231 F. 255 | N.D.N.Y. | 1916
(after stating the facts as above). The bankrupt, Victor J. French, was and is an unmarried man, but he rented and worked a farm in the town of Norwich, upon which was a dwelling house in which he lived and kept house, having a housekeeper, his aunt, who owned the larger part of the household furniture. However, the bankrupt purchased the supplies and boarded his hired help. He owned two Round Oak stoves and one cookstove, which were used in the house. This was a dairy farm, and the milk from the dairy was taken to Borden’s Condensary in the city of Norwich in the name of French. On the farm French had a chestnut horse, a black mare, 13 milk cans, two land plows, a spring tooth harrovy, two cultivators, one Stewart clipping machine, onefc Ireland buzz saw, two ice racks, two hayracks, a heavy single harness, a fur robe and four pairs of team blankets.
On the 27th day of October, 1915, being heavily in debt, which indebtedness he was unable to pay, said Victor J. French filed in this court a voluntary petition in bankruptcy, and he was duly adjudicated on or about that date and Willard B. Phetteplace at the first meeting of creditors was duly appointed and qualified as trustee of his estate in bankruptcy.
On the 1st day of May, 1915, the said Victor J. French was indebted to Thomas A. Jewell, the claimant here, in the sum of $1,115, and on that day he executed and delivered to Jewell a chattel mortgage as collateral security for the payment of two notes given to and held by Jewell, the aggregate of which were said $1,115. This mortgage
On or about the 7th day of July, 1915, the said Victor J. French became indebted to said Jewell in the further sum of $25, part of the purchase price of a hay tedder, and on that day he signed and delivered to Jewell a property note for said sum of $25, which became a lien on the tedder. September 23, 1915, the said Victor J. French gave another chattel mortgage to Jewell to secure the sum of $538.77, which indebtedness was represented by a note of said Jewell, then in the Chenango National Bank of Norwich, N. Y. In fact this last-mentioned mortgage was also additional collateral security for the payment of the notes secured by the chattel mortgage of May 1, 1915. This second chattel mortgage covered the above-mentioned chestnut horse, black mare, two Round Oak stoves, cookstove, milk cans, land plows, spring tooth harrow, cultivators, clipping machine, buzz saw, ice racks, hayracks, single harness, robe and team blankets. The first mortgage covers the same two horses mentioned and described in the second mortgage. At the time this second chattel mortgage was given said French, by oral agreement, merely assigned a half interest in the milk checks thereafter to be received by him from Borden’s Condensary to Jewell as further security for the payment of his indebtedness to Jewell then existing.
Later a judgment was obtained against French by other parties, and a levy was made by virtue thereof upon the personal property of French. French had given other chattel mortgages to other parties, and a sale of all the personal property of the bankrupt was advertised to take place on the 28th day of October, 1915. The voluntary petition in bankruptcy anticipated this sale, and this court granted an injunction, enjoining the parties interested from making such sale, but before same was served or brought to the knowledge of the holders of the mortgages, a part of the property had been sold. Of the property covered by the chattel mortgages held by Jewell there was sold the two plows, the two cultivators, one ice rack, the buzz saw, and the spring tooth harrow. The sum bid for these articles was $45.25, and the purchasers had paid thereon the sum of $30 and this $30 was paid over to Thomas A. Jewell, the claimant, and is held by him. The claim filed by Jewell does not credit this sum of $30, and in fact it is held awaiting the determination of this court as to the rights of the respective parties thereto. Said Borden’s Condensary, out of one-half of the milk checks going to French, paid Jewell the sum of $13.28. on account of the September, 1915, milk delivery.
