Page:Federal Reporter, 1st Series, Volume 9.djvu/504

SMITH V. SCHWED. 489 �name for the benefit of Schwed & Newhouse. Such being the scheme, it would be impossible to hold it valid as to part and void as to the remainder. That Schwed & Newhouse acted with fraudaient intent is entirely clear. It would be difficult to imagine a more outrageous fi-aud upon creditors than appears to have been deliberately attempted by them. In the course of about six months they made purohases of merchandise on credit from 51 merchants, aggregating some $25,000, and then suddenly undertook, through confessions of judgmcnts and sales, to transfer the very goods for which these debts were in large part contracted to a brother-in-law of one of them, with the under- standing that he would allow them to retain the goods, and go on with the business under the guise of an agency. �There is no room for question here except as to whether Heller had notice of the fraudulent purpose of Schwed & Newhouse. I have already given some of my reasons for holding that he had notice. The transactions were extraordihary, unusual, and suspicious. The relations between the parties aliord strong ground for the conclusion that Heller was fully advised as to the condition and purposes of the firm. Their conduct was such as to put him on inquiry and lead him to infer that they were trying to put their property beyond the reach of creditors ; and, as already suggested, the conduct of Heller himself can be explained oiily upon the hypothesis that he knew the purpose of Schwed & Newhouse to be -to defraud creditors, and intended to aid them in that purpose. �3. In view of what bas been said, it is unnecessary to decide the question whether Schwed & Newhouse were hona fide indebted to Heller in the full amount of the judgments confessed. If it were necessary to decide this question I would examine the evidence very carefully, as I am not at present satisaed as to what the fact is. Being satisfied that the judgment was fraudulent, — in fact, given and taken with a deliberate purpose to defraud, — I hold that it must be set aside, independently of the question of the hona fides of Heller's claims. A creditor having a demand, however just, cannot use it as a means of defrauding other creditors of the^ same debtor. In a fair race for preference, if he, by diligence, secures an advantage, it may, perhaps, be maintained ; but if his purpose is not to collect his debt, but to help the debtor cover up his property, he cannot shield himself by showing that his debt was hona fide. �4. It is alleged in the bill that the judgment in question is void becaua« not entered in accordance with the statute of Missouri reg- ulating the confession of judgments. It is said that the statement ��� �