Ordinarily it seems that whether the circumstances are such as should have put the subsequent purchaser on inquiry is one for the determination of the jury. Where the person claiming under the buyer, after the seller has established the fraud of the buyer, has himself proven that he is a purchaser for value, it has been held in some cases that the burden is then upon the seller to show that such person had notice of the fraud when he purchased or before he paid the purchase money or parted with the consideration or had knowledge of facts putting him on inquiry which if diligently prosecuted would have brought him to a knowledge of the buyer's fraud.5 Other cases, however, in announcing the broad rule that the burden is upon the purchaser from the fraudulent buyer to show that he was a bona fide purchaser for value seem to include the element of want of notice of the buyer's fraud and some authorities expressly so hold." 598. Assignee for Benefit of Creditors; Trustee in Bankruptcy; Receiver. The assignee for the benefit of creditors of the fraudulent buyer succeeds only to the rights and interest of the buyer and is not entitled to hold the goods as against the defrauded seller; and an action of replevin may be maintained against the assignee though he took without notice of the fraud, and it has been held that the fraudulent buyer and his assignee may be jointly sued in replevin." The assignee in bankruptcy of the fraudulent buyer acquires no greater rights than the buyer and cannot retain the goods as against the defrauded seller. 10 Where the defrauded seller rescinds the sale 4. Higgins v. Lodge, 68 Md. 229, 11 Atl. 846, 6 A. S. R. 437. 648, N. Y. 552, 40 N. E. 206, 27 L.R.A. 757; Converse v. Sickles, 146 N. Y. 200, 40 N. E. 777, 48 A. S. R. 790; Knowles v. Lord, 4 Whart. (Pa.) 500, 34 Am. Dec. 525; Belding Bros., etc., Co. v. Frankland, 8 Lea (Tenn.) 67, 41 Am. Rep. 630; Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. 785, 61 A. S. R. 902. Notes: 25 Am. Dec. 614; 37 Am. Dec. 327; 19 A. S. R. 743; 2 L.R.A. 154; 17 L.R.A. (N.S.) 1032; 44 L.R.A. (N.S.) 4. 5. Morrow Shoe Mfg. Co. v. New England Shoe Co., 57 Fed. 685, 18 U. S. App. 256, 6 C. C. A. 508, 24 L.R.A. 417; Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448. Note: 8 L.R.A.(N.S.) 449. 6. Ditton v. Purcell, 21 N. D. 132 N. W. 347, 36 L.R.A. (N.S.) Note: 8 L.R.A. (N.S.) 448. 7. Lowry v. Hitch, 33 Ky. L. 573, 110 S. W. 833, 17 L.R.A. (N.S.) 1032; Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L.R.A. (N.S.) 245; Mooney v. Davis, 75 Mich. 188, 42 N. W.-802, 13 A. S. R. 425; Hiller v. Ellis, 72 Miss. 701, 18 So. 95, 41 10. Montgomery v. Bucyrus Mach. L.R.A. 707; Farley v. Lincoln, 51 N. Works, 92 U. S. 257, 23 U. S. (L. H. 577, 12 Am. Rep. 182; Sleeper v. ed.) 656; Donaldson v. Farwell, 93 Davis, 64 N. H. 59, 6 Atl. 201, 10 U. S. 631, 23 U. S. (L. ed.) 993; A. S. R. 377; Nichols v. Michael, 23 Gillespie v. J. C. Piles, 178 Fed. 886, N. Y. 264, 80 Am. Dec. 259; American 102 C. C. A. 120, 44 L.R.A. (N.S.) Sugar Refining Co. v. Fancher, 145 1; Lowry v. Hitch, 33 Ky. L. Rep. 8. Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182. 9. Nichols v. Michael, 23 N. Y. 264, 80 Am. Dec. 259. Note: 80 Am. Dec. 269. and receives back the goods, though with the consent of the buyer, this is not an unlawful preference by the fraudulent buyer, within the meaning of the Federal Bankruptcy Statute, though it would have been an unlawful preference if the goods were received back in payment or part payment of the price,11 and the same has been held true where the defrauded seller received from the fraudulent buyer the proceeds of goods resold by the buyer.12 Also, as the goods do not become in any sense a part of the assets of the fraudulent buyer's estate, neither the trustee nor his attorney has any legal or equitable claim for compensation out of the proceeds thereof, the goods having been sold as perishable by order of the bankruptcy court, for services rendered to bring them into or retain them in the estate of the bankrupt, because their services were not beneficial, but were deleterious to the defrauded seller.18 If goods are sold to an insolvent corporation in reliance on false representations as to its financial condition, the seller, if he promptly rescinds the sale, may recover the goods or their proceeds in the hands of the receiver of the corporation.14 599. Attachment and Execution Creditors.