Case Name: M'Mechen's Lessee vs. Grundy & Thornburgh
Court: Court of Appeals of Maryland
Jurisdiction: Maryland
Decision Date: 1810-12
Citations: 3 H. & J. 185
Docket Number: 
Parties: M‘Mechen's Lessee vs. Grundy & Thornburgh.
Judges: The cause was argued before Chase:, Ch. J. and Büohakan, and Earljb, J.
Reporter: Reports of cases argued and determined in the General Court and Court of Appeals of the State of Maryland, form 1800 ... [to 1826]
Volume: 3
Pages: 185–193

Head Matter:
M‘Mechen's Lessee vs. Grundy & Thornburgh.
Aiteat. from Baltimore County Court from a judgment rendered in favour of the defendant in that court, in an action of ejectment brought to recover the possession of a lot of ground in the city of Baltimore, described by metes and bounds. The general issue was pleaded.
Where a conveyance of a lot of ground from A U« (w ho h id committed an act of bank rupley,) to W M* was held not to be fraudulent, it Imv ing been made for a valuable consideration, and for th e purpose of Mjhitimfk/Uy complying with an engagement of A ft to I and ,T P, to transfer bank ¡stock to them to secure them against any loss they might sustain by endorsing three promissory note# for hi* accommodation; and A P>, not having; bank stock, when applied to by I and J P, offered the lot of gimme! to them as a substitute, and at their instance sold and conyeyed it to W M, who took i:p the .¡u.l notes — That the preference acquired by I and J P was consequential and nothing more than a substantial fulfilment of the engagement made by A B to them,at the time of endorsing the BOtkS.
To mider a payment or transfer by a debtor to his creditor fraudulent as to the other creditor*, tinder the bankrupt law, it must be spontaneously made inconsequence of a forirud design to become u bankrupt. Here the conveyance made by A B was not voluntary, but produced by the ftp# piscaron of I and 7 P for a transfer of the bank stock, wh ich they wtre entitled lo, and the refusal of A Í1 to comply with his engagement, or to make an) provision to indemnify them, would have sub•-eeicd him to an action at law, or bill in chancery, for a specific execution of his contract; and in that of view the application of l and 3 P must be considered as importunate and pressing*
1. At the trial the plaintiff below read in evidence a grant of Todd’s Range to James Todd, on the 1st of June 1700, and proved that the premises, mentioned in declaration, were part of that tract, and that JJqulla Brown being seized and possessed of the said premises, did, oil the 20th of February 1802, convey the same to M'Mechen, the lessor of the plaintiff, in consideration of the sum of §14,050, by deed duly executed, acknowledged and recorded. He also .offered evidehce, that. 7. and Jo P. Pleasants had previously to the 29th of December 1801, endorsed sundry notes For the accommodation of Brown, to the amount oí §16,000, none of which were then payable, and did not become payable till after the 20th of February ensuing; and that Brown, on the 29th of December 1801, applied to 7 and J. P. Pleasants to endorse further and other notes for his accommodation, which they refused to do, unless Brown would secure them, by the conveyance of property, against any responsibility which they might incur by reason of such proposed endorsements; that Brown did then agree with 7 and J. P. Pleasants to secure them, by the transfer of bank stock, against any responsibility which they might incur by reason of such endorsements to be made by them for the accommodation of Brown', that in pursuance of such engagements, I. and J. P. Pleasants did endorse for the accommodation of Brown three promissory notes, each for §4,674, dated the 29th of December 1801, drawn by Brown, and payable to and endorsed by 7. and J. P.Pleasants, one in 170 days, another in 180 days, and the other in 190 days; and that Brown did thereupon sign and deliver to 7 and J. P. Pleasants the following receipt; “Received, December 29th, 1801, of Israel and John P. Pleasants, their three several endorsements of my notes for four thousand six hundred and seventy-four dollars each, making fourteen thousand dollars, which I promise to provide for and payas they become due, say on the 17tii and 27th of June, and 7th of July next; and as a security for the faithful performance thereof, I hereby engage to deposit bank stock to the amount in their hands.
