void as against the judgment creditor." Active participation in the fraud is not necessary where the vendee had knowledge, but knowledge or implied notice is held to be equivalent to, and to constitute, participation, where the transfer is to one not a credi

tor. 48

Participation need not be by some affirmative action on the part of the transferee, but the taking of a conveyance with actual notice of the grantor's fraudulent intent, or under circumstances where the law will impute knowledge of the fraudulent purpose, renders one a participator in the fraud." Fraud may be imputed to a grantee, either by direct co-operation in the original design at the time of its concoction, or by constructive co-operation from notice of it and carrying the design upon such notice into operation.50 It is not necessary to allege or prove that the purchaser entered into the transaction with the intention of aiding the debtor's fraudulent design,51 or that there was any confederation between the parties to the transfer to delay or defraud creditors;52 the only questions in order to determine whether the sale was fraudulent are as to the vendor's intent and the purchaser's notice of it.53 Where a purchaser of property is a mere volunteer, and the seller intends by the sale to hinder, delay, or defraud his creditors, it is not necessary that it should be shown that the purchaser bought with a like intent.

Bros. v. Doner, 122 Iowa, 533, 98 N. W. 317; Redhead v. Pratt, 72 Iowa, 99, 33 N. W. 382; Jones v. Hetherington, 45 Iowa, 681.

Ky.-Huffman v. Leslie, 23 Ky. L. Rep. 1981, 66 S. W. 822.

Mich. Gumberg v. Treusch, 110 Mich. 451, 68 N. W. 236; Bedford v. Penny, 58 Mich. 424, 25 N. W. 381; Hough v. Dickinson, 58 Mich. 89, 24 N. W. 809.

N. H.-Robinson v. Holt, 39 N. H. 557, 75 Am. Dec. 233.

N. J.-Hancock v. Elmer, 61 N. J. Eq. 558, 49 Atl. 140, 63 N. J. Eq. 802, 52 Atl. 1131.

N. D.-Lockren v. Rustan, 9 N. D. 43, 81 N. W. 60; Fluegel v. Henschel, 7 N. D. 276, 74 N. W. 996, 66 Am. St. Rep. 642.

Tex.-Humphries v. Freeman, 22 Tex. 45.

49. Kansas Moline Plow Co. v. Sherman, 3 Okl. 204, 41 Pac. 623, 32 L. R. A. 33.

50. Magniac v. Thomson, 32 U. S. 348, 8 L. Ed. 709.

51. Cowling v. Estes, 15 Ill. App. 255; Ferguson v. May, 4 Ky. L. Rep. 989; Summers v. Taylor, 4 Ky. L. Rep. 290; Cansler v. Cobb, 77 N. C. 30.

52. State v. Nauert, 2 Mo. App. 295; Burgert v. Borchert, 59 Mo.

80.

53. Hathaway v. Brown, 18 Minn.

414.

It is sufficient that the latter had knowledge of the fraudulent intent of the former.54

§ 7. Effect of proper application of proceeds.-A transfer of property by an insolvent debtor is void at common law as to his creditors, even though the purchase money is applied on bona fide debts of the debtor to the amount of the fair value of the property, if the debtor intended thereby to hinder, delay and defraud his other creditors and the transferee had notice of such fraudulent intent, although the persons whose debts were paid did not participate in such fraudulent purpose.55 But it has been held that a conveyance to one with notice of the fraudulent intent of the grantor to defeat a creditor is valid so far as the consideration for the conveyance was devoted to the payment of the grantor's honest debts.56

§ 8. Knowledge of co-grantee.-A conveyance by an insolvent debtor to a number of grantees jointly, while void as to the grantees who had knowledge of the fraudulent intent of the grantor, is valid as to such of them as had no knowledge or were without notice of such intent.57 But the fact that one grantee for a valuable consideration must have known that his co-grantee gave no consideration, and, from his knowledge of the grantor's affairs, that, as to his co-grantee, the conveyance was void as to creditors by the statute of fraud, shows him, as matter of law,

54. Lyons v. Hamilton, 69 Iowa, 47, 28 N. W. 429, 72 Iowa, 759, 33 N. W. 655; Edgell v. Lowell, 4 Vt. 405.

55. Kurtz v. Lewis Voight & Sons Co., 175 Mo. 506, 75 S. W. 386; Frank v. Zeigler, 46 W. Va. 614, 33 S. E. 761. A third person who, in consideration of a transfer of the property of a debtor, pays the amount due a creditor, occupies the position of the creditor in respect to the ques

tion whether the sale is to be considered fraudulent, as the effect of the transaction is nothing more than a preference of such creditor. Sammons v. O'Neill, 60 Mo. App. 530, 544. See also Duty to see to application of proceeds, § 16, infra.

56. Gray v. Folwell, 57 N. J. Eq. 446, 41 Atl. 869.

57. Livesay v. Beard, 22 W. Va. 585.

to have been so far implicated in the fraud that the conveyance is void as to him.58

59

9. Effect of knowledge or notice where transfer is to a creditor - Participation in fraudulent intent when debt is sole consideration.—A creditor who accepts property from an insolvent debtor in payment of a valid pre-existing debt occupies a more favored position than a purchaser for a present consideration.5 The right of a creditor to accept the amount of his debt, or security or property therefor, from his debtor, is indisputable, although the creditor knows that other creditors will thus be prevented from obtaining payment of their debts, and although friendship constitutes the debtor's motive in giving the preference. Where, however, one not a creditor purchases and pays full value for the property of one whom the purchaser knows to intend defrauding his creditors by placing his property beyond their reach, such purchaser will not be protected in the possession of the property so

58. Swartz v. Hazlett, 8 Cal. 118. 59. U. S.-Bamberger v. Schoolfield, 160 U. S. 149, 16 Sup. Ct. 225, 40 L. Ed. 374.

Ala.-Pollock v. Meyer, 96 Ala. 172, 11 So. 385; Carter v. Coleman, 84 Ala. 256, 4 So. 151; Hodges v. Coleman, 73 Ala. 103; Crawford v. Kirksey, 55 Ala. 282, 28 Am. Rep. 704.

Me.-Hartshorn v. Eames, 31 Me. 93. N. D.-Lockren v. Rustan, 9 N. D. 43, 81 N. W. 60, "the reasons that have been assigned for the distinction between one who purchases for a present consideration and one who purchases in satisfaction of a preexisting debt are sound and unassailable. The former is in every sense a volunteer. He has nothing at stake, -no self interests to serve. He may, with perfect safety, keep out of the transaction. Having no motive of

interest prompting him to enter it, if yet he does enter it, knowing the fraudulent purpose of the grantor, the law, very properly, says that he enters it for the purpose of aiding that fraudulent purpose. Not so with him who takes the property in satisfaction of a pre-existing indebtedness. He has an interest to serve. He can keep out of the transaction only at the risk of losing his claim. The law throws upon him no duty of protecting other creditors. He has the same right to accept a voluntary preference that has to obtain a preference by superior diligence. He may know the fraudulent purpose of the grantor, but the law sees that he has a purpose of his own to serve, and, if he go no further than is necessary to serve that purpose, the law will not charge him with fraud by reason of such knowledge."

purchased, as against the seller's creditors.60 A sale or transfer of property to a creditor by way of preference is not invalidated by a fraudulent intent on the vendor's part to defeat his other creditors, or by the fact that, as a result, the remaining creditors of the vendor cannot obtain payment of their debts, although the vendee had knowledge of such fraudulent intent, unless the vendee or preferred creditor actually participates in the fraudulent intent or purpose of the debtor. A preference secured for a bona