ulent purchase under which the legal title would pass by the delivery to the impostor and enable him to transfer a good title to a bona fide purchaser,15 and the same has been held true where the impostor made the purchase in person under the assumed name and the goods were shipped to and received by him under such assumed name.16

602. Pre-existing Indebtedness as Consideration; Majority View.— The broad question as to whether one who takes property in satisfaction of or as security for a pre-existing debt is a purchaser for value is one which arises in many cases other than sales proper and is one in which there is a great conflict in the authorities.17 It is held in most jurisdictions in this country, in the absence of statute to the contrary, that one who takes a mortgage as security or purchases goods in satisfaction of a pre-existing debt from one who by fraud induced the seller to sell to him on credit is not entitled to protection as a bona fide purchaser for a valuable consideration.18 As has been said a valuable consideration in such cases means something more than the discharge of a debt that revives when the consideration for its discharge fails. It means the parting with some value that cannot be actually restored by operation of law, leaving the purchaser in a changed condition, so that he may lose something besides his bargain.19 And where the defendant purchased and paid for a certain

367; Rodliff v. Dallinger, 141 Mass. N. W. 661, 48 A. S. R. 406; Hurd v. 1, 4 N. E. 805, 55 Am. Rep. 439; Bickford, 85 Me. 217, 27 Atl. 107, 35 Hamet v. Letcher, 37 Ohio St. 356, A. S. R. 353; Schloss v. Feltus, 96 41 Am. Rep. 519; Hollins v. Fowler, L. R. 7 H. L. 757, 44 L. J. Q. B. 169, affirming L. R. 7 Q. B. 616, 41 L. J. Q. B. 277, 2 Eng. Rul. Cas. 409. Notes: 25 Am. Dec. 614; 2 Eng. Rul. Cas. 436.

15. Note: 13 L.R.A. (N.S.) 413. 16. Hickey v. McDonald, 151 Ala. 497, 44 So. 201, 13 L.R.A. (N.S.) 413. Note: 13 L.R.A. (N.S.) 414.

Mich. 103, 55 N. W. 1010, 36 L.R.A. 161; Bidault v. Wales, 20 Mo. 546, 64 Am. Dec. 205; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 A. S. R. 377; Lloyd v. Brewster, 4 Paige (N. Y.) 537, 27 Am. Dec. 88; Root v. French, 13 Wend. (N. Y.) 570, 28 Am. Dec. 482; Barnard v. Campbell, 55 N. Y. 456, 58 N. Y. 73, 14 Am. Rep. 289, 17 Am. Rep. 208; Wails v. Farrington, 27 Okla. 754, 116 Pac. 428, 35 L.R.A. (N.S.) 1174; W. G. Ward Lumber Co. v. American Lum17. See such titles as BILLS AND ber, etc., Co., 247 Pa. St. 267, 93 Atl. NOTES, vol. 3, p. 1064; CHATTEL 470, Ann. Cas. 1918A 451 (announcMORTGAGES, vol. 5, p. 449; MORT- ing the law of Ohio); Woonsocket RubGAGES, vol. 19, p. 410; VENDOR AND PURCHASER.

See supra, par. 113, as to the general effect of a mistake as to the identity of a party to a sale.

18. Gavin v. Armistead, 57 Ark. 574, 22 S. W. 431, 38 A. S. R. 262; Sargent v. Sturm, 23 Cal. 359, 83 Am. Dec. 118; Adam, etc., Co. v. Stewart, 157 Ind. 678, 61 N. E. 1002, 87 A. S. R. 240; Reid v. Cowduroy, 79 Ia. 169, 44 N. W. 351, 18 A. S. R. 359; Reed v. Brown, 89 Ia. 454, 56

her Co. v. Loewenberg, 17 Wash. 29, 48 Pac. 785, 61 A. S. R. 902.

Notes: 25 Am. Dec. 487, 532, 613; 28 Am. Dec. 487; 61 A. S. R. 907; 19 L.R.A. 590; 36 L.R.A. 166; 35 L.R.A. (N.S.) 1174; 44 L.R.A. (N.S.) 2.

