In re Smith

| U.S. Circuit Court for the District of Eastern Virginia | Feb 15, 1874

HUGHES, District Judge.

It is unnecessary to inquire whether the purchase of Foster was in good faith. Were the bona fides perfect on his part, it could not be sustained. Smith & McCurdy had no power, either under the order of the district court, given on the ISth July, or under the law of Virginia relating to the homestead, to sell the goods. Foster confessedly had knowledge that these goods were set apart and exempted in lieu of the homstead. He claims to have seen the order. He knew that the order treated the goods as property thus exempted. He knew that it did not, in its terms or purport, give power to Smith & McCurdy to alienate them. He was bound to have knowledge that the laws of Virginia expressly forbade the alienation of personal property exempted in lieu of the homestead except by the joint act of the husband and wife. Smith & McCurdy, not being the owners of the property, and Foster having notice of the fact, it cannot be claimed that their sale to him was valid to pass a title in the goods. That the order of the district court gave power to Smith & McCurdy to sell the goods cannot be pretended. The only effect of that order, as far as its terms go, was to fix the character of the exempted property upon the goods. It was afterwards, at some future time, for the court to ascertain whether the purchase-money for the property had been paid, and whether it was in other respects property which could be held as an exemption; and if so, then to prescribe the manner in which the property should be held and managed for the benefit of the family. Vet before any other action of the court in these respects could be had, these bankrupts, in a few days, sold the whole stock of goods as their own absolute property, and Foster bought part of them, having before his eyes the order of the court giving no such power, but fixing the character of this property. There being nothing in this order of the 18th July giving Smith & McCurdy power to sell, was there anything in the laws of Virginia on the subject of homestead conferring a power to sell on the men who had custody of it under the order of court? This order expressly refers to the constitution of Virginia.

The eleventh article of this constitution provides for the exemption of a homestead to the householder or head of a family. In section 5 it empowers the legislature to prescribe by law in what manner and on what conditions the head of a family may hold “for the benefit of himself and family such personal property” as may be exempted. The legislature accordingly did prescribe how property should be set apart and held as an exemption. It first gives directions in regard to real estate, among other things providing, .in section 7, c. 1S3, of the Code, that the homestead shall not be alienated except by the joint act of husband and wife, if both are alive. It then, in section 13, ■directs how personalty may be set apart as an exemption; and in section 12 directs that an exemption in personalty shall be held in the same manner, under the same limitations, and subject to the same conditions, as to incumbrance and sale, and in all other respects as had been provided in regard to a homestead in realty. Plainly, under these provisions of the Virgina law of homestead, these men, Smith & McCurdy, had no title as individuals to this property; and no title in it whatever under the order of court, except as an exemption for the benefit of the family, in their character of heads of families, without power to alienate except jointly with their wives, and then only for the purpose of reinvestment in some other property to be held as an exemption. Therefore Smith & McCurdy had no power to sell. Foster had full notice that this was a family exemption, and was bound to know the provisions of the laws of Virginia denying to them that power. It is a plain principle of law that a person who buys goods (otherwise than in market overt) acquires no better title than that possessed by his immediate vendor, even though such purchaser buys bona fide, without notice of any infirmity of title on the part of his vendor. Here Foster bought with full notice of facts which, as he was bound in law to know, negative the right of the vendors to sell. He therefore acquired no right to the goods by his purchase. To allow such a purchase as this to stand would be to establish a pernicious precedent.

The goods in question must therefore be taken possession of by the assignee as part of the assets of these bankrupts.