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U.S. Supreme Court


4 U.S. 304 (Dall.)

Murgatroyd's Assignees.

Supreme Court of Pennsylvania.

September Term, 1804

THE point agitated upon the trial of this cause, turned on the validity of a mortgage given to the plaintiff by Murgatroyd, to secure to his wife, the amount of a legacy, which had been bequeathed to her, by her grandmother. It appeared, that in the year 1784, Murgatroyd had entered into articles of agreement with trustees, by which he engaged to secure the legacy, in case he should become insolvent. He received the money, and mixed it with his other pecuniary funds; but took no steps to secure the amount for his wife, until the execution of the present mortgage, in March 1802, when he was insolvent, and was soon afterwards duly declared a bankrupt.

The case was considered, as a case of marriage settlement, by the counsel on both sides.

In support of the settlement, the following authorities were cited: 6 T. Rep. 154. 2 Bous. & Pull. 582. 6 T. Rep. 80. 2 Atk. 558. 1 Atk. 192. 1 P. Wms. 459. 2 Dall. Rep. 199.

In opposition to the settlement were cited, 1 Fonbl. 271, 272. 2 Atk. 480, 1. 8 T. Rep. 82.

SHIPPEN, Chief Justice. [304-Continued.]

The mortgage given by Murgatroyd is resisted on behalf of his creditors, upon the general ground, that it was given in contemplation of bankruptcy. There is but one exception to the rule, which declares a conveyance so given to be void; namely, where a creditor obtains a preference, by urging his debtor for payment, and threatening him with legal process. The only question, therefore, is a matter of fact, whether Murgatroyd, at the execution of the mortgage, contemplated bankruptcy, and meant voluntarily to prefer the particular creditor? If the evidence proves the affirmative, the mortgage is void; but, if otherwise, it is lawful and valid.

It has been urged, in favour of the plaintiff's claim, that whatever may have been the situation of Murgatroyd, at the time of executing the mortgage, the act was done, in pursuance of a previous agreement, entered into for a valuable consideration, when he was perfectly solvent. It would be grateful to our feelings on the present occasion, could we express sentiments favourable to the maintenance and fortunes of a wife and children; but we cannot seek that gratification, through a sacrifice of the established principles of law. The agreement was executory; and although it had relation to a possible insolvency, it might, perhaps, independent of the bankrupt law, have been carried into effect. But no antecedent contract, can make the mortgage valid, upon the provisions and principles of the bankrupt law, if Murgatroyd

Page 4 U.S. 304, 305

actually gave it, when he was insolvent, upon the eve of a legal bankruptcy. The general creditors had then acquired an interest in his estate; and it was too late to perform an engagement for giving preferences and securities, at their expense, to any particular creditor. The law respecting marriage settlements, is the same in England and in Pennsylvania. It requires a fair motive, as well as a valuable consideration; and the interest must be actually declared and vested, at the time of a settlement, or it cannot prevail against the rights of honest creditors. The present case, by no means resembles the case of general Stewart's settlement. There, Mr. M'Clenachan, on his daughter's marriage, delivered to general Stewart a large sum in certificates of public debt, expressly stipulating, that those certificates should be held and appropriated to the use of Mrs. Stewart and the children of the marriage. General Stewart always kept the fund represented by the certificates, distinct from his own immediate funds; and although he subscribed them, first to the new loan of Pennsylvania, and afterwards to the general loan of the United States, constituting the funding system, it was traced and ascertained, that the real estate specified in the deed of settlement (which, it is true, was made long after the marriage) had been, in fact, purchased with the actual proceeds of the original certificates, delivered by Mr. M'Clenachan upon the marriage. But here, the bequest of the legacy was made without stipulation, or condition; the money being received by Murgatroyd, was blended with his other property, so that a separate existence, or application, could never be traced; and, under these circumstances, he acquired a credit, which would be false and delusive indeed, were the property now withdrawn, upon an obsolete and latent pretence, from the creditors who trusted to it.

SMITH, Justice. I am, likewise, of opinion, that the mortgage must yield to the superior legal and equitable claims of the general creditors. It is a sound and uniform rule, that settlements made upon a wife and children, by persons who have not a sufficient estate to pay all their debts, are void against creditors. The decision upon general Stewart's settlement was not a departure from the rule; but simply a recognition of the marriage portion of Mrs. Stewart, transformed and ascertained in a new shape. The late, as well as the present, Chief Justice, and myself, delivered our opinions at large in that case; and united in the result, for the reasons that have been suggested; none of which can be assigned in favour of the present claim, under the mortgage. The jury, according to the charge, found a verdict for the defendant. 1 [4 U.S. 304, 306]

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