approval of the National Conference of Commissioners on Uniform State Laws.

A transfer of property by one who is indebted, with a view to "hinder, delay, or defraud" his creditors was probably voidable at common law. Any doubt on this point, however, was definitely removed in England by a statute.' The principles of this statute are now recognized as law even in those states in which the matter has not been dealt with by legislation.

That the public policy which finds expression in the statute. of 13 Eliz. c. 5 is really imbedded in the common law system is confirmed by the numerous decisions which hold that certain transfers are voidable by creditors on the ground of "constructive fraud" or "legal fraud." The statute in terms applies only to conveyances made with "intent" to "hinder, delay, or defraud," yet courts have declared certain conveyances fraudulent irrespective of the actual intent of the debtor. Whenever the inevitable consequence of a course of dealing by the debtor with respect to his property is actually to hinder, delay, or defraud his creditors, "the intent to do so will be presumed."*

A typical case of such a transfer is presented whenever a debtor makes himself insolvent by giving away his property. It matters not that such a debtor's action was prompted by a keen sense of his responsibility to his wife or his child; the law insists that he must be just before he can be generous. It may be true as Emerson says, that it is always so pleasant to be generous, though very vexatious to pay debts. The law, however, has little sympathy with such a point of view.

Often a debtor who is insolvent makes payments on life insurance policies of which his wife is the beneficiary. In The Merchants' and Miners' Trans. Co. v. Borland, it was said by Pitney, V. C.: "There is no mystery or charm about life insur

1St. 13 Eliz., c. 5 (1570).

"Whether a transaction be fair or fraudulent is often a question of law; it is the judgment of law upon facts and intents." Lord Mansfield in Worseley v. Demattos (1758), 1 Burr, Part IV. 467, 474.

In a few states it is even held that a gift of property by one who is indebted is conclusively fraudulent as against existing creditors irrespective of the financial condition of the debtor at the time. Fortunately this extraordinary doctrine is probably not law today anywhere except in Ala., Ky., Mich., N. J., S. C., and Va.

(1895) 53 N. J. Eq. 282.

ance.

The case presented, then, is this: A debtor owing a large sum of money upon a judgment, and plainly insolvent, is in receipt from some source, each year, of money and means belonging to himself, over and above what he finds necessary or proper to expend for current expenses, to the amount of about $1,500, and instead of devoting it to the payment, pro tanto, of his debt, he makes a present of it to his wife and children by the machinery of divers polices of life insurance, with the result that, at his death, he has given his wife in premiums enough to pay his debt, and she has become practically rich at the creditor's expense. This statement of the case seems to me to decide it... I am unable to discover any principle or well-considered authority upon which such a transaction can be sustained against creditors."

Situations exist in which the transaction is "constructively fraudulent" even though the debtor receives value for the assets he has transferred. Thus, it is general law that a transfer by an insolvent debtor is voidable if the only consideration received by him is a promise of support. An insolvent debtor is not permitted to secure for himself a purely personal benefit at the cost of stripping himself of assets which could have been used to satisfy the claims of creditors.

Another instance of a transfer of assets by way of a sale which will be set aside irrespective of the debtor's actual intent is a sale by an insolvent debtor of all his property to a corporation organized and controlled entirely by him for that purpose. If such a transaction were allowed to stand, it would prevent a seizure and sale of the debtors' tangible assets; and its necessary effect would be to hinder and delay creditors. Hence, it carries "its death-wound upon its face," and is voidable as against existing creditors even if the insolvent or failing debtor acted openly.

The foregoing transactions are exceptional in character; the general rule is that a transfer for a consideration can be im

"Some courts refuse to give creditors the entire proceeds of the policy, and today most states have statutes which grant relief of varying degrees of generosity to the beneficiary of the policy. In many states this legislation fixes the amount which the husband may annually set aside, as against his creditors, for the payment of the premiums on policies in favor of his wife.

peached by creditors only upon proof of an actual intent to defraud them. Although there is an aphorism to the effect that "it is trite law that the thought of man is not triable, for even the devil does not know what the thought of man is," the law certainly makes intention of decisive importance in more than one situation. The right to sell one's property is about as absolute as any legal right, yet in the case of a sale of property by a debtor, an intention of placing the property beyond the reach of creditors is generally a sufficient ground for invadidating the transaction on the initiative of creditors.

Actual fraudulent intent is an issue of fact. Generally, of course, only circumstantial evidence is available to prove it. The "marks" or "badges" of fraud are of many varieties and the degree of weight which is to be attached to any one of them always depends upon all the facts of the case. Courts prudently refrain from making an avowedly complete enumeration of the facts which are calculated to throw suspicion on the transaction. The following list of suspicious circumstances is given only for illustrative purposes: transfer of all the debtor's property; sale of stock and fixtures in bulk by an insolvent debtor; secrecy of the transfer, as for example, agreement to withhold a chattel mortgage from record to protect the mortgagor's credit and enable him to get on his feet; conveyance absolute in form but intended as mere security; retention by the seller of possession of the goods sold ;* sale on a long and unusual

"From a judgment of Brian, C. J., cited by Lord Blackburn in Brogden v. Metropolitan Ry. Co. (1877), L. R. 2 App. Cas. 666, 692.

