In re Kane

127 F. 552 | 7th Cir. | 1904

JENKINS, Circuit Judge

(after stating the facts as above). A court of bankruptcy is a court of equity, seeking to administer the law according to its spirit, and not merely by its letter. The bankruptcy act provides that it shall not affect the allowance to bankrupts of the exemptions prescribed by the state laws at the time of the filing of the petition. Act July i, 1898, c. 541, § 6, 30 Stat. 348 [U. S. Comp. St. 1901, p. 3424]. It also provides by section 7 that the bankrupt in the schedules to his petition shall make a claim for such exemptions as he may be entitled to. The statute of Illinois (Starr & C. Ann. St. 1896, c. 52, par. 15, p. 1892), after exempting certain specific property) exempts $100 worth of other property, to be selected by the debtor, and, in addition, when the debtor is the head of a family, and resides with the same, $300 worth of other property, to be selected by the debtor. It is insisted that the bankrupt is not entitled to his exemption because he had not claimed specific articles of property. The bankruptcy act allows the exemptions which the state law provided, and these laws, from motives of public policy, should be liberally construed. Courts of bankruptcy are not controlled as to the time or the manner in which claims for exemptions may be preferred in bankruptcy. The exemptions provided by the law of the state are allowed by the bankruptcy act, but the manner of claiming such exemptions, and of setting apart and awarding them, is regulated by the bankruptcy act. We have so held in Re Friedrich, 40 C. C. A. 378, 100 Fed. 284. It was also ruled by this court in Re Mayer, 47 C. C. A. 512, 108 Fed. 599, 600, that the bankrupt under the act could waive the exemptions in favor of the assignee, claiming the proceeds of the sale of the property or not, as he should choose. The purpose of the state statute of exemptions was to allow the debtor property to a certain amount for the support of his family, that they should not be cast destitute upon the world. It is true that statute provided that the debtor should select the articles. The bankruptcy law allowed that exemption, recognizing the-public benefit of such exemption. But the manner of its allowance is reserved to the bankruptcy court, and its action is not controlled by the specific manner of allowance prescribed by the state law, for the trustee is to set off to the bankrupt the exemptions claimed, with the estimated value of each article; and cases are not infrequent, where it appeared for the benefit of all concerned that the stock should be sold as an entirety, that it was so sold by arrangement between creditors and debtor, and courts have upheld the claims of the debtor to the value of his .exemptions from the proceeds of the sale. And that is just. Here the entire stock of goods was mortgaged, and in possession of the mortg-agee, and advertised for sale. The debtor could not claim any specific article as exempt, because every article was subject to the mortgage, and no one article could be set apart to the debtor. Tfie entire stock was subject to sale to satisfy the lien of the mortgage. It would be most inequitable to say that ■under such circumstances the debtor cannot be allowed to claim as exempt a sum of money from the proceeds equal to the amount allowed by the law. It would be equivalent to saying that he had waived his exemption because he had not done 'that which it was -impossible for him to do. We are not able to construe the bankruptcy act to effect so inequitable a conclusion.

The decree is affirmed.