And see infra. par. 668 et seq. 19. Hurd v. Bickford, 85 Me. 217, 27 Atl. 107, 35 A. S. R. 353.

quán tity of a commodity to be delivered at a future day, and his seller did not have such commodity, but thereafter by fraud induced the plaintiff to sell it to him on credit, and on acquiring the possession delivered the property to the defendant in pursuance of the prior contract of sale, it has been held that the defendant occupied the position of a purchaser for a pre-existing debt and therefore could not hold it as against the plaintiff's right of possession.20 It is to be noted that the courts which deny that one who takes in payment of a pre-existing debt is a purchaser for value frequently cite the New York cases in support of their position and that in New York the rule prevailed that even one who took negotiable paper in payment of a pre-existing debt is not a purchaser in due course and for value.1 This view, however, is taken even though the rule prevails that one taking commercial paper in payment of a pre-existing debt is considered a purchaser for value and in due course and entitled to full protection. The English Sale of Goods Act provides that "when the seller of goods has a voidable title thereto but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods provided he buys them in good faith without notice of the seller's defect of title.". This would seem to afford protection to one who purchases from a fraudulent buyer in satisfaction of a pre-existing debt. Similar acts have been enacted in some jurisdictions in this country known generally as the Uniform Sale of Goods Acts, but it is to be noted that they do not all follow the wording of the English act. Thus the New York act expressly requires that the purchase shall be "for value" to entitle the purchaser to protection, and therefore the rule announced in the earlier cases in that state denying protection to one who purchases from a fraudulent buyer in satisfaction of a pre

existing debt still exists.

to the

603 Minority View as to Pre-existing Indebtedness.-In opposition rule laid down in the preceding section, the view is taken in Jurisdictions that one purchasing from the fraudulent buyer in satisfaction of a pre-existing debt is entitled to protection as a purfor value. In these jurisdictions a purchase from a fraud

chaser

20.

456,

Barnard v. Campbell, 55 N. Y. 58 N. Y. 73, 14 Am. Rep. 289, 17 Am- Rep. 208.

v. Bickford, 85 Me. 217, 27 Atl. 107, 35 A. S. R. 353; Schloss v. Feltus, 96 Mich. 619, 103 Mich. 525, 55 N. W.

3. See the cases cited supra, this paragraph, as to the general rule.

1. See Butters v. Haughwout, 42 1010, 61 N. W. 797, 36 L.R.A. 161. Ill. 18, 89 Am. Dec. 401, explaining grounds taken in other jurisdicfor their view denying protecone taking in satisfaction of a

the

tions tion

2.

to

4. Butters v. Haughwout, 42 Ill. 18, 89 Am. Dec. 401; Rice v. Cutler, 17 Wis. 351, 84 Am. Dec. 747. See

also Le Grand v. Eufaula Nat. Bank, 81 Ala. 123, 1 So. 460, 60 Am. Rep. See also Pelham v. Chattahoo

pre-existing debt. People's Sav. Bank v. Bates, 120 556, 7 S. Ct. 679, 30 U. S. (L. 754; Reed v. Brown, 89 Ia. 454, 140. W. 661, 48 A. S. R. 406; Hurd chee Grocery Co., 146 Ala. 216, 41 So.

ed.)

S.

56 N.

ulent buyer is placed on the same footing as a purchase of negotiable paper taken in payment of a pre-existing debt, and it is asserted that ao difference in principle between the two as to the standing of the subsequent purchaser as a purchaser for value can consistently be made. And as showing the injury to the subsequent purchaser from any other rule and that he has parted with value, it is pointed out as cogent argument that the purchaser having no reason to suspect any other claim existing to the property and having no reason to doubt his title is lulled into security and rests in the belief that his debt is paid and in that belief forgoes all effort to seek other payment or security and is necessarily in a worse condition than if he had not made the purchase.

