99 assent of the original grantor than that which is contained in the vesting of the grantee with all the grantor's rights in the property. But such mortgage or conveyance is subject to the claims of creditors who had acquired a lien on the property prior thereto, since it is well settled that a grantee or incumbrancer, who does not advance anything at the time, takes the interest conveyed, subject to any prior equity attaching to the subject.' Where the creditor taking the mortgage or conveyance knowingly participates in a purpose to defraud other creditors, or where with notice of the fraud his debt is created contemporaneously with or subsequently to the fraudulent conveyance,3 or where subsequent to the mortgage he takes an absolute conveyance fraudulent as to other creditors, such mortgage or conveyance is invalid as to other creditors of the grantor. 54. Rights and liabilities of bona fide purchasers from grantee generally. No one who has actual knowledge or notice Neb.-Longfellow v. Barnard, 58 Neb. 612, 79 N. W. 255, 76 Am. St. Rep. 117. N. J.-Thompson v. Williamson, 67 N. J. Eq. 212, 58 Atl. 602. Ohio.-Webb v. Brown, 3 Ohio St. 246; Brown v. Webb, 20 Ohio, 389. Pa.-Stark v. Ward, 3 Pa. St. 328. Tenn. Keith v. Proctor, 67 Tenn. 189, such a title is good as against a judgment creditor of the grantor to the amount of the transferee's debt, he being unaware of the fraud. Compare Jewett v. Cook, 81 Ill. 260; Hoff v. Larimore, 106 Ill. App. 589. Where a mortgage given to defraud creditors is assigned by the mortgagee, who is also the vendee of the property, as security to a bona fide creditor of the mortgagor, such transaction is in substance a restoration of the property to the owner and an execution by him of a mortgage thereon to secure the just claim of a creditor. The original mortgage is thereby purged of the fraud with which it was originally tainted and becomes a valid and enforceable security. Longfellow v. Barnard, 58 Neb. 612, 79 N. W. 255, 76 Am. St. Rep. 117. 99. Longfellow v. Barnard, supra; Webb v. Brown, 3 Ohio St. 246. 1. Wood v. Robinson, 22 N. Y. 564; Mahoney v. McWalters, 3 App. Div. (N. Y.) 248, 38 N. Y. Supp. 256. See also cases cited in last preceding note. 2. Thompson v. Furr, 57 Miss. 478; Webb v. Brown, 3 Ohio St. 246. 3. Rilling v. Schultze, 95 Tex. 352, 67 S. W. 401, aff'g (Civ. App. 1901) 66 S. W. 56. 4. Copenheaver v. Huffaker, 45 Ky. 18, both mortgage and conveyance are fraudulent in such a case. of a fraudulent sale can become a subsequent bona fide purchaser of the property which is the subject thereof, in good faith, so as to avail himself of the advantage awarded to that class of purchasers, except where he purchases from a bona fide grantee, without notice, actual or constructive, of the fraud. To entitle him to the protection due to a purchaser without notice of the fraud, he must have purchased the property for a valuable consideration, and must be innocent of any purpose to further the fraud, even to protect himself. Ignorance of the corrupt purpose, where such ignorance could only exist by design, will not protect him.8 7 § 55. Notice. While one who has actual notice of the fraud cannot be a purchaser in good faith from a fraudulent grantee,' actual notice or positive and legal proof of the fraud is not necessary, but it is sufficient if he has constructive notice thereof." Where a purchaser of property has not actual notice of the fraudulent intent with which the property has been conveyed to his vendor, but the circumstances are such as would have put a prudent man upon inquiry, and, if prosecuted diligently, would have exposed the fraud, he is chargeable with constructive