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Argument for Appellants.

77; Walpole Platen Co. v. Law, 10 U. S. App. 704; Coolidge v. Melvin, 42 N. H. 510; Winkley v. Hill, 9 N. H. 31; Scott v. Hartman, 26 N. J. Eq. 89, 92; Moode v. Williamson, 44 N. J. Eq. 496, 505; Newell v. Wagner, 1 N. Dak. 69; Mendenhall v. Elwert, 36 Oregon, 375; Bentz v. Rockey, 69 Pa. St. 71, 77; Edwards v. Dickson, 66 Texas, 614; Humphries v. Freeman, 22 Texas, 45; Young v. Heermans, 66 N. Y. 382.

The text books are to the same effect. See Bump. on Fraud. Conv., § 201; Wait, Fraud. Conv., § 272; Ency. Law, 2d ed., Vol. 14, p. 248; Cyc., Vol. 20, pp. 463, 464; Story, Eq., Jur., Vol. 1, §§ 361, 362; Kerr on Fraud and Mistake, §§ 206, 207.

The proviso of § 1120 of the District Code that in suits to set aside conveyances or assignments as made with the intent to hinder, delay or defraud creditors "the question of fraudulent intent shall be deemed a question of fact and not of law" does not alter the Federal rule when applied to the instant case. The proviso does not abolish the cardinal rule that parties shall be deemed to intend the natural and probable consequences of their acts. Crawford v. Neal, 144 U. S. 585.

In Maryland, from whose laws most of the Code of the District of Columbia is taken, there is a statute similar to section 1120. In Franklin v. Claflin, 49 Maryland, 24, the court held: "Nothing can be more truly inconsistent with a contract of sale of chattels purporting to be absolute than the existence of a right or interest in or a secret reservation to be evidence of collusion"; and see Farrow v. Hayes, 51 Maryland, 505; Main v. Lynch, 54 Maryland, 671, 672, 673; Whedbee v. Stewart, 40 Maryland, 414.

New York State has a statute identical with the last proviso of § 1120 and, construing it, the highest courts of that State have held that every party must be deemed to have intended the natural and inevitable consequences of

Argument for Appellee.

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his acts, and where his acts are voluntary and necessarily operate to defraud others, he must be deemed to have intended the fraud. Coleman v. Burr, 93 N. Y. 17; Edgell v. Hart, 9 N. Y. 13; Thompson v. Crane, 73 Fed. Rep. 327, 329.

Minnesota's code provides that fraudulent intent shall be deemed a question of fact, and not of law (see Vase v. Stickney, 19 Minnesota, 370), but see Hathaway v. Brown, 18 Minnesota, 414; see also Moore v. Wood, 100 Illinois, 455; Palmour v. Johnson, 84 Georgia, 99.

Even if the secret trust made the assignment only presumptively fraudulent and the court below was correct in holding the transaction susceptible of explanation, its conclusion was error, for the explanation must be one of fact and a bare denial of intent to defraud does not overcome the presumption of fraud. The denial is not even competent evidence as to the intent.

Secret trusts have been denounced, and while a creditor may seek to have his own claim preferred, he must do no more than by fair methods to obtain payment of his own claim; as if he goes further and secure a benefit to the failing debtor this will taint the whole transaction. Crawford v. Kirksey, 55 Alabama, 282; Seaman v. Nolan, 68 Alabama, 466; Story v. Agnew, 2 Ill. App. 358; Sidensparker v. Doe, 52 Maine, 481, 490.

These cases apply to choses in actions as well as other species of property. Code of D. C., § 1120; Insurance Co. v. Sears, 109 Massachusetts, 383; Green v. Tantum, 19 N. J. Eq. 105; Hitt v. Ormsbee, 14 Illinois, 236; Savings Bank v. McLean, 84 Michigan, 628; Bump on Fraud. Conv., 239, 240.

Mr. Arthur A. Birney and Mr. Henry F. Woodard for appellee:

There was no purpose in Mertens and Agnew to cheat, defraud or hinder Hensey's other creditors.

221 U.S.

Argument for Appellee.

With these facts found the decree below should be affirmed and the bill dismissed, and the complainants should not be heard upon the claim of constructive fraud, or fraud in law. False charges of the moral turpitude involved in fraud in fact are discouraged in equity, and a complainant having failed to establish such charge will not be permitted to shift his ground and obtain relief on the claim of constructive fraud. Eyre v. Potter, 15 How. 41, 56; Dashiell v. Grosvenor, 27 L. R. A. 67; Tillinghast v. Champlin, 4 R. I. 173; Fisher v. Boody, 1 Curt. C. C. 206.

Section 1120, Code of Dist. of Col., has abolished constructive fraud, and made it necessary that fraud in fact, or dishonesty, shall be found in order to vacate a transfer.