A. Brown, jr.’”
That Brown, afterwards did negotiate, for his own use and accommodation, the said three notes so endorsed by 7 and J, P. Pleasants, with a certain E. Pannell, and that 7. and J. P. Pleasants afterwards, on the 19th of February 1802, knowing Brown to be in difficult circumstances, called on him and requested him to secure them, in pursuance of his said engagement, against any responsibility which they might incur by reason of their said endorsements; and thereupon Brotan having then no bank stock, offered to convey to them the premises mentioned in the declaration, for the purpose of indemnifying them as aforesaid, but which they did not accept. That the leísor of the plaintiff, on the 20th of February 1802, in order to assist I. and J. P. Pleasants, agreed with Brown and I. and J, P. Pleasants, that if Brown would sell and convey to him the property mentioned in the declaration for the amount of the said nates, that he would pay Pan-nett the amount of the said notes when due; and that Brown, in pursuance of his said undertaking to 7. and./. P. Pleasants, and at their request, and in pursuance of the above mentioned agreement between the lessor of the plaintiff, 7. and J. P. Pleasants and himself, did on the 20th of February 1802, sell and convey to the lessor of the plaintiff, by the deed herein before mentioned, the premises mentioned in the declaration; and that the lessor of the plaintiff did, at the respective periods at which the said, three notes became due, pay the amount of them to Panne'll, the holder; and that the promises mentioned in the declaration were not worth the amount of the said three notes, so paid by the lessor of the plaintiff, That Brown’s affairs being desperate, and it being impossible for him toga on with his business, or pay his debts, he was, on the said days, and particularly on the 20ih of February 1802, very fearful of being arrested by his creditors, or some of them, and took measures to avoid such arrest The defendants then gave in evidence, that Brown was,, on the 17th, of February 18.Q2, and long before, and from that day until the 22d of the same month, a merchant, residing in tha city of Baltimore; that he was at the said times, and long before, a person actually using the trade of merchandise, by buying and selling in gross, and dealing in bills of exchange; and that he was on the 20th of February 1802, indebted to N. Norris above the sum of g 1,000 then due; that on that day Norris sued out of Baltimore county covmt a writ of capias ad respondendum against Brown» which writ, was directed, and the same day delivered, to the sheriff of Baltimore county, to be served upon Browns that the sheriff on the same day, at 4 o’clock in the afternoon, called at the dwelling-house of Brown to serve the writ, who concealed himself therein, and directed one of his i lerks to inform the sheriff that he, Brown, was not at home, although he was at that time in his said house, and did deny himself for the purpose of preventing himself from being arrested upon the said writ. That Brown did, before the 20th of February 1802, declare that he had been advised to become a bankrupt, and that he was determined to become one. That ‘on the 17th of February 1803, Brown, being indebted to R L, J M, & Ii C, in the sum of §7000, on a protested bill of exchange drawn by him in their favour, and before that time protested for nonpayment, B C called on Brown, and urged him to pay or satisfy the said bill; and that Brown did therefore, for the purpose of discharging the said bill, execute and deliver to R L and J M, with the assent of R C, on the 17th of February 1802, a bill of sale of a Brig called The Hurler, then belonging to Brown. That on the 19th of February 1802, Brown and J P, being tenants in common of and in three tracts of land in Anne-Arundel county, containing 300 acres, Brown did, at the urgent request of J P, by deed duly executed and recorded, convey to J P, and his heirs, all his Brown's interest and estate in the said lands, in consideration of the spin of S20CÜ about two years before that time expended by J P for Brown in the improvement of the said land, and in pursuance of an agreement so to convey, made by Brown with J P soon after the time of making the said improvement, and two years before the date of the deed. That all the said conveyances, including the deed to the lessor of the plaintiff, were made by Brown with a view to, and in contemplation of, an act of bankruptcy, stoppage of payment, and insolvency by him to be committed, and with intent to give to the several persons aforesaid, being a part of his creditors, a preference in payment of their debts, to the exclusion or injury of his other creditors; that the debts then due from him to the said persons, together amounted to 823,000, the property so conveyed to §16,000, the whole of his debts to all his creditors §460,000, and the whole of his property and estate to about gl 00,000. That Brown did actually stop payment on the 19th of February 1802, and that one of his notes was duly protested for nonpay» ment on the 20th of the same month, in the afternoon. That on the 20th of February 1802, N. Norris presented to J W, then district judge of the U. S. in and for the district of Ataryland, a petition stating that Broum had become bankrupt, &c. and praying the judge to grant unto him a commission of bankruptcy against Brown, &c. And did also, on the 22d of February 1802, make añida» vit in writing of his