notice of the fraudulent intent of the original grantor and cannot be deemed a bona fide purchaser in good faith." Ordinary diligence 16 is all that the purchaser can be charged with in determining whether he had notice of the fraud."2 That the purchaser, an attorney, had defended in a former suit to set aside the fraudulent conveyance,13 that he had formerly prosecuted an action in which the same fraud was directly charged in his complaint," and that he had been present in court on the trial of an action to which his grantor was a party and heard evidence proving his grantor's title to be fraudulent,5 has been held sufficient to charge the purchaser with notice of the fraud. On the other hand the fact that the property is sold for less than its value, the record of a judgment against the grantor where at the time of the purchase the legal title was in the grantee," and the filing of a writ of attachment against the original grantor,18 has been held insufficient to charge the purchaser with notice of the fraud. Where the purchaser from a fraudulent grantee purchases with notice that proceedings are to be instituted or are pending to set aside the former conveyance as fraudulent and to subject the property to the payment of a judgment against the original grantor,19 or is a party to an action for the purpose,20 or purchases Neb.-Lane v. Starkey, 15 Neb. 285, 18 N. W. 47. N. J.-Dewitt v. Van Sickle, 29 N. J. Eq. 209. Or.-Lyons v. Leahy, 15 Or. 8, 13 Pac. 643, 3 Am. St. Rep. 133. W. Va.-McMasters v. Edgar, 22 W. Va. 673. 12. Sanger v. Thomason, (Tex. Civ. App. 1898), 44 S. W. 408. 13. Russell v. Russell, 34 Ky. 40. 14. Farmers' Bank v. First Nat. Bank, 30 Ind. App. 520, 66 N. E. 503. 15. Wise v. Tripp, 13 Me. 9. 16. Mathews v. Reinhardt, 149 Ill. 635, 37 N. E. 85. 17. Phelps v. Morrison, 24 N. J. Eq. 195; Danbury v. Robinson, 14 N. J. Eq. 213, 82 Am. Dec. 244. 18. Morrow v. Graves, 77 Cal. 218, 19 Pac. 489; Halverson v. Brown, 75 Iowa, 702, 38 N. W. 123; Ashland Sav. Bank v. Mead, 63 N. H. 435; Clerf v. Montgomery, 15 Wash. 483, 46 Pac. 1028, 48 Pac. 733. 19. Ark.-Stix v. Chaytor, 55 Ark. 116, 17 S. W. 707. Ky.-Copenheaver v. Huffaker, 45 Ky. 18. La.-City of New Orleans v. Marchand, 35 La. Ann. 222. Minn.-Smith v. Conkwright, 28 721. W. Va.-Goshorn v. Snodgrass, 17 W. Va. 717. Wis.-Hamlin v. Wright, 26 Wis. 50. 20. Henry v. Harrell, 57 Ark. 569, 22 S. W. 433. after an execution sale of the property," or where the conveyance to the fraudulent grantee is clearly fraudulent on its face,22 or where the purchaser has notice that another claims the right to recover the property on the ground that it was conveyed in fraud of creditors,23 he is chargeable with notice of the fraud and cannot claim to be a bona fide purchaser without notice. But, in the absence of actual fraud, a subsequent purchaser is not chargeable with notice of the fraud where the grantee's recorded title and possession give no indication of fraud or trust, nor does mere knowledge on his part of the indebtedness of the original grantor constitute fraud either in fact or in law. The record of a voluntary conveyance in consideration of love and affection is not sufficient to put a bona fide purchaser from a fraudulent grantee on inquiry and charge him with notice of the fraud.26 The mere fact that a purchaser from the holder of a voluntary conveyance has notice that it was not founded upon a pecuniary V. 21. Stivers v. Horne, 62 Mo. 473. The registry of a sheriff's deed under a sale of execution levied on the land of the debtor, after he had conveyed it in fraud of his creditors, is notice of the fraud to a subsequent purchaser for value. Baxter Sewell, 3 Md. 334; McGregor v. White, 15 Tex. Civ. App. 299, 39 S. W. 1024. But a sheriff's deed, although recorded, is not notice of the fraud to one who had purchased from the fraudulent grantee prior to the sheriff's sale. Crockett v. Maguire, 10 Mo. 34. 