*IX. Of sales of goods, as affected by fraud.

Though there be a judgment against the vendor, and

*512

den v. Lance, 1 M'Mullan's S. C. Eq. R. 87. Hight v. Ripley, 19 Maine R. 137. Bennett v. Hull, 10 Johns. Rep 364. Crookshank v. Burrell, 18 ibid. 58. Sewall v. Fitch, 8 Cowen's Rep. 215. Jackson v. Covert, 5 Wendell, 139.1 These latter cases admit the distinction above stated to be well settled, and that it goes to sustain the correctness of the decisions in Strange, if not in Burrow, though not entirely upon the ground assumed in them. And yet, in Garbutt v. Watson, 5 Barn. & Ald. 613, the decision of Clayton v. Andrews is strongly and justly shaken, as having pushed the distinction to an extreme of refinement; and though, in the last case, the sacks of flour sold were not then prepared, but were to be got ready for delivery in a few weeks, yet the sale was held to be within the statute, and that though the flour was not ground at the time, it was still a contract for the sale of goods, and not for work and labor and materials found. This seems to be the most reasonable construction of such a contract. See also to the S. P., Downs v. Ross, 23 Wendell, 270; and see, in Scott v. Eastern Co. R. Co. 12 Meeson & Welsby, 33, where part of the goods are made and delivered, and the residue are to be manufactured according to order, the whole forms one entire contract, and the acceptance of part applies to the whole so as to satisfy the statute of frauds.

The court of appeals in Maryland, in Eichelberger v. M'Cauley, 5 Harr. & Johns. 213, followed, with some reluctance, the case of Clayton v. Andrews, and declared that it was not to be extended to cases where the work and labor to be done might be, of themselves, considered parts of the contract. The English statute of 9 Geo. IV. ch. 14, entitled, "An act for rendering a written memorandum necessary to the validity of certain promises and engagements," has provided for this case, by declaring that the statute of frauds of 29 Car. II. ch. 3, shall extend to all contracts for the sale of goods of the value of ten pounds and upwards, notwithstanding the goods may be intended to be delivered at some future time, or may not, at the time of the contract, be actually made, procured, or provided, or fit, or ready for delivery, or some act may be requisite for the making or completing thereof, or rendering the same fit for delivery. It was said, in the last century, at Westminster Hall, that the statute of frauds of 29 Car. II. had not been explained at a less expense than one hundred thousand pounds sterling. I should suppose, from the numerous questions and decisions which have since arisen upon it, that we might put down the sum at a million and upwards. How hazardous it would now seem to be, to attempt to recast the statute in new language, or to disturb the order and style of its composition, considering how costly its judicial liquidation has been, and how applicable its provisions are to the daily contracts and practical affairs of mankind. It has been affirmed in England, that every line of it was worth a subsidy; and uniform experience shows how difficult it is, by new provisions, to meet every contingency, and silence the tone of sharp, piercing criticism, and the restless and reckless spirit of litigation.

Robertson v. Vaughn, 5 Sandf. S. C. R. 1. Allen v. Jarvis, 20 Conn. 38. Courtwright v. Stewart, 19 Barb. 455. Illay v. Yates, 36 Eng. L. & Eq. 540.

2 In Hardell v. McClure, 1 Chand. 271, the Supreme Court of Wisconsin considers this statute as merely declaratory of the true construction of the statute of C. II.: and decide that, though there is no corresponding enactment in that state, yet the class of cases covered by it comes under the statute of frauds.

the purchaser has notice of it, that fact will not, of itself, affect the validity of the sale of personal property. But *513 if the purchaser, knowing of the judgment, purchases

with the view and purpose to defeat the creditor's execution, it is iniquitous and fraudulent, notwithstanding he may have given a full price, for it is assisting the debtor to injure the creditor. The question of fraud depends upon the motive. The purchase must be bona fide, as well as upon a valuable consideration. The rule has been repeatedly declared and established. (a) Whether it would be an act of fraud sufficient to vacate the contract, if the purchaser, knowing of his own insolvency and utter incapacity to make payment, but without using any device or contrivance to deceive the vendor, purchases goods of another, who is ignorant of his insolvency, and sells them under the belief of the solvency as well as *514 good faith of the buyer, is a question which was raised, but left undecided, in Conyers v. Ennis. (b) It has been since decided in another case, (c) that the mere insol vency of the vendee, and the liability of the goods to im mediate attachment by his creditors, though well known to himself, and not disclosed to the vendor, would not, of itself, avoid the sale. In that case there was no false assertion, or fraudulent misrepresentation or deceit practised, or concert, or secret agreement, with any other person, and there was no direct evidence that the vendee knew at the time that he was insolvent. The decision was put upon the ground that the credit was in fact obtained without any fraudulent intent, and the validity of the sale would depend upon the decision of the question, whether there was fraud in fact. (d)

