218 F. 422 | 9th Cir. | 1914
Lead Opinion
(after stating the facts as above). The petition presents these questions: (1) Is a bankrupt in the state of California entitled to claim a real estate homestead exemption, where neither he nor any one in his behalf has made and recorded a declara
Sections 1240 and 1241 of the Civil Code of California provide that the homestead is exempt from execution or forced sale, except—
“in satisfaction of judgments obtained: (1) Before tbe declaration of homestead was filed for record, and which constitute liens upon the premises. (2) On debts secured by mechanics’, * * * matérialmen’s or vendors’ liens upon the premises. (3) On debts secured by mortgages on the premises, executed and acknowledged by husband and wife. * * * (4) On debts secured by mortgages * * * executed and recorded before the declaration of homestead was filed for record.”
Section 1262 provides:
“In order to select a homestead, the husband or other head of a family, or in ease the husband has not made such selection, the wife, must execute and acknowledge, in the same manner as a grant of real property is acknowledged, a declaration of homestead, and file the same for record.”
Section 70a of the Bankruptcy Act provides that the trustee of the bankrupt’s estate shall be vested by operation of law with the title of the bankrupt as of the date he was adjudged a bankrupt, “except in so far as it is to property which is exempt,” and property which prior to the filing of the petition he could by any means have transferred, or which might have been levied upop and sold under judicial process against him.
Section 2, cl. 11, gives courts of bankruptcy authority to “determine all claims of bankrupts to their exemptions.”
Section 7, cl. 8, requires the bankrupt to make and file a schedule of his property “and a claim for such exemptions as he may. be entitled to.”
Section 47a, cl. 11, directs trustees to “set apart the bankrupt’s exemptions and report the items and estimated value thereof to the court as soon as practicable after their appointment.”
Section 6 provides:
“This act shall not affect the allowance to bankrupts of the exemptions .which are prescribed by the state laws in force at the time of the filing of the petition in the state wherein they have had their domicile for the six months or the greater portion thereof immediately preceding the filing of the petition.”
While exemptions allowed a bankrupt are fixed and defined by the law of the state of his domicile, the Bankruptcy Act is controlling as to the time and manner of claiming, selecting, and allowing exemptions, and the courts have given these provisions of the act a liberal and equitable construction. In Smith v. Thompson, 213 Fed. 335, 129 C. C. A. 637, Judge Hook said:
“In every court the administration of an exemption law should comport with the beneficent spirit that prompted its enactment. A court of equity especially should not attempt to defeat the exemption by niceties in practice. It should be helpful to those whose condition requires them to invoke it.”
“In tins ease the bankrupt did not waive his exemptions, and he had, notwithstanding his omission to sot forth his claim in the schedules, a clear legal right to the exemptions allowed by the laws of the state of Alabama; and we think he had a legal right to prefer his claim in the bankruptcy proceedings at any seasonable time while the property remained in the hands of the trustee unaffected by adverse rights.”
“And such trustees, as to all property in the custody or coming into the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a creditor holding a lien by legal or equitable proceedings thereon, and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of á judgment creditor holding an execution duly returned unsatisfied.”
The argument is that the amendment puts the trustee, as to all property in the custody of the bankruptcy court, in the position of a creditor holding a lien by legal or equitable proceedings, and, as to all other property, in the position of a creditor holding an execution returned unsatisfied, and that it follows that the trustee in the case at bar is in the attitude of a lien creditor as to the real estate which is claimed as a homestead, and that his lien represents the entire indebtedness against the bankrupt, so as to exclude a claim of homestead exemption. We do not so construe the amendment. Section 6 of the act remains unamended and unrepealed. The amendment does not affect the provision of that section, in which the intention of Congress is plainly expressed, that the Bankruptcy Act shall not affect tire allowance to bankrupts.of the exemptions which are prescribed by state laws. Section 6 still remains one of the fundamental provisions of the act, and it is the duty of the courts to construe the act with all its amendments as a whole, and to harmonize all its parts. The purpose of the amendment to 47a was to make effective the rights of creditors against those who claimed secret or unrecorded liens or adverse interests in the property of the bankrupt. Before the amendment, the trustee in bankruptcy was vested with no better title to the bankrupt's property than the bankrupt had at the time when the trustee’s title accrued. He stood in the shoes of the bankrupt, and where, under the law of the state, a conditional sale, a vendor’s lien, or an unrecorded mortgage was good between the parties, it was good as against the trustee. The amendment gives the trustee the right to attack all such unrecorded liens and secret equities, without requiring that he shall be in the position of representing creditors who have acquired liens by legal or equitable proceedings against the bankrupt. It is conceded that the purpose of the amendment was to remedy the situation disclosed in York Manufacturing Co. v. Cassell, 201 U. S. 344, 26 Sup. Ct. 481, 50 L. Ed. 782, in which it had been reaffirmed that .the trustee in bankruptcy was vested with no better right or title to the property than the bankrupt had when the trustee’s title accrued, and that where a contract of conditional sale of personal property was good as between the parties themselves, although not filed, the vendor of- such property, where payment had not been made, might remove the same as against all creditors of the bankrupt who have, not fastened upon it by some specific lien. The amendment should be construed in the light of the purpose which it was intended to serve, and this is shown by the report of the Senate judiciary committee when
“The general assignment, made by Abraham to Davidson, did not constitute Davidson an assignee for value, but simply made him an agent of Abraham for the distribution of the proceeds of the property among Abraham’s credl-itors. This general assignment was of itself an act of bankruptcy, without regard to the question whether Abraham was insolvent.”
