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ABRAHAM VENABLE AND GEORGE M'DONALD, APPELLANTS v. THE PRESIDENT

January 1, 1829

ABRAHAM VENABLE AND GEORGE M'DONALD, APPELLANTS
v.
THE PRESIDENT, DIRECTORS AND COMPANY OF THE BANK OF THE UNITED STATES, APPELLEES.



APPEAL from the circuit court of the United States for the district of Kentucky. The appellees, at the May term 1822 of the circuit court for the district of Kentucky, obtained a decree against Venable and others, for the sum of $4,700 with interest and costs; upon which execution was issued, and levied by the marshal upon 367 acres of land and sundry slaves and other property, named in the return, dated September 2, 1822, shown, as the marshal says, 'as the property of Abraham Venable, and not sold for the want of time.' On the 26th of November 1822, the appellees exhibited their bill, in which, after giving a history of their case, and stating the facts of the levy on the property of Venable as above; they charge, that on the 9th day of February 1822, the said Venable executed two several deeds, whereby he conveyed all the land, slaves and effects, which belonged to him to George M'Donald, who is made defendant: that 'the said deeds are fraudulent, intended to defraud the creditors of the said Venable, particularly the complainants, and were executed without any valuable or legal consideration passing between the parties, with that fraudulent purpose and intent,' &c. &c. The complainants pray that the said estate and property be decreed to be sold to discharge the debt aforesaid; for an injunction; and for general relief. The defendant, M'Donald, by his answer admits, that he claims the property as his own, by virtue of a contract, and the conveyances which are referred to; and also in virtue of a mortgage executed long anterior to the decree against Venable, by said Venable to him and George Norten; in order to indemnify them for their joint liability, as the security of Venable in two bonds, the one as the administrator of the estate of George Adams, and also as the security for said Venable as the guardian of the infant heirs of said Adams; states the probable extent of that liability; and denies all fraud or intention of fraud. The evidence and proceedings, and other matters in the case, are stated more at large in the opinion of the Court. The court below, by decree, declared the conveyance to M'Donald fraudulent and void, and directed the sale of the estate, under the execution; subject however to the mortgage executed by the defendant Venable to the defendant George M'Donald and George Norten, dated the 22d May 1820, which deed of mortgage is not in any manner to be affected by said decree. The defendants below prosecuted this appeal, and claimed to reverse the same on the ground: 1. That the court erred in the decree, in annulling the deeds of Abraham Venable to George M'Donald. 2. The court ought not to have directed a sale of the real and personal estate, conveyed by Abraham Venable to George M'Donald and George Norten, and in their possession; until the mortgage was satisfied, or the condition it contained was performed. 3. Want of parties. No decree should have been pronounced by which the interest of George Norten in the mortgaged premises could be affected, as he was not before the court. The case was argued for the appellants by Mr Wickliffe, and by Mr Sergeant for the appellees. Mr Wickliffe contended, that upon the evidence in the cause, it was manifest that the liabilities of M'Donald for Venable, were sufficiently great to authorise the transfer to him of the whole property conveyed by the deeds for his protection. The extent and effect of the mortgage could not be ascertained until the settlement of the accounts of Venable, as guardian of the children of Adams; and therefore, the amount of M'Donald's liabilities as the surety of the guardian, were undetermined and must remain so until that event. Guardians are appointed by the county courts of Kentucky, under the authority of the first section of the act of 1797, 1 Littell, 673; and the court are required 'to take good security of all guardians by them appointed.' The act of 1809, 4 Littell, 125, directs these bonds to be taken in the name of the commonwealth; and he contended that the responsibility of the security was beyond the penalty in the bond, and to the whole extent of the estate which might come into the hands of the guardian. By an action of 'covenant' on the obligation, the liability of the surety might be so extended; when, if 'debt' was brought the penalty in the bond would limit it. 2. If the decree of the court had gone no further than to vacate the deed alleged to be fraudulent, the proceeding might have been sustained. It was no matter who had the equity of redemption of the estate, but the possession of the estate was important, and this should not have been touched. A creditor may protect himself by the purchase of property, which he knows is about to be sold under an execution. 3. The decree of the court, if carried into effect, will take the possession of the estate from George Norten, who was not a party to the proceedings. Mr Sergeant, for the appellees, went into a full examination of the facts of the case as admitted by the appellant Venable; and shown, by the evidence, to establish fraud. He denied that, upon the evidence, the responsibilities of M'Donald exceeded the amount of the mortgage executed to him and Norten; and claimed, that by a reference to the accounts and documents exhibiting the amount of the estate which came, or could come into the hands of Venable as guardian of the children of Adams, it would manifestly appear that the protection of the surety was, under that mortgage, complete. No decision had been produced to show that the liability of the surety for a guardian goes beyond the penalty of the bond; and it is contrary to every principle of law, that such should be the fact. A careful examination of the acts of the assembly of Kentucky, will make it evident that such a liability does not exist. There was no obligation on the appellees to make George Norten a party. A mortgagor may convey the equity of redemption without consulting the mortgagee. In this case, the decree of the court directed a sale of the property, subject to the mortgage; and the rights of Norten were not affected by this proceeding. The whole purpose of the bill of the appellees was to set aside the conveyances to M'Donald, and the decree goes no further.

The opinion of the court was delivered by: Mr Justice Story delivered the opinion of the Court.

This is an appeal from a decree of the circuit court of the Kentucky district.

