Case ID: so2d_358/html/0704-01.html
Source: Caselaw Access Project
Author: {"author": "BEER, Judge. LEMMON, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Mrs. Beverly Strain, wife of Milton W. LEYDECKER, Sr. v. Milton W. LEYDECKER, Sr. Milton W. LEYDECKER, Sr. v. Mrs. Beverly Strain LEYDECKER.
    No. 8999 Consolidated with No. 9000.
    Court of Appeal of Louisiana, Fourth Circuit.
    April 11, 1978.
    
      Jerome P. Halford, New Orleans, for plaintiff-appellant.
    Emile L. Turner, Jr., New Orleans, for defendant-appellee.
    Before LEMMON, SCHOTT and BEER, JJ.
   BEER, Judge.

Appellant, Beverly May Strain, the divorced wife of Milton Leydecker, Sr., sued for partition of the community alleged to have existed during , their marriage. By peremptory exception of no right or cause of action, appellee alleged that exorbitant community debts had caused him to file bankruptcy proceedings prior to the dissolution of the community; that all community assets and debts were listed in bankruptcy schedules; and that such schedules reflected an indebtedness which greatly exceeded the total assets of the community. He contended, in effect, that the Bankruptcy Act operated in such a way as to dissolve the community. The trial court maintained the exception.

By brief filed in this court, appellant alleges that certain real property located at 2928 Franklin Avenue in New Orleans (which had been listed in the bankruptcy schedule to show only appellee’s undivided one-half interest) was reacquired (in toto) by appellee as a result of the trustee’s disclaimer. However, appellee contends, also by brief, that the cash tendered for the disclaimer was his separate property, earned subsequent to dissolution of the community and was paid to reacquire full title to the property. In support of his contention that the disclaimer vested him with full title to the property, appellee avers that:

1. all community property is presumed to be included in the bankrupt estate of a husband since community debts will be discharged therefrom,
2. pursuant to 11 U.S.C. § 110, title to the property vested in the bankruptcy trustee, and
3. disclaimer by the trustee for $2,500 cash consideration was a sale transferring title of the entire property to his separate estate because of the alleged use of separate funds for said “purchase.”

Although the record came before us devoid of any evidence of the bankruptcy proceedings, the attorneys for the parties have, by stipulation at the time of oral argument in this court, now made those pleadings a part of the record. The bankruptcy pleadings do include a trustee’s disclaimer of the Franklin Avenue property for $2,500 cash. They also include a schedule which indicates that the bankrupt estate included only the bankrupt’s one-half interest in the property at 2928 Franklin Avenue. The property is valued at $4,000 on the schedule. The total shown as the bankrupt’s interest is one-half of that amount, $2,000. Even though appellee paid $2,500 for the disclaimer, it is difficult for us to comprehend how the disclaimer can be said to affect anything more or less than the bankrupt’s right, title and interest in the one half of the property which the schedule of assets lists as the bankrupt’s one-half interest. Apparently, appellant’s one-half interest was not scheduled in the bankruptcy proceedings and, as we see it, nothing more than the one-half interest of appellee was available to be released to him by the trustee’s disclaimer.

Since it is correct that disclaimer by the trustee revests title in the bankrupt as though no transfer to the bankruptcy trustee was ever made, such an order can do no more than restore to the bankrupt his scheduled interest therein.

Appellee may well have numerous valid claims for reimbursement from appellant including, perhaps, some part of the consideration for the disclaimer if separate funds were used, as alleged, to obtain same.

However, the well-pled allegations of appellant’s petition and the documents before us by stipulation make out a case of some community property left to be divided by partition subject to various credits, etc. Since a cause of action does appear to exist, this case must proceed to a trial on the merits where both parties will have a full opportunity to allege and stand ready to prove their various claims and counterclaims affecting the property sought to be partitioned.

The exceptions must be overruled and the case remanded. In view of this, we must address a further contention of appellant that the trial court erred in allotting this consolidated matter to Division “F” of the Civil District Court since it should have been allotted to Division “I,” where the separation proceedings bear a lower docket number than the divorce proceedings sought to be consolidated with them. Accordingly, appellant seeks to have the case remanded to Division “I.”

Although the general allotment of cases is covered by Rule 8, Sec. 9 of the rules for the Civil District Court for the Parish of Orleans, we are referred to no specific rule governing allotment where there has been consolidation of separate suits.

Compliance with generally accepted procedure would seem to indicate that the allotment should have been Division “I.” However, no motion was made at the trial court level to have the case reallotted, and objections to the allotment of a consolidated case cannot be first made on appeal. See, e. g., Union Garment Co., Limited, v. Newburger, 124 La. 820, 50 So. 740 (1910); Fluker v. DeGrange, 117 La. 331, 41 So. 591 (1906).