There are similar provisions in the laws of California, New York, Michigan, Indiana, Wisconsin, and other States, and wherever construed, the courts have denied the right of the judge to rule a conveyance fraudulent, unless upon its face the instrument was inconsistent with an honest purpose. The question of fraud is for the jury, not for the court. McFadden v. Mitchell, 54 California, 628; Babcock v. Eckler, 24 N. Y. 623; Howe Machine Co. v. Claybourn, 6 Fed. Rep. 438; Hooser v. Hunt, 65 Wisconsin, 71. And it would seem that if any effect is to be given the proviso of section 1120, it must be held to reject the contention that a transaction perfectly honest, may, by construction of law only, be found dishonest.

The reservation of a surplus to Hensey after the payment of expenses and the debt due Mertens and Agnew was not even constructively fraudulent. Huntley v. Kingman, 152 U. S. 527; Etheridge v. Sperry, 139 U. S. 267, 271; Leitch v. Hollister, 4 N. Y. 211; and see Curtis v. Leavitt, 15 N. Y. 127, 146, 204; Durham v. Whitehead, 21 N. Y. 131; Camp v. Thompson, 25 Minnesota, 175; Didier v. Patterson, 93 Virginia, 534.

There is on the face of the papers no fraudulent proVOL. CCXXI-22

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vision, and if this be conceded, the plaintiffs must claim to have proved fraud dehors the writings, or the wicked purpose and intention-the moral turpitude, which their bill alleges; and this is disproved.

The fact that the assignment was filed while the agreement as to application of the proceeds was not filed, is not only not conclusive evidence of fraud, but, alone, is of no probative force. They were under no obligation to other creditors so to file it. Fechheimer v. Baum, 43 Fed. Rep. 719, 726; Blanks v. Klein, 53 Fed. Rep. 436; Blennerhassett v. Sherman, 105 U. S. 100. This will not be held to be fraud if the conveyance is only for security; the deed will be enforced to the extent of the secured debt. Chickering v. Hatch, 3 Sumner's R. 474; Gaffney's Assignee v. Signaigo, 1 Dillon, 158; Worten v. Clark, 23 Mississippi, 77. Complainant cites many cases, but they do not give support to complainant's theories, except so far as general expressions may appear to do so; they are simply inapplicable. They apply only where the court does not find that an honest debt was intended to be secured, and can find either motive or purpose in the creditor secured to cheat or defraud others.

A special assignment of a particular part of a debtor's property, the possession whereof is surrendered by the debtor, will be regarded as valid in the absence of convincing proof of fraudulent design. The property passes by delivery, or the equivalent thereof. A pledge is complete without any writing.

If it be shown that the conveyance, though absolute in form, was given in good faith to secure a real debt, it will be quite immaterial that the right to redeem was not expressed but rests in parol. The conveyance will be upheld to the extent of the debt proved. Cases supra and Muchmore v. Budd, 53 N. J. Law, 369; Didier v. Patterson, 93 Virginia, 534; Bump on Fraud. Conv., 4th ed., §55; Smith v. Onion, 19 Vermont, 427; Oriental Bank v. Haskins,

3 Met. 332; Howe Machine Co. v. Claybourn, 6 Fed. Rep. 438; 20 Cyc. 474, 475, 476.

If an absolute conveyance be found constructively fraudulent, it will yet be sustained to the extent of the debt it was given to secure. Boyd v. Dunlap, 1 Johns. Ch. 478; Lobstein v. Lehn, 120 Illinois, 549; Bates v. McConnell, 31 Fed. Rep. 588; Stamy v. Laning, 58 Iowa, 662; Brock v. Hudson &c. Bank, 48 N. J. Eq. 615; Short v. Tinsley, 1 Metc. (Ky.) 397; Bartlett v. Cheesbrough, 23 Nebraska, 767; Ball v. Phenicie, 94 Michigan, 355; Waterbury v. Sturdevant, 18 Wend. 353.

MR. JUSTICE LURTON delivered the opinion of the court.

This is a bill filed by a creditor of the defendant Hensey attacking as fraudulent an assignment by him of a certain cause of action against the defendant, the Mercantile Trust Company. The bill upon final hearing was dismissed by the trial court, and this judgment was affirmed in the Court of Appeals of the District of Columbia. From that decree an appeal has been perfected to this court.

The thing assigned was a claim for damage under an indemnity bond made by the Mercantile Trust Company upon which an action was at the time pending. The assignment was in these words:

"Washington, D. C., October 21, 1903. For value received, I hereby sell, assign, transfer and set over to Frederick Mertens and Park Agnew my cause of action in the above entitled suit, and all the proceeds which may be derived from the prosecution thereof and from any judgment that may be obtained. I further authorize and empower the said assignees to continue the prosecution of said cause in my name, to which end I constitute them my lawful attorneys in fact.

In witness whereof, I have hereunto set my hand, this twenty-first day of October, 1903.

(Signed) Melville D. Hensey."