Case ID: mass_87/html/0073-01.html
Source: Caselaw Access Project
Author: {"author": "Dewey, J.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles White vs. William W. Rice.
    Those creditors of an insolvent debtor, whose claims accrued before the passage of the statutes creating a right of homestead, are entitled to have the whole amount which has been realized by the assignee from the sale of the right of homestead, applied towards the paj-ment of their claims, in priority to the general creditors, and to take a dividend with the othef creditors for the balance of their claims, if any. And the amount realized from the sale of the reversionary interest in the land, after the expiration of the right of homestead, is to be distributed among the general creditors.
    Petition, alleging that the respondent is the assignee of John P. Southgate, an insolvent debtor; that Southgate was entitled to a right of homestead under St. 1855, c. 238; that the petitioner proved claims, amounting to $1821.94, against his estate, which were contracted before the passage of that statute ; that all the other claims which were proved against his estate were contracted since the passage of that statute; that the respondent had taken and sold the real estate held by Southgate as a homestead, and charged himself with the avails thereof; and that the petitioner applied to the judge of insolvency to have the avails of said sale, to the amount of $800, applied in reduction of his claims, and to be allowed to receive a dividend for the balance, with the other creditors, which the judge refused to order. The respondent admitted that the facts set forth in the petition were true.
    The questions arising upon the petition ana answer were reserved, by the chief justice, for the determination of the whole court.
    
      T. L. Nelson, (D. Foster with him,) for the petitioner.
    
      W. W. Rice, pro se.
    
   Dewey, J.

The St. of 1855, c. 238, § 1, has exempted from sale or levy on execution, to the value of $800, the homestead farm, or the lot and building thereon, occupied as a residence and owned by a debtor. But by a further provision, in § 3, such exemption was not to have effect, as against any debt contracted previous to the passage of the act.

As this homestead right could not have been lawfully conveyed by the debtor, or taken on execution upon a judgment against him for any debts contracted after the passage of the . statute, the assignment of the estate of the insolvent debtor would not have passed the homestead estate to the assignee for the benefit of such creditors. It is solely by reason of the debt to the petitioner, which was contracted before the passage of the statute, that the assignee acquires any rights paramount to that of the homestead. That the mere fact of such a preexisting debt carries the entire homestead into the hands of the assignee, for distribution among all the creditors of the insolvent, without regard to the homestead estate, certainly is not true. The case of Clark v. Potter, 13 Gray, 21, is directly to the contrary, holding, as it does, that, in case the preexisting debt is to an amount less than $800, after setting off enough to secure the payment of the actual debt having priority, the insolvent has a right to retain the residue; that is, he is entitled, although his estate is in the hands of an assignee in insolvency, to have set off to him a homestead of the value of $800, deducting the amount of such prior debts.

If, then, the debts due to prior creditors exhaust the whole homestead interest, they should take the same to the exclusion of the subsequent creditors. It is solely through their right that the same passes to the assignee, and only to the extent of such right can he hold the same. The consequence necessarily and properly follows, that the avails of the homestead estate are to be applied in discharge of the claims of the prior creditors exclusively, if required for that purpose.

It is urged, on behalf of the respondent, that the case of Norton v. Norton, 5 Cush. 530, is adverse to making such distinction between the two classes of creditors. It is true, such distinction was there refused to be made, as to the avails of property fraudulently conveyed by the debtor, when such conveyance had been set aside as fraudulent, against preexisting creditors. In that case, the whole title failed by reason of fraud. It was as though no conveyance had been made, and the whole estate became assets for general distribution. In the present case, no fraud exists, no conveyance is set aside, but a lien in behalf of a particular class of creditors created by law is enforced for their benefit, and to the extent only of their demands. We think under these circumstances that the prayer of the petitioner to have the proceeds of the sale of the homestead right applied in reduction of his claim, and that for the balance of the indebtedness to him he may receive a pro rata dividend with the other creditors, ought to have been granted.

A further question arises as to the extent of the exemption under the homestead act. Is it an exemption of the parcel of land embraced in the homestead, from any attachment, or conveyance by the debtor ? Or is it merely an exemption of the homestead right, that is, the right of the husband and wife to" use the same during their joint lives, and, in case the wife should survive, for her benefit and that of her minor children, until the youngest child is twenty-one years of age, and until the marriage or death of the widow ? This is the extent of the duration of the homestead right. Gen. Sts. c. 104, § 12. And if the exemption goes no further than to exempt this limited estate, then it would be competent for the husband to convey the reversionary right, and equally competent for all creditors to levy an execution on the same; and the assignee of the insolvent would hold the reversiqn for the benefit of all the creditors, and no priority as to that portion of the estate would exist in behalf of prior creditors.

As already stated, St. 1855, c. 238, exempts from sale or levy-on execution “ the homestead farm, or the lot and buildings thereon, occupied as a residence and owned by a debtor.” It is under this statute that the exemption in the present case arises. It may be said that the language of the act would seem to exempt the land comprising the homestead from any levy of execution thereon. If so, then nothing passes to the assignee beyond what is held for the benefit of prior creditors. But if the exemption is merely of the estate or interest to the extent of the enjoyment as to him that is secured by the act, the prior creditors are also restricted to that extent.

In the Gen. Sts. c. 104, § 1, the language of the exemption clause is somewhat different from that of St. 1855, c. 238. The term “ an estate of homestead ” is used. But, as it seems to us, the proper construction of the statutes giving an exemption of a homestead is, that it is a mere exemption of the particular estate created by the statute, and that all existing beyond this as a reversionary interest is subject to attachment by all creditors, and passes into the hands of the assignee for the benefit of the creditors generally, and is to be distributed pro rata.

To the extent of the value of the mere homestead interest, the petitioner will enjoy a priority over the subsequent creditors; but the reversionary interest in the homestead lands will be-as* sets for the general creditors. 
      
       This case was decided before the case of Smith v. Provin, 4 Allen, 516.