Refurbished Archeus

Archeus is the sword of Morgan Ladimore, a soldier from Darkshire who fought for the Alliance in Lordaeron. After the death of Uther the Lightbringer, he returned to Darkshire to find his wife and two of his three children dead, and subsequently went mad, eventually killing a group of cemetery custodians who came to investigate. Committing suicide, Ladimore returned as the beast Mor'Ladim, haunting the cemetery of Raven Hill until he was destroyed by adventurers working on behalf of Darkshire. Delivering his daughter's ring to his grave outside of Raven Hill, Ladimore's spirit personally gives his sword to those who defeated him, hoping that they would use it as he had once done - in defense of all that was good and decent.

Source
This item is a quest reward from A Daughter's Love which starts with The Weathered Grave (quest) outside of Raven Hill Cemetery, north of the Forlorn Rowe in Duskwood.