22. Johnson v. Thweatt, 18 Ala. 741. 23. Walker v. Cady, 106 Mich. 21, 63 N. W. 1005. 24. Peck v. Dyer, 147 Ill. 592, 35 N. E. 479, aff'g 45 Ill. App. 184; Fox v. Peck, 45 Ill. App. 239; Leach v. Ansbacher, 55 Pa. St. 85, the purchaser is not required to make in 25 quiry in such a case; Hart v. Bates, 17 S. C. 35. Where a sheriff attaches real estate of a debtor in the hands of his fraudulent grantee, but makes no addition to his return, describing the property and stating the name of the person in whom the record title stands, as required by Gen. St., chap. 123, § 55, there is no notice to a third person afterwards purchasing for value and in good faith from the fraudulent grantee, and the attachment is invalid as to such purchaser. Morse v. Aldrich, 130 Mass. 578. 25. Davis v. Woods, 7 Ky. L. Rep. 308. 26. Yardley v. Torr, 67 Fed. 857; McKee v. West (Ala. 1904), 37 So. 740; Davis v. Woods, supra. Contra. -Milholland v. Tiffany, 64 Md. 455, 2 Atl. 831; New England L. & T. Co. v. Avery (Tex. Civ. App. 1897), 41 S. W. 673. consideration is not sufficient to make it his duty, at his peril, to inquire whether the title of his grantor was not fraudulent, unless some other fact is brought to his knowledge to raise a suspicion in his mind that the conveyance was intended to defraud some one. Constructive notice is not sufficient, but actual notice of the fraud must be shown, where a valuable consideration has been paid by the purchaser to the fraudulent grantee, or where he purchases from one who was a creditor of the original grantor and purchased from his debtor to assist him to hinder, delay, and defraud his creditors.29 28 56. Consideration.- No one but a purchaser for a valuable consideration, which has actually passed, or who has parted with something of value, before notice of the fraud, can claim title as a bona fide purchaser from a fraudulent grantee.30 The mere surrender of a pre-existing debt due from the grantee to such a purchaser, without the actual payment of money or other consideration," the surrender of a valuable right," or the assumption of an irrevocable obligation,33 is not sufficient to constitute him a 27. Frazer v. Western, 1 Barb. Ch. (N. Y.) 220. 28. Stearns v. Gage, 79 N. Y. 102; Lyons v. Leahy, 15 Or. 8, 13 Pac. 643, 3 Am. St. Rep. 133. But see McMasters v. Edgar, 22 W. Va. 673. 29. White v. Million, 102 Mo. App. 437, 76 S. W. 733, such knowledge may be submitted as evidence tending to show actual knowledge. 30. U. S.-Thompson Nat. Bank v. Corwine, 95 Fed. 54, 89 Fed. 774. lowa.-Des Moines Ins. Co. v. Lent, 75 Iowa, 522, 39 N. W. 826. Mich.-Dixon v. Hill, 5 Mich. 404. Minn.-Hicks v. Stone, 13 Minn. 434. Neb.-Lane v. Starkey, 15 Neb. 285, 18 N. W. 47. N. J.-Dewitt v. Van Sickle, 29 N. J. Eq. 209. R. I.-Anthony v. Boyd, 15 R. I. 495, 8 Atl. 701, 10 Atl. 657. Tex.-Miller v. Vernoy, 2 Tex. Civ. App. 675, 22 S. W. 64, the assumption by a surety on a note of one-half of the debt is not sufficient. 31. Victoria Paper Mills v. New York, etc., Co., 28 Misc. Rep. (N. Y.) 123, 58 N. Y. Supp. 1070, aff'g 27 Misc. Rep. 179, 57 N. Y. Supp. 397; Agricultural Bank v. Dorsey, Freem. Ch. (Miss.) 338; Case Plow Works v. Ross, 74 Mo. App. 437; Dewitt v. Van Sickle, 29 N. J. Eq. 209; Mingus v. Condit, 23 N. J. Eq. 313. 32. Case Plow Works v. Ross, 74 Mo. App. 437, surrender of securities; Dewitt v. Van Sickle, supra. 33. Dewitt v. Van Sickle, supra; Taylor's Appeal, 45 Pa. St. 71. |