November 13, 1915, by stipulation of all the parties concerned, and pursuant to an order of this court, the personal property of French remaining unsold was sold at public auction, and the articles covered by the first chattel mortgage mentioned, given to Jewell, were sold for the sum of $748.50. The hay tedder, subject to the lien of the prop
The claim of Jewell filed and heretofore allowed, and which is sought to be revised and disallowed unless Jewell shall surrender the alleged preference, is for the sum of $968.40. In getting at this sum credit is given for the $13.28 received of Borden’s Condensary for the September milk, but not for the $30 received and paid over to Jewell on account of the articles sold at the auction on the 28th day of October, 1915. The said $757.50 is credited in the claim, leaving same at the sum of $210.90, and Jewell alleges that it is secured by the said chattel mortgage of September 23, 1915, and Jewell claims that he is entitled to have, receive, and retain the $95.50 received on the last mortgáge sale for the articles mentioned in the second chattel mortgage given September 23, 1915, but which sum does not include the amount received for the horses therein mentioned. This $95.50 is now in the hands of the trustee in bankruptcy. This claim of $210.90 the trustee asks to have disallowed unless Jewell shall return the $30 hereinbefore mentioned, and also return or pay to the trustee in bankruptcy the $13.28 received by him from Borden’s Condensary on account .of the September milk. The claimant Jewell insists that an order should be made, awarding to him, not only the said $45.25, which sum includes the $30 mentioned, but the $95.50 now in the hands of the trustee, and which came from articles described in the second chattel mortgage and also the $13.28, and that his claim should be reduced by said sums of $95.50 and $45.25, in all $140.75, -and that it should be allowed for the balance or in the sum of $70.15, and that he should share with unsecured creditors in the distribution - of the assets of the bankrupt to that extent.
As to the stoves mentioned, and which were covered by the second chattel mortgage, the claimant Jewell asserts that French was a householder, and entitled to the exemption allowed householders by the" laws of the state of New York. He insists that as the stoves were exempt property, that is exempt from levy and sale on execution against French, French had the right to mortgage them to thé claimant Jewell, and that Jewell has the right to avail himself of the fact that they were exempt from levy and sale on execution as to all creditors. The trustee in bankruptcy insists that Jewell, as mortgagee, cannot assert any right in or title to such property or its proceeds under the chattel mortgage by virtue of its exempt character, inasmuch as no one but the householder himself can assert or avail himself of the exemption right or privilege given by statute. As to the plows, harrow, cultivators, buzz saw, rack, etc., mentioned, and which were covered by the second chattel mortgage, the' same claims, in substance, are made by the respective parties, that is, it is asserted on the one hand that French was a householder and a farmer and that such articles were exempt from levy and sale, and that he had a right to mortgage them to Jewell, and that Jewell, as against the trustee in bankruptcy and other cr'editors, may assert such exemption in his own favor, while the trustee in bankruptcy asserts that French only can assert such right of exemption. The contention is—and this seems to be the fact
“The following personal property, when owned by a householder, is exempt from levy and sale by virtue of an execution; and each movable article thereof continues to be so exempt, while the family, or any of them, are removing from one residence to another: 1. All * * * stoves, put up, or kept for use, in a dwelling house.”
Beds and bedding necessary for the judgment debtor and the family are also exempt, but the robe and blankets mentioned do not seem to come within this description. By section 1391 of the said Code of Civil Procedure it is provided:
“In addition to the exemptions, allowed by the last section, necessary household furniture, working tools and team, » * * not exceeding in value $250.00, * * * are exempt from levy and sale by virtue of an execution, when owned by a person, being a householder, or having a family for which he provides, except,” etc.
“The term ‘householder,’ as used in the statute, has a very well-defined meaning, and imports the master or head of a family who reside together and constitute a household. And the statute is entitled to a liberal construction, with a view to effectuate its purpose, which is the protection of families against being, by the process of execution, divested of the necessaries for support, which the exempted articles may furnish and provide the means to supply.”
In Fink v. Fraenkle (N. Y. City Ct.) 14 N. Y. Supp. 140, it was held that:
“A householder is the master of a household; and that a household is a family living together, * * * not necessarily wife and children, but * * * a family, small or large, for which the debtor provides.”
“The word ‘householder’ means the head, master, or person who has the charge of and provides for a family, and does not apply to the subordinate members or inmates of the household.”
It seems to me that the man who rents, holds, and occupies the house, if he has and hires a housekeeper and keeps house and hires help to run his farm and hoards such help in the house, is a householder. Bouvier’s Law Dictionary defines “household” as “those who dwell under the same roof and constitute a family”; and as to “householder,” that word is defined as “master or chief of a family; one who keeps house with his family * * * a keeper of a tavern or boarding house, or a master or mistress of a dwelling house.”
