McLaughlin v. Bank of Potomac - 48 U.S. 220 (1849)
U.S. Supreme Court
McLaughlin v. Bank of Potomac, 48 U.S. 7 How. 220 220 (1849)
McLaughlin v. Bank of Potomac
48 U.S. (7 How.) 220
Where an issue is sent by a court of equity to be tried by a jury in a court of law, and exceptions are taken during the progress of the trial at law, these exceptions must be brought before the court of equity and there decided, in order to give this Court cognizance of them when the case is brought up by appeal.
A question, whether or not certain conveyances were fraudulent, was properly submitted to the jury. Fraud is often a mixed question of law and fact, and the jury can be instructed upon matters of law.
A note held by a bank for a debt due to it, and renewed from time to time with the same maker and endorser, is sufficient to constitute the bank a creditor in claiming to have conveyances set aside as fraudulent, although the note was not due when the conveyances were made, and the present note was renewed afterwards.
Where the original debtor had made a conveyance of property to a trustee for the purpose of securing his endorser, it was not necessary to pursue and exhaust that trust property before proceeding against the endorser and his property. A judgment had been obtained against the administrator of the endorser, which fixed his liability.
This judgment against the administrator in which a devastavit had been suggested, and a return of nulla bona to an execution, was good evidence against the surety of the administrator, and also against the fraudulent grantee of the intestate.
Although the creditor has a remedy against the surety of the administrator by a suit at law upon the bond, yet he may also file a bill in chancery against all the parties who are concerned in the alleged fraud, and such other persons as are interested in the estate.
Although by the laws which prevail in the District of Columbia, the personal estate of a deceased person should be resorted to for the payment of debts before applying to the realty; yet where the administrator was found guilty of a devastavit, and the personal property was chiefly left in the hands of the surety, who was also the person charged with being a fraudulent grantee of the intestate, the general rule is not applicable.
In a bill against the fraudulent grantee, it is not necessary to aver a deficiency of the personal estate of the deceased; it is sufficient to aver the fraud and the waste of the personal assets by such grantee, who was also the personal representative.
The bill was filed in the circuit court by the President, Directors, and Company of the Bank of Potomac, Elijah Dallett and Elijah Dallett, Jr., trading under the firm of Elijah Dallett
& Co., William H. Miller, and A. C. Cazenove & Co., who sue in behalf of themselves and such other creditors of the estate of Edward McLaughlin, deceased, as will make themselves parties and contribute to the expense of this suit, against Edward Sheehy, in his own right and as administrator of Edward McLaughlin, and Ann Sheehy, wife of said Edward and one of the children and heirs at law of said Edward McLaughlin, Bridget, otherwise called Biddy McLaughlin, another of the children and heirs at law of said Edward McLaughlin, and surety for said Edward Sheehy's administration on said estate, and Edmund I. Lee, trustee under a deed of trust from the said Edward Sheehy.
The narrative of the case is as follows.
Edward Sheehy's notes, endorsed by Edward McLaughlin, were discounted at the Bank of Potomac as follows, viz.:
1828 -- Dec. 12, 1 note for . . . . . . . $2,000
1830 -- Jan. 15, 1 note for . . . . . . . 2,000
Feb. 5, 1 note for . . . . . . . 2,000
And they were curtailed and renewed from time to time, until they all became due the 20th January, 1832, viz.:
1 note for . . . . . . . . . . . $1,375
1 note for . . . . . . . . . . . 1,900
1 note for . . . . . . . . . . . 1,975
Amounting to . . . . . . . . $5,250
when they were amalgamated, and one note substituted for the three, which note was renewed from time to time until 15-18 April, 1834, when it became due and was protested.
Whilst these notes were running on, namely, on 27 September, 1830, one James Robinson conveyed certain property in Alexandria to Bridget McLaughlin, who was the daughter of Edward McLaughlin, the endorser of the above notes. Sheehy, the maker, was married to another daughter. One of the allegations in the bill was that this property was secretly paid for by Edward McLaughlin, who, it was alleged, procured it to be conveyed to his daughter for the purpose of placing it out of the reach of his creditors.
On 24 November, 1830, Sheehy conveyed a lot of ground in the Town of Alexandria to Edmund I. Lee, in trust, to secure McLaughlin against his endorsements in the bank, as far as the sum of $3,950. Lee was to sell it whenever McLaughlin requested him, in writing, to do so.
On 6 November, 1832, Edward McLaughlin conveyed to his daughter Bridget four lots in Alexandria, in fee simple, reserving to himself a life estate.