-It is the well recognized general rule that neither an attachment creditor nor an execution creditor acquires any greater right in the property attached or levied on than his debtor possessed; his levy is subject to all outstanding rights and equities of third persons.15 It is accordingly held that where a sale of chattels is induced by the fraud of the buyer, the seller may rescind therefor and recover the chattels as against a creditor of the buyer who levies an attachment before the discovery of the fraud by the seller and the rescission of the contract, 16 and the same right is given the defrauded seller as against a judgment creditor of the buyer levying his execution on the property.17 It has been held that 573, 110 S. W. 833, 17 L.R.A. (N.S.) 1032; Hodgson v. Barrett, 33 Ohio St. 63, 31 Am. Rep. 527. Note: 17 L.R.A.(N.S.) 1032. 11. Montgomery v. Bucyrus Mach. Works, 92 U. S. 257, 23 U. S. (L. ed.) 656; Silvey v. Tift, 123 Ga. 804, 51 S. E. 748, 1 L.R.A.(N.S.) 386. 12. Montgomery v. Bucyrus Mach. Works, 92 Ū. S. 257, 23 U. S. (L. ed.) 656. 13. Gillespie v. J. C. Piles, 178 Fed. 886, 102 C. C. A. 120, 44 L.R.A. (N. S.) 1. 14. Seeley v. Seeley-Howe-Le Van Co., 130 Ia. 626, 105 N. W. 380, 114 A. S. R. 452. 16. Thompson v. Rose, 16 Conn. 71, 41 Am. Dec. 121; Atwood v. Dearborn, 1 Allen (Mass.) 483, 79 Am. Dec. 755; Buffington v. Gerrish, 15 Mass. 156, 8 Am. Dec. 97; Newell v. Randall, 32 Minn. 171, 19 N. W. 972, 50 Am. Rep. 562; Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205; Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 A. S. R. 377; Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. 785, 61 A. S. R. 902. Notes: 25 Am. Dec. 614; 61 A. S. R. 907. 17. Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205; Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182; Durell v. Haley, 1 Paige (N. Y.) 492, a creditor of the fraudulent buyer purchasing at his own execution sale is not entitled to protection as a purchaser for value.18 The rule that attachment and execution creditors are not entitled to protection is especially true where the indebtedness was not incurred after the purchase and on the faith of the buyer's ownership of the property.19 But where the debt of the attachment or execution creditor was contracted after the fraudulent purchase and in reliance on the buyer's ownership of the property, it has been held that he would be entitled to protection as against the defrauded seller's right to rescind.20 This distinction between the rights of prior and subsequent creditors is not, however, always recognized.1 Ordinarily a demand should be made on the officer levying on the goods at the instance of creditors of the fraudulent buyer before an action of replevin is brought against him, unless this is waived, as he should not be placed in the position of a wrongdoer without such demand. 600. Bona Fide Purchaser Generally.-Though as a general rule the maxim caveat emptor applies to the sale of personal property and the buyer acquires only such rights as the seller possessed, still one who intrusts another with the indicia of ownership of personalty may be estopped to assert his title as against a bona fide purchaser. And it is well settled that where the seller has delivered possession to the buyer, though the sale was induced by the buyer's fraud, and for such reason the seller would as against the buyer be entitled to rescind and recover the property, still if the property has passed into the hands of a bona fide purchaser for value the right of the original seller to recover the property is lost. 19 Am. Dec. 444; Root v. French, 13 Notes: 37 Am. Dec. 327; 2 L.R.A. 154. 18. Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118. Notes: 28 Am. Dec. 488; 79 Am. Dec. 756. 19. Thompson v. Rose, 16 Conn. 71, 41 Am. Dec. 121; Truxton v. Fait, etc., Co., 1 Penn. (Del.) 483, 42 Atl. 431, 73 A. S. R. 81 (overruling an earlier case giving protection to an execution creditor whose debt was contracted prior to the sale); Hurd v. Bickford, 85 Me. 217, 27 Atl. 107, 35 A. S. R. 353. 20. Hurd v. Bickford, 85 Me. 217, 27 Atl. 107, 35 A. S. R. 353; Smith v. Smith, 21 Pa. St. 367, 60 Am. Dec. 51. The principle of this rule of 1. Atwood v. Dearborn, 1 Allen (Mass.) 483, 79 Am. Dec. 755. 2. Converse v. Sickles, 146 N. Y. 200, 40 N. E. 777, 48 A. S. R. 790. As to when a demand is a prerequisite to an action of replevin, see generally, REPLEVIN, vol. 23, p. 888 et seq. 3. See infra, par. 662 et seq., as to general rights of bona fide purchasers of personal property. 4. Le Grand v. Eufaula Nat. Bank, 81 Ala. 123, 1 So. 460, 60 Am. Rep. 140; Hickey v. McDonald, 151 Ala. 497, 44 So. 201, 13 L.R.A. (N.S.) 413; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Truxton v. Fait, etc., Co., 1 Penn. (Del.) 483, 42 Atl. 431, 73 A. S. R. 81; Jennings v. Gage, 13 Ill. 610, 56 Am. Dec. 476; Fawcett v. Osborn, 32 Ill. 411, 83 Am. Dec. 278; Union Stock Yards, etc., Co. v. Mallory, etc., Co., 157 Ill. 554, 41 N. E. 888, 48 A. S. R. 341; Alexander law is well illustrated by the distinction between the case of a fraudulent purchase and that of stolen goods, or goods pledged by a factor who was authorized to sell them; in both which cases, by the common law, the original owner might reclaim them from an innocent purchaser without notice. In the former case no title passed by the felonious taking, and therefore none could be communicated (except in England by sale in market overt, which stands on different grounds) to a purchaser. In the case of goods pledged by a factor, the title, the right of property of the owner, was never divested by his own act, or by his authority. The factor had a naked authority to sell, and a sale under that authority would have passed a good title from the owner. But the factor had no authority to pledge the goods; his act in that respect was void, and vested no title in the pledgee." One making advances on the security of the goods in good faith without notice of the buyer's fraud is a bona fide purchaser to the extent of his advances within the operation of the rule affording protection to bona fide purchasers. And when the fraudulent buyer places the goods in the hands of an auctioneer for sale, and the latter, in good faith, advances money on them, or incurs expenses in relation to them, he is entitled to the protection of a bona fide purchaser against the claim of the original defrauded seller.7 So one acquiring an artisan's lien on the property for work performed for the fraudulent enberg, 17 Wash. 29, 48 Pac. 785, 61 A. S. R. 902; Rice v. Cutler, 17 Wis. 351, 84 Am. Dec. 747; Cundy v. Lindsay, 3 App. Cas. 459, 47 L. J. Q. B. 481, 38 L. T. N. S. 573, 26 W. R. 406, 6 Eng. Rul. Cas. 211. Notes: 23 Am. Dec. 613; 25 Am. Dec. 613; 28 Am. Dec. 487; 37 Am. Dec. 327; 39 Am. Dec. 716; 56 Am. Dec. 480; 64 Am. Dec. 209; 83 Am. Dec. 122; 89 Am. Dec. 401; 3 A. S. R. 202; 35 A. S. R. 353. v. Swackhamer, 105 Ind. 81, 55 Am. Rep. 180; Baehr v. Clark, 83 Ia. 313, 49 N. W. 840, 13 L.R.A. 717; Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434; Higgins v. Lodge, 68 Md. 229, 11 Atl. 846, 6 A. S. R. 437; Rowley v. Bigelow, 12 Pick. (Mass.) 307, 23 Am. Dec. 607; Moody v. Blake, 117 Mass. 23, 19 Am. Rep. 394; Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205; Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 