fice, to sustain the purchase as against the seller's creditors: 1. The purchaser must purchase in good faith. 2. There must be a valuable consideration; and 3. That consideration must actually have been paid without notice of the seller's fraud.1 § 953. Fraud of seller alone not enough.— The seller's fraud alone is not therefore of itself enough to defeat the title of the purchaser for value. To accomplish that result, the purchaser must, to some extent at least, have known of or participated in the intention of the seller. How direct and full the purchaser's knowledge must be is a question upon which the authorities do not agree. The court in Massachusetts has required not only knowledge of the seller's fraud, but participation in it. In New York, Connecticut, Missouri, Oregon, and perhaps other States,' actual knowledge by the buyer must 1 Tillman v. Heller, 78 Tex. 597, 14 S. W. R. 700, 11 L. R. A. 628, 22 Am. St. R. 77; Galbreath v. Cook, 30 Ark. 417; Smith v. Selz, 114 Ind. 229, 16 N. E. R. 524; Arnholt v. Hartwig, 73 Mo. 485; Stone v. Spencer, 77 Mo. 356; Paul v. Baugh, 85 Va. 955, 9 S. E. R. 329; Beasley v. Bray, 98 N. C. 266, 3 S. E. R. 497; Hedman v. Anderson, 6 Neb. 392; Beidler v. Crane, 135 Ill. 92, 25 Am. St. R. 349, 25 N. E. R. 655. "The consideration must, in all cases, be actually passed before notice. Unless payment has been actually made in some shape, the authorities are quite clear that the purchase will not be upheld." Dixon v. Hill, 5 Mich. 404. Same: Arnholt v. Hartwig, 73 Mo. 485. 2 Foster v. Hall (1831), 12 Pick. 89, 22 Am. Dec. 400; Ricker v. Ham, 14 Mass. 137; Hill v. Ahern, 135 Mass. 158; Bristol Savings Bank v. Keavy, 128 Mass. 298. Participation seems also to be required in Kentucky. Brown v. Foree (1847), 7 B. Mon. 357, 46 Am. Dec. 519. 3 Parker v. Conner (1883), 93 N. Y. 118, 45 Am. R. 178; Stearns v. Gage, 79 N. Y. 102; Bush v. Roberts (1888), 111 N. Y. 278, 7 Am. St. R. 741, 18 N. E. R. 732. 4 Knower v. Cadden Clothing Co. (1889), 57 Conn. 202, 17 Atl. R. 580. 5“The knowledge of facts which, if investigated and followed out, would lead to knowledge of the fraud, is not deemed sufficient under the decisions of this court." State v. Mason (1892), 112 Mo. 374, 20 S. W. R. 629, 34 Am. St. R. 390; Van Raalte v. Harrington (1890), 101 Mo. 602, 20 Am. St. R. 626, 11 L. R. A. 424, 14 S. W. R. 710. Compare Connecticut Mut. L. Ins. Co. v. Smith (1893), 117 Mo. 261, 38 Am. St. R. 656, 22 S. W. R. 623. See also Riley v. Vaughan, 116 Mo. 169, 22 S. W. R. 707. 6 Lyons v. Leahy (1887), 15 Oreg. 8, 13 Pac. R. 643, 3 Am. St. R. 133; Coolidge v. Heneky, 11 Oreg. 327, 8 Pac. R. 281. 7 The same rule prevails in New Hampshire. Seavy V. Dearborn (1849), 19 N. H. 351. be shown. The majority of the courts, however, do not go so far,' and the rule sustained by the great weight of the authorities is that neither participation nor actual knowledge is required, but that notice of facts sufficient to put a prudent man In Michigan it is held "that knowledge of facts sufficient to put an ordinarily prudent man on inquiry is all that is required, and that participation in the fraud is not necessary." Bedford v. Penny, 58 Mich. 424, 25 N. W. R. 381; Hough v. Dickinson, 58 Mich. 89, 24 N. W. R. 809; Eureka Iron Works v. Bresnahan, 66 Mich. 489, 33 N. W. R. 834. See also Treusch v. Ottenburg, 4 C. C. A. 629, 54 Fed. R. 867. In Texas, "knowledge of facts sufficient to excite the suspicions of a prudent man and to put him upon inquiry is sufficient." Moseby v. Gainer, 10 Tex. 393; Edrington v. Rogers, 15 id. 188; Mills v. Howeth, 19 Tex. 257, 70 Am. Dec. 331. In