French was in the actual and rightful sole possession of a dwelling house, a farmhouse, and he lived in and occupied it with others, having sleeping rooms where they slept, and kitchen where the cooking was done, and a common table where they all ate together. It seems to me that this constituted a household, and made French a householder. If he had been married and had kept house in the same w,ay, his wife living with him but having a hired housekeeper, and his wife had died, would he have ceased to be a householder?
We now come to the question 'whether the trustee in bankruptcy could have taken, and can take, the stoves and the farming tools sold
In Field v. Ingreham, 15 Misc. Rep. 529, 37 N. Y. Supp. 1135, County Judge Metcalf held that property specifically, by section 1390, exempted from levy and sale by judgment creditors is exempt by operation of law absolutely, but that articles to a certain value, exempted under section 1391 of the Code referred to, must be claimed as exempt.
It would seem just that if a debtor, even in contemplation of bankruptcy, or knowing his insolvency, -borrows money or purchases property to use up, and pledges as security his exempt property, property his trustee in bankruptcy cannot take and which it is the duty of the bankruptcy court to set aside, the pledgee or mortgagee ought to be able to himself assert such exemption to protect his security as against the trustee in bankruptcy. Such pledgee or mortgagee for a valuable consideration and in good faith should be held subrogated to the rights of such pledgor or mortgagor in the interest of fair dealing and justice. He ought not to be at the mercy of the mortgagor and his election. If this is permitted the general creditors and trustee are no worse off than they would be if such mortgage had not been given or pledge made, as the bankrupt has parted with his interest in his exempt property only. Such a transaction is not in derogation of the rights of general creditors in any respect or to any extent whatever.
“ExempUom of iankrwpta.-—a. This act shall not affect the allowance to bankrupts of the exemptions which aro 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 mouths or the greater portion thereof immediately preceding the filing of the petition.”
Section 47 of the Bankruptcy Act (section 9631) provides:
“Trustees shall respectively * * * (11) set apart the bankrupt’s exemptions and report the items and estimated value thereof to the court as soon as practicable after tlieir appointment.”
“The trustee shall make report to the court within twenty days after receiving the notice of his appointment of the articles set off to the bankrupt by him according to the provisions of the forty-seventh section of the act with the estimated value of each article and any creditor may take exceptions to the determination of the trustee within twenty days after the filing of the report.”
By section 70a of the act the trustee of the estate of a bankrupt upon his appointment and qualification is 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 to all.” Then follows a statement of the property the title to which vests in the trustee. In Collier on Bankruptcy (10th Ed.) page 191, it is said:
“Whether an exemption is a mere personal privilege which must be claimed by the bankrupt, or is a property interest accruing from the statute itself, will determine the necessity of claiming the exemption. If the exemption is of the former class, it must be asserted with the formality required by the state statute; if it is of the latter class the statute executes itself.”
Moran v. King, 7 Am. Bankr. Rep. 176, 111 Fed. 730, 49 C. C. A. 578, is cited as authority. This decision was rendered in regard to the homestead exemption laws of the state of Virginia and Judge Boyd refers to Reed v. Bank, 29 Grat. 719. In Collier on Bankruptcy (10th Ed.) at page 191, it is also said:
“While an exemption is a matter of right, it, being personal to the bankrupt, must be asserted, or he will be deemed to have waived it. What he does not claim for himself and his family he leaves in the general fund for distribution.”
In re Brown (D. C.) 4 Am. Bankr. Rep. 46, 100 Fed. 441, In re Bolinger (D. C.) 6 Am. Bankr. Rep. 171, 108 Fed. 374, and In re Sloan (D. C.) 14 Am. Bankr. Rep. 435, 135 Fed. 873, all Pennsylvania cases, are cited.
In Lockwood v. Exchange Bank, 190 U. S. 294, 23 Sup. Ct. 751, 47 L. Ed. 1061, it was held:
“Under the Bankruptcy Act of 1898, the title to property of a bankrupt which is generally exempted by the law of the state in which the bankrupt resides remains in the bankrupt, and does not pass to the trustee, and the bankrupt court has no power to administer such property even if the bankrupt has, under a law of the state, waived his exemption in favor of certain of his creditors. The fact that the act confers upon the bankruptcy court authority to control exempt property in order to set it aside does not mean that the court can administer and distribute it as an asset of the estate. The two provisions of the statute must be construed together, and both be given effect.”
