Chapter LVI.

Fraudulent Sales; Assignments; Gifts, &c.

Sec.1.  The title to property is sometimes transferred with fraudulent intent.  A debtor, to place his property beyond the reach of his creditors, sells or assigns it to others by way of mortgage, under the false pretense of securing the payment of a debt; the property to remain in the possession and use of the assignor.

Sec.2.  Any agreement which operates as a fraud upon third persons, is void.  It is a rule of common law, that all deeds of gift, and all transfers of goods and chattels made by any person to secure them for his future use, shall be void as against creditors; and that if property assigned or sold remains with the seller or assignor, the transaction is to be presumed fraudulent.  But whether such conveyance of goods is only prima facie (at first view) evidence of fraud, which the vendee or assignee may rebut by proving the sale or assignment to have been made honestly and in good faith; or whether the transaction is fraudulent in point of law, and void, is a question upon which the decisions of the courts in England as well as those in this country differ, and which, therefore, may be considered as not conclusively settled.

Sec.3.  Some have made a distinction between bills of sale and assignments that are absolute and those that are conditional.  The supreme court of the United States has affirmed the doctrine that an absolute and unconditional bill of sale or conveyance, when the property is retained in possession, is of itself conclusive evidence of fraud; in other words, it is presumed to be fraud in point of law, whatever it may be in fact.  It has been held by the same court, that a conveyance with a condition that the property is to remain with the vendor until the condition shall be performed, or a conveyance in the nature of a mortgage or security, expressing an agreement between the parties, that the mortgager shall retain possession, is valid.

Sec.4.  In some states, the doctrine established by the courts is, that a continuance of possession is only prima facie evidence of fraud; in which case the mortgagee or assignee is allowed to show by proof, that the conveyance was made in good faith and for a valuable consideration.  In other states, the strict rule prevails, that, without a change of possession, the transaction is fraudulent in law; in which case the assignee, or person claiming the property under the assignment, is not permitted to show that, in point of fact, the transaction was bona fide, (in good faith.)

Sec.5.  The rule that holds every conveyance to be fraudulent unless the property immediately changes hands, often operates to inconvenience and even injury of honest debtors.  A debtor may be obliged to part with property, however convenient or needful its present use may be to him, when, but for this stringent rule of law, he might borrow the money to pay a debt, or procure a postponement of payment, and retain the use of the property pledged.