Mississippi, knowledge, “or, what is the same thing, notice of such facts or circumstances as would lead a reasonable man to the conclusion that fraud in fact existed or was intended." Tuteur v. Chase (1889), 66 Miss. 476, 6 S. R. 241, 14 Am. St. R. 577, 4 L. R. A. 832. In New Jersey, "circumstances . . . of such a character as to awaken his suspicion and put him upon inquiry" will charge a mortgagee with knowledge. Moore v. Williamson (1888), 44 N. J. Eq. 496, 15 Atl. R. 587, 1 L. R. A. 336; De Witt v. Van Sickle, 29 N. J. Eq. 209. In Alabama, knowledge, or notice of such facts as would put a reasonable man upon inquiry, is sufficient. Smith v. Collins (1891), 94 Ala. 394, 10 S. R. 334; Stix v. Keith (1888), 85 Ala. 465, 5 S. R. 184. The same rule prevails in Iowa: Williamson v. Wachenheim (1882), 58 Iowa, 277, 12 N. W. R. 302; Jones v. Hetherington (1877), 45 Iowa, 681; Lyons v. Hamilton, 69 Iowa, 47, 28 N. W. R. 429; Spaulding v. Adams, 63 Iowa, 437, 19 N. W. R. 341. In Nebraska: Bollman v. Lucas (1888), 22 Neb. 796, 36 N. W. R. 465; Temple v. Smith (1882), 13 Neb. 513, 14 N. W. R. 527. See also Brittain v. Crowthers, 4 C, C. A. 341, 54 Fed. R. 295. In Kansas: Gollober v. Martin (1885), 33 Kan. 252, 6 Pac. R. 267. In Minnesota: Holcombe v. Ehrmanntraut (1891), 46 Minn. 397, 49 N. W. R. 191; Manwaring v. O'Brien, 75 Minn. 542, 78 N. W. R. 1. In Maryland: Biddinger v. Wiland (1887), 67 Md. 359, 10 Atl. R. 202; Higgins v. Lodge (1887), 68 Md. 229, 6 Am. St. R. 437, 11 Atl. R. 846. In California: Godfrey v. Miller (1889), 80 Cal. 420, 22 Pac. R. 290. In Wisconsin: Hooser v. Hunt (1886), 65 Wis. 71, 26 N. W. R. 442. In Nevada: Greenwell v. Nash (1878), 13 Nev. 286. In Arkansas: Dyer v. Taylor (1887), 50 Ark. 314, 7 S. W. R. 258. In Virginia: Hickman v. Trout, 83 Va. 478, 3 S. E. R. 131; Batchelder v. White, 80 Va. 103. In Georgia: Smith v. Wellborn, 75 Ga. 799; Phillips v. Adair, 59 Ga. 370. In Indiana: Sanders v. Muegge (1883), 91 Ind. 214. In Illinois: Mathison v. Prescott (1877), 86 IIL 493. upon an inquiry which would have disclosed the truth will prevent the purchaser from becoming a bona fide purchaser within the statute.1 § 954. — Inadequacy of consideration.— " Adequacy" of consideration is not usually indispensable to make it "valuable," and this rule is applicable here; but at the same time it is unquestionable that an inadequate consideration may raise a presumption of bad faith on the part of the buyer, which will grow in conclusiveness as the inadequacy appears more and more gross.2 In Pennsylvania: Dean v. Con- ance the property against the price nelly (1847), 6 Barr, 239. as to leave no room for the ordinary In South Dakota: Shauer v. Alter- differences of opinion as to values, ton, 151 U. S. 607. In England, the same rule is applied under the statute. National Bank v. Morris, [1892] 17 App. Cas. 287. 1 The existence of the facts and their sufficiency to constitute notice or knowledge are usually questions to be determined by the jury, and a wide range of evidence is ordinarily admissible. Lyons v. Leahy, 15 Oreg. 8, 13 Pac. R. 643, 3 Am. St. R. 133; Hough v. Dickinson, 58 Mich. 89, 24 N. W. R. 809; Tuteur v. Chase, 66 Miss. 476, 6 S. R. 241, 14 Am. St. R. 577, 4 L. R. A. 832; Judson v. Lyford, 84 Cal. 505, 24 Pac. R. 286; Helms v. Green, 105 N. C. 251, 11 S. E. R. 470, 18 Am. St. R. 893; Heaton v. Nelson, 74 Mich. 199, 41 N. W. R. 895; Nichols v. Nichols, 61 Vt. 426, 18 Atl. R. 153; Van Raalte v. Harrington, 101 Mo. 602, 14 S. W. R. 710, 20 Am. St. R. 626, 11 L. R. A. 424; State v. Mason, 112 Mo. 374, 20 S. W. R. 629; Boyle v. Maroney, 73 Iowa, 70, 35 N. W. R. 145, 5 Am. St. R. 657. 