The opinion of the court was delivered by
Me. Justice McIvee.The object of this action was to set aside a sale of a stock of goods, wares and merchandise made by the defendant Good to his co-defendant Cox, upon the ground of fraud. The circumstances relied upon by the plaintiffs, as badges of fraud, were: 1st. That Good was insolvent at the time of the sale, which was made soon after suits had been commenced against him, and embraced all of his property except that which was covered by a prior lien. 2d. That Good remained in possession of the property alleged to have been sold, and to all appearances continued business as before.
The master found, as matters of fact, that the insolvency of Good was not known to Cox at the time of the sale; that he paid full value for the goods sold; that the object of the sale was to provide for the payment of a debt upon which Cox was surety; that Cox had no intent to perpetrate a fraud in becoming the purchaser, and only bought to protect himself from liability as surety; that after the sale he employed Good as his agent to carry on the business, and that the result of the whole transaction was a loss to Cox of something over four hundred dollars. The Circuit judge concurred with the referee in these findings of *232fact, and this is conclusive upon us, for it is manifest that there was testimony, which, if believed, would be sufficient to establish each and every one of these facts.
It is, however, earnestly contended on the part of the appellants, that these badges of fraud are conclusive evidence of the fraud charged, and are incapable of being explained or rebutted by evidence. It is not to be denied that there are authorities which seem to support this proposition, and very possibly if the question were res integra it might be regarded as the safer and better rule. But we think that the more recent cases, not only in England and in the Supreme Court of the United States, but also in this State, show that such a proposition cannot now be sustained; and that the true rule is that while these badges of fraud constitute such strong evidence that they will be regarded as conclusive, unless explained by the most satisfactory testimony, yet they do not constitute such a presumption of fraud as to be irrebuttable by any evidence. In other words, when these badges of fraud are established, and nothing more, the presumption of fraud then becomes conclusive, and no inquiry into the intention of the parties is necessary or admissible. But when satisfactory evidence is offered to explain them, it then becomes a question of fact, to be determined by that branch of the court invested with jurisdiction to determine issues of fact, whether under all the circumstances the transaction brought in question is bona fide or fraudulent.
The case of Edwards v. Harben, 2 T. R. 587, may be regarded as the leading case in support of the proposition contended for by the appellants, but it is at least open to question whether the language used in that case is not susceptible of a construction more favorable to the rule which we have stated to be the correct rule, than to the proposition contended for by appellants. The language used by Buller, J., in that case is as follows: “ This has been argued, by the defendants’ counsel as being a. case in which the want of possession is only evidence of fraud, and that it was not such a circumstance y>er se as makes the transaction fraudulent in point of law'; that is the point which we have considered, and we are all of opinion that if there be nothing but the absolute conveyance without the possession, that in point of law is *233fraudulent.” "When it is considered that there was no evidence in the case tending to explain the continued possession of the vendor, the language above quoted may well be construed as meaning that the retention of possession by the vendor, where such continued possession is not satisfactorily explained, is not merely evidence from which a jury may find fraud, but that it is conclusive.
As has been well said by the learned annotator in his notes to Twyne’s Case, 3 Rep. 8, at page 10 of 1 8m. Lead. Cas.; “ The words of Buller, J., were, ‘ if there be nothing but an absolute conveyance, without the possession, that in point of law is fraudulent,’ by which his lordship may have intended that where there was nothing, i. e., no facts whatever appearing in the case except the absolute conveyance and the non-delivery, that then the inference of fraud would be so strong that a jury ought not to resist it. But it is very different in cases where, although the conveyance is absolute and the possession has not passed, still there are surrounding circumstances which show that a fraud may not have been intended; in such eases it cannot properly be (said that there is nothing but an absolute conveyance without the possession.” At all events it appears from the case of Martin-dale v. Booth, 3 Barn. & Ad. 498, and other cases cited in the same note, that the tendency of the latter cases in England is to hold that retention of possession by the vendor is not absolutely conclusive, but only prima facie evidence of fraud, which may be rebutted by testimony satisfactorily explaining such possession.
The case which is usually cited from the Supreme Court of the United States, in support of appellants’ proposition, is Hamilton I. Russell, 1 Cranch 310. That case rests entirely upon the authority of Edwards v. Harben, supra, and is open to the same explanation, inasmuch as it does not appear that any evidence was offered tending to explain the continued possession of the vendor; and in the absence of such explanation the retention of possession would properly be considered conclusive evidence of fraud. But in addition to this, the authority of Hamilton v. Russell, as sustaining the proposition contended for, is certainly shaken, if not overthrown, by the subsequent case of Warner v. Norton, 20 How. 448, in which it was held that retention of *234possession- by the vendor of personal property is only prima facie, and not conclusive evidence of fraud, and may, therefore, be explained. The court, in speaking of the question now under consideration, uses this language: “ New questions in the law have given rise to a greater conflict of authority than the one now under consideration. But for many years past the tendency has been, in England and in the United States, to consider the question of fraud as a fact for the jury under the instructions of the court, and the weight of authority seems to be now, in this country, favorable to this position. Where possession of goods does not accompany the deed, it is prima facie fraudulent, but open to the circumstances of the transaction which may prove an innocent purpose.”