debt, amounting to §2356 39, &c« Tie also executed on the 22d of February 1802, and delivered to the judge, his bond as required by law. That on the 22d of February 1802, the judge did, by commission under his hand and seal, appoint J C, &c. to act as commissioners of Brown. That the commissioners, having taken the oath required, &c. did on the 22d of February 1802, proceed to execute the said commission, and cause reasonable notice in writing to be served on Bi-own, &c. • That Brown, on the 23d of February 1802, in pursuance of the notice, appeared before the commissioners, and submitted himself to the couppissiouers, and did not require that any jury should be impannelled, &c. That the commissioners did, on the 23d of February 1802, on due examination and proof, adjudge and declare Brown a bankrupt. That the commissioners did immediately after they had adjudged and declared Brown bankrupt as aforesaid, cause due and sufficient notice to be given to Brown's creditors, and did in such notice appoint a convenient timo and place for the said creditors to meet and prove their debts, and to choose assignees, &c. which notice was duly published, &c. That at the time and plape specified in the said notice, the creditors pf Brown proved their debts, and did then and there duly appoint the defendants, assignees of Brown. That the commissioners afterwards, on the 11th of March 1802, made, executed and delivered, a deed to the defendants, appointing them assignees, and conveying to them all and singular the goods, &c. of Broten, of which he was possessed, &c. The plaintiff then offered evidence, that it was previously to the 20t!i of February 1802, concerted between Brown and Norris, the petitioning creditor, that Norris should sue forth a writ of cupias usl respondendum against Brown, and that Brown should keep his house so that he should not be taken or served with the writ, and that Norris should thereupon petition the district judge for a commission of bankruptcy against ' Browns and that in pursuance of the said concerted agreement between Norris and Brown, Norris did sue forth the writ herein before mentioned against Brown, and that Brawn did, in pursuance of the said agreement, keep his bouse at 4 o’clock, P. M. on the 30th of February 1802, so that he could not-be served with the said process; and that- Norris did, in further execution of the said concerted scheme, petition the district judge for a commission of bankruptcy, who issued the commission herein before mentioned;, and that the commissioners appointed in and by the said commission, and herein before named, did declare Brown a bankrupt on account of his haviiig sa as aforesaid avoided the service of the said process. That on the 20th of February 1802,, there was no debt due and payable from Brawn to Norris. That the deed from' Brown to the lessor of the plaintiff was executed and de« livered to the lessor of the plaintiff on Saturday the 20th of February 1802, at 8 o’clock in the morning, and that Brown did not consent to commit an act of bankruptcy until the 19th of February 1802, in the evening, and then with reluctance, although persuaded or advised so to do by some of his friends, and that he did not refusé to pay any of his creditors their respective debts until the 20th of February 1802, The county court, [Nicholson Ch. J.3 Upon the prayer of the defendants, directed the jury, that if they believed from the testimony in the cause that Brown had agreed, on the 19th of February 1802, with his friends, to deny himself to the sheriff for the purpose of committing • air act of bankruptcy, thereby to lay a foundation for a commission of bankruptcy; that he did so deny himself on the 20th; that a commission issued in pursuance thereof, and that he was declared a bankrupt; that the deed from liim to the lessor of the plaintiff was executed on the 20th of February, after he had formed tins resolution, with a view Solely to secure the Pleasants against any responsibility which they might afterwards incur on aecount of their endorsements for Proton’s use; and that the lessor'of the plaintiff accepted the said deed, and agreed to take up Brown’s notes endorsed by the Pleasants, when they became payable, with the same view of relieving the Pleasants from their future responsibility, and to secure them againsc any loss which they might sustain in consequence of the derangements of Brown's business, then the said deed is not a bona fide purchase in the purview of the tenth section of the Uct of congress, but must be considered fraudulent is point of law, by giving a preference to certain persons, who might possibly afterwards become creditors, in exclusion of other creditors, if the jury believe that I)fotón •had other creditors to a considerably larger amount than las funds. And inasmuch as the deed was a fraudulent conveyance, made in contemplation of, and with a determination to commit an act of bankruptcy, it is void, and is in itself an act of bankruptcy, and will support the commission and adjudication of the commissioners, although the act, upon Which the commission issued, was subsequent to the execution of the deed, but upon the same, day, and although the said act might not have been an act of bankruptcy. The deed to the lessor of the plaintiff being void, he cannot recover in this cause-, as he has shown no other title than that derived from Brown, which did not pass, by reason of the fraud upon Brown's other creditors. The plaintiff excepted.