604. Other Considerations in Addition to Pre-existing Indebtedness. -According to the better view it seems that if one purchasing from a fraudulent buyer pays part of the price in cash and part by the discharge of a pre-existing debt, he is to be deemed a purchaser for value to the same extent as though he had paid all cash and not merely to the extent of his cash payment. Other cases, however, take the view that such a purchaser is to be regarded as a purchaser for value only to the extent of his cash payment.8 If one taking goods fraudulently purchased as security for a pre-existing debt, at the time, releases security which he held for the debt, such as a surety or collateral security, this will place him in the position of a purchaser for value. So it has been held that a mortgagee who, in corsideration of the mortgage, and without notice of the fraud, has extended the time of payment of his debt, or assumed any new or additional obligation, is entitled to protection though the antecedent debt itself would not have been sufficient.10

605. Transferee of Bill of Lading or Warehouse Receipt.-A bill of lading is the symbolical representative of the property and its transfer operates as a transfer of the property represented thereby,11

12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448; Hiller v. Ellis, 72 Miss. 701, 18 So. 195, 41 L.R.A 707.

Notes: 25 Am. Dec. 613; 28 Am. Dec. 487; 48 A. S. R. 410; 61 A. S. R. 908; 36 L.R.A. 163; 35 L.R.A. (N.S.) 1175.

5. Butters v. Haughwout, 42 Ill. 18, 89 Am. Dec. 401. See also Henry v. Vliet, 33 Neb. 130, 36 Neb. 138, 49 N. W. 1107, 54 N. W. 122, 29 A. S. R. 478, 19 L.R.A. 590.

6. Butters v. Haughwout, 42 Ill. 18, 89 Am. Dec. 401.

7. Pelham v. Chattahoochee Grocery Co, 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A.(N.S.) 448.

Note: 35 L.R.A. (N.S.) 1176.

8. Gavin v. Armistead, 57 Ark. 574, 22 S. W. 431, 38 A. S. R. 262.

Note: 35 L.R.A. (N.S.) 1177.

9. Kearney Milling, etc., Co. V. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434; Henry v. Vliet, 33 Neb. 130, 49 N. W. 1107, 29 A. S. R. 478, 19 L.R.A. 590.

10. Adam, etc.. Co. v. Stewart, 157 Ind. 678, 61 N. E. 1002, 87 A. S. R. 240.

11. See supra, par. 278, as to the effect of the transfer of a bill of lad. ing or warehouse receipt as passing title to the buyer.

and therefore where the fraudulent buyer ships the goods and takes a bill of lading, the transferee of the bill of lading is entitled to protection as a bona fide purchaser to the same extent as though there had been an actual delivery of the property to him.12 Similarly where the property is shipped by the seller to the fraudulent buyer and a bill of lading sent to him, the transferee of such bill of lading is also entitled to the same protection.18 A warehouse receipt also is considered the symbolical representative of the property, and its delivery on a sale of the property transfers the title as between the parties, 14 and a purchaser in good faith and for value taking a transfer of such a receipt from the fraudulent buyer is entitled to protection to the same extent as any other purchaser for value.15

606. General Effect of Rescission by Seller.-If a defrauded seller has exercised his right to rescind the sale, this puts an end to his rights as a seller based on the continued existence of the contract.16 Therefore where the seller of an automobile received a certificate of deposit in payment, but, on being informed by the bank that the certificate was not good, took and retained possession of the machine, it was held that he could not recover on the certificate of deposit.17 A peculiar operation of this principle is exemplified in a case where a sale was made to an insolvent who had no intention of paying and a bill of sale which was sent to him was transferred by him to a bona fide purchaser or pledgee for value. While the goods were in transit the seller rescinded the sale, recovered the possession of the goods in replevin against the carrier and resold them. The transferce of the bill of lading intervened in the replevin action and claimed the goods as a bona fide purchaser. It was held that though the defrauded seller could have asserted his right of stoppage in transitu against the intervener, this right was lost by the rescission of the sale, and the seller could thereafter assert only the right of a defrauded seller to rescind the sale, which could not be asserted against the intervener because he was a bona fide purchaser for value.18 It does not seem to follow as a corollary from the rule giving effect to the institution of an action for the price as a waiver of the right to rescind that the institution of an action based on a rescission will preclude, if unsuccessful

12. Rowley v. Bigelow, 12 Pick. 'Mass.) 307, 23 Am. Dec. 607.

13. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434. But see Decan v. Shipper, 35 Pa. St. 239, 78 Am. Dec. 334. As to whether in addition to this the transferee of the bill of lading is protected against the seller's right of stoppage in transitu, see supra, par. 410.

