tice of the fact that the purchaser in possession, under the contract of sale, has placed a mortgage on the property, cannot thereafter rescind the sale, whether for cause or by agreement with the purchaser, without the consent of the mortgagee, or without giving him an opportunity to perform the contract.13 So, the fact that a mortgagor is induced by fraudulent representations to sign the mortgage without reading it renders it voidable merely, and not void, and therefore it cannot be avoided in the hands of a person who in good faith advances money thereon.14 So, a married woman cannot avoid a mortgage or conveyance executed by her of her separate estate, on the ground of fraud and false representations on the part of her husband, of which the mortgagee was ignorant and innocent.15 But if a third person takes property with knowledge that it was procured by his grantor from the original owner by fraud, false representations, duress, etc., or if he knows facts sufficient to put a man of ordinary business prudence on inquiry, which would lead to such knowledge, then he cannot claim the protection of a bona fide purchaser, and the transfer to him. is no obstacle to a rescission or cancellation at the instance of such original owner.16 Thus, where the release of a

Purmort, 5 Paige (N. Y.) 620; Boyd v. Turpin, 94 N. C. 137, 55 Am. Rep. 597; Garza v. Scott, 5 Tex. Civ. App. 289, 24 S. W. 89; Hill v. Horse Creek Coal Land Co., 70 W. Va. 221, 73 S. E. 718; Dunfee v. Childs, 59 W. Va. 225, 53 S. E. 209; Western Min. & Mfg. Co. v. Peytona Cannel Coal Co., 8 W. Va. 406. Compare Bailey v. Herron, 20 Ky. Law Rep. 1957, 50 S. W. 834; Thomas v. Sweet, 111 Ky. 467, 63 S. W. 787, 65 S. W. 827; Bonelli v. Burton, 61 Or. 429, 123 Pac. 37. 13 Scott v. Farnam, 55 Wash. 336, 104 Pac. 639. Compare Rafferty v. Heath, 115 Va. 195, 78 S. E. 641.

14 Dixon v. Wilmington Savings & Trust Co., 115 N. C. 274, 20 S. E. 464.

15 Paxton v. Marshall (C. C.) 18 Fed. 361; Vancleave v. Wilson, 73 Ala. 387; Pacific Guano Co. v. Anglin, 82 Ala. 492, 1 South. 852. But see Central Bank v. Copeland, 18 Md. 305, 81 Am. Dec. 597, holding that the fact that mortgagees took no part in procuring the mortgage, which was obtained from a married woman by her husband by duress, will not help them when she seeks to avoid the transaction on that ground, since they allowed the husband to act as their agent and are bound by his acts.

16 Old Colony Trust Co. v. Dubuque Light & Traction Co. (C. C.) 89 Fed. 794; Lockwood v. Tate, 96 Ala. 353, 11 South. 406; Light v. Jacobs, 183 Mass. 206, 66 N. E. 799; Brice v. Brice, 5 Barb. (N. Y.)

mortgage has been obtained by fraud, equity will reinstate the mortgage, not only as against the mortgagor, but also as against a purchaser from him with notice of the mortgage, and in whose favor no new rights have intervened since the release. Moreover, the character of a bona fide purchaser is not made out, within the meaning of the rule under consideration, where it appears that, though a deed was executed to him, it was neither delivered to nor accepted by him nor any consideration given.18 And it is not enough that the purchaser should have taken the property in good faith and without knowledge of invalidating circumstances, but it must also be shown that he paid value for it.19 Thus, one who takes an assignment of a bond and mortgage securing the price of property, upon a fraudulent conveyance thereof, but who takes it simply as a gift and without paying any pecuniary consideration, is not a bona fide purchaser so as to prevent a rescission of the contract as against him.20 But if a third person, acting in good faith, has paid a substantial part of the consideration in cash, the fact that another part of the consideration was an antecedent debt of the grantor's husband, does not affect his rights as a bona fide purchaser.21

But if the original transfer was absolutely void, no question of the rights of subsequent purchasers can arise. Thus, a forged deed cannot operate to convey title to the grantee or to persons holding under him, nor will the good faith of a subsequent holder suffice to make such deed a good conveyance of title.22 And it has been held that the question of fraud only becomes important, in an action to rescind a sale, where the sale is fully consummated, but that

533; Beeson v. Smith, 149 N. C. 142, 62 S. E. 888; Hofecker v. Pfeil, 193 Pa. 288, 44 Atl. 421; Taylor v. National Bank, 6 S. D. 511, 62 N. W. 99; Goree v. Goree, 22 Tex. Civ. App. 470, 54 S. W. 1036. 17 Ellis v. Lindley, 37 Iowa, 334.

18 Reddin v. Dunn, 2 Colo. App. 518, 31 Pac. 947.

19 Colton Imp. Co. v. Richter, 26 Misc. Rep. 26, 55 N. Y. Supp. 486; Rapps v. Gottlieb, 142 N. Y. 164, 36 N. E. 1052. See Reed v. Wessel, 7 Mich. 139.