(a) Lord Mansfield, 1 Burr. Rep. 474. Cowp. Rep. 434. Dallas, Ch. J., 8 Taunt. Rep. 678. Beals v. Guernsey, 8 Johns. Rep. 446. Duncan, J., 7 Serg. & Rawle, 89. (b) 2 Mason's Rep. 236.

(c) Cross v. Peters, 1 Greenleaf's Rep. 376.

(d) It was settled in the Court of Errors of New York, in Lupin v. Marie, 6 Wendell's Rep. 77, that where goods are delivered unconditionally to the vendee, a mistake or error as to his solvency will not invalidate the contract, or entitle the vendor to relief; for the vendor of personal property has no lien on the goods sold and delivered. But if there be fraud, in fact, on the part of the buyer, in respect to the purchase, the vendor may elect either to affirm the sale and sue for the price, or to treat the sale as void, and follow the goods or proceeds even into the hands of a third person, who

If the vendee discovers that he is insolvent, and that it is not in his power to pay for the goods, the courts have allowed him to rescind the contract, and return the goods to the seller with his assent, provided he did it before the contract was consummated by an absolute delivery and acceptance, and provided it was done in good faith, and not with the colorable design of favoring a particular creditor. He cannot rescind the contract after the transit has ceased, and the goods have been actually received in his possession, and the rights of other creditors have attached. (a)

*(1.) On the subject of fraudulent sales, another and *515 a very vexatious question has arisen, as to the legal consequence and effect of an agreement between the parties at the time of the sale, that possession was not to accompany and follow the bill of sale of the goods. There is no doubt of its

received them without paying any new consideration. Lloyd v. Brewster, 4 Paige's Ch. Rep. 537. Cary v. Hotailing, 1 Hill's N. Y. Rep. 311. George v. Kimball, 24 Pick. Rep. 241. If, however, the purchaser from the fraudulent vendee has actually paid for the goods, he will hold them. See the last case, supra. A fraudulent purchaser of goods gives no title as against the vendor, nor will such a purchaser's transfer of the goods, to pay or secure a bona fide creditor for a preëxisting debt, vest a title in the creditor. But if the under or second purchaser obtains the goods bona fide, in the usual course of trade, by giving value, or incurring responsibilities on the strength of a pledge of the goods, he may hold the goods as against the original vendor. Root v. French, 13 Wendell, 576. Trott v. Warren, 2 Fairfield, 227. Mowrey v. Walsh, 8 Cowen, 238. Rowley v. Bigelow, 12 Pick. 307. But these latter cases are questioned in Ash v. Putnam, 1 Hill's N. Y. Rep. 306-7, and, with the exception of commercial paper, the rule is, that he who has acquired no title can convey none. Vide supra, p. 324, note. In the jurisprudence of some parts of continental Europe, it is admitted that there exists a presumption juris et de jure of fraud, if the buyer becomes insolvent within a few days (and which, in some cases, has been fixed at three) after receiving the goods. Voet, Com. ad Pand. 6, 1, 14, cites several authorities in support of this rule. In 1736, it was attempted to be introduced into the law of Scotland as a rule, that the cessio fori, within three days after the purchase, should be received as evidence per se of fraud; but such a strict and precise test was finally rejected, in 1788, in the case of Allan & Stewart v. The Creditors of Stein, 1 Bell's Com. 244-248.

(a) Barnes v. Freeland, 6 Term Rep. 80. Richardson v. Goss, 3 Bos. & Pull. 119. Neate v. Ball, 2 East's Rep. 117. Dixon v. Baldwen, 5 ibid. 175. Salte v. Field, 5 Term Rep. 211. In Neate v. Ball, Lord Kenyon said, it was much to be wished that, where goods continued in bulk, and discernible from the general mass of the trader's property at the time of bankruptcy, that they could be returned to the original owners who had received no compensation for them, but that it could not be done without breaking in upon the whole system of the bankrupt laws.

being evidence of fraud; but the great point has been, whether the fraud which was to be inferred in such a case, was an inference of law to be drawn by the court, and resulting inevitably from the fact, or whether the fact was only evidence of fraud to be drawn by the jury, and susceptible of explanation. The history and diversity of the decisions on this subject, form a curious and instructive portion of our jurisprudence.

