§ 654. Again, where a man is deeply indebted, or in embarrassed circumstances, every voluntary assignment or conveyance to third persons, not his creditors, for which a valuable consideration is not given, can be avoided by the creditors; and a creditor may, notwithstanding the conveyance, avail himself of all his legal remedies for collecting his debts out of the estate, treating the property as still belonging to the vendor.4 A gift or conveyance, therefore, founded merely upon . a good consideration, such as blood or affection, may be set which one creditor to a composition deed acquires an advantage over other signers, unknown to them, is fraudulent and void. Bliss v. Matteson, 45 N. Y. 22 (1871). And see Adams v. Outhouse, ib. 318.
1 Sternburg v. Bowman, 103 Mass. 325 (1869). And see Partridge v. Messer, 14 Gray, 180; Lothrop v. King, 8 Cush. 382; Ramsdell v. Edgar-ton, 8 Met. 227; Case v. Gerrish, 15 Pick. 49.
2 Wells v. Girling, 4 Moore, 78; s. c. 1 Br. & B. 447. See also Alsager v. Spalding, 6 Scott, 204; s. c. 4 Bing. N. C. 407; Howden r. Haigh, 11 Ad. & El. 1033.
3 Knight v. Hunt, 5 Bing. 432.
4 Owen v. Dixon, 17 Conn. 492; Parkman v. Welch, 19 Pick. 231. And where a creditor or purchaser obtains the estate of an insolvent debtor at an undue value, there is a strong presumption of a secret trust and fraudulent intent. Shelton v. Church, 38 Conn. 416 (1871).
§ 655. But although creditors may set aside a conveyance made to a third party in fraud of their right, the grantee or assignee, and his heirs, and all persons taking under him or them in privity of estate, with notice of the fraud, would be bound by the conveyance or assignment.1 And where a fraudulent conveyance was made for the benefit of the grantor's children, it was held that the grantee could not set up the fraud as a defence to an action by the children.2
1 Hinde v. Longworth, 11 Wheat. 199; Verplank v. Sterry, 12 Johns. 536; Reade v. Livingston, 3 Johns. Ch. 481, 497, 501; Sexton v. Wheaton, 8 Wheat. 229; Bennett v. Bedford Bank, 11 Mass. 421; Cadogan v. Ken-nett, 2 Cowp. 432; 1 Story, Eq. Jur. § 362-365.
2 See 1 Story, Eq. Jur. § 355 to 365, in which Mr. Justice Story reviews the principal cases, and gives the weight of his opinion in favor of the rule as stated in the text. The Supreme Court of the United States has held the same doctrine. Sexton v. Wheaton, 8 Wheat. 229; Hinde v. Longworth, 11 Wheat. 199. And it is in accordance with the case of Cadogan u. Ken-nett, 2 Cowp. 432, and Doe v. Routledge, 2 Cowp. 705; and the recent case of Townsend v. Westacott, 2 Beav. 340, 345. So, also, see Salmon u. Bennett, 1 Conn. 525, in which the same rule is sustained by the Supreme Court of Connecticut; and Verplank v. Sterry, 12 Johns. 536. See Green v. Tanner, 8 Met. 411.
3 Dundas v. Dutens, 1 Ves. Jr. 196; s. c. 2 Cox, 235; M'Carthy v. Goold, 1 Ball & B. 390; Grogan v. Cooke, 2 Ball & B. 233; Caillaud v. Estwick, 2 Anst. 381; Nantes v. Corrock, 9 Ves. 188, 189; Rider v. Kidder, 10 Ves. 368; Guy v. Pearkes, 18 Ves. 196,197; Mathews v. Feaver, 1 Cox, 278; 1 Story, Eq. Jur. §367.
4 Legro v. Lord, 1 Fairf. 161.
§ 656. A conveyance of property, real or personal, executed or executory, made to defraud creditors of the grantor, is good between the parties, and the grantee is not bound to refund the same, although he participated in the fraud.3 In England, if a person places personal property in the hands of a third person, by a fraudulent bill of sale, with intent to defraud his creditors, he can recover it back from such nominal purchaser by an action of trover,4 contrary to the rule there obtaining as to conveyances of real estate.5 But in America the same rule exists in both cases. The former owner is without remedy in either case,6 but the administrator of the fraudulent vendor might recover the property for distribution among the creditors.
§ 657. Again, another class of cases, in which the law implies fraud against third persons, is to be found in contracts for the sale of property by a debtor, which, by the agreement, is to remain in the possession of the vendor. As far as concerns the immediate parties to such contracts, the sale would be binding.7 But as to creditors, it would be treated merely as a
1 1 Story, Eq. Jur. § 371; Randall v. Phillips, 3 Mason, 378; Curtis v. Price, 12 Ves. 103. 2 Fairbanks o. Blackington, 9 Pick. 93.
