10. How Fraud May Be Shown. - No general rule can be given so as to define the circumstances under which fraud may be committed. If one in debt make a voluntary conveyance of his entire property, it would be a clear case of fraud; but this rule would not apply if such a conveyance were made by a person free from all embarrassments and without reference to future responsibilities. But, between these extremes, numberless cases arise under facts and circumstances which must be minutely examined to ascertain their true character." Fraud may be shown in conveyances of property made to hinder, delay, and defraud creditors, by the conduct and appearances of the parties, the details of the transaction, and the surrounding circumstances, and may be inferred when the facts and circumstances are such as to lead a reasonable man to believe that the property of a debtor has been attempted to be withdrawn from the reach of his creditors. A voluntary deed is fraudulent, by operation of law, where the facts and circumstances clearly show that existing creditors are thereby prejudiced, without regard to whether there were any actual or moral fraud in the conveyance." Where a person has taken out policies of insurance upon his life for the benefit of his estate, it has been frequently held that, as against creditors, his assignment, when insolvent, of such policies to or for the benefit of wife and children, or either, constitutes a fraudulent transfer of assets within the statute, and this, even though the debtor may have had no deliberate intention of depriving his creditors of a fund to which they were entitled, because his act has in point of fact withdrawn such a fund from them and dealt with it by way of bounty." A voluntary conveyance is void only as to antecedent, and not as to subsequent creditors. Evidence of judgment against the grantor is admissible to impeach the deed as fraudulent."* A subsequent indebtedness is not sufficient to make such a transfer fraudulent. There must exist at the time on the 41 13 How (U. S.) 92, 97, 98 (1851). 4273 Fed. Rep. 327 (1896). 43 128 U. S. 195, 205 (1888). part of the grantor a fraudulent view, and until this fraudulent purpose is established, either by positive proof or the exhibition of such facts as justify the inference of its actual existence, the conveyance cannot be set aside." If the purpose and motive of the grantor were to withdraw the property from the reach of debts which he intends to contract, the conveyance is invalid against debts subsequently incurred. The motive may be inferred from such facts as his having entered into a new and hazardous business about the time of making the conveyance, or from his having contracted large debts immediately thereafter." 11. A mere expectation, however, of future indebtedness, or even an intent to contract debts, if it be only an intent, not coupled with a purpose to convey the property, in order to keep it from being reached by the creditors, will not make the deed invalid as against such future creditors." The transfer to be void must be made with direct reference to immediate future indebtedness and must be coupled with an actual intent to deprive the future creditors of a security upon which they have a right to rely. For, in such case, when this purpose is accomplished, such subsequent creditors are injured and defrauded."" The well-settled rule is that where a conveyance is intentionally made to defraud creditors, it is void as to all subsequent as well as prior creditors and, if it be made with the view of defrauding subsequent creditors, it is as to them void, although all prior creditors are paid in full. Where a voluntary conveyance is made by an individual free from debt, with a purpose of committing a fraud on future creditors, it is void under the statute." Even a voluntary conveyance from husband to wife is good as against subsequent creditors, unless made with. intention to defraud them, or made secretly so that knowledge of it was withheld from them and they dealt with the 45 71 Tex. 549, 556 (1888). 46 39 Pa. 499, 506 (1861). 47 69 Pa. 21, 28 (1871). 489 Fed. Rep. 84, 87 (1881). grantor upon the faith of his owning the property transferred, or the transfer was made with a view of entering into some new and hazardous business, the risk of which the grantor intended should be cast upon the parties having dealings with him in the new business." If it be proven that an insolvent conveys all, or substantially all, his property in consideration of love and affection only, it is constructively fraudulent against subsequent as well as existing creditors." Subsequent creditors may have a voluntary conveyance set aside by showing antecedent debts in such quantity as to afford reasonable evidence of a fraudulent intent," an intent to defraud antecedent creditors being held prima-facie proof of an intent to defraud subsequent creditors." In Pennsylvania, however, a subsequent creditor can only avail himself of a fraud practiced against him, and a deed void as against existing creditors does not even raise a suspicion of fraud as against creditors whose debts had no existence when it was made." Where a deed is