
consequences of the rule in Gray. Therefore, this assignment of error is without merit.
III. THE CHANCELLOR ERRED IN FINDING THAT MEMPHIS HARDWOOD AND
NORTHERN HARDWOOD, INC., WERE INVOLVED IN A JOINT VENTURE
JUSTIFYING THE DISMISSAL OF MEMPHIS HARDWOOD'S CROSS-CLAIM.
¶38. The chancellor ruled that because Northern and Memphis were in pari delicto in this matter, Memphis'
cross-claim against Northern and Easley was without merit. This finding is not manifestly wrong or clearly
erroneous. It is supported by substantial credible evidence and is upheld by this Court.
¶39. The joint nature of this venture between Northern and Memphis and Memphis' liability for the fraud
committed upon Daniel have been discussed above and will not be re-addressed here. The chancellor
appropriately dismissed the cross-claim. This assignment of error is without merit.
CONCLUSION
¶40. The chancellor's findings are neither manifestly wrong nor clearly erroneous. They are supported by
substantial evidence. For the foregoing reasons, the judgment of the Chancery Court of Union County is
affirmed.
¶41. AFFIRMED.
PRATHER, C.J., PITTMAN AND BANKS., P.JJ., McRAE, SMITH, WALLER AND
COBB, JJ., CONCUR. DIAZ, J., NOT PARTICIPATING.