3 Harvey v. Varney, 98 Mass. 118 (1867); The Lion, 1 Sprague, 40; Nichols v. Patten, 18 Me. 231; Knapp v. Lee, 3 Pick. 452; Dyer v. Homer, 22 Pick. 253; Brooks v. Martin, 2 Wall. 72.
4 Bowes v. Foster, 2H.&N. 779 (1858).
5 Doe v. Roberts, 2 B. & Al. 367.
6 Stewart v. Kearney, 6 Watts, 453; Yates v. Foot, 12 Johns. 1; White v. Crew, 16 Ga. 416; McLoskey v. Gordon, 26 Miss. 260; Britt v. Aylett, 6 Eng. 475; James v. Bird, 8 Leigh, 510; Broughton v. Broughton, 4 Rich. 491; Pepper v. Haight, 20 Barb. 429; Cushwa v. Cushwa, 5 Md. 44; White p. Hunter, 3 Fost. 128; Murphy ». Hubert, 16 Penn. St. 50.
7 Hawes v. Leader, Cro. Jac. 270; Martindale v. Booth, 3 B. & Ad. 505; Steel v. Brown, 1 Taunt. 381; Baker v. Lloyd, Bull. N. P. 258; Robinson v. M'Donnell, 2 B. & Al. 134; Doe v. Roberts, 2 B. & Al. 367; Deady v. Harrison, 1 Stark. 60; Banks v. Thomas, 1 Meigs, 33; Nichols v. Patten, 18 Me. 231; Jones v. Yates, 9 B. & C. 532; Wall v. Provident Institution, 6 Allen, 320 fraud, unless the sale be completely bond fide, or unless the subsequent possession by the vendor appear to be merely the condition of an executory contract.1
1 Edwards v. Harben, 2 T. R. 587. In this case, Buller, J., said: "But if the deed or conveyance be conditional, there the vendor's continuing in possession does not avoid it, because by the terms of the conveyance the vendee is not to have the possession till he has performed the condition. Now here the bill of sale was on the face of it absolute, and to take place immediately, and the possession was not delivered; and that case makes the distinction between deeds, or bills of sale which are to take place immediately, and those which are to take place at some future time. For in the latter case the possession continuing in the vendor till that future time, or till that condition is performed, is consistent with the deed; and such possession comes within the rule, as accompanying and following the deed. That case has been universally followed by all the cases since. One of the strongest is quoted in Bucknal and others v. Roiston, Pr. in Ch. 287; there one Brewer, having shipped a cargo of goods, borrowed of the plaintiff £600 on bottomry, and at the same time made a bill of sale of the goods, and of the produce and advantage thereof, to the plaintiff. There Sir E. Northey cited a case ' where a man took out execution against another; by agreement between them, the owner was to keep the possession of them upon certain terms, and afterwards another obtained judgment against the same man, and took the goods in execution; and it was held that he might, and that the first execution was fraudulent and void against any subsequent creditor, because there was no change of the possession, and so no alteration made of the property.1 And he said it had been ruled forty times in his experience at Guildhall, that if a man sell goods, and still continue in possession as visible owner of them, such sale is fraudulent and void as to creditors, and that the law has been always so held. The Lord Chancellor held in the principal case that the trust of those goods appeared upon the very face of the bill of sale. That though they were sold to the plaintiff's, yet they trusted Brewer to negotiate and sell them for their advantage, and Brewer's keeping possession of them was not to give a false credit to him, as in other cases which had been cited, but for a particular purpose agreed upon at the time of the sale. So that the Chancellor in that case proceeded on the distinction which I have taken; he supported the deed, because the want of possession was consistent with it. This has been argued by the defendant's counsel as being a case in which the want of possession is only evidence of fraud, and that it was not such a circumstance per se as makes the transaction fraudulent in point of law: that is the point which we have considered, and we are all of opinion that if there be nothing but the absolute conveyance, without the possession, that in point of law is fraudulent." This case is also cited and approved by Marshall, C. J., in Hamilton v. Russel, 1 Cranch, 310; Cadogan v. Kennett, 2 Cowp. 432; Jarman v. Woolloton, 3 T. R. 618; Stone v. Grubham, 2 Bulst. 225; Bucknal v. Roiston, Pr. in Ch. 285; Reed v. Wilmot, 7 Bing. 577; s. c. 5 Moo. & P.