§ 978. Fraudulent conveyance not good as security for amount paid upon it.- Where a conveyance is set aside as fraudulent in fact it is so ab initio and in toto. It cannot therefore be permitted to stand as security for the sums which the fraudulent grantee may have paid in consideration of it. "It is fit and proper that this result should take place," said Chancellor Kent in an early case," as a contrary course might afford countenance to fraud by giving it a partial effect. It would not become a court of equity to take a single step to save harmless a party detected in a fraudulent combination to cheat."1 Where, however, the conveyance is only constructively fraudulent as to creditors, it may be permitted to stand as security for the purpose of reimbursing an innocent purchaser for the money advanced by him."

OF FRAUD UPON SUBSEQUENT PURCHASERS.

§ 979. In general.- Closely, if not inseparably, associated with the question of fraud upon creditors is, as has been already noticed, the question of fraud upon subsequent purchasers; and many of the cases in treating of the matter lay down rules as equally applicable to both. In the preceding subdivision, however, the considerations arising when the claims of creditors were involved have so greatly overshadowed the matter of the rights of subsequent purchasers from the vendor, that, for emphasis at least, a separate reference to the subject seems desirable. There are, also, aspects in which the two questions are not precisely identical.

§ 980. Delivery as a requisite to the transfer of title. It has been seen in a previous chapter that, as a general rule,

1 Sands v. Codwise (1808), 4 Johns. (N. Y.) 536, 4 Am. Dec. 305. To same effect: Bean v. Smith, 2 Mason (U. S. C. C.), 252; Beidler v. Crane, 135 Ill. 92, 25 Am. St. R. 349, 25 N. E. R. 655 (citing Lobstein v. Lehn, 120 Ill. 549, 12 N. E. R. 68; Phelps v. Curts, 80 Ill.

109); Lyons v. Leahy, 15 Oreg. 8, 3
Am. St. R. 133, 13 Pac. R. 643; Liv-
esay v. Beard, 22 W. Va. 585; Hen-
derson v. Hunton, 26 Gratt. (Va.) 926.
2 Philbrick v. O'Connor, 15 Oreg. 15,
Am. St. R. 139, 13 Pac. R. 612.
3 See ante, § 483 et seq.

3

whenever parties have agreed upon the present transfer of the title to a specific chattel in a deliverable condition, and nothing remains to be done by either party which the parties have evidently deemed a condition precedent, the title does pass at once, in pursuance of their agreement, although the goods are, in fact, neither delivered nor paid for. In accordance with this rule, delivery is not a prerequisite to the transfer of the title; and this seems to be the true and natural rule.

§ 981. - Indications, however, have not been wanting of a contrary view. Thus, as has been seen,' it has been suggested by some courts that if the purchaser of goods permits them to remain in the possession of the seller, he so clothes the latter with the apparent indicia of ownership that he should be estopped to assert his title against a subsequent purchaser who buys the goods from the vendor relying in good faith upon the latter's apparent ownership. It has been said in other cases that while delivery might not be necessary to pass the title as between the parties, still "that delivery of possession is necessary to the conveyance of a title to personal chattels,

1 See ante, § 167.

2 Upon this point the case of Lanfear v. Sumner (1821), 17 Mass. 110, 9 Am. Dec. 119, so often discussed and criticised, is the leading one. The court there said: "The general rule is perfectly well established that the delivery of possession is necessary in a conveyance of personal chattels, as against every one but the vendor. When the same goods are sold to two different persons by conveyances equally valid, he who first lawfully acquires the possession will hold them against the other. This principle is recognized in the case of Lamb v. Durant, 12 Mass. 54 [7 Am. Dec. 31], and in Caldwell v. Ball, 1 T. R. 205 [1 Rev. Rep. 187]. The latter, indeed, was a case not of actual delivery of goods to either party,

but of delivery of the bill of lading. There were two bills of lading, signed at different times by the master of the ship, and the party who first obtained one of them by a legal title from the owner of the goods was held to have the best right, although the bill of lading under which he claimed was made the last. The indorsement and delivery of the bill of lading in such a case is equivalent to the actual delivery of the goods. This is also the rule of the civil law. When the same thing is sold to two different persons, manifesti juris est, cum, cui priori traditum est, in detinendo dominio esse potiorem.'" Cod. 3, 32, 15.

