Negotiable notes and United States bonds purchased, and held as
investments, for an incompetent World War veteran by his guardian
out of "payments of benefits" made to him by the United States
under laws relating to such veterans held
not exempt under
§ 3 of the Act of August 12, 1935 from execution upon a judgment
against the incompetent. P. 306 U. S.
214 N.C. 174, 198 S.E. 651, affirmed.
p. 622, to review the affirmance of
a, decree dissolving an order which restrained respondent from
executing upon a Judgment.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
The Supreme Court, North Carolina, ruled that negotiable notes
and United States bonds purchased and held as investments for an
incompetent World War veteran
Page 306 U. S. 546
by his guardian out of "payments of benefits" authorized under
laws relating to such veterans were subject to execution upon a
judgment against the incompetent. Petitioners challenge that view,
and claim immunity under § 3, Act August 12, 1935 (c. 510, 49 Stat.
"Sec. 3. Payments of benefits due or to become due shall not be
assignable, and such payments made to, or on account of, a
beneficiary under any of the laws relating to veterans shall be
exempt from taxation, shall be exempt from the claims of creditors,
and shall not be liable to attachment, levy, or seizure by or under
any legal or equitable process whatever, either before or after
receipt by the beneficiary. Such provisions shall not attach to
claims of the United States arising under such laws, nor shall the
exemption herein contained as to taxation extend to any property
purchased in part or wholly out of such payments. Section 4747 of
the Revised Statutes and section 22 of the World War Veterans' Act,
1924, are hereby repealed, and all other Acts inconsistent herewith
are hereby modified accordingly. The provisions of this section
shall not be construed to prohibit the assignment by any person, to
whom converted insurance shall be payable under title III of the
World War Veterans' Act, 1924, of his interest in such insurance to
any other member of the permitted class of beneficiaries. . .
"* * * *"
"Sec. 5. That this Act shall take effect and be in force from
and after its passage, but the provisions hereof shall apply to
payments made heretofore under any of the Acts mentioned
The conclusion below is supported by McCurry v. Peek,
54 Ga.App. 341, 187 S.E. 854, the only other opinion squarely upon
the point here involved which has been called to our attention.
The language of section three, although not entirely felicitous,
conflicts with the petitioners' insistence.
Page 306 U. S. 547
The first sentence grants exemption from taxation, claims of
creditors, attachment, levy, or seizure under any legal process
whatever. The things exempted are "payments of benefits" due or to
become due either before or after receipt by the beneficiary.
Investments purchased with money received in settlement of
benefits are not such payments due or to become due. Accordingly,
giving the words employed their ordinary meaning, the notes and
bonds in question are not exempted by the first sentence in section
three. It left them, like other property, subject to taxation,
claims of creditors, and legal process.
The second sentence in the section clearly recognizes the
distinction between benefit payments and property purchased with
money therefrom. It declares the exemption provisions in the first
sentence shall not attach to claims of the United States; also that
exemption from taxation shall not extend to property purchased out
of benefit payments. Nothing is said concerning claims of
creditors. Nevertheless, petitioners seem to maintain, immunity
from these must be inferred. But a mere declaration that
investments always subject to taxation shall not enjoy exemption
therefrom affords no basis for holding them free from claims of
creditors. Although the first sentence extended no immunity to
investments, apparently out of abundant caution, the second
declared them subject to taxation.
We find nothing in the history or supposed purpose of the
enactment adequate to support a construction not in accord with the
ordinary import of the words employed.
Under Spicer v. Smith, 288 U.
, 288 U. S. 434
payment of benefits to the guardian vested title in the ward. The
exemptions of the statute would not be different if the ward had
personally received the payments.
Section 4747 Revised Statutes, Act March 3, 1873 (38 U.S.C. §
54) remained in force until repealed by Act August 12, 1935. It
Page 306 U. S. 548
"No sum of money due, or to become due, to any pensioner shall
be liable to attachment, levy, or seizure by or under any legal or
equitable process whatever, whether the same remains with the
Pension Office, or any officer or agent thereof, or is in course of
transmission to the pensioner entitled thereto, but shall inure
wholly to the benefit of such pensioner."
This section was considered in McIntosh v. Aubrey,
185 U. S. 122
185 U. S. 124
where it was unsuccessfully claimed that property purchased with
pension money could not be seized under an execution. It was there
"The language of the section of itself seems to present no
difficulty, and if doubt arises at all, it is only on account of
the decisions of courts whose opinions are always entitled to
respect. . . . But, notwithstanding, we think the purpose of
Congress is clearly expressed. It is not that pension money shall
be exempt from attachment in all of its situations and
transmutations. It is only to be exempt in one situation -- to-wit,
when 'due or to become due.' From that situation the pension money
of plaintiff in error had departed."
Section 22 World War Veterans' Act, 1924, c. 320, 43 Stat. 607,
613, repealed by Act August 4, 1935, provided:
"That the compensation, insurance, and maintenance and support
allowance payable under Titles II, III, and IV, respectively, shall
not be assignable; shall not be subject to the claims of creditors
of any person to whom an award is made under Titles II, III, or IV,
and shall be exempt from all taxation: Provided,
compensation, insurance, and maintenance and support allowance
shall be subject to any claims which the United States may have,
under Titles II, III, IV, and V, against the person on whose
account the compensation, insurance, or maintenance and support
allowance is payable. . . . "
Page 306 U. S. 549
Trotter v. Tennessee, 290 U. S. 354
290 U. S.
-357, construed this section. A veteran had purchased
land in Tennessee with money received as compensation, and claimed
exemption from taxation. We said:
"The moneys payable to this soldier were unquestionably exempt
till they came into his hands or the hands of his guardian.
McIntosh v. Aubrey, 185 U. S. 122
. We leave the
question open whether the exemption remained in force while they
continued in those hands or on deposit in a bank. . . . Be that as
it may, we think it very clear that there was an end to the
exemption when they lost the quality of moneys and were converted
into land and buildings. The statute speaks of 'compensation,
insurance, and maintenance and support allowance payable' to the
veteran, and declares that these shall be exempt. We see no token
of a purpose to extend a like immunity to permanent investments or
the fruits of business enterprises."
In 1935, Congress gave much consideration to the exemption which
should be accorded to veterans. The outcome is shown by §§ 3 and 5,
Act August 12, 1935, ante,
p. 306 U. S.
Section three of that Act came under review in Lawrence v.
Shaw, 300 U. S. 245
300 U. S.
-250. Exemption was successfully claimed for bank
deposits standing in the name of a veteran's guardian upon the view
that such deposits, made in the ordinary course and subject to
demand for the veteran's use, should be treated as if money in his
"The World War Veterans' Act, 1924, provided that the
compensation and insurance allowances should be 'exempt from all
taxation.' The Act of 1935 is more specific, providing that the
payments shall be exempt from taxation and shall not be liable to
process 'either before or after receipt by the beneficiary.' There
was added the qualification that the exemption should not extend
Page 306 U. S. 550
any property purchased in part or wholly out of such payments.'
This more detailed provision was substituted for that of the
earlier Act, and was expressly made applicable to payments
theretofore made. We think it clear that the provision of the later
Act was intended to clarify the former, rather than to change its
import, and it was with that purpose that it was made retroactive.
. . . The provision of the Act of 1935 that the exemption should
not apply to property purchased out of the moneys received from the
Government shows the intent to deny exemption to investments, as
was ruled in the Trotter
The questioned judgment must be