184 F.2d 751 | 5th Cir. | 1950
Lead Opinion
The question presented by this appeal, dispositive of the case without regard to other subordinate questions raised, concerns the power of a Court of Bankruptcy, under the circumstances of this case, to determine the validity, priority and effect of an assignment of homestead exemption executed by the bankrupt as a part of a note evidencing indebtedness, and to adjudge delivery of the property to the creditor, when the contest is solely between the bankrupt and such creditor, and when the trustee in bankruptcy who has set aside the claimed exemption expressly disclaims any interest therein on behalf of the general creditors. In his schedule the bankrupt designated certain property as his exemption, its aggregate value being slightly less than the sixteen hundred dollars allowed by the laws of Georgia. The trustee duly approved and reported the claim, and thereupon appellees filed their claim to the property predicated upon the transfer and assignment evidenced in notes held by them.
While it would be fruitless, if indeed not impossible, to define the precise extent of the jurisdiction of a bankruptcy court with reference to questions arising upon the setting apart of exempt property, or of claims arising in connection with the exercise of this branch of such court’s jurisdiction, it seems clear that at least since the decision in Lockwood v. Exchange Bank, 190 U.S. 294, 23 S.Ct. 751, 47 L.Ed. 1061, no authoritative decision has questioned the proposition that after the designated property has been set apart and the question of its exemption vel non determined, the bankruptcy court thereafter has no power to distribute the exemption by adjudicating contests between the bankrupt and his creditors which involve, solely, the ownership of the aggregate exemption, as such.
The well established Georgia law which permits the sale or assignment of exempt property (as distinguished from a general waiver of exemption rights), does not change the matter. This is so because the exemption and exempt property which has been assigned is determinable only after the final determination of its specific existence. Therefore a creditor, such as the appellees, have no claim enforceable definitely upon specific assets until the exemption has been declared and perfected. However, this very act of the bankruptcy court, essential to- the perfection of the creditors claim, is the final act within the jurisdiction of the bankruptcy court, and consequently any contest as to whom the exempt property should be awarded has then passed beyond the power o-f the court of bankruptcy, and for the enforcement of the assignment the creditor is relegated to a court of competent jurisdiction. This proposition is so clearly established by the language and plan of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., as to- render further argument in support thereof unnecessary, but in passing we may nevertheless call attention to the consequences of a contrary holding. In the event there were numerous creditors holding similar assignments, with conflicting claims as to priority, and indeed existence of assignments, dependent in each case on whether the indebtedness which the assignment was given to- secure had in fact been paid, a bankruptcy court would find itself enmeshed in the determination of questions with which it is in no wise concerned, -its proper function having been discharged upon the determination and setting apart of the exemption claimed by the bankrupt.
Review of the Kronstadt case discloses that the question of whether the bankruptcy court may adjudicate the existence or effectiveness of the assignment in a contest between the bankrupt and a creditor, which arises only after the property has been declared exempt, was not there presented. The ruling in that case related squarely to the final setting aside of the
The appellants also complain that the Court erred in taxing the expenses of storage of the exempt articles • against the articles, the effect of which will be to diminish the amount of the exemption. This assignment does not properly reflect the action of the Court. After awarding the property to the claimants, the Court directed that they pay the costs of storage before receiving delivery. Therefore, under our ruling that the order directing delivery was erroneous, the question of. costs is not now properly before us, and as to this part of the case we shall not anticipate that in carrying out the mandate of this Court upon reversal that the Court will tax such storage expenses other than in accordance with law.
The judgment of the trial Court is reversed and the cause remanded with direction to dismiss the intervention and the claim of the appellees.
Judgment reversed.