14. See supra, par. 278.

R. C. L. Vol. XXIV.-—21.

321

15. Rice v. Cutler, 17 Wis. 351, 84 Am. Dec. 747.

16. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. S. R. 434.

17. American Trust, etc., Bank v. Moore, 161 Mich. 436, 126 N. W. 716, 137 A. S. R. 518.

18. Kearney Milling, etc., Co. v. Union Pac. R. Co., 97 Ia. 719, 66 N. W. 1059, 59 A. R. 434.

§ 607

SALES

in the recovery of the property, the subsequent recovery of the price. 19 The rescission revests in the seller the title and the right to possession and he may, as in other cases, retake the property if it can be done. without unnecessary violence to the person and without breach of 1.he peace. His right to use force is limited to the degree necessary to overcome the buyer's resistance.1

607. Restoration by Seller Generally.-If the buyer has paid any part of the purchase price, the seller must as a general rule return or offer to return the amount paid before he can exercise his right of rescission and recover the property, possession of and title to which had passed to the buyer. So in case of an exchange of property, if the party seeking to rescind for the fraud of the other party has received boot money, he must return it as well as the article received by him in the exchange before he will be permitted to rescind and recover the article delivered by him. As replevin is strictly an action at law, the duty on the part of the seller to make restoration before the institution of such an action has been held imperative, as his right of recovery must exist at the time the action is commenced.* And when the action by the seller is replevin, it has been held that if the affidavit is made and the writ of replevin is sued out before the consideration is tendered back, the suit is premature although the tender is made before the writ is served.5 The same has been held true as to the return of boot money paid by the defendant where the plaintiff brings trover for the value of the property obtained in an exchange induced by the fraud of the defendant. So it would seem

19. Bolton Mines Co. v. Stokes, 82 Md. 50, 33 Atl. 491, 31 L.R.A. 789. In Crossman v. Universal Rubber Co., 127 N. Y. 34, 27 N. E. 400, 13 L.R.A. 91. As to the effect of the seller's action for the price as a waiver of his right to rescind, see infra, par. 611.

1. Hodgeden v. Hubbard, 18 Vt. 504, 46 Am. Dec. 167. See generally, ASSAULT AND BATTERY, vol. 2, p. 560, as to when force may be used in asserting property rights without rendering a person civilly liable for assault and battery.

2. Eclipse Bicycle Co. v. Farrow, 199 U. S. 581, 26 S. Ct. 150, 50 U. S. (L. ed.) 317; Silvey v. Tift, 123 Ga. 804, 51 S. E. 748, 1 L.R.A. (N.S.) 386; Jennings v. Gage, 13 Ill. 610, 56 Am. Dec. 476; Thompson v. Peck, 115 Ind. 512, 18 N. E. 16, 1 L.R.A. 201; Adam, etc., Co. v. Stewart, 157 Ind. 678, 61 N. E. 1002, 87 A. S. R. 240;

322

Kimball v. Cunningham, 4 Mass. 502, 3 Am. Dec. 230; Wilbur v. Flood, 16 Mich. 40, 93 Am. Dec. 203; American Trust, etc., Bank v. Moore, 161 Mich. 436, 126 N. W. 716, 137 A. S. R. 518; Masson v. Bovet, 1 Denio (N. Y.) 69, 43 Am. Dec. 651; Patten's Appeal, 45 Pa. St. 151, 84 Am. Dec. 479.

Notes: 43 Am. Dec. 654; 87 A. S. R. 244; 2 L.R.A. 155; 9 L.R.A. 608; 21 L.R.A. 206; 30 L.R.A. 44 et seq.; Ann. Cas. 1912A 660 et seq.

3. Kimball v. Cunningham, 4 Mass. 502, 3 Am. Dec. 230.

Note: 21 L.R.A. 206.

4. Thompson v. Peck, 115 Ind. 512, 18 N. E. 16, 1 L.R.A. 201.

5. Wilbur v. Flood, 16 Mich. 40, 93 Am. Dec. 203.

Note: 21 L.R.A. 206.

6. Kimball v. Cunningham, 4 Mass. 502, 3 Am. Dec. 230.