The quotation in the text is made from Crawford v. Forristall (1877), 58 N. H. 114, citing Ricker v. Cross,

as against every one except the vendor; and a subsequent purchaser with no notice of a prior sale, receiving possession, has a better title than one who has before purchased the same thing with no delivery of possession."

Reasons for the rule.-Various reasons for this rule have been assigned. In an early case1 in Illinois the court. said: "Possession of personal property has always been re

garded as evidence of ownership, and public policy requires that while personal chattels remain in the possession of the former owner they should, as to third persons, be regarded as his." In a Connecticut case1 it was said to be adhered to "because it has been thought better to take away the temptation to practice fraud than to incur the danger arising from the facility with which testimony may be manufactured to show that a sale was honest." In the Illinois case above referred to, and in a later Pennsylvania case, it is said to be in furtherance of the general principle of the law that where one of two innocent persons must suffer the loss should fall " him whose act or omission has made, or contributed to make, the loss possible."

These cases clearly regard the rule as a general principle of law regardless of the motives of the parties.

§ 983. Retention of possession by seller as badge of fraud. Usually, however, the rule has been put upon the ground of actual or constructive fraud; aided, of course, in many States by the express language of the statutes. But, as in the case of the similar question where creditors are involved, while the retention of the possession by the seller would raise some presumption in favor of the subsequent bona fide purchaser, the courts are not agreed as to the conclusive character of that presumption.

§ 984. Conclusiveness of the presumption.-In some States the presumption of fraud is held to be conclusive. In Connecticut, for example, the court says: "This rule, that the retention of possession of personal property by the vendor is conclusive evidence of a colorable sale, is a rule of policy required for the prevention of fraud, and is to be inflexibly main

37 Ill. 362; Gradle v. Kern (1884), 109 Ill. 557.

1 Kirtland v. Snow, 20 Conn. 23, quoted in Huebler v. Smith (1892), 62 Conn. 186, 25 Atl. R. 658, 36 Am. St. R. 337.

2 Burnell v. Robertson, supra.

3 Stephens v. Gifford (1890), 137 Pa. St. 219, 20 Atl. R. 542, 21 Am. St. R. 868.

tained." In Pennsylvania also, as has been seen, the rule operates regardless of the motive of the parties. In most States, perhaps, the presumption is not conclusive, and may be rebutted by evidence of actual good faith. In this respect the question presents substantially the same aspects as where the rights of creditors are involved, discussed in the preceding subdivision.

.

§ 985. Statutory provisions. In some States, moreover, it must be remembered, the question of the conclusiveness of the evidence is determined by statute. Thus, for example, in Michigan the statute provides that "every sale made by a vendor, of goods and chattels in his possession or under his control, unless the same be accompanied by an immediate delivery, and be followed by an actual and continued change of possession of the things sold, shall be presumed to be fraudulent and void as against purchasers in good faith, and shall be conclusive evidence of fraud unless it shall be made to appear, on the part of the person claiming under such sale, that the same was made

subsequent

in good faith and without any intent to defraud such

1 Hatstat v. Blakeslee, 41 Conn. 301; Capron v. Porter, 43 Conn. 383; Mead v. Noyes, 44 Conn. 487; Huebler v. Smith, 62 Conn. 186,- though these were all cases involving the rights of creditors.

2 Stephens v. Gifford (1890), 137 Pa. St. 219, 20 Atl. R. 542, 21 Am. St. R. 868, quoted from in note to § 988, post.

3 Thus, in Hight v. Harris (1892), 56 Ark. 98, 19 S. W. R. 235, it is said: "Under our decisions the retention of possession by the vender of personal property after sale is not a conclusive presumption of fraud. Whether there was a delivery, within Shaul v. Harrington [1891, 54 Ark.

305, 15 S. W. R. 835] was a question of fact."

As to Lanfear v. Sumner (17 Mass. 110), supra, the court, in Shaul v. Harrington, said: "The application of its doctrine to a different state of facts seems to have introduced overnice refinements, and caused some apparent, if not real, confusion in the decisions of Massachusetts and other States as to the character of the delivery that must be made to protect the vendee. The authority of that case has been fairly challenged. See 1 Parsons on Shipping, p. 84 and note; Blackburn on Sales, 327-329; Hallgarten v Oldham, 135 Mass. 1. It cannot control the decision of this case."