The conveyance to Welch was executed not only for the purpose of ultimately securing to his wife the proceeds of the lands conveyed, but also for the purpose of devoting those proceeds, in the mean time, to the use and benefit of Welch, in his own right. The court found that the conveyance was executed upon a verbal agreement between Wood, the grantor, .and Welch, the grantee, that Welch might and should dispose of the said land, and of the timber thereon, and take and -use the avails and proceeds thereof,' as- capital in Ins business of a merchant, in which he was then engaged or about to engage, and at some future time pay or secure to his wife, in her own right, the entire amount of such avails or proceeds.” It is also found that he sold and disposed of said land and timber, and that from May, 1846, to June, 1849, he realized therefrom the sum of $2789.27, which he invested and used in his said business ; that shortly before the 18th of June, 1860, being then insolvent, he accounted and settled with an agent of his wife for said proceeds, in which settlement interest was allowed on said proceeds from the time they were received by him, making in all the sum of $4970.67; that he gave his promissory notes for that amount, payable to said agent or or bearer, which have since been paid, except the sum of $486.29 ; and that he continued in said mercantile business until- the 4th of September, 1861, when he executed an assignment of all his property in trust to pay his debts, in which he preferred said debt to his wife át the sum last mentioned. It is also found that the debt to the plaintiff ivas contracted in April, 1861.
Upon these facts I am of opinion that the equity of the plaintiff to be paid out of the assigned property is superior *280to that of Mrs. Welch, even assuming for the present that she has a claim which will he upheld in equity. The conveyance to Welch furnished him with capital to use in his business, as a merchant. For aug’ht' that appeared on the face of the deed the property conveyed became his absolutely. The arrangement out of which the wife’s demand arises was secret, and unknown to third persons dealing with Welch. The possession and use of the property and its proceeds, under the circumstances, gave him the same credit as if he had owned the property absolutely. Ho time was fixed, by the terms of the arrangement, when the proceeds should be paid or secured to his wife. Either the time of payment was optional with Welch or he was liable to pay over the proceeds as soon as he received them, or on reasonable demand thereafter. Whatever construction in that respect be adopted, the proceeds should be regarded, in equity, as dedicated either by the express agreement of Wood, the grantor, or by the acquiescence and consent of Mrs. Welch, the ultimate beneficiary, to a liability for the payment of Welch’s debts contracted while such proceeds continued to be used by him and invested in his business. In fact they were allowed to be thus used by him, till he became insolvent. Even after that event, and until after he had contracted the debt which the plaintiffs are seeking to enforce in this action, he was permitted to use so much of the proceeds as he afterwards undertook to secure to his wife by the preference in the assignment. It is inequitable to permit his wife now to step in and withdraw the means thus employed by him, at the expense of creditors who trusted him on the faith of such means.
The case is no stronger for Mrs. Welch than if she had received the proceeds of the land directly from her father, as her separate estate, and had then permitted her husband to use it as capital in his business of a merchant, under a verbal agreement to pay or secure it to her at some future time. In such a case, I apprehend, her equity would be postponed to that of creditors. (See Gage v. Dauchy, 28 Barb. 622, and *281authorities there cited by Davis, J.) So, even if he had carried, on the business in the name of his wife, prior to the statute of 1860. (Buckley v. Wells, 42 Barb. 589. Sherman v. Elder, 24 N. Y. Rep. 381.)
But if I am wrong in this, there can be no question that under such circumstances the wife would be held to have conferred upon her husband the use or income of her separate property, as a gift. (Clancy’s Rights of Married Women, 354, and oases there cited.) And, therefore, whether Welch be regarded as deriving his rights directly from Wood, or from his wife, he was entitled to the whole use and income of the capital while it was invested by him in his business, and his wife had no claim for interest thereon, even in equity. By the terms of the deed he had a right to use the proceeds of the land, and she had no right to interest thereon while he used them. Before the assignment was executed she had been paid more than the whole- principal with interest on it from the time of the accounting and settlement, and there was nothing due her. Even if we regard the preference in the assignment 'as a settlement upon the wife for a valuable consideration, it can only be upheld to the extent of the consideration, as against creditors. (Schaffner v. Reuter, 37 Barb. 44. Garlick v. Strong, 3 Paige, 452.)
In any view of the case, .therefore, I am opinion that at the time when the assignment was executed Mrs. Welch had no claim against her husband which could be enforced or upheld, either at law or in equity. It follows that the preference of her claim, in the assignment, of legal necessity, had the effect of defrauding the plaintiffs.
There is no question of mistake, in fact, in preferring her demand, or of an unintontial over statement of its amount. In short, the facts of the case are undisputed. If the views of the law above expressed are correct, there can be no doubt that in case the facts found by the court respecting the consideration of the debt tq Mrs. Welch had been stated in the assignment, the preference of her debt would have amounted *282to conclusive evidence of fraud, and it would have been the duty of this court to set aside the finding in opposition to such evidence. (Cunningham v. Freeborn, 1 Edw. Ch. 256. S. C. 3 Paige, 557. S. C. 11 Wend. 240. Nicholson v. Leavitt, 2 Seld. 510. Dunham v. Waterman, 17 N. Y. Rep. 9.) I am ¡irepared to hold that the same rule should he adopted in cases where extrinsic facts, conceded or established without dispute, make the assignment necessarily fraudulent according to thg law of the case. The special term case of Webb v. Daggett, (2 Barb. 9,) is a decision in support of this position. To the same effect are the opinions of Justices Nelson, in Cunningham v. Freeborn, (11 Wend. 254, 255 ;) Denio, in Edgell v. Hart, (5 Seld. 219 ;) and Sutherland, in Babcock v. Eckler, (24 N. Y. Rep. 632.)
[Monroe General Term, September 5, 1865.■ For these reasons I am- of opinion that the judgment should he reversed, and a new trial ordered, with costs to abide the event.
Judgment affirmed.
Johnson, J. 0. Smith and E Danoin Smith, Justices.]