In re Cook and Gleason.

some of the district courts in bankruptcy, and although not directly passed upon, I think the reasoning in those cases in harmony with the views herein expressed by me.

I think there are three good answers to the claim of Davis, the private creditor of Gleason:

First-When partners, as in this case, are in fact insolvent, they should be considered in equity as holding the partnership effects in trust for the benefit of the firm creditors; and they cannot, by a transfer of the interest of one to the other, defeat this trust; as stated in Bird vs. Morrison, 12 Wisconsin, 153: "The partnership property is subject to an implied trust in favor of the partnership debts."

Second-That a sale by one partner to his co-partner, when the firm is insolvent and upon the eve of bankruptcy, as in this case, which, if upheld, would operate to apply the property of the retiring partner to the payment of the individual debts of the partner purchasing, is presumptively fraudulent as to the firm creditors, and the courts should set aside such sale, and distribute the property as firm property to the payment of the firm debts.

Third-If the legal effect of such transfer would be to change the order of payment and prefer certain creditors, the private creditors over the firm creditors, it would be void as creating a preference contrary to the provisions of section 35, of the bankrupt act.

I therefore order and adjudge that the sale of Cook to Gleason was fraudulent and void as to firm creditors, and direct that the partnership property and assets of the firm of Cook & Gleason be distributed as partnership effects and to the payment of the firm debts as provided by law.

I further order and adjudge that the store and lot, for the purpose of distribution, are to be treated as a part of the firm assets, and that the judgment of the petitioner was not and did not becoms a lien thereon by the sale of Cook to Gleason, and that the petitioner Davis has no lien or claim upon said fund by virtue thereof, and that her judgment is not payable out

Jenkins, Assignee, etc., vs. Einstein.

of the firm effects of Cook & Gleason until after the payment of all the debts of said firm.

And the petition and motion of said Davis is denied.

Consult In re Munn, post, 442; In re Knight, Vol. 2 of this Series, 515.

[Reporter.

JENKINS, ASSIGNEE, ETC., VS. EINSTEIN.

CIRCUIT COURT-NORTHERN DISTRICT OF ILLINOIS-JULY TERM,

1871.

IN EQUITY.

FRAUDULENT CONVEYANCE

1. INTENT OF BOTH PARTIES MUST APPEAR.-To set aside a conveyance as made to hinder and defraud creditors the intention of both parties must be shown,

2. Testimony of witnesses as to the value of property at an anterior date commented upon.

3. INADEQUACY OF CONSIDERATION MUST BE GROSS.-To set aside a conveyance for inadequacy of consideration, the consideration must be grossly inadequate, and such as to clearly indicate the existence of unfair dealing, fraud, imposition or oppression.

4. PURCHASE WITHOUT ABSTRACT OF TITLE.-The fact that an attorney, who thinks that he knows the title, has confidence in the vendor, and purchases without an abstract or examination of title, is not a proof of fraud.

5. USURY.-The fact that the negotiator of a loan, who personally guaranteed the paper, received a large compensation for so doing, does not vitiate a conveyance made to him in settlement of a part of the loan which he was afterwards compelled to take up.

6. It seems, that an assignee cannot set aside a transaction of the bank. rupt on the ground of usury.

Jenkins, Assignee, etc., vs. Einstein.

7. SALE TO ATTORNEY-WHEN VALID.-To set aside a conveyance made to his attorney by a party in embarrassed circumstances, it must be shown that he had been consulted in regard to the particular transaction, or that he was in a position to take an unfair advantage.

8. The fact that their relations were intimate and that the vendor expected to be able to re-purchase on favorable terms, does not make the conveyance a simple security for indebtedness.

9. DEPRECIATED NOTES.-The fact that a part of the consideration was the paper of the firm to which vendor belonged, which was then only worth a part of its face, does not, at common law, vitiate the transaction.

10. LOOSE CONVERSATIONS.-Loose conversations or statements should not be allowed to change the character of a conveyance, and subsequent parol promises by the vendee to give the vendor the advance in the property, and offers to convey to any one who would take it off his hands, are without consideration, and cannot be enforced either in law or equity.

This was a bill filed by Robert E. Jenkins, assignee of John K. Pollard, against Morris Einstein, Arthur D. Rich and Calvin P. Austin, to set aside a conveyance of certain real estate made by Pollard to Rich, and alleged to be with intent to hinder and delay his creditors.