In that case, however, the bankrupt set aside and claimed his homestead exemption in his schedules, and the trustee set same aside and designated the property claimed as a homestead exemption. By clause 8 of section 7 of the Bankruptcy Act, the bankrupt is required to schedule all his property, and to make “a claim for such exemptions as he
“We think that the terms of the Bankruptcy Act of 3898, above set out, as clearly evidence the intention of Congress that the title to the property of a bankrupt generally exempted by state laws should remain in the bankrupt and not pass to his representative in bankruptcy, as did the provisions of the act of 1867, considered in Re Bass. The fact that the act of 1898 confers upon the court of bankruptcy authority to control exempt property in order to set it aside, and thus exclude it from the assets of the bankrupt estate to be administered, affords no just ground for holding that the court of bankruptcy must administer and distribute, as included in the assets of the estate, the very property which the act in unambiguous language declares shall not pass from the bankrupt or become part of the bankruptcy assets. The two provisions of the statute must be construed together and both be given effect. Moreover, the want of power in the court of bankruptcy to administer exempt property is besides shown by the context of the act, since throughout its text exempt property is contrasted with property not exempt, the latter alone constituting assets of the bankrupt estate subject to administration. The act of 3.898, instead of manifesting the purpose of Congress to adopt a different rule from that which was applied, as we have seen with reference to the act of 1867, on the contrary, exhibits the intention to perpetuate the rule, since the provision of the statute to which we have referred in reason is consonant only with that hypothesis.”
I think that under the decisions the title to the three stoves which were unqualifiedly exempt was in and remained in the bankrupt, French, and that such title never passed to or vested in the trustee in bankruptcy. No assertion or claim of exemption was necessary. It was evident on the face of tilings that these stoves were exempt, and it was the duty of the trustee to set them apart, or at least let them alone. French had the right to mortgage them, and Jewell, under his mortgage, had the right to take and sell them, even if such mortgage was given within the four-month period and constituted a preference. No general creditor of French, and no judgment creditor of French, could have seized, levied upon, or sold these stoves; and, as the title did not pass to the trustee, and as the mortgage, so far as the stoves were concerned, is valid in any event, the proceeds derived from their sale belong to JewelL
“Norwich, New York, Sep. 28, 1915.
“To Borden’s Condensed Milk Co., 108 Hudson Street, New York City: In making payment for milk delivered by me during the month of Sept., 1915, at the factory of Borden’s Condensed Milk Co., located at Norwich, New York, please draw check or checks to the order of the following person or persons for the amount set opposite each name respectively, viz.:
“Check to the order of y2 Bert Hawley for 8-
“ “ “ “ y2 T. A. Jewell “ -
“Victor J. French, Dairyman.
-‘Witness: G. A. Romer, Factory Supt.
“N. b.—This order applies only to the month above specified, and a separate order must be filed for each month a dairyman desires to assign money due him for milk,”
“Voidable Preferences—Transfers Constituting. Where defendant, within four montiis before the filing of a petition in bankruptcy and while the bankrupt was insolvent, received from the bank nipt to apply on a pre-existing debt accounts due tho bankrupt under circumstances such as naturally would have caused an ordinary person to believe that a preference would thereby be effected, the trustee could recover for the benefit of the bankrupt estate.” ■
Section 57g of the Bankruptcy Act, as amended 1903 reads as follows :
“The claims of creditors who have received preferences, voidable under section sixty, subdivision ‘b,’ or to whom conveyances, transfers, assignments, or Incumbrances, void or voidable under section sixty-seven, subdivision ‘o,' have been made or given, shall not be allowed unless such creditors shall surrender such preferences, conveyances, transfers, assignments, or incumbrances.”
Sections 60a and 60b of the said act, so far as applicable here, provide as follows:
(a) “A person shall bo deemed to have given a preference if, being insolvent, he has, within four mouths before the filing- of the petition, * * i: made a transfer of any of his property, and the effect of the enforcement of such * * * transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the samo class. * * *
“If a bankrupt shall * * * have made a transfer of any of his property, and if, at the time of the transfer * * * and being within four months before the filing of the petition in bankruptcy * * * the bankrupt be insolvent and the * * * transfer then operate as a preference, and the person receiving it or to be benefited thereby, or his agent acting therein, shall then have reasonable causo to believe that the enforcement of such * * * transfer would effect a preference, it shall be voidable by the trustee and he may recover the property or its value from such person.”
