In Re Martin
Thе bankrupt seeks a review of the referee’s order overruling the bankrupt’s objeсtions to the trustee’s report of exempt property; in short, to the failure of thе trustee and referee to include as exempt property of the bankrupt a certain .308 rifle.
It appears from the transcript of testimony filed herein that: Bankrupt, on May 14, 1962, had cash on hand in the amount of $400.00 as net proceeds from the sale of his realty. He had conferred with his attorney about conserving his funds and the attorney “told me I was allowed the rifle and a pistol and a whole bunch of exempt articles.” Bankrupt had decided the $400.00 “was to go—
“A. Hundred and seventy-five for the bankruptcy, which was * * *. I had tо do, twenty-five dollars legal fee for the sale of the house and two hundred dollars fоr the rifle.”
On that date he purchased the rifle in question, now claimed as exempt рroperty, from Allied Surplus, a retail store, for $200.00; and
On the following date, May 15, the bankrupt signed the petition and schedules, which were filed, and instituted these proceedings on May 17.
In determining whether the rifle was exempt property, the referee, as directed by § 6 of the Bankruptcy Act (Title
“All property * * * of the judgment debtor, shall be liable to an еxecution, except as provided in this section and in other statutes grant *938 ing exemptions from execution # * *»
and 23.200, reading:
“Every citizen of this state above the age of 16 years shall be entitled to have, hold and keеp, for his own use and defense and shall have exempt from execution one riflе or shotgun and one pistol.”
However, Gardner v. Johnson,
“The exemption here in question is defined by (Oregon) law. The Bаnkruptcy Act declares the policy of Congress to give effect to state exemption laws. But once bankruptcy has intervened, the time, manner and conditions under which such exemptions may be claimed as against the trustee are matters of federal law, and are determined by the Bankruptcy Act.”
It seems the referee took support for his disallowance from In re Majors,
“ * * * that the purchase of exempt property by an insolvent debt- or on the eve of bаnkruptcy will not, in itself, permit the trustee to disallow the claimed exemption unless therе is evidence of actual fraud.” See49 A.L.R. 918 (citing Forsberg v. Security State Bank,15 F.2d 499 (8th Cir., 1926); 3 Remington on Bankruptcy 1297; Stricker v. Trullinger,172 Minn. 547 ,216 N.W. 231 (1927); In re Silansky,21 F.Supp. 41 (E.D.Pa.1937); In re Berman,31 F.Supp. 926 (E.D.N.Y.1940).
In Dudley, the bankrupt had purchased exempt property about one week before he filed a voluntary petition at a time when he was “heavily in debt and clearly insolvent.” At рage 947 of 72 F.Supp. we find its thrust:
“And, as there is no showing of actual fraud, the stock is immune against the creditors and never passed tо the trustee.”
While in Majors, the bankrupt, shortly before filing a voluntary petition, purchasеd exempt farm equipment, and concerning the transaction Majors testified:
“Q. Insteаd of paying your debts, you put it (the money), into exempt property?
“A. Yes sir; I had to.
“Q. Why did you have to?
“A. Because they would have taken everything I had.”
Majors clarifiеs its thrust by concluding Majors had made the purchase in order to claim the propеrty as exempt and preserve unto himself the assets, which was “tantamount to creаting a preference in favor of himself, which renders it voidable within the spirit of the bankruptcy act.” In other words, in Majors, unlike Dudley, the court found that the purchase of exempt property was made with the intent to defeat the claims of his creditors and that this constituted fraud.
In these proceedings, the referee found that Martin’s conversion or “change in the status of the property (cash amount of $200.00 into one rifle) effеcted with a conscious effort to convert nonexempt assets into exemрt assets with the purpose of making them unavailable to the trustee in a contemрlated bankruptcy proceedings then imminent.” This, in the language of Majors, was “tantamоunt to creating a preference in favor of himself, which rendere[d] it void within the spirit of the bankruptcy act”; in other words, a fraudulent intent and action to retain an assеt from the reach of his creditors. There is substantive evidence in the record to support the referee’s findings and conclusions, and this court adopts the same as its own. The referee’s order should be affirmed.
Counsel for the trustee is requested to submit proposed order.