On 15 March, 1833, Sheehy and wife conveyed to McLaughlin certain other real property and slaves, and other personal property. It was an indemnity against loss from the endorsement of McLaughlin upon the notes in question and other notes.
On 9 November, 1833, McLaughlin executed another deed in fee simple of certain property to his daughter Bridget.
In April, 1834, the note mentioned in the beginning of this narrative became due and was protested. Its amount was $5,250.
In May, 1834, the Bank of Potomac brought suit upon the note, and in August, 1834, obtained judgment by default, against Edward McLaughlin.
On 15 September, 1834, McLaughlin executed another deed for certain other property in fee simple to his daughter Bridget.
In September, 1834, after the execution of the above deed, McLaughlin died.
On 12 November, 1834, Sheehy took out letters of administration upon his estate, and Bridget McLaughlin became the security upon his bond. It is not necessary to state the appraisement, or the measures pursued by other creditors than the Bank of Potomac. No administration account was filed.
In June, 1835, the judgment which the bank had obtained against McLaughlin in his lifetime was revived, by scire facias, against his administrator, upon which an execution was issued. The return was that no effects of the said McLaughlin, in the hands of his administrator, were to be found whereon to levy the said execution.
In April, 1836, the bank brought an action against Sheehy, suggesting a devastavit, and in June, 1837, obtained a judgment against him de bonis propriis. Execution was also issued upon this, the return to which was that no goods and chattels of the said Sheehy were to be found.
In January, 1838, the bank filed its bill on the equity side of the court, suing for itself and such other creditors of the estate of Edward McLaughlin as chose to make themselves parties and contribute to the expense of the suit. The bill recited the above facts; averred that a large amount of personal property came into the hands of the administrator; that the said administrator, and his said surety, combining together to defraud the creditors of the said McLaughlin, caused his personal estate to be appraised at prices greatly below its value, and then sent off the said slaves to distant parts for sale, where they
were actually sold for sums greatly exceeding the said appraisement; that no account of the sales of the said McLaughlin's personal estate had ever been returned to the said orphans' court, nor had the said administrator ever made any settlement of his administration accounts; that large sums of money of the said estate yet remain unaccounted for, and misapplied to their own use by the said administrator and his surety; that McLaughlin had combined and confederated with his daughter Bridget fraudulently to convey and transfer his property to her, with a view to protect it from liability for his debts; that all the said deeds were fraudulent and void; that the deceased left no real estate, having thus conveyed it all fraudulently away; that his personal estate had been made away with and misapplied by the administrator and his surety, the said Bridget; that the bank had a right to be substituted to the benefit of the trust deeds. The bill then prayed a discovery and account of the personal estate; that the fraudulent deeds might be set aside and annulled, and the property mentioned in them be applied to the payment of the debts of the estate, and for general relief.
A supplemental bill and answer were filed in the course of the proceedings, which did not essentially vary the state of the case.
In May, 1838, Bridget filed her answer, which was afterwards withdrawn, and another filed in May, 1842. Sheehy and wife filed their answer in May, 1839. The answer of Bridget denied all the allegations in the bill, and especially a legal recovery against Sheehy for said debt, but, if proved, contested that she was bound for the same, being no party thereto. She further admitted giving the bond as surety for Sheehy, but denied that it was binding on her or that personal property of more value than $1,653.28 came to his hands, as shown in the inventory thereof. She denied any combination to defraud the creditors of Edward McLaughlin by undervaluing his personal estate or selling it higher than the appraisement or not having it accounted for. She denied the existence of any indebtedness now by Edward McLaughlin, or at his death, as endorser for Sheehy, which existed in September, 1830, and averred that notice of protest was necessary to make him so liable, which had never taken place, and that the deed then given to her was not fraudulent as to the bank. She further averred that the deeds were not void, because Sheehy was the principal debtor, and possessed sufficient real estate then to satisfy the debt. She further alleged, that the real estate of her father was liable in the hands of his heirs only for specialty debts, which this was not. She proceeded to deny fraud in the various other
deeds to her, and to allege a moneyed consideration therefor. She admitted the conveyances in trust by Sheehy, and averred that the bank had never requested the land held in trust to be conveyed and applied to the discharge of this debt, or it would have been done, and that it ought now to be done before a resort to the personal estate. She denied the validity of the judgments against Sheehy as affecting her, and proceeded to answer the special interrogatories addressed to her.