Cases in point are In re Falconer, 110 Fed. 111, 49 C. C. A. 50; Bashinski v. Talbott, 119 Fed. 337, 56 C. C. A. 241; In re Thompson (D. C.) 140 Fed. 257; In re Soper (D. C.) 173 Fed. 116; In re Irwin (D. C.) 177 Fed. 284.
The petition to revise is denied, and the order of the District Court is affirmed.
Dissenting Opinion
(dissenting). The conclusion reached by the' majority of the court in this case finds support in some of the District Court cases, but is, I think, in direct conflict with the decision of the Circuit Court of Appeals for the Eighth Circuit in the case of In
“At: what -point of time must the bankrupt be entitled to a particular exemption under the state laws to have it allowed and set apart under the saving and. protecting provisions of the bankruptcy act? The answer must, of course, be found in that act. Naturally it would be expected that this point of time would not -be later than the date as of which the general estate of the bankrupt is wrested from his dominion and vested in his trustee for the benefit of the creditors. And such, we think, is actually and plainly the effect of the provisions before set forth. Thus it is declared, in section 6, that the exemptions to be allowed are those prescribed by the state laws in force ‘at the time of the filing of the petition,’ and, in section 70a, that, upon his appointment and qualification, the trustee shall be vested, by operation of law, with the title of the bankrupt, ‘as of the date he was adjudged a bankrupt,’ to all property, not exempt, which, ‘prior to the filing of the petition,’ he could by any means have transferred, or which might have been, levied upon and sold under judicial process against him. -Other provisions strengthen this view, notably the requirement of section 7, cl. 8, that a voluntary bankrupt shall claim his exemptions at the time of filing his petition, and that an involuntary bankrupt shall claim them within 10 days after the adjudication, unless further time' is granted. Indeed, we think the statute admits of doubt only in respect of whether the right to any claimed exemption is to be determined as of the time of the filing of the petition or as of the time , when the debtor was adjudged a bankrupt. That it is to be determined as of the earlier date is suggested by those provisions of section 6, section 7, cl. 8, and section 70a, cl. 5, which make the time of the filing of the petition of special significance, and that it is to be determined as of the later date is suggested by the provision in section 70a that the trustee shall be vested with the title of the bankrupt as of the date he was adjudged a bankrupt But, as the facts of the present case do not require that we determine this matter, we pass it, observing, first, that the present act differs from that of 1867 in that by section 14 of the latter the trustee became vested with the title of the bankrupt as of the date of the commencement of the proceedings; and, second, that the Circuit Court of Appeals of the Seventh Circuit seems to regard the date when the debtor was adjudged a bankrupt as controlling, as is shown in Re Mayer, 108 Fed. 599, 608, 47 C. C. A. 512, 521. where-it was said by Judge Woods: ‘The intention of this statute is, without doubt, that the creditors shall have all of the estate of a bankrupt which is not exempt, and that the bankrupt shall have the exemptions allowed by the law of his domicile détermined by relation to the date of adjudication.’ Although dissenting from the judgment in that case, Judge Jenkins also said (108 Fed. 615, 47 C. C. A. 528): ‘The general purpose of the bankruptcy act is that the bankrupt, surrendering' his estate not exempt, should be discharged from his debts then existing, and should retain the property exempted and allowed to him by the law of the state of his domicile. The creditors are to have all of the estate not exempt, and must surrender all claims against the bankrupt if he shall receive his discharge. The title to the property thus reserved for the benefit of the creditors is vested in the trustees as of the date he was adjudged a bankrupt. That date is the “dead line,” separating the past and the future. All that the bankrupt had on that date, except property exempt, goes to his creditors.’ We conclude that a claimed exemption otherwise recognized by the state laws, but to which the bankrupt had not become entitled at the time of the filing of the petition or at the time he was adjudged a bankrupt, is not within the saving and protecting clauses of the bankruptcy ■ act, and cannot be allowed or set apart thereunder.”
I think that reasoning entirely sound, and I therefore dissent from the judgment given here.