Court Opinion

ID: 8778886
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:11:04.225534+00
Date Added: 2024-06-11T17:02:43.957965
License: Public Domain

ROSS, Circuit Judge
(after stating the facts as above). The motion to dismiss the petition for review is without merit and is denied.
While it is well-established law that exemptions in behalf of unfortunate debtors are to be liberally construed in furtherance of the object of such statutes, it should never be forgotten that courts have not the power to legislate, and can no more add an exemption not fairly within the statute than they can take from the statute. So also must it be remembered that courts of bankruptcy proceed upon equitable principles, and should no more sustain a positive fraud than would a court of equity. In respect to this homestead claim, both the referee and the District Court expressly recognized its fraudulent character. In view of the facts found, it is impossible to see how it could'have-been otherwise. -Here was a debtor fully conscious of his *697bankruptcy, strenuously opposing those of his creditors _ who were seeking his adjudication as a bankrupt, the while disposing of and secreting his cash, and finally consenting to such an adjudication prowled the creditors would dismiss their then pending- petition for his adjudication as a bankrupt and procure other creditors to file a new one; his obvious purpose, made manifest by his action, being to put, in the interim, the money to which his creditors were justly entitled into property upon which he could and did forthwith declare a homestead. Surely no court acting upon equitable principles should sustain such a transaction.
In denying the validity of a similar claimed exemption, the Circuit Court of Appeals for the Fourth Circuit said, in the case of McGahan v. Anderson, 113 Fed. 115, 119, 51 C. C. A. 92, 95:
“As to the homestead exemption, the evidence of the bankrupt is by no means satisfactory. lie admits that he began the erection of the ‘house in July or August, 1880 — after Inly 1st.’ He does not make a candid disclosure as to where the money came from to build this house, but, when pressed, admitted that a part of it ‘came from the sale of goods which he had not paid for.’ He fails to disclose how much money came from the goods which Iw liad purchased and never paid for. He alone was possessed of the Information upon the subject. It was his duty, in setting up a claim to a homestead, to show by clear and conclusive proof that at the time he built the house upon the property he was in a solvent condition, and able to satisfy aU the claims against him,' before he could take money from his business for the purpose of securing a homestead. The fair deduction from all the evidence In this case tends clearly io prove that at the time he commenced the erection of this house he was in a failing condition, if not insolvent. He built this house upon a lot owned by.his wife, and afterwards had it conveyed to himself in order that he might have it set apart as a homestead. This is a most potential fact to show that he was shaping his course to protect himself as far as possible from the consequence of bankruptcy, which the evidence tends to show was imminent at that time, for on the 25th day of October following a petition of involuntary bankruptcy was filed against him, and in less than a month he was adjudicated a bankrupt. We deem it unnecessary 1o discuss the evidence in detail filed in this case, hut content ourselves with the conclusions that we have reached based upon all the evidence, more particularly on the evidence of the bankrupt himself.”
See, also, In re Mayer, 108 Fed. 599, 47 C. C. A. 512; In re H. L. Evans & Company (D. C.) 158 Fed. 153; In re Boothroyd & Gibbs, Fed. Cas. No. 1,652.
.Respecting the money allowance to the bankrupt in lieu of the cows, oalves, swine, bees, and domestic fowls exempted by the Washington matute, it is not claimed that the exact provisions of the statute of that state here in question have been expressly construed by the Supreme Court of Washington; but its rulings in the cases of Carter v. Davis, Sheriff, 6 Wash. 327, 33 Pac. 833, and United States Fidelity, etc., Co. v. Hollenshead, 51 Wash. 326, 98 Pac. 749, are quite suggestive of the true construction of the provisions of that statute. The first of the cases mentioned was brought by the wife of one R. P. Carter against the sheriff of one of the counties of the state of Washington to recover certain property levied by the sheriff under certain writs of attachment issued against R. P. Carter, and also to recover certain moneys, being the proceeds of attached property sold by the sheriff by order of court. The property levied upon and sold consisted of *698two horses named Big Nellie and Fannie, for which the sheriff received $165, and also certain other live stock, consisting of mules, horses, and cattle, for which he received $250. R. P. Carter having-left the state, his wife, “ ‘acting for the said R. P. Carter, and in his absence,’ duly and legally claimed of the appellant (sheriff) as exempt from attachment and sale, and as being community property of the respondent (plaintiff) and the said R. P. Carter, certain household goods and furniture,” not exceeding $150 in value, and not involved in the litigation; and “also $250 in coin, the proceeds of the sale of , live stock, selected in lieu of the exemptions provided for in, subdivision 4 of section 486 of the Code of Civil Procedure; and also the sum of $165, the proceeds derived from the sale of the horses Big Nellie and Fannie.” The court said:
, “Now, conceding that R. P. Carter was a householder at the time of the levy, and it appearing that his family consisted of his wife, the respondent, only, he had a right as such householder, if entitled to any exemption whatever, to retain one bed and bedding and other household goods and utensils and furniture, such as