2 In Alabama it is said that "while 'the law will not weigh considerations in diamond scales,' nor so closely bal yet when the jury can see that the disparity amounts to a gross inadequacy their verdict should be against the transaction." Mobile Sav. Bank v. McDonnell (1889), 89 Ala. 434, 8 S. R. 137, 18 Am. St. R. 137, 9 L. R. A. 645. The question here is different from the case in which the grantor seeks to set aside a conveyance for inadequacy. Here "inadequacy of price, when unreasonable, is evidence of a secret trust. and it is prima facie evidence that a conveyance is not bona fide, if it is accompanied with any trust." Kuykendall v. McDonald (1852), 15 Mo. 416, 57 Am. Dec. 212. "There is no doubt that inadequacy of price in the sale of property by an insolvent debtor is a badge of fraud; but it is not regarded as sufficient alone to raise a legal inference of fraud, unless so grossly so as to 'strike the understanding at once with the conviction that such a sale never could have been made in good faith.'" State v. Mason, 112 Mo. 374, 20 S. W. R. 629, 34 Am. St. R. 390. The inadequacy was held to be so strikingly great in Connecticut Mut. L. § 955. Considerations other than pecuniary.- The consideration need not be a pecuniary one. It may be anything which the law in other cases regards as valuable.1 Satisfaction or security of a debt owing by the seller to the buyer will suffice, and the latter may thus lawfully secure a bona fide Ins. Co. v. Smith, 117 Mo. 261, 38 Am. St. R. 656, 22 S. W. R. 623. The price paid may be so entirely inadequate as to put a prudent man on his guard. Weber v. Rothchild (1887), 15 Oreg. 385, 15 Pac. R. 650, 3 Am. St. R. 162. And while mere inadequacy may not prove fraud, it is clear that if gross it may do so, and in any event it is a proper matter for consideration by the jury. Kempner v. Churchill, 8 Wall. (U. S.) 362; Jaeger v. Kelley, 52 N. Y. 274; Emonds v. Termehr, 60 Iowa, 92, 14 N. W. R. 197; Shelton v. Church, 38 Conn. 416; McFadden v. Mitchell, 54 Cal. 628; Newman v. Kirk, 45 N. J. Eq. 677, 18 Atl. R. 224; Smith v. Boyer, 29 Neb. 76, 45 N. W. R. 265, 26 Am. St. R. 373; Philbrick v. O'Connor. 15 Oreg. 15, 3 Am. St. R. 139, 13 Pac. R. 612; Weber v. Rothchild, 15 Oreg. 385, 15 Pac. R. 650, 3 Am. St. R. 162. 1 Thus a conveyance in consideration of marriage is a valuable one, which will sustain it as against creditors (marriage portion to grantor's daughter). Cohen v. Knox (1891), 90 Cal. 266, 27 Pac. R. 215, 13 L. R. A. 711 [citing Magniac v. Thompson, 32 U. S. (7 Pet.) 348, 8 L. ed. 709; Prewit v. Wilson, 103 U. S. 22, 26 L. ed. 360; Wood v. Jackson, 8 Wend. (N. Y.) 9, 22 Am. Dec. 603; Herring v. Wickham, 29 Gratt. (Va.) 628, 26 Am. R. 405; Huston v. Cantril, 11 Leigh (Va.), 136; Sterry v. Arden, 1 Johns. (N. Y.) Ch. 261; Brown v. Carter, 5 Ves. Jr. 862; Otis v. Spencer, 102 Ill. 622, 40 Am. R. 617; Dugan v. Gittings, 3 Gill (Md.), 138, 43 Am. Dec. 306]: National Exch. Bank v. Watson, 13 R. I. 91, 40 Am. R. 623, n. Consideration of future support of grantor is not one which will sustain the consequence as against creditors, at least unless he retains sufficient property to pay his present debts. Johnston v. Harvy, 2 Pen. & W. (Pa.) 82, 21 Am. Dec. 426; Sidensparker v. Sidensparker, 52 Me. 481, 83 Am. Dec. 527; Woodall v. Kelly, 85 Ala. 368, 5 S. R. 164, 7 Am. St. R. 57; Harting v. Jockers, 136 Ill 627, 27 N. E. R. 188, 29 Am. St. R. 341; Davidson v. Burke, 143 Ill. 139, 32 N. E. R. 514, 36 Am. St. R. 367. Conveyance by insolvent father to son in consideration of wages of son earned while unemancipated, and received by father, is not valid as against father's creditors. Halliday v. Miller, 29 W. Va. 424, 6 Am. St. R. 653. But a conveyance of land made in pursuance of a parol trust - a promise to the devisor through whose will it was received - was upheld against creditors in Carver v. Todd, 48 N. J. Eq. 102, 21 Atl. R. 943, 27 Am. St. R. 466; and so was a conveyance made to perfect a parol gift, made by a father then solvent but now insolv ent, to a son who had made permanent improvements. Dozier v. Matson, 94 Mo. 328. 