. “Bach of us, .whether principal, surety, guarantor, endorser or other party hereto, hereby severally waives and renounces each for himself and family, any and all homestead or exemption rights any one of us may have [under] or by virtue of the Constitution and laws of Georgia, any other state, or the United States, as against this debt or any renewal thereof; and the undersigned, as well as all sureties, endorsers, guarantors, or other parties to this note, jointly and severally transfer, convey and assign to the payee or holder of this note a sufficient amount of any homestead or exemption that may be allowed to any one of us, including such homestead or exemption as may be set apart in bankruptcy, to pay this note in full, with all costs of collection; and each of us hereby directs the Trustee in Bankruptcy, Receiver or other person having possession of such homestead or exemption to deliver to the payee or holder of this note a sufficient amount of property or money set apart as exempt to pay off the indebtedness evidenced hereby; and each of us further waives, demand, protest and notice of demand, protest and non-payment.”
. Statement of the universal rule and numerous authorities in support thereof are contained in Collier on Bankruptcy, 14th Ed. page 805, et seq.
Concurrence Opinion
(concurring
specially).
I agree with the conclusion of the main opinion that under the circumstances of this case the court below erred in taking jurisdiction of, and adjudicating, the complicated issues tried below.
With the premise, however, on which that conclusion was based, that the court was without power to do so-, I emphatically disagree.
While, therefore, I concur in the judgment ordered, I feel that I should make plain that I do not do so because the power of the court over the property was exhartsted with the setting aside' of the exemption to the bankrupt. I do- it only because I am of the opinion that, declining to concern itself with the litigation of the complicated question presented, the court, in the exercise of:a sound discretion, should have remitted the parties to the state court for the determination of the matters to be litigated.
As carefully pointed out in the Kronstadt case, cited in the majority opinion, the Lockwood case, relied on by the majority for its holding of want of power, did not deal with the question presented here. It dealt with a claim of the holder of a waiver agreement which could be enforced only upon the theory that, because of the waiver, the property, claimed as exempt, constituted a part of the assets of the estate and was, therefore, subject to his claim as a creditor to it.
The court there correctly held, and this is all that it did hold, “such exempted property constitutes no part of the assets in bankruptcy. The agreement of the bankrupt in any particular case to waive the right to the exemption makes no difference”.
With deference, the court in the Lockwood case, did not hold, it could not have held as the question was not before it, as was suggested in the majority opinion, that “after the designated property has been set apart and the question of its exemption vel non determined, the bankruptcy court thereafter has no power to distribute the exemption by adjudicating contests between the bankrupt and his creditors which involve, solely, the ownership of the aggregate exemption, as such.”
Throughout the Lockwood opinion, and in all of the cases and text books citing and following it, it is made clear that what the court held in Lockwood’s case was that the bankrupt court has no power to administer exempt property as “assets of the bankrupt estate subject to administration.” [190 U.S. 294, 23 S.Ct. 753.]
Our case, In re Marschall, 5 Cir., 296 F. 685, 686, while not precisely in point on its facts, plainly and unequivocally holds that property in possession of the bankrupt claimed by him as exempt “is brought into the custody of the court the same as all other property owned by him and in his possession”, and that where there is a controversy over its ownership, the bankruptcy court has the power, as distinguished from the duty, to determine whether it should be delivered to the bankrupt or to the person claiming title under him.
There may, there most probably will, be many cases arising in Georgia in which there is no substantial controversy between the assignee of the homestead exemption and the bankrupt as to the validity of the assignment and the rights of the assignee under it. Because this is so, I am unwilling to agree to the view that in all such instances the bankruptcy court for want of power must, declining to order the exempt property turned over to the assignee, remit the parties to the state court. I think it can, and should, in such circumstances settle the matter in a summary way by ordering the exempt property delivered to the creditor assignee, thereby determining the credit to be allowed against his general claim against the estate and thus expediting its winding up.
In situations where, as here, there are complicated defenses to the assignee’s claim, or where, as supposed in the majority opinion, there are numerous creditors holding conflicting claims, the bankruptcy court ought not to take on the determination of these questions, not, however, because of a want of power but because it ought not to commit its resources to, or dissipate its energies in, doing so.
To hold, as the májority opinion does, that there is a complete want of power in the bankruptcy court to make the simple adjudication necessary in bringing most of these controversies to an end is, in my opinion, to confuse power with expediency and thus to unduly hamstring and cripple simple bankruptcy administration in Georgia.