Jewell knew that French was on a rented farm; that his horses, harnesses, and farming tools, including robe and blankets, ice rack and hayracks and all the household furniture he owned and all the live stock on the farm either was already under chattel mortgage to himself and others or was then (in September) being put under the .lien of a chattel mortgage to himself. By means of the orders 'on Borden’s Condensed Milk Company the entire proceeds of the dairy (and this was a dairy farm) were turned over to Jewell and to Hawley, both holding security for their claims. Hawley’s mortgage was on the cows principally. So far as appears, these mortgages and these orders covered all the property of French of every name and nature, except his clothing and his personal ornaments, if any. French was owing for rent of the farm he occupied, and hundreds of dollars to other persons, excluding from consideration his help on the farm. Jewell testifies that French did not pay as obligated and agreed, and that on several occasions he either “jacked him up” or caused him to be “jacked up,” that is, “dunned,” or urged to pay as agreed. Still payments were not made except as Jewell and Hawley drew from the Borden’s Condensed Milk Company the proceeds of the dairy.
The evidence is■ conclusive that the indebtedness of French, aside, from labor claims, was such that the enforcement of the chattel mortgage and orders, or of either, would give to Jewell a much greater percentage of the claim due him than any other creditor of the same class would or could obtain. French knew that he was giving a preference, and if Jewell did not actually know that French was insolvent, he had knowledge of such facts, conditions, and circumstances as put him on inquiry, and charged him with knowledge of that fact, and naturally would have caused even an ordinary person to believe that a preference would be effected by the giving and enforcement of the mortgage and orders of September, 1915. It is impossible to find or hold otherwise. The orders given by French to Jewell on Borden’s Condensed Milk Company, to which company the milk from the dairy was daily delivered and sold, and the chattel mortgage of September 28th, all being dated the same day, are voidáble preferences, and it is the duty of the trustee to collect of that company the balance due for milk, and Jewell’s claim cannot be allowed until he surrender the preference received, $13.28 for milk.
“the earnings of the judgment debtor for his personal services, rendered within the sixty days, next before the institution of the special proceeding; when it is made to appear, by his oath or otherwise, that these earnings are necessary for the use of a family, wholly or partly supported by his labor.”
No such fact appears in this case. There was no family supported by the labor of French. Being a householder is one thing, and having a family supported by his labor is another. The proceeds of the milk delivered at the Condensary were not “the earning-s” of French within the meaning of this statute. Fie has not asserted any exemption or made any claim to these sums as earnings. This question is settled by Prince v. Brett, 21 App. Div. 190, 47 N. Y. Supp. 402; and Mulford v. Gibbs, 9 App. Div. 490, 41 N. Y. Supp. 273; Re Wyman, 76 App. Div. 292, 78 N. Y. Supp. 546; Martin v. Sheridan, 2 Hilt. (N. Y.) 586; Vain Vechten v. Hall, 14 How. Prac. (N. Y.) 436.
The conclusions and holdings are:
2. The first chattel mortgage, that of May 1, 1915, was and is valid, and hence the proceeds of the property covered thereby belong to Jewell.
3. The second chattel mortgage, that of September 23, 1915, was arid is voidable and void as a preference, except as to the stoves, which sold for $29.25, and that part of the proceeds of the sale amounting to $95.50 belongs to Jewell.
5. The orders given by French to Jewell on Borden’s Condensed Milk Company are voidable and void as a preference, and the $13.28 received by Jewell on the one given for the proceeds of the September milk must be returned to the trustee as heretofore stated as a condition of having his claim allowed, making a total of $14.03 to be returned or paid by Jewell to the trustee.
6. If such $14.03 is returned and such preferences surrendered, then the claim of Jewell will be allowed at the sum of $224.18. If such sum is not paid over to the trustee and the preferences surrendered, such claim will be disallowed, rejected, and expunged from the list of proved and allowed claims, and in such event the trustee will sue for
There will be an order accordingly.