in part; if there is a scheme, plan, or purpose to secure the property for the benefit of the debtor to the exclusion of the creditors; if there is a purpose to cover up, secrete, remove, or dispose of the

property so as to prevent its coming to the hands of the creditors; or if there is an attempt to so hinder and delay them as to force them to accept a compromise for less than that which is actually due and owing them, then and in all such cases the transaction is fraudulent and void; and if a creditor participates in such scheme and has knowledge of such purpose, or in any manner aids and abets the accomplishment of such purpose, he becomes a party to the fraud, and is liable to have any lien that he may have procured postponed to that of other creditors, even though the debt is actually due and owing to him from the debtor. If the purpose of the creditor in obtaining or taking a transfer to himself of the property of his insolvent debtor is not to collect or secure the payment of his own debt, but to aid the debtor in covering up his prop

N. J.-Richey v. Carpenter (Ch. 1895), 33 Atl. 472; Folk v. Fonda (Ch. 1894), 29 Atl. 676; Moore v. Williamson, 44 N. J. Eq. 496, 15 Atl. 587, 1 L. R. A. 336; Metropolis Nat. Bank v. Sprague, 21 N. J. Eq. 530.

N. C.-Peeler v. Peeler, 109 N. C. 628, 14 S. E. 59; Hafner v. Irwin, 23 N. C. 490.

N. D.-Daisy Roller Mills v. Ward, 6 N. D. 317, 70 N. W. 271.

Ohio.-Fassett v. Traber, 20 Ohio, 540; Brooks v. Todd, 1 Handy, 169.

Pa.-Thornburn v. Thompson, 192 Pa. St. 298, 43 Atl. 992; Werner v. Zierfuss, 162 Pa. St. 360, 29 Atl. 737; Bunn v. Ahl, 29 Pa. St. 387, 72 Am. Dec. 639; Jaroslawski v. Simon, 3 Brewst. 37. But see Whitman v. O'Brien, 29 Pa. Super Ct. 208.

S. C.-Pickett v. Pickett, 2 Hill Eq. 470; Fryer v. Bryan, 2 Hill Eq. 56.

Tex.-Edrington v. Rogers, 15 Tex. 188; Louisiana Sugar Refining Co. v. Harrison, 9 Tex. Civ. App. 141, 29 S. W. 500; Mixon v. Symonds, 2 Tex. Civ. App. 629, 21 S. W. 772.

Va.-National Valley Bank v. Han

70

cock, 100 Va. 101, 40 S. E. 611, 93 Am. St. Rep. 933.

Wis.-Zimmerman v. Bannon, 101 Wis. 407, 77 N. W. 735.

Eng.-Twyne's Case, 3 Coke, 80a, 1 Smith Lead. Cas. 1.

See also Retention of possession or apparent title, chap. XII, supra; Reservations and trusts for grantor, chap. X, supra.

Liable as garnishee for excess. A mortgage creditor who surrenders his mortgage and takes back a bill of sale for the purpose of hindering, delaying and defrauding other creditors of the mortgagor, cannot complain because he is held liable in garnishment proceedings by a creditor of the mortgagor for the proceeds of the sale in his hands in excess of the debt due him. Carter, R. & H. Co. v. McDonald, 94 Wis. 186, 68 N. W. 655.

70. Galle v. Tode, 148 N. Y. 270, 42 N. E. 673; Maase v. Falk, 146 N. Y. 34; Manning v. Beck, 129 N. Y. 1, 14 L. R. A. 198; Young v. Clapp, 147 Ill. 176, 32 N. E. 187, 35 N. E. 372; Bunn v. Ahl, 29 Pa. St. 387, 72 Am. Dec. 639.

erty and defeating other creditors, or to help the debtor by securing to him a secret interest or benefit therein, or any reservation of the property for the debtor's own use and benefit, he participates in the fraudulent intent of the debtor and will not be protected as a preferred creditor, though it be shown that his debt was bona fide and of an amount equal to the fair value of the property." The same rule applies where the transferee knows that the debtor has made false statements in regard to, or has purposely concealed, his financial condition in order to obtain credit on purchases from another creditor, or knows that the purchases were made from the latter for the purpose of obtaining goods to secure the transferee's claim. Payment of a valuable consideration upon the transfer of property, whether by the satisfaction of a valid existing indebtedness or in any other manner, is not inconsistent with the exist

71. Smith v. Schwed, 9 Fed. 483; Schram v. Taylor, 51 Kan. 547, 33 Pac. 315; Johnson v. Whitwell, 24 Mass. 71; McDonald v. Hoover, 142 Mo. 484, 44 S. W. 334; Sunday Creek Coal Co. v. Burnham, 52 Neb. 364, 72 N. W. 487.