2. The plaintiff then prayed the opinion of the court, and their direction to the jury, that if the jury shall be of «pinion from the evidence, that Brown was, on the 20th of February 1802, seized of the premises mentioned in the declaration, and being so seized did on that day convey the same to the lessor of the plaintiff by deed duly executed, acknowledged and recorded, for a fair and Full price, and that the said deed was executed and delivered to the lessor of the plaintiff by Brown, before the act of bankruptcy committed by Brown, on which the commission of bankruptcy against him issued, and that the lessor of the plaintiff had no knowledge, information or notice, of any act of bankruptcy committed by Brown at the time of the execution and delivery of said deed, that then and in that ease the plaintiff is entitled to recover. This opinion arid direction the court refused to give. The plaintiff excepted. The verdict and judgment being for the defendants, the plaintiff appealed to this court.
The cause was argued before Chase:, Ch. J. and Büohakan, and Earljb, J.
Martin and W. Dorsey, for the Appellant,
contended, 5. That the conveyance from Brown to the lessor of the plaintiff could not be deemed a voluntary preference on ths part of Brown-, and if it was not Voluntary, it was not ^'ai,^ldenr> And 2. That if it Was made in contemplation of bankruptcy, and to give a preference, still it was not by . that circumstance void, because it was made on the pressing application of creditors. They referred to the act of congress, to establish an uniform system of bankruptcy, passed on the 4th of April 1800, ch. 19. Phœnix vs. Ingraham's assignees, 5 Johns. Rep. 412. Hartshorn vs. Slodden, 2 Bos. & Pull. 582. Ex Parte Scudamore, 3 Ves. 85. Worseley vs. De Mattos, 1 Burr. 467, 480. Harman vs. Fishar, 1 Cowp. 117. Small vs. Dudley, 2 P. Wms. 427. Rust vs. Cooper, 2 Cowp. 629. Hooper vs. Smith, 1 W. Blk. Rep. 441. Thompson vs. Freeman, 1 T. R. 156, (note.) Smith vs. Payne, 6 T. Rep. 152. Yeates vs. Groves, 1 Ves. jr. 280. Hopkins vs. Grey, 7 Mod. 139. Cock vs. Goodfellow, 10 Mod. 489, 497; and Smith vs. Hodson, 4 T. R. 211, 212.
Harper argued for the Appellees.

Opinion:
Chase, Ch. J.
delivered the opinion of the court. The court are of opinion, that the conveyance from Jlquila Brown to TVilliam M'-Mechen, the lessor of the plaintiff, is not fraudulent, the same having been made for a valúa* ble consideration, and for the purpose of substantially complying' with the engagement of Broion to.the Messrs. Pleasants, to transfer or deposit bank stock with them, to secure them, against any loss they might sustain by endorsing the three notes. As Brown could not comply with his engagement to transfer or deposit bank stock with the Messrs. Pleasants, when applied to by them, and as Brown offered to convey the house and lot to them as a substitute for the bank stock, and inasmuch as the conveyance was made to MiMechen, with the concurrence of all the parties then concerned, on his engaging to take up the notes, the preference acquired by the Messrs. Pleasants was consequential, and nothing more than a substantial fulfilment of the engagement made by Brown to them at the time of endorsing the notes.
The court are of opinion, that to render a payment or transfer by a debtor to bis creditor, fraudulent as to the other creditors, under the bankrupt law, it must be spontaneously made in consequence of a formed desigu to bp come a bankrupt. In this case the conveyance made by Brown was not voluntary, but produced by the application of the Messrs. Pleasants for a transfer of bank stock, which they were entitled to, and the refusal of Brown to comply with his engagement, or to make any provision to indemnify them, would have subjected him to an action at Jaw, or bill in chancery for a specific execution of his contract, and in that point of view the application of the Messrs. Pleasants must be considered as importunate and pressing.
The court reverse the judgment of the court below, this court dissenting from the opinions expressed in both of the bills of exceptions, and awarded a procedendo.
JUDGMENT REVERSED, &C"