Court Opinion

ID: 6558373
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:04:55.002892+00
Date Added: 2024-06-11T15:56:20.488288
License: Public Domain

Johns, Jr., Chancellor.
The complainants are credi tors of the late firm of Kennedy and Denning. They have proceeded at law to judgment. The firm being insolvent, and also the individual members,these creditors seek relief in equity, by impeaching, on the ground of fraud, a conveyance made by Kennedy of a part of his real estate to his sister, Margaret Kennedy, now Margaret Talmadge. The grantee took the conveyance in payment and discharge oif^a separate debt, the grantor conveying his separate property. The consideration for the entire property conveyed was the balance ascertained by the proper officer to be due from Kennedy, as the guardian of his sister, on the settlement of his guardian account, to the amount of $3778.50.
The conveyance was of a life estate in Kennedy in a farm situated in St. George’s Hundred, in the State of Delaware, by deed dated, June 1820, for the express consideration of $3000.00. The annual rental value of this farm, may be taken upon the proof to have been $600.00. The property in Maryland appears to have comprised two dwelling houses and a farm. The two dwelling houses were worth together, a rental of $24.00 per annum, and the farm was worth $95.00 per annum. Thus the total annual value of the property conveyed may be set down at $719.00. The annual interest upon the debt due from Kennedy as guardian, would be about $226.00, which sum bring deducted from the annual rental of $719.00, leaves $493.00, as the excess of rent.over interest. This sum if regularly applied would, in sixteen years, be sufficient fully to discharge the debt due from the guardian, and leave a *16considerable surplus, not less in amount than the sum of $4000.00.
I have gone into this calculation, only to ascertain the effect and operation of this conveyance by Kennedy to his sister, supposing the possession of Kennedy to have been consistent with the deed.
The conveyance in this case, being prior to the Act of Assembly relative to assignments by debtors, is not affected by the provision of that act which avoids any preference among creditors given by a debtor in contemplation of insolvency. At the time when the conveyance in this case was made, a debtor had the power to prefer any creditor; but all such transfers of property as modes of payment must necessarily be subject to the consideration of relative value. They were allowed, prior to fine Act of Assembly, upon the principle that a debtor had a right to apply his property in discharge of his debts ; and, as he might confess a judgment and thus give a preference to one creditor, he was allowed by assignment to transfer his property for the benefit of his creditors, and in such mode of conveyance to prefer any creditor. As the whole proceeding is based on the principle of payment, it would be wrong to extend it so as to allow a debtor to convey all his property to a single creditor, if it greatly exceeds in value the amount of the debt due. For, by so much as the property conveyed exceeds in value the debt, it would be a gift, a mere gratuity, a voluntary conveyance,-and, if permitted to stand,it would enable the debtor to place his property out of the reach of his creditors, exceptthe one he chose to prefer, and with whom he might, by collusion, so arrange matters as to enjoy all the benefits of the fraud. Hence, in all transfers like the present, which is not an assignment in trust for the benefit of creditors but an absolute conveyance, it is essential to consider the value of the property conveyed and for which the debt is the consideration. If it greatly exceeds the amount *17due, then, as to such excess, the other creditors have an interest, and are entitled to have the excess applied in discharge of their debts. This is effected in equity by considering the property conveyed as a security,—first, to the grantee, and on his being fully paid, then that the balance be applied to the other creditors.
As I am of opinion in this case that the value of the property conveyed greatly exceeded the amount of the of the debt due; and considering also that the circumstances attending the transaction are suspicious, I shall direct an account, as prayed for by the bill. It should be observed, however, that this was the separate property of Kennedy and that the complainants are proceeding to collect a partnership debt. The separate creditors of Kennedy must be allowed to come in and be first satisfied before the fund arising from the separate property can be applicable to partnership debts due from Kennedy and Denning.