But a mortgage given to secure a previously existing valid indebtedness is valid against other creditors, though made and secured with intent to place the mortgagor's property beyond the reach of such other creditors, and, at the same time, secure him in the use of it. A debtor has the right to prefer one creditor over another, even though the effect be to prevent the other from collecting his debt. Hastings v. Claflin, 14 N. Y. Supp. 757; Billings v. Billings, 31 Hun (N. H.), 65; Jewett v. Noteware, 30 Hun (N. Y.) 192.

It is not fraudulent to give or receive a pledge for the payment of an honest debt, especially

if the pledge does not exceed in value the amount of the debt; but it is otherwise if done collusively and the real object is to delay or defeat other creditors. Reynolds v. Wilkins, 14 Me. 104.

Giving the debtor authority to sell goods transferred to the creditor to sell and apply to payment of his debt does not show that the creditor participated in the fraud. Marsalis v. Brown, 1 Tex. App. Civ. Cas., § 453.

A conveyance to a creditor to prevent attachment of the property by other creditors and to secure its continued use in the business of the debtor is fraudulent, where its object is not to secure his debt or to raise money for the payment of other debts. Bernard v. Barney Myroleum Co., 147 Mass. 356, 17 N. E. 887.

72. Hill v. Mallory, 112 Mich. 387, 70 N. W. 1016.

ence of an intent to defraud, but is simply a circumstance to be considered in determining the question of intent. A creditor has

a right to protect his own interests, but in so doing he must not lend himself to any scheme whereby others may be defrauded; and he does this whenever he knowingly accepts the benefits of an arrangement by which others are deceived or misled and the interests of the debtor thereby improperly protected from the lawful demands of his creditors." It is necessary that good faith should be observed toward the rights of other creditors and that both the debtor and the preferred creditor should act solely for the purpose of securing the debt preferred, without interposing any barrier to the rights of others or hindering or delaying the other creditors, except such as may be incidental to the preference or necessary to effect that object.75

§ 10. Participation by creditor in fraudulent intent where debt is only part of consideration.—Where a creditor purchases or receives from his debtor more goods or property than are necessary to pay his debts, although he pays a consideration for the

73. Billings v. Russell, 101 N. Y. 226, 4 N. E. 531. See also Effect of consideration, chap. XIII, § 30, infra. 74. Thompson v. Furr, 57 Miss. 478.

Participation by a creditor in the debtor's fraudulent purpose is not sufficiently shown by his knowledge that the debtor desires to and does prefer him to other creditors. Bank of Commerce v. Schlotfeldt, 40 Neb. 212, 53 N. W. 727. Nor can it be inferred from his failure to point out to an officer holding an attachment writ the goods of the debtor. Steinberg v. Buffum, 61 Neb. 778, 86 N. W. 491.

Failure of a creditor to give notice to other creditors of judgment notes given him by an insolvent debtor does not show participation in

the debtor's intention to defraud his creditors. Field v. Ridgely, 116 Ill. 424, 6 N. E. 156. Or of a check given by him to the debtor in payment for the goods purchased, after learning of the fraud and while the check was still in the debtor's hands. Keet-Roundtree Shoe Co. v. Lisman, 149 Mo. 85, 50 S. W. 276.

75. Harris v. Russell, 93 Ala. 59, 9 So. 541, the purchasing creditor cannot go beyond the legitimate purpose of obtaining payment of his debt; Foster v. Grigsby, 1 Bush. (Ky.) 86; Hafner v. Irwin, 23 N. C. 490; Walker v. Walker, 6 Ohio S. & C. P. Dec. 355, 4 Ohio N. P. 324; Brooks v. Todd, 1 Handy (Ohio), 169, 12 Ohio Dec. (Reprint), 84; Fassett V. Traber, 20 Ohio,

540.

remainder, he thereby puts it in the power of his debtor to hinder, delay and defraud other creditors, and the transfer is fraudulent as to other creditors, if he has knowledge of the seller's fraudulent intention, or grounds for reasonable suspicion that his act will aid the debtor in perpetrating a fraud on his other creditors.76 A