20 Baker v. Lever, 67 N. Y. 304, 23 Am. Rep. 117.

21 Finnegan v. Finnegan, 3 Tenn. Ch. 510.

22 Sapp v. Cline, 131 Ga. 433, 62 S. E. 529.

where no sale is really made, but a delivery is effected to one on false representations that he is acting for an undisclosed principal, the party to whom delivery is made is in no position to transfer title, even to a bona fide purchaser, since there is an absence of a party to the contract and therefore no contract of sale.23 The question of the rights of an innocent purchaser for value from the grantee of an insane grantor has been considered in another connection. 24

§ 641. Same; Sales of Personal Property.-Substantially the same rules govern the case of a sale of personal property, induced by fraud, but followed by a transfer of the goods to a third person. "Where a vendee obtains possession of a chattel with the intention by the vendor to transfer both the property and possession, although the vendee has committed a false and fraudulent misrepresentation in order to effect the contract or obtain the possession, the property vests in the vendee, until the vendor has done some act to disaffirm the transaction, and the legal consequence is that if, before the disaffirmance, the fraudulent vendee has transferred either the whole or a partial interest in the chattel to an innocent transferee, the title of such transferee is good against the vendor." 25 This principle is more fully explained in an important decision in Alabama, as follows: Where a buyer of goods has been guilty of such fraudulent conduct as will authorize the seller to rescind the contract and recover the goods, a third person claiming them as a sub-purchaser, must show that he bought from the original vendee and that he paid the reasonable value of the goods or took them at their reasonable value in payment of a bona fide debt. If he holds the goods under a secret trust for the original purchaser, the seller will be entitled to recover from the sub-vendee upon proof of facts which would enable him to recover from the original vendee. But if the sub-vendee shows that he paid reasonable value for the goods, the burden is on the seller to

23 Rodliff v. Dallinger, 141 Mass. 1, 4 N. E. 805, 55 Am. Rep. 439. 24 Supra, § 258.

25 Pease v. Gloahec, L. R. 1 P. C. 220.

show notice to the sub-vendee of the fraud of the original vendee at the time of the purchase or before payment of the purchase price. And in the case of a sub-purchaser without notice, it is not necessary that the consideration which he paid should have been all cash, or that it should have been equal to the full value of the goods, but only that it was a valuable consideration as distinguished from a good consideration.20 It may be added that where the seller of personal property has put it out of his power to return the property received in part payment thereof, he cannot, as against a subsequent bona fide purchaser, claim that the sale was conditional, and rescind it for a failure to pay the balance of the purchase price.27

§ 642. Assignee of Purchase-Money Notes.-When the vendor of land takes purchase-money notes and assigns one or more of them, his right to rescind the contract of sale on default or repudiation by the vendee, and to reclaim the land, is suspended by the assignment, since it is no longer in his power to put the vendee in statu quo by returning all of the notes; and the right of rescission will not be revived until the legal title to the land and the ownership of all of the notes shall unite in some one individual, but until such time, the remedy is by foreclosure and sale. of the property under the vendor's lien, if any, reserved in the contract.28 Similarly, if, after the maturity of a note given for the purchase price of land, an action for its collection is brought by a bona fide transferee before maturity, it is too late for the vendee to rescind the contract and enjoin the collection of the note on grounds which would have been available against the vendor, as, for instance, defect of title or the existence of an undisclosed incumbrance.29

26 Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 South. 12, 8 L. R. A. (N. S.) 448, 119 Am. St. Rep. 19.

27 Dial v. Peterson, 34 Ill. App. 478.

28 Douglass v. Blount, 95 Tex. 369, 67 S. W. 484, 58 L. R. A. 699; McClure v. Bryant, 18 Tex. Civ. App. 141, 44 S. W. 3; Russell v. Kirkbride, 62 Tex. 455; Lawson v. Conolly, 51 La. Ann. 1753, 26 South. 612; Shaw v. Benesh, 37 Wash. 457, 79 Pac. 1007.

29 Brill v. Merchants' & Planters' Bank (Miss.) 12 South. 29; Mayes v. Robinson, 93 Mo. 114, 5 S. W. 611. But see Smith v. Pettus, 1 Stew. & P. (Ala.) 107.

But even in the case of a purchase-money note, the assignee will be required to show the exercise of reasonable care and prudence. Thus where the purchaser of land, after delivery of the deed to him, fraudulently included other land in it, and then made a voluntary conveyance of all of it to a third person, taking back purchase-money notes, which he assigned to a bank, and the bank did not examine the records, but took the purchaser's word as to the title, it was held that there was nothing to estop the original vendor from obtaining relief against the deed.3°

80 Gill v. Fugate, 117 Ky. 257, 78 S. W. 188.