During the year 1866, and for several years prior thereto, Pollard was engaged in business in Chicago as a member of the firm of Pollard, Doane & Co., a wholesale grocery house. transacting a large business and in good credit, and also of the firm of R. M. Whipple & Co., real estate agents and general speculators. The defendant Rich, a lawyer of the same city, had frequently acted as attorney for Pollard and had had considerable financial transactions with him, and had, from time to time, advanced him sums of money. In June, 1865, the firm of R. M. Whipple & Co., then claiming to be entirely solvent, was pressed for money and applied to Rich for a loan of $20,000, and through his influence the loan was procured from third parties on the notes of R. M. Whipple & Co., who paid Rich for his commission in the negotiation the sum of $3,750, Rich personally guaranteeing $15,000 of the notes. This loan was procured at the express request of Pollard, who gave his personal promise to Rich to see it paid.

Part of the notes were paid by the firm, but the balance

Jenkins, Assignee, etc., vs. Einstein.

Rich was compelled to take up, and in October, 1866, Rich still held $8,000 of the paper. At that time the affairs of R. M. Whipple & Co. had become badly embarrassed, and Pollard became alarmed in regard to its effect upon his grocery firm. At Pollard's request Rich then went with him to consult Whipple at Pithole, Pennsylvania, in regard to paying or securing this paper, and arranging for other liabilities of the firm then past due; but nothing was accomplished.

On the 16th day of November, Pollard conveyed to Rich certain property on Fourth avenue, Chicago, for the expressed consideration of $25,000, made up as follows: Notes of R. M. Whipple & Co., held by Rich, $8,000; mortgage notes, guaranteed by Whipple, $3,000; checks of R. M. Whipple & Co. to J. K. Pollard, $9,000: and the balance, $5,000, in Rich's own note, due in one year, secured back on the property. At the same time he also conveyed to Rich certain property on the corner of Wabash avenue and Thirteenth street, for the expressed consideration of $15,000, as follows: $5,000 in cash, and his two notes for $5,000 each for the balance, due in twenty and thirty days, respectively, which notes were paid or. maturity.

On the 11th of March, 1868, Rich conveyed to Austin the Wabash avenue property for $26,000, cash. On the 15th of January, 1869, he conveyed the Fourth avenue property to Einstein for $26,500; $14,000 cash and $12,500 secured back by mortgage on the property, which mortgage Rich still owned at the time of the suit; and the bill charged the purchasers with notice of all of complainant's equities as set up in the bill.

Prior to the execution of the deeds by Pollard to Rich two judgments had been recovered against him in the Superior Court of Chicago, amounting to over $10,000, upon which executions were issued and levied, and the property sold at sheriff's sale.

Rich knew nothing of these judgments until after the sheriff's sales, and soon after the time for redemption had expired, he

Jenkins, Assignee, etc., vs. Einstein.

bought them up for $13,000, taking a conveyance from the purchasers to himself.

Rich, in his answer, denied all allegations in the bill charging him with fraud, and insisted that he was a bona fide purchaser for a valuable and adequate consideration.

The facts further appear in the opinion.

George F. Harding and Milton T. Peters, for complainant. The creditors, or the assignee, have the right to avoid a conveyance prior to their right or lien, by showing it usurious or fraudulent. Dix vs. Van Wyel, 2 Hill, 522; Post vs. Dent, 8 Paige, 632; Thompson vs. Van Vechten, 27 New York, 568; Schoepel vs. Corning, 5 Denio, 236; Valentine vs. Conners, 40 New York, 254.

Conveyances made with intent to defraud or defeat creditors will be void, although there may be in the strictest sense a valuable consideration, nay an adequate consideration. 1 Story's Equity Jurisprudence, § 369; Rogers vs. Evans, 3 Black. 576; Meyer vs. McCullough, 1 Carter, 339.

This is a secret reservation of the surplus of the value of the property, viz., of a benefit in the right of redemption upon a conveyance absolute in form. This is admitted to be fraud by all courts. McCulloch vs. Hutchinson, 7 Watts, 434; Smith vs. Lowell, 6 New Hampshire, 67; Smith vs. Smith, 11 do., 460; 1 American Leading Cases, 71.

An attorney cannot buy of or against his client. He has a duty to perform inconsistent with the character of purchaser on his own account. Van Epps vs. Van Epps, 9 Paige, 237. He is a trustee. Howell vs. Baker, 4 Johnson's Chancery, 118. The principle that a client is protected in his contracts with his attorney is deemed so important that the client is allowed to set aside a fraudulent assignment to his attorney; prevailing over general rule that one party to a fraud, standing on equal footing, cannot be relieved against the other. Ford vs. Harrington, 16 New York, 285; 1 Story's Equity Jurisprudence, 300-10; Thalimer vs. Brinkerhoff, 20 Johnson, 396; Osborne