The Bank of the United States, at Lexington, Kentucky, on the 3d of July 1819, discounted a note of the same date for $4700, signed by one George Norten, payable sixty days after date, to one Daniel Halstead or order, and by him indorsed to Abraham Venable, and subsequently and severally indorsed by William Adams and Joshua Norten, and by the latter to the bank. The note was not paid at maturity, and due diligence having beer used to obtain the amount from the maker, according to the local law; a suit in equity was brought in the circuit court in November 1821, against all the indorsers (as is course by the local law), in which a decree for principal, interest and costs was rendered in May 1822. An execution issued upon this decree against the parties, upon which a tract of land of 200 acres, a tract of 113 acres, several negroes, and some other personal property of Venable, were levied on, but the same were not sold; the former for want of proper bidders, the latter on account of a claim set up to the same, by the defendant, George M'Donald.

The present bill, after stating these facts, charges that on the 9th of February 1822, Venable made two deeds to M'Donald, by which he conveyed the tracts of land and other property to M'Donald, and that the same deeds were colourable and fraudulent; and the prayer of the bill is that the deeds may be declared fraudulent, and the property may be decreed to be sold; and an injunction granted in the mean time, and for further relief.

The answers of the defendants, M'Donald and Venable, deny that the deeds of the 9th of February 1822, were colourable or fraudulent, and on the contrary, assert them to have been bona fide, and for a valuable consideration. The answer of M'Donald further sets up a mortgage executed by Venable on the 22d of May 1820, to him, M'Donald, and one George Norten, (who is not a party to the bill), of a tract of land of about 245 acres (part of the land in controversy), and of nine negroes (including those in controversy), to secure them against a bond executed by them as sureties, with Venable as principal, upon his appointment as guardian of the infant children of George Adams deceased, whose mother Venable had since married, she having previously administered upon Adams's estate. The guardianship bond was in the penal sum of $4000, and upon the usual condition.

The cause being put at issue, upon the final hearing, the court decreed the deeds of the 9th of February 1822, to be colourable and fraudulent, and ordered the same to be set aside and annulled; and that the plaintiffs might pursue their judgment and execution against the real and personal estate of Venable, as if the said deeds had never been made; subject however to the mortgage aforesaid, which was not in any manner whatever to be affected by this decree.

It is upon an appeal taken by Venable and M'Donald to this decree, that the cause is now before this Court; and independently of the merits as to the asserted fraud, or good faith of the deeds of 1822, two objections have been made by the counsel for the appellants.

The first is, that the court erred in directing a sale of the estate conveyed to M'Donald and Norten, until their mortgage was satisfied, or the condition thereof performed; because it had no right to change, by sale of the estate, the rights or interests of the mortgagees under a conveyance admitted to be valid, unless by their consent. This objection is founded upon a misinterpretation of the decree, which does not authorize any sale to be made by virtue of it, but merely removes out of the way the deeds which obstructed a sale at law under the judgment and levy. The decree also leaves the mortgage wholly untouched, and consequently no sale could prejudice the rights appertaining to it.

The next objection is, that George Norten, the mortgagee, is not made a party to the bill. But this objection falls for the same reason as the preceding. As the mortgage is not in any measure interfered with by the decree, it is wholly unnecessary to make Norten a party to the bill. He has no interests which are controverted or injured by declaring the nullity of the other deeds.

The real question then is, whether the deeds of 1822 are fraudulent or not; and to that question the consideration of the Court will now be addressed. The answers of the defendants, having denied all fraud, those answers are entitled to stand, unless they are overcome by the testimony of two witnesses, or of one witness and circumstances.

One of the deeds purports, for the consideration of $6260 paid and secured to be paid, to convey to M'Donald the two tracts of land; the other, for the consideration of $3400, to convey certain slaves, household furniture, horses, wagons, hogs, sheep, cattle, &c. and other stock usually belonging to a farm. The bill charges that these constituted the whole estate of Venable; and this fact is not attempted to be denied in the answer. Except his liability as guardian, and as indorser of the note to the bank, it does not appear that Venable was at this time indebted to any persons whatever; the fact is charged in the bill, that he was not under any embarrassment, and it is supported by the proofs.

Here then is the case of a person upon the eve of a decree being rendered against him for a large sum of money, which it is admitted would go far to his ruin, making conveyances of his whole property real and personal to his brother-in-law, for an asserted consideration equal to its full value. The brother-in-law is proved to be a thrifty, industrious man, but not at the time known to possess property sufficient to pay the purchase money; having other pursuits; and as soon as the purchase is made, suffering the estate to remain in possession of the former tenant.

How and in what manner is the consideration paid or received? M'Donald in his answer states that Venable, under the administration of his wife on Adams's estate, and his own guardianship of her infant children, was indebted for assets received to the amount of $6286 54; and that he, M'Donald, finding that Venable had used this money and was wasting the estate of his wards, and was involved in difficulties by his suretyship for others, &c. with a view to his own safety and that of George Norten (who is now insolvent), first tool the mortgage, and afterwards being fearful of the waste of the estate, was induced to purchase it, that he might have the control of it, and accordingly he did purchase it. The manner in which the consideration was paid and secured, he states to have been as follows. He assumed by a written contract given to Venable, to pay the debt due by Venable to his wards, when they came of age, and in the mean time to pay annually a sufficient sum for their maintenance and support, to be allowed in extinguishment of the interest that might become intermediately due. The contract itself is now produced, and it contains an agreement to pay to the wards, not a specific sum of money, but 'as much money as they shall have a right to demand of Venable, as guardian, when they become of age.' It further contains a promise to furnish Venable 'as much beef, pork, hay, corn, flour, &c. to the amount of what it shall be worth, to board, school and clothe' his wards.

The residue of the consideration for the purchase, viz. $2060 50 cents, M'Donald asserts to have been paid by him in money to Venable, part of which he admits that he borrowed, but he does not state how much. By the contract above stated, ...


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