Bumpas v. Dotson

1. Where the surety in a guardian bond took a moitgage on the guardian’s estate, and the mortgage specified the liability of the surely “at about $2,000,” when in fact it amounted to only about half that sum; It is held, that this mis-statement of the consideration was not conclusive evidence of fraud; the mortgage not professing to state with accuracy the amount of the liability, and the actual amount having been unascertained. 2. An admission of the mortgagee, that the property mortgaged was left in the p ossession of the mortgagor, with the intent that he should make money thereby, ■will not be evidence of a fraudulent purpose in the execution of the deed. 3. The relationship of parties, though calculated to awaken suspicion, is of itself no evidence of a fraud in a conveyance of property. 4. Where a guardian bond contained no penalty, this would prevent a recovery at law, yet in equity, on proof that the guardian obtained his ward’s estate on the faith oí the bond, the beneficiaifies in the bond would be entitled to a decree for an account against guardian and suieties.

Lucas was the guardian of the heirs of Johnson, deceased, and gave bond for the performance of the trust, which bond was without a penalty and in blank. Lucas being embarrassed and having creditors, conveyed by deed of mortgage several slaves to Dotson, to indemnify him against loss as his surety in his guardian bond.- He conveyed the slaves afterward? to Dotson by absolute bill of sale. The judgment creditors of Lucas filed this bill in the Chancery Court at Lawrenceburgh, against Lucas and Dotson and others, to set aside the deeds above mentioned as fraudulent. The Chancellor, Bramlett, refused to declare them fraudulent, but directed the sale of the slaves and an account to be taken. From this decree the complainants appealed. We say the two deeds executed by Lucas to Dotson on the 5th and 8th of January, 1842, were fraudulent and void, and of no validity or effect whatever. How are the facts? On the 5th he mortgaged to Dotson, the slaves Frank, Ben, Green, Polly, Mima, George and Mary, reciting upon its face as its object, to secure him as the security of Lucas to certain creditors, and among others, to the children of Samuel Johnson, in a debt of $2,000, as their guardian; and to secure Dotson certain debts due him, which debts and liabilities are there put at $3,200. It turns out that the debt to Johnson’s children, instead of $2,000, was not $1,000, and that the whole debt really did not exceed $2,400, though put at $3,200. But though the recitals in this deed were false and fictitious, and known to be so, what else is done? Why on the 8th of January, only three days after, this mortgage is turned into an absolute deed, and given the appearance of a sale, at the price of $4,000, actually paid, when, in fact, one-third of it had not been paid, and was made up of liabilities chiefly, and all, both debts and liabilities, did not exceed $2,500. The negroes are worth from $3,400 to $4,000, and when in fact too, this latter deed was really intended, and was a mortgage in secret between Lucas and Dotson. Dotson took possession for a few days, and then let Lucas have them to make money to pay his debts, and he used them ever afterwards. All these facts appear in the answer of Dotson and Lucas. Dotson is son-in-law to Lucas, and takes notes for the hire of the negroes, and surrenders them without payment. He, in fact, was not able to buy so many slaves. These false and deceptive recitals vitiate both these deeds. The express purpose no doubt, was (in changing an avowed, open mortgage to a secret one) to keep creditors from a knowledge of the real debt and liabilities, that they might be deceived and file no bills for the surplus, and thus Lucas would enjoy the estate. Why else make the change? And why recite debts that were only liabilities, and liabilities, as such, that really did not exist? And why recite the actual payment of $4,000, when one-third of it had not been paid? Peacock vs. Tompkins, Meigs Rep. 317; Hyslop vs. Clarke, 14 Johns. Rep. 465; Gregory vs. Perkins, 4 Dev. Law Rep. 53. . The admission in the answer, that a secret mortgage was intended, and that Lucas was to use the properly to pay debts, &c., makes the deed void. It was a secret trust for the benefit of Lucas. Besides Lucas’possession, relationship, &c., were •prima, facie evidence of fraud, and the onus of debts and fairness was upon Dotson. But there was no such proof, nor can be. 3 Yerg. Rep. 504. 2. The guardian bond executed by Lucas for Johnson’s children, was in blank — had no penalty, and was therefore void, and created no liability on Dotson. Hurlstone on Bonds, 9 Law Library 1: Dodson vs. Keys, Yel. Reports, 193; 193: 5 Comyn’s Dig. (A Title Obligation,) 191: do. (B 5) 193. How then could these assets be retained by him or any other, to pay or secure the debt to them? The conveyance was merely to secure Dotson from harm for his liability, and to secure the payment of certain debts due Dotson. These are the words of the deeds, and extent of the contract, and it goes no further. It was not to secure the debt to these wards, but intended as a personal indemnity to Dotson. It is claimed as a liability. If it were a liability, then the deed covers it. But it is said if Dotson cannot claim the fund, the children themselves can. If so, it must be in consequence of some implied equity or rule, and not because of any contract or engagement on the part of Lucas. In fact, such claims will have'to be in opposition to the very terms of the deed, which