Sheehy and wife, in their answer, denied all fraud in the inventory or management of the estate; admitted that no account of his administration had been rendered by Sheehy, but averred his readiness to do so; that although he was the nominal administrator, yet Bridget McLaughlin transacted all the business, and denied all combination with Bridget, or with any other person, to defraud the creditors of Edward McLauglin.
In April, 1839, the court passed a decree for the sale of the property mentioned in the two deeds of Sheehy to Lee, of 24 November, 1830, and Sheehy and wife to Edward McLaughlin, of 15 March, 1833. The reports of sale need not be further adverted to.
In May, 1843, the cause standing under a general replication and issue, the court ordered it to be tried at law, for the purpose of ascertaining:
1st. Whether any and what valuable consideration was paid or given, and by whom, to James Robinson for the property conveyed by him to the said Bridget McLaughlin in the bill mentioned, and whether the said property, in the said deed mentioned, was purchased bona fide by the said Bridget, with her own funds.
2d. Whether the deeds of 6 November, 1832, and 9 November, 1833, in the bill mentioned, from the said Edward McLaughlin and the said Bridget McLaughlin, or either, and which of said deeds, were or was made with intent to hinder, delay, or defraud the complainants of their just and lawful actions as creditors of the said Edward McLaughlin, or whether the said deeds were made for valuable consideration, and bona fide.
3d. Whether the deed 15 September, 1834, from the said Edward McLaughlin to the said Bridget, was made with a like intent to hinder or delay the said complainants, or bona fide, and for valuable consideration.
The jury, being unable to agree, were discharged, and the record transferred to Washington County, where the cause was tried at March term, 1844. The certificate was as follows:
"Upon the first issue joined the jury say, that the valuable consideration expressed in the deed referred to in the said issue
was paid by Bridget McLaughlin to said James Robertson, and that the said property mentioned in said deed was purchased bona fide by the said Bridget, with her own funds."
"And we find, as to the second of the said issues, that the said deeds of 6 November, 1832, and 9 November, 1833, in the said bill mentioned, from said Edward McLaughlin to said Bridget McLaughlin, were, and both and each of them were made by the said Edward with intent to hinder, delay, and defraud the said complainants of their just and lawful action as creditors of the said Edward McLaughlin, and that the said Bridget had notice of said intent, and that they were not, nor were either of them, made for an adequate valuable consideration, nor were either of them made bona fide between the said parties."
"And as to the third of the said issues, we find that the deed of 15 September, 1834, from the said Edward McLaughlin to the said Bridget, was made with a like intent to hinder and delay the said complainants, and was not bona fide, and the same was not made for a valuable consideration."
"And we find upon the second and third issues for the complainants."
In the course of this trial, sundry bills of exceptions were taken, which it is unnecessary to specify, because the points made were not brought before the court which sent the issue to be tried at law, and therefore it was held that they should not come before this Court for review.
In June, 1845, the Circuit Court of Alexandria passed the following final decree:
"The court, on consideration of the above matters, do now here, this 10 June, 1845, order, adjudge, and decree, that the aforesaid deed from James Robertson to Bridget McLaughlin, dated 27 September, 1830, in the bill of the complainants mentioned, was not made with intent to hinder or defraud the creditors of the said Edward McLaughlin, and is not fraudulent and void. And they do further adjudge and decree that the several deeds dated 6 November, 1832, and 9 November, 1833, and 15 September, 1834, from the said Edward McLaughlin to his daughter, the said Bridget McLaughlin, were made without valuable consideration, and were made with intent to delay, hinder, and defraud the creditors of the said Edward McLaughlin, and are, therefore, fraudulent and void as against them, and that the said deeds be set aside and annulled."
"And the court, proceeding to grant to the complainants such relief as they are entitled to, and as sought in their said bills, do further adjudge, order, and decree, that the real estate described
and mentioned in the above last-mentioned deeds, from the said Edward to the said Bridget McLaughlin, and by this decree declared fraudulent and void, be subjected to the payment of the debts of the complainants, in the manner hereinafter directed, and that the commissioners hereinafter named do proceed to make out of the said property, by a sale of the same, or so much thereof as may be requisite, and in such lots as to the said commissioners shall seem best, at public auction, to the highest bidder, after giving thirty days' notice of the time, place, and terms of sale, by publication in the Alexandria Gazette, the following several sums, that is to say [proceeding then to distribute the fund amongst the creditors]."
An appeal from this decree brought the case up to this Court.