Hiram W. Fritz, Respondent, v. George P. Worden and Lucy M. Worden, Appellants

Hiram W. Fritz, Respondent, v. George P. Worden and Lucy M. Worden, Appellants. Pension money — invested in real estate — transfer thereof in fraud of ereditors. Where a United States pensioner of the civil war conveys premises purchased with his pension moneys to his wife upon her oral agreement to reconvey them to him at his request,, a person, ignorant of the wife’s promise, who has accepted a note guaranteed by the husband and wife, upon the faith of her apparent ownership of the real estate, is entitled to maintain an action to set aside a reconveyance of the premises, designed to defeat his claim under such guaranty, made by the wife to the husband after the creditor had begun bis action upon the note and guaranty. Qutere, whether the husband, by his conveyance to his wife, lost his right of exemption in the property conveyed as against his future creditors. Appeal by the defendants, George P. Worden and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Steuben on the 29th day of July, 1896, upon the report of a referee, which judgment set aside a conveyance of real estate in favor of the plaintiff as a creditor of the defendants. The defendant George P. Worden was a soldier of the United States in the war of the rebellion, and received on account of total disability a large pension. In 1887 he purchased a house and lot in Hornellsville, R. Y., with pension money, taking the title in his own name. On the 17th of June, 1889, he conveyed these premises to the defendant Lucy 1VI. Worden, his wife, by an absolute deed, and, by parol agreement between them, she was to deed the property back to him at his request. This conveyance was made upon a nominal consideration by George P. Worden to avoid the payment of debts which were pressing him at the time, and which he seems to have believed could be collected out of the projjerty. The deed to the wife was recorded in Steuben county clerk’s office on the same day, or the day following its execution. These parties had a son, a young man, T. J. Worden. The plaintiff was engaged in the butchering business in Hornellsville, and he sold a half interest in his business to this son for $400. The son not having the money, George P. Worden and his wife, the defendant Lucy M. Worden,' jointly and severally guaranteed a note of the son executed to the plaintiff for $400, payable in six months with interest, dated April 2, 1894, and at that time the title to the premises was in Mrs. Worden. This note was not paid, and an action was commenced by the plaintiff to recover the amount thereof, and, after the commencement of - such action, and on the 20th day of December, 1894, the defendant Lucy M. Worden conveyed the premises by an absolute deed to the defendant George P. Worden. There was no consideration for that transfer, the defendants testifying in effect that the transfer was made to carry out the parol agreement to reconvey ¡above stated. On the 11th of January, 1895, judgment was recovered in said action against the defendants for $418.66 damages and $21.09 costs, upon which execution was issued and returned unsatisfied, and, after such return, this action to set aside the last-mentioned conveyance with a view of collecting the plaintiff’s debt was instituted. It appeared undisputed in the evidence, and the referee so found, that the plaintiff was ignorant of the secret oral agreement to reconvey; that he believed that-the defendant Lucy owned the land in fee unaffected by any right," trust or condition in her husband, and that the plaintiff accepted the guaranty "of the said note and extended the credit to the maker óf the said note -upon the faith and credit of such belief of the ownership of Mrs. Worden in fee simple. The plaintiff testified that he accepted the guaranty, knowing that the wife was the owner of the real estate; that in accepting it he relied upon her 'solvency by reason of such title, and that lie had no knowledge that the defend- • ant George P. "Worden had ever held title to the said real estate. The referee found -that the conveyance made by the wife to the husband was made, executed and delivered by her and accepted by him without consideration and with intent on the part of each of the said defendánts to hinder, delay and defraud this plaintiff as the then existing creditor of the wife, and, as a conclusion of law, the referee found that the said deed was fraudulent and void as against the plaintiff’s judgment and that the plaintiff was entitled to a judgment setting aside the said deed and a decree that his judgment .be a lien upon the said real estate and that the premises be sold and out of the proceeds the plaintiff’s claim be collected. James H. Stevens, for the appellants. F. A. Rathbun, for the respondent. [MAJORITY — Ward, J. :] Ward, J. : An examination of the evidence in. this case clearly shows that the conveyance from the defendant Lucy M. Worden to her husband, George P. Worden, of the premises described in the complaint was executed with the intent of the parties to the instrument to prevent the collection of the plaintiff’s debt, and the finding of the referee upon that subject seems fully sustained. The learned counsel for the appellants seems to regard the house and lot that was purchased with the pension money as still exempt from execution as the property of George P. Worden, by virtue of the oral agreement to reconvey, and that he stands precisely in the same condition, having had the' property reconveyed to him by reason of the oral .arrangement, as though he had never parted with the title. The oral arrangement was void and could not be enforced. There was no fraud or mistake alleged. The conveyance was absolute from Worden to his wife, and the parol arrangement comes within the condemnation of Sturtevant v. Sturtevant (20. N. Y. 39); and Wheeler v. Reynolds (66 id. 227), and of the Statute of Frauds. Any equities that may exist between Worden and his wife as to this transaction will not prevail against the plaintiff’s equity as a creditor of the Wordens, having trusted them upon the strength of the wife’s title to the premises, and without knowledge of the secret •oral agreement. The property was exempt in the hands of George P. Worden, as it was purchased with his pension money, and his creditors had no ■claim upon or interest in it, and he had the right to give it to his wife or any other party, and his grantee would not be liable to account for this property to his creditors, but when George P. Worden, for whatever reason, voluntarily disposes by an absolute conveyance, duly recorded, of his title to the property, and by his act . thereby holding out to the world the title of that property in another, and permitting that other to obtain credit thereby, and his grantee having been trusted upon the faith of such title, equity will not permit him now to claim the property as exempt against such a creditor. The pension money is used as a shield to protect the soldier from want and to secure a support for his family, but it cannot be used as-an instrument by which a fraud is perpetrated upon the public. It is the settled law of this State that, undér the provisions of the Code of Civil Procedure (§ 1393) exempting pensions granted by the United States, or a State, for military or naval services, from levy and sale on execution, where the receipts from a pension can be directly traced to the purchase of property necessary or convenient for the support and mainténance of the pensioner and his-family, such property is exempt. This is a wise and just provision in favor of soldiers of the republic, and these provisions will be enforced by the courts in all proper cases. (Yates Co. National Bank v. Carpenter, 119 N. Y. 550, and cases there cited.) But when the pensioner parts with the title to the property in which his-’ pension money is invested, or parts with the. proceeds of his pension in any other form so that the rights of third persons as to that property intervene, the right to the exemption ceases, as, like all other exemptions, it is a personal privilege. Judge Barker says, in speaking for the General Term of the old' fifth department, in Burgett v. Fancher (35 Hun, 650): “ The favor of the statute. is personal to the pensioner, and if he once relinquishes his privileges then, of course, it cannot be restored by any effort on his part.” It is, however, not necessary in this case to decide whether, by the conveyance from Worden to his wife, he lost his right of exemption in the property conveyed as against future creditors. We only hold that, as against the plaintiff, under the. circumstances of this case, he cannot maintain the exemption he claims in the property. . The judgment appealed from should be affirmed, with costs. All concurred, except Follett, J., not sitting. Judgment affirmed, with costs.