The first case in our own State upon the subject, which we have been able to find, is DeBardeleben v. Beekman, 1 Desaus. 346, where it was held that if possession does not accompany the bill of sale, and the same be not recorded, it shall be void as to creditors, though there was no doubt that the parties intended no actual fraud. But in this case it seems to have been conceded that the vendor was allowed to retain possession for his own use and benefit, which, as will be seen from the discussion in the subsequent cases, is the very reason why retention of possession by the vendor is regarded as so strong a badge of fraud. This case, therefore, which seems to have escaped notice in the subsequent decisions, lends no support to the proposition contended for by the appellants.
In Kennedy v. Ross, 2 Mill Const. R. 125, it was held that retention of possession by the vendor was sufficient proof of fraud; but in that case there was no testimony offered tending to explain the continued possession of the vendor, and there is nothing in the case which warrants the conclusion that the court meant to decide that such possession was so absolutely conclusive of fraud as to be incapable of being explained by other testimony. The case of Kid v. Mitchell, 1 Nott & McC. 334, can scarcely be said to have decided anything upon the point we are considering, though the case seems to imply that retention of possession by the vendor is not absolutely conclusive, but only prima facie evidence of fraud. In Terry v. Belcher, 1 Bail. *235568, the question was distinctly made and it was held that retention of possession by the vendor, after an absolute sale, is not conclusive, but only prima faoie evidence that the sale was fraudulent.
In Smith v. Henry, 2 Bail. 118, the court held that the most ■usual badges of fraud are retention of possession by the vendor, and the sale of the whole or the most valuable part of the -debtor’s property pending suits against him, and that when these two badges of fraud are found together they become conclusive and render the sale fraudulent per se unless explained by the most satisfactory evidence of the absence of any fraudulent intent. It is quite true that when this case came before the Court of Appeals a second time, (1 Hill 16,) Harper, J., in delivering the opinion of the court, did use language going very far towards sustaining the view that the retention of possession by the vendor, after an absolute sale, was -absolutely conclusive of fraud, and not capable of being rebutted or explained by evidence ; but that such was not the intention of the court is conclusively shown by the subsequent case of Jones & Briggs v. Blahe and wife, 2 Hill Ch. 629, in which the opinion of the court was delivered by the same distinguished judge, holding that the retention of possession by the vendor may be explained by satisfactory evidence that the possession was retained under a bona fide agreement for hhe, or that the possession of the vendor was in any other way consistent with a bona fide sale, and was not allowed for fhe purpose of securing to the vendor some "advantage in relation to property, profit or pecuniary advantage.”
In Anderson v. Fuller, McMull. Eq. 27, there was no satisfactory evidence explaining the continued possession of the vendor, and hence the presumption of fraud arose. In Fulmore v. Burrows, 2 Rich. Eq. 95, the decision turned upon the fact that the evidence was not sufficient to satisfy the chancellor that there was any bona fide agreement for hire, and, therefore, the retention of possession by the vendor not being satisfactorily explained, was sufficient to establish fraud. In Pringle v. Rhame, 10 Rich. 72, it was held that the retention of possession by the vendor after an absolute sale may be explained by satisfactory *236evidence that the possession was retained under a bona fide agreement for hire. In that case, Withers, J., in delivering the opinion of the court, undertakes to show that the case of Smith v. Henry, as reported in 1 Hill 16, when properly understood, does not support the idea that retention of possession by the vendor is so absolutely conclusive of fraud as to be incapable of explanation by evidence.
Applying the rule deduced from the foregoing authorities to the case in hand, we see no reason for interfering with the judgment below. The Circuit judge held, and correctly held, that, in the absence of a bankrupt law, an insolvent debtor has the right to prefer one bona fide creditor to another, and, therefore, the sale to Cox, although made pending suits against the debtor, being made for the purpose of paying a bona fide debt upon which the vendee was surety, constituted no sufficient evidence of fraud.
As to the retention of possession by Good, the Circuit judge held that it was sufficiently explained by the fact which he regarded as satisfactorily proved, that such possession was held merely as the agent of Cox, and not for the benefit of Good. If, as we have seen, the retention of possession by the vendor is susceptible of explanation by satisfactory evidence that the parties had assumed towards each other the relation of bailor and bailee for hire, we cannot see any reason why the fact that the parties have assumed the relation of principal and agent should not have a like effect. Indeed, after the agency has been satisfactorily proved, which, according to the findings both of the master and the Circuit judge, was done in this case, it may be doubted, under the cases of Brooks v. Penn, 2 Strobh. Eq. 113, and Lott v. DeGraffenried, 10 Rich. Eq. 346, whether it is proper to say that the vendor retained possession in this case, or whether it would not be more correct to say that the vendee, by his agent, took possession immediately upon the execution of the bill of sale.
After Cox became the owner of the goods he, of course, had a right to do with them as he pleased; and what more natural than that he, who had no experience in handling a stock of goods, should entrust them to the management of his son-in-law, *237who had been engaged- in that kind of business. For such management he, of course, had a right to allow him whatever compensation he thought proper, and no one else had a right to complain. It' is true that the amount allowed seemed to- be greatly out of proportion to the services required of the agent, but while this was a circumstance to be.weighed, and doubtless was given its due weight by the Circuit judge, in considering the ■question as to the bona fides of the transaction, yet it was not conclusive; and the Circuit judge, having found that there was no fraud in the sale, we cannot say that there was any such error, as, under the well settled rules of this court, would warrant us in interfering with his conclusion.
The judgment of this court is that the judgnient of the Circuit Court be affirmed.