A. S. R. 377; Hollingsworth V. Napier, 3 Caines (N. Y.) 182, 2 Am. Dec. 268; Durell v. Haley, 1 Paige (N. Y.) 492, 19 Am. Dec. 444; Root v. French, 13 6. Truxton v. Fait, etc., Co., 1 Wend. (N. Y.) 570, 2 Am. Dec. 482; Penn. (Del.) 483, 42 Atl. 431, 73 A. Hamet v. Letcher, 37 Ohio St. 356, S. R. 81; Hoffman v. Noble, 6 Metc. 41 Am. Rep. 519; Mackinley v. (Mass.) 68, 39 Am. Dec. 711; Smith McGregor, 3 Whart. (Pa.) 369, 31 v. Smith, 21 Pa. St. 367, 60 Am. Dec. Am. Dec. 522; Smith v. Smith, 21 Pa. 51. St. 367, 60 Am. Dec. 51; Sinclair v. 7. Higgins v. Lodge, 68 Md. 229, Healy, 40 Pa. St. 417, 80 Am. Dec. 589; Woonsocket Rubber Co. v. Loew 5. Hoffman V. Noble, 6 Metc. (Mass.) 68, 39 Am. Dec. 711. As to the general rights of bona fide purchasers of stolen property, see infra, par. 663. 11 Atl. 846, 6 A. S. R. 437. buyer would, it seems, be protected to the extent of his lien.8 If the defrauded seller has established the fraud of the buyer, the burden is on a third person claiming under the buyer to show that he is in fact. a purchaser for value. If the person claiming under the fraudulent buyer is a purchaser for value and without notice of the fraud, his right to protection as against the seller's right to rescind is not affected by the fact that the price paid by him was greatly less than the value of the goods, though such fact is to be considered on the question of his good faith.10 601. Qualification of General Rule as to Bona Fide Purchaser.As a general rule to entitle a bona fide purchaser from a fraudulent buyer to protection, the sale to the latter must have been such as to transfer to the buyer the legal title, subject merely to the seller's right of rescission,11 and if the sale was executory and there was no delivery of possession to the buyer so as to transfer title the fact that the buyer surreptitiously acquired the possession will not enable him to transfer a good title, as against the original seller, even to a bona fide purchaser.12 Ordinarily if a buyer, in a sale consummated by correspondence, by the fraudulent misrepresentation of his identity induces a seller to sell goods on credit and surreptitiously gains possession from the carrier by whom the goods are shipped to the person to whom the sale was intended to be made, it is held that the sale is absolutely void, as there is no meeting of the minds of the parties, and a bona fide purchaser from the impostor would acquire no title as against the original seller.13 So if one falsely represents himself as the agent of a third person and as such authorized to make the purchase, and a sale is made to him as agent and the property delivered to him, no title whatever passes to the agent and he cannot by a resale even to a bona fide purchaser transfer a good title as against the original seller. 14 On the other hand if the buyer personally appears before the seller misrepresenting his identity and personally receives the delivery of the goods, this has been treated as a fraud 8. Conrow v. Little, 115 N. Y. 387, 22 N. E. 346, 5 L.R.A. 693. 9. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448; Ditton v. Purcell, 21 N. D. 648, 132 N. W. 347, 36 L.R.A. (N.S.) 149. Note: 8 L.R.A. (N.S.) 448. 10. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A.(N.S.) 448. 11. Alexander v. Swackhamer, 105 Ind. 81, 4 N. E. 433, 55 Am. Rep. 180; Baehr v. Clark, 83 Ia. 313, 49 N. W. 840, 13 L.R.A. 717; Hamet v. Letcher, 37 Ohio St. 356, 41 Am. Rep. 519. 12. Jennings v. Gage, 13 Ill. 610, 56 Am. Dec. 476. 13. Moody v. Blake, 117 Mass. 23, 19 Am. Rep. 394; Cundy v. Lindsay, 3 App. Cas. 459, 47 L. J. Q. B. 481, 38 L. T. N. S. 573, 26 W. R. 406, 6 Eng. Rul. Cas. 211. Notes: 13 L.R.A. (N.S.) 413; 2 Eng. Rul. Cas. 433. 14. Alexander v. Swackhamer, 105 Ind. 81, 4 N. E. 433, 55 Am. Rep. 180; Peters Box, etc., Co. v. Lesh, 119 Ind. 98, 20 N. E. 291, 12 A. S. R. |