By the English statutes of 3 Hen. VII. and 13 Eliz. ch. 5, which have been reënacted in New York, (a) and the essential provisions of which have been adopted generally throughout the United States, all conveyances of goods and chattels not made bona fide and upon good consideration, but in trust for the use of the person conveying them, or made to delay, hinder, or defraud creditors, are declared to be void; and it is everywhere admitted, (b) that the statutes of fraud of 13 and 27 Eliz. were declaratory of the principles of the common law; and the decisions of the English courts are, therefore, applicable to questions of constructive fraud arising in this country. (c)

Twyne's case, (d) which arose in the star chamber in the 44th Eliz., is the basis of the decisions on the question of fraud arising from possession being retained by the vendor.

Among other indicia of fraud upon which the court re* 516 lied, and adjudged the deed fraudulent in that case, a prominent one was, that the vendor, after a bill of sale of chattels for a valuable consideration to a creditor, continued in possession, and exercised acts of ownership over the goods. Afterwards, in Stone v. Grubham, (e) upon a bill of sale of chattels, being a lease for years, the vendor continued in possession; but as the conveyance was only conditional upon payment of

(a) Vide supra, p. 440.

(b) Lord Mansfield, Cowp. Rep. 434. Marshall, Ch. J., 1 Cranch's Rep. 316. Robertson v. Ewell, 3 Munf. Rep. 1. Story, J., 1 Gall. Rep. 423.

(c) By constructive frauds, are meant such contracts or acts as, though not originating in any actual evil design or contrivance to perpetrate a positive fraud or injury upon other persons, are yet, by their tendency to deceive or mislead other persons, or to violate public or private confidence, or to impair or injure the public interests, deemed equally reprehensible with positive fraud, and therefore are prohibited by law, as within the same reason and mischief as contracts and acts done malo animo. Story's Com. on Equity Jurisprudence, 261.

(d) 3 Co. 87, S. P. Infra, p. 532, note.

(e) 2 Bulst. Rep. 225.

money, it was held, that the possession did not avoid the sale, as by the terms of the deed the vendee was not to have possession until he had performed the condition. The rule was explicitly declared in Shepherd's Touchstone, in the time of James I., that if a debtor secretly made a general deed of his goods to one creditor, and continued the use and occupation of the goods as his own, the deed was fraudulent, and void against a subsequent judgment and execution creditor, notwithstanding the deed was made upon good consideration. (a) Again, in Bucknal v. Roiston, (b) a bill of sale of goods was given by way of security or pledge for money lent, and a trust in the vendor to keep the goods, and sell them for the benefit of the vendee, appeared on the face of the deed; and for that reason it was held by the lord chancellor not to be fraudulent. One of the counsel in that case observed, that it had been ruled forty times in his experience at Guildhall, that if a man sells goods, and still continues in possession as visible owner of them, the sale was fraudulent and void as to creditors. The case of a mortgage of goods was afterwards held, in Ryall v. Rowles, (c) not to form an exception to the general rule recognized in the former cases. It was declared by very strong authority in that case, that a mortgagee of goods, permitting the mortgagor to keep possession, had no specific lien against general assignees under a commission of bankruptcy; and he was understood to confide in the personal credit of the vendor, and not in any security. Though that case was decided upon the bankrupt act *517 of 21 James I., and not upon the statutes of Elizabeth, the reasoning of the court relative to the distinction between absolute and conditional sales and mortgages, was founded on general principles applicable to every case. It was the doctrine of the case, that in a mortgage of goods the mortgagee takes possession; and that there was no reason, unless in very special cases, why an absolute or conditional vendee of goods should leave them with the vendor, unless to procure a collusive credit. There was no distinction, it was admitted, under the 13 Eliz., between conditional and absolute sales of goods, provided they

(a) Shep. Touchstone, 66.

(c) 1 Vesey, 348. 1 Atk. Rep. 165.

(b) Prec. in Ch. 285.