7 S. W. R. 268, 4 Am. St. R. 388; Willis v. McIntyre, 70 Tex. 34, 8 Am. St. R. 574, 7 S. W. R. 594. debt even though the process exhausts the seller's property, leaving nothing for his other creditors.1 § 956. Conveyance subject to secret lien or trust.-Lacking in the essential elements which alone sustain the convey 1 The transfer by a debtor of property, at a fair valuation, in payment of an honest debt is, in the absence of a statute making it so, no fraud upon other creditors, even though the debtor is insolvent and such conveyance will prevent other creditors from getting their pay, as both grantor and grantee knew or must have known. Covanhovan v. Hart (1853), 21 Pa. St. 495, 60 Am. Dec. 57 [Summer's Appeal, 16 Pa. St. 169, and Ashmead v. Hean, 13 id. 584, being overruled]; Crawford v. Kirksey (1876), 55 Ala. 282, 28 Am. R. 704; Roswald v. Hobbie (1887), 85 Ala. 73, 4 S. R. 177, 7 Am. St. R. 23; Bamberger v. Schoolfield (Ala.), 160 U. S. 149, 16 S. Ct. R. 225, 40 L. ed. 374; Pollock v. Meyer (1892), 96 Ala. 172, 11 S. R. 385; Dawson v. Flash (1893), 97 Ala. 539, 12 S. R. 67; Powell v. Kelly (1888), 82 Ga. 1, 3 L. R. A. 139, 9 S. E. R. 278; Citizens' Bank v. Williams (1891), 128 N. Y. 77, 28 N. E. R. 33, 26 Am. St. R. 454; Shelley v. Boothe (1880), 73 Mo. 74, 39 Am. R. 481; Christian v. Greenwood (1861), 23 Ark. 258, 79 Am. Dec. 104; York County Bank v. Carter (1861), 38 Pa. St. 446, 80 Am. Dec. 494; Hauser v. Beaty (1892), 93 Mich. 499, 53 N. W. R. 628; Erdall v. Atwood, 79 Wis. 1; Weaver v. Nugent, 72 Tex. 272, 10 S. W. R. 458, 13 Am. St. R. 792; Elwood v. May, 24 Neb. 375, 38 N. W. R. 793; Smith v. Boyer, 29 Neb. 76, 45 N. W. R. 265, 26 Am. St. R. 373; Bailey v. Kennedy, 2 Del. Ch. 12, 29 Am. Dec. 351; Schram v. Taylor, 51 Kan. 547, 33 Pac. R. 315; Nelson v. Kinney, 93 Tenn. 428, 25 S. W. R. 100; Matthews v. Reinhardt, 43 Ill. App. 169. Principal debtor may transfer property to indemnify a surety who as sumes the debt. Frees v. Baker, 81 Tex. 216, 13 L. R. A. 340, 16 S. W. R. 900; Pollock v. Jones, 96 Ala. 492, 11 S. R. 529. The same rule applies to a mortgage by a debtor, though insolvent, to secure one debtor for bona fide debt, in the absence of a statute forbidding such preferences. Warner v. Littlefield (1891), 89 Mich. 329, 50 N. W. R. 721; Sheldon v. Mann (1891), 85 Mich. 265, 48 N. W. R. 573; First National Bank v. Ridenour (1891), 46 Kan. 718, 27 Pac. R. 150, 26 Am. R. 167; McFadden v. Ross, 126 Ind. 341, 26 N. E. R. 78; Turner v. Iowa Nat. Bank, 2 Wash. 192, 26 Pac. R. 256. And so where there is a conveyance of property in payment of a valid debt, though there is an agreement to reconvey upon payment of that debt. Carey Lumber Co. v. Cain, 70 Miss. 628, 13 S. R. 239. It may be otherwise if the value of the property is greatly in excess of the debt. Thompson v. Richardson Drug Co., 33 Neb. 714, 29 Am. St. R. 505, 50 N. W. R. 948. Statutes forbidding preferences by insolvent debtors. It is, of course, competent by statute to forbid certain preferences to be made by insolvent debtors; but this is a subject foreign to the present consideration. But, for example, see |