set aside as void as to existing creditors, all the creditors, prior and subsequent, share in the fund pro rata. RIGHTS OF CREDITORS 12. A creditor is not simply a person to whom a debt is due, but a person to whom any obligation is due. It is a person who has the right to require the fulfilment of any obligation, contract, or guaranty, and he is to be considered as a creditor of such obligor or guarantor from the time of his entering into the obligation. Thus, the contract of a surety only creates a contingent liability. Until the principal is in default, it is uncertain whether an action will ever accrue against the surety. The drawer of a bill of exchange is only bound to pay it upon a contingency which may never happen; and so it is with the indorser of negotiable paper of all kinds. The contract of indemnity is another case where 50 134 N. Y. 35 (1892); 134 U. S. 405 (1890). $135 Conn. 328 (1868). 52 12 Barb (N. Y.) 653 (1852). · 53 13 Cal. 62 (1859). 54 90 Pa. 293 (1879); 193 Pa. 89, 92 (1899). an action may never accrue upon the undertaking. In these and all other cases depending upon a contract, the person to whom the engagement is made is as much a creditor within the meaning of the statute as though he had a debt on which a right of action already existed. And he is entitled to the same protection in the one case as in the other." So, a right of action arising from a tort is within the protection of the statute, and a conveyance made to defeat such right will be set aside. A conveyance of real property, though void as to creditors asserting their rights against it, passes all the estate of the grantor in the premises to the grantee; and, therefore, the lien of a subsequent judgment against the grantor, which only attaches to property then belonging to him, does not affect the property so conveyed; and the creditor first seeking to set aside such conveyance obtains a prior right to satisfaction thereout, from the commencement of his suit for that purpose." A party, though in debt, may sell his property to whom he pleases, if no lien exist to prevent it, and, if the transaction be an honest one, made in good faith and for an adequate consideration, it matters not how many creditors may thereby be prevented from reaching the property." A conveyance executed for a valuable and adequate consideration will be upheld against the creditors of the grantor, however fraudulent his purpose may have been, if the grantee had no knowledge thereof. Thus, an antenuptial settlement of lands, though made by a settler with the design of defrauding his creditors, will not be set aside in the absence of the clearest proof of his intended wife's participation in the fraud."* It is not indispensably necessary to establish fraud in a deed, as against creditors, that it should be shown that the party was in debt at the time of its execution, or that it was executed with a view to future indebtedness. == 5573 Fed. Rep. 327, 331 (1896); 29 N. J. Eq. 554, 559 (1878). 56 36 Fed. Rep. 29 (1888). A creditor 57 74 III. 242 (1874). 58 103 U. S. 22 (1880). may have the deed avoided by proof of facts subsequent to its execution, showing that the sale was merely colorable. For, if, notwithstanding an absolute sale, possession remain. in the vendor, it is generally destructive of the conveyance. The retention of possession creates the inference that the sale was made upon a secret trust for the use of the vendor. The fraud consists in this, that the vendee permits him to hold himself out to the world as the owner of the property, and upon the faith of it to obtain credit." 13. Interest of the Purchaser. - A purchaser, unlike a creditor, does not trust to the personal responsibility of the debtor, but pays his money upon the faith of the debtor's actual title to the specific property transferred; and his interests, therefore, in such property are superior to those of the creditor. To entitle the purchaser to such superior rights three things must exist: (1) He must buy without notice of the bad intent on the part of the vendor; (2) he must be a purchaser for a valuable consideration; and (3) he must have paid the purchase money before he had notice of the fraud."" He is then said to be an innocent purchaser for value. A conveyance of goods for the purpose, on the part of the vendor known to the vendee, of hindering, delaying, or defrauding creditors is void as to such creditors, even though the vendor be not solvent. The fact that a person selling his goods is at the time indebted and does not intend to apply the money he receives for them to his debts, is not of itself sufficient to establish a fraudulent or dishonest purpose. A sale to be void as to creditors must be made with intent to hinder, delay, or defraud them, in which the purchaser must participate by purchasing with a view to abet the fraudulent design." A bona-fide sale for a fair price to an innocent purchaser will not be set aside at the instance of a creditor of the grantor on the grounds of alleged fraud, for the sole reason that in the opinion of sundry witnesses the 591 Hill Ch. (S. C.) 297, 305 (1833). 60 19 N. Y. 417, 420 (1859). 6144 Neb. 600 (1895). |