is to be void, upon its face, if Dotson is indemnified. How then can it be said to be the intention of the parties, that the deed is to have a further effect than Dotson’s safety? Can they create further trusts and equities not intended, and that too in opposition to and in the very face and terms of the deeds? Is there not a .distinction between a conveyance to secure the payment of a debt, and one to indemnify a surety? What is it that creates the trust? Is it not the contract of Lucas? Could it exist without the contract? And can it exist in terms beyond the contract? If a deed were to provide for the payment of a debt in a certain event, though made ostensibly for the surety and to him. Yet in such a case, the fund would inure to the use of the creditor. But if the conveyance is not for the payment of the debt, but only the surety’s indemnity, how can the creditor ever reach the fund under the deed? If the deed is to be void if the surety never suffers, whether the debt is paid or not, how can the creditor claim in such a case? 1 Devereaux Equity Reports, 205; Horner vs. Savings Bank,, 2 Con. Rep. 478, (Second Series.) The Bank vs. Grundy and Bass, Meigs Rep. 256. Johnson’s children could only reach the fund through a judgment and ji. fa. with a return of nulla lona. Until then they could have no lien. Meigs, 256. The complainant filed his bill to subject certain negroes and other property to .the satisfaction of a judgment at law, against the defendants, Wm. Lucas, J. H. Bumpas, and J. H. Lucas. The defendant, E. B. Dotson, purchased the negroes of Wm. Lucas, and this bill is filed to set aside the sale for fraud, and subject the negroes to the judgment of the complainants. 1. To enable the complainants to obtain the relief prayed for, they must show that they have exhausted their remedy at law. 3 Atk. 300; 2 John. Rep. 296; 1 Paige’s Ch. Rep. 637; 10 Yerg. Rep. 212; 3 Hump. Rep. 81 and 662. 2. The charge of fraud in the bill, is denied by the answers of the defendants, and this denial is sustained by the proof. The answer is responsive to the bill in this particular, and must be taken as true, unless overturned by two witnesses, or one witness with strong corroborating circumstances. The proof shows, that no fraud was intended in fact, that deed of trust or mortgage, and the bill of sale were executed in good faith, and to secure Iona fide existing debts and liabilities on the part of the defendant, Dotson, for Wm. Lucas. 3. There being no fraud in fact, is there any fraud by ‘‘legal construction.” It is said, that the deed of trust, and the bill of sale to Dotson, are both fraudulent as to the creditors of William Lucas. Because it is said, that they announce to the creditors of Wm. Lucas, that the sum $3,200 is due from him to the defendant, Dotson, when in fact the amount actually due to Dotson, is only about $2,700, and that, therefore, the deed and bill of sale are void by operation of law, and that it is a legal fraud upon the creditors of Wm. Lucas. This may be true, where it is the intention of parties to “hinder and delay” creditors, but in this case there is a struggle between two creditors, and one obtains a conveyance from the debtor to secure his debt, and a mistake is made as to the amount of liabilities, or sum due- to the heirs of Johnson. This is not like the case of Peacock vs. Tompkins, Meigs 317. In that case two notes (one for $200 and the other for $300) were attempted to be secured by a trust deed, the proof showing that these notes were executed without consideration, and the court said that the attempt to secure these notes was a fraud upon the creditors of Turner, because Turner was made to acknowledge an indebtedness to the extent of $500 more than was actually due, for the purpose of keeping off other creditors from resorting to the surplus of the property conveyed. But in this case no debt is mentioned of the character of the debts in the deed to Tompkins, all the debts and liabilities mentioned in the deed and mortgage were bona fide existing debts, and the mistake as to amount, was as to the sum due to minor heirs of Johnson, a thing that Dotson could not be expected to know. In the deed the amount is stated to be $2,000, but upon subsequent investigation it was found to be $1,045, after deducting expenses, &c. 4. When a deed or conveyance is sought to be set aside by-creditors, and the proof discloses only suspicious circumstances, either as to the consideration, or as to the fairness of the transaction, a Court of Chancery will not set aside such conveyance, but permit it to stand as a security for the amount actually due. 1 John. Rep. 473, and the authorities cited. This was the view the Chancellor seems to have taken of this case, and it cannot be a hardship upon the complainants; they are creditors, and, as such, should not be permitted to occupy higher ground than Dotson, who is also a creditor of the defendant, Wm. Lucas. 5. The deed, and sale to Dotson, were made in part to secure the heirs of Johnson, and being before the court, the court should protect their interest; they are minors, and specially under the protection of a Court of Chancery, even if the guardian bond executed by Wm, Lucas, as their guardian, with Dotson as security, should be defective. The bond being in blank as to the penalty, can make no difference; such an omission does not make void the bond, and if the omission does make the bond void, the creditors of guardian could not take advantage of the irregularity. 1 Story’s Eq. 165 and 167; 1 Cond. Eng. Ch. Rep. 106; 2 John. Ch. Rep. 585.