Accordingly, the judgment maintaining the exceptions dated February 9, 1977 is overruled. This case is remanded to Civil District Court, Division “F,” for further proceedings consistent with this opinion. Each party is to bear his own cost of this appeal.

REVERSED AND REMANDED.

LEMMON, Judge,

concurs and assigns reasons.

I am concerned that this decision may be construed to stand for the proposition that a purchaser does not acquire valid title to community immovable property from a bankruptcy trustee, if only the husband is adjudicated a bankrupt at the time when the spouses are living separate and apart, but are not divorced or judicially separated.

Normally, when the bankruptcy arises out of community debts, the filing of the petition by the husband vests the trustee with title to all of the community property for the benefit of the community’s creditors. 4A Collier, Bankruptcy ¶ 70.17[11] (14th ed. 1976). This v.iew represents an application to community property of the rule that the title of a bankrupt to immovable property is vested by operation of law in the trustee of the bankrupt’s estate as of the date of the filing of the petition initiating the bankruptcy proceeding. 11 U.S.C. § 110.

Milton Leydecker’s petition for bankruptcy was filed on March 29, 1974. On that date the parties were living separate and apart, and while his petition for divorce was then pending, the judgment of divorce was not rendered until February 28, 1975.

When the judgment of divorce was rendered, the dissolution of the community was retroactive to the date of the filing of the petition, but without prejudice to rights validly acquired in the interim between the commencement of the action and the recor-dation of the judgment. C.C. arts. 155,159. If the June, 1974 action by the trustee had been a valid bankruptcy sale to a third party, I would be inclined to find the purchaser’s title unassailable, because the husband then had legal capacity to convey the property, and his petition for bankruptcy was in effect a conveyance to the trustee of all community property for the benefit of the community’s creditors. But I conclude the transaction involved in this litigation was not a sale.

The only document in the bankruptcy proceedings referring to the trustee’s actions in regard to title to the subject property is the “Trustee’s Petition of Disclaimer & Abandonment”. That document petitions the court as follows:

“On the ground that there is no equity in the hereinafter described property for the estate(s) of the above named bankrupt(s), over and above such mortgages and/or other liens as may affect the said property and such exemptions as may apply thereto, or that if there is any such equity, it is not sufficient to justify administration,
“The undersigned trustee, who has become vested (in his said official capacity and under Federal law) with all such right, title and interest, if any, as the said bankrupt(s) had or may have had in and to the said property as of the date of the filing of the petition for adjudication of bankruptcy herein, does by these presents, subject to the approval of this Court (which approval is hereby prayed for), disclaim and abandon all such right, title and interest of the said bankrupt estate(s) in and to the following described property:
“FOR AND IN CONSIDERATION OF THE PRICE AND SUM OF $2,500.00:” (Then follows the property description.)

The trustee’s disclaimer or abandonment of the bankrupt’s property is simply not a sale of the property. The trustee has a duty to liquidate the bankrupt’s estate, but he has no duty to administer property so heavily encumbered as to offer no prospect of significant funds available for distribution, and the trustee may disclaim or abandon certain property when it is not practicable to see that property. The disclaimer or abandonment constitutes a refusal to administer the particular asset and a rejection of the title which otherwise had vested in the trustee by operation of law. When the trustee disclaims or abandons certain property, title revests in the bankrupt as if no assignment had been made and title had never vested in the trustee. 4A Collier, Bankruptcy ¶ 70.42 (14th ed. 1976).

The critical issue, therefore, is whether the trustee’s action was a sale or a disclaimer. Although ordinarily a sale of the bankrupt’s asset produces funds and a disclaimer does not, I view the petition for disclaimer in this case as an attempted disclaimer to the bankrupt for consideration rather than as a sale. The bankrupt’s valuation of the property at $4,000.00 and of his interest at $2,000.00 apparently referred to the equity, since the property was elsewhere in the schedules valued at $18,000.00 (although the mortgage balance was only $9,625.52). I interpret the trustee’s action as an exercise of judgment that a disclaimer for the consideration of $2,500.00 would benefit the creditors more than the sale of the property.

The title therefore reverted to the community, and Mrs. Leydecker has a right of action to demand partition of the community property. 
      
      . This stated difference of about $8,500.00, plus the sparsity of other community debts, casts some doubt on the purpose of the bankruptcy. Indeed, when the summary of debts and assets is corrected to show the real estate value as $18,000.00 rather than $2,000.00, the assets almost exceed the debts.