Faulds v. Harper

Faulds v. Harper

The Supreme Court held the sale to Harper was in substance a purchase by and for the mortgagee in breach of fiduciary duty and therefore fraudulent and voidable in equity; because the fraud was concealed and plaintiffs (many of whom were infants) lacked knowledge and did not acquiesce, the statute of limitations did not bar their equitable suit to set aside the purchase and to redeem; plaintiffs were entitled to a lien on the mortgage given by Lane, while Lane as a bona fide purchaser without notice retained his purchase subject to that mortgage lien.

Citation
(1886) 11 SCR 639
Parties
Plaintiffs/appellants: Elijah Washington Faulds; William Martin Faulds; James Linda Faulds; Wesley Bell Faulds; Matilda Elizabeth Faulds; Defendants/respondents: Margaret Harper; Joseph Harper; James C. Lane
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
6 March 1886
Procedural Posture
Foreclosure and Redemption; Appeal / Appeal to the Supreme Court of Canada From the Court of Appeal for Ontario
Outcome
Appeal allowed; order of Court of Appeal reversed; decree of Divisional Court restored with modifications and declarations.
Legal Topics
Foreclosure and Sale, Purchase by Mortgagee Through Agent, Redemption, Breach of Trust, Concealed Fraud, Acquiescence and Laches, Bona Fide Purchaser Without Notice
Source Language
English
Property Law Equity Trusts and Fiduciary Duties Mortgages Statute of Limitations Foreclosure and Sale Purchase by Mortgagee Through Agent Redemption +4 more

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Parties

Elijah Washington Faulds; William Martin Faulds; James Linda Faulds; Wesley Bell Faulds; Matilda Elizabeth Faulds

Plaintiffs/appellants

Margaret Harper; Joseph Harper; James C. Lane

Defendants/respondents

Procedural Posture

Foreclosure and Redemption; Appeal / Appeal to the Supreme Court of Canada From the Court of Appeal for Ontario

Legal Issues

  1. 1 Whether a purchase at a foreclosure sale made by an ostensible purchaser as agent for the mortgagee can be set aside as a fraudulent trustee purchase
  2. 2 Whether the statute of limitations bars a suit in equity impeaching such a purchase
  3. 3 Whether possession held by defendants was possession as mortgagee sufficient to trigger limitation periods

Ratio Decidendi

The Supreme Court held the sale to Harper was in substance a purchase by and for the mortgagee in breach of fiduciary duty and therefore fraudulent and voidable in equity; because the fraud was concealed and plaintiffs (many of whom were infants) lacked knowledge and did not acquiesce, the statute of limitations did not bar their equitable suit to set aside the purchase and to redeem; plaintiffs were entitled to a lien on the mortgage given by Lane, while Lane as a bona fide purchaser without notice retained his purchase subject to that mortgage lien.

Court Disposition

Appeal allowed; order of Court of Appeal reversed; decree of Divisional Court restored with modifications and declarations.

Orders

  • Declare that purchase by Joseph Harper was in trust for and for the benefit of Andrew Faulds and was fraudulent and void in equity as against persons claiming under Andrew Faulds except James C. Lane
  • Declare James C. Lane a purchaser for valuable consideration without notice and entitled to retain his purchase subject to the mortgage mentioned in the pleadings