'In recent times, many states have passed Sales in Bulk Acts which provide that a sale of merchandise in bulk by a dealer is prima facie fraudulent, unless the sale be recorded or notice be given to creditors.

"In a number of states it is held that a sale of goods unless accompanied and followed by an actual change of possession is conclusive evidence of fraud and void as against the vendor's bona fide creditors (or purchasers). The decisions and statutes relating to the requirement of delivery of possession and the effect of the vendor's retention of possession are far from uniform, and it is impracticable in this text to attempt a detailed statement of the peculiarities and refinements in the rules of the several states. As regards the rights of creditors, the Uniform Sales Act merely provides that "where a person having sold goods continues in possession of the goods, or of negotiable documents of title to the goods, and such retention of possession is fraudulent in fact or is deemed fraudulent under any rule of law, a creditor or creditors of the seller may treat the sale as void." (Uniform Sales Act, §25.)

credit; inadequacy of consideration; insolvency or heavy indebtedness of the grantor; expectation or pendency of a suit; transfer made immediately before embarking upon a hazardous business or transaction involving risks exceeding the grantor's remaining assets.

Any single one of the foregoing facts may be suspicious enough to call for an explanation to say the least; some of them are treated by certain courts as involving an "irrebuttable presumption of fraudulent intent." Increased weight often attaches to these factors if the grantor and grantee are husband and wife, or stand in any other relation that binds them together in a community of interest, or offers unusual facilities for the perpetration of fraud upon creditors.

But proof of actual fraud on the part of the grantor does not in every case enable the injured creditors to avoid the fraudulent transfer. Creditors have but one argument for claiming the property which has been transferred to another, namely, that common fairness entitles them to it. Obviously, however, the argument is applicable whenever the property has passed to a purchaser who has acted in good faith and has paid the full consideration called for by the bargain."

On the other hand, even a transfer for value is voidable by the creditors if it is made with a fraudulent purpose which is shared by the grantee as well as the grantor. Generally, the intent of the buyer, like that of the seller, is merely a matter of inference from all the surrounding circumstances, and each particular case, therefore, stands on its own footing.

Whenever the evidence indicates an actual mutual intent to defraud either existing or subsequent creditors, or both classes, any of the members of these respective classes may have the conveyance set aside. In addition, it is held by some courts, although not by all, that a transaction in which there is an actual intent to defraud existing creditors is also invalid as against subsequent creditors. In general, however, subsequent

"A marriage settlement between husband and wife, if entered into before marriage, is supported by the consideration of marriage and is, therefore, unimpeachable by creditors unless both parties concurred in the intended fraud upon creditors.

creditors have fewer rights than existing creditors, and it is necessary for them to prove actual and not merely constructive fraud as to themselves. Neither the fraudulent debtor, nor any person in pari delicto is entitled to avoid a fraudulent conveyance. The law does not give one who has participated in the fraudulent intent any help whatsoever with reference to the transaction. The dishonest grantor is without a remedy if the grantee proves to be an unreliable confederate.10 Similarly, the unscrupulous grantee will fail if he should sue for reimbursement from his grantor after the transaction has been set aside by creditors. The law leaves fraudulent parties where it finds. them.

In a few situations a transfer of assets with intent to defeat creditors is not a voidable transaction. One instance in which it is generally held that a transfer of assets is valid in spite of an intent to defeat creditors is a transfer which results in securing property which is exempt from seizure by creditors in exchange for property which is not exempt. "He takes from his creditors by this action nothing in which they have any vested right. The constitution or statute exempting the homestead from the judgments of creditors is in force when they extend the credit to him, and they do so in the face of the fact that he has this right.""

Again, the child's duty of service during minority is not an asset which is available to creditors of the parent. "A creditor cannot make his debtor work in order to pay the debt, nor can he force him to make his children work."" When, therefore, a parent relinquishes his rights to the earnings of his minor child, he terminates a merely personal right belonging to himself. Hence, his creditors are unable to interfere so far as the child's future earnings are concerned. On the other hand, wages actually earned by the child before emancipation are property

1oBut it seems that in a few states the grantor is allowed to sue for the price if he frames his action in such a way that it will not be based on an avowed fraud.

"First National Bank v. Glass (1897), 79 Fed. Rep. 706 (C.C.A.), per Sanborn, J.

"Winchester v. Reid (1861), 8 Jones' Law (N. C.), 379.