M'Donald v Bank of the United States

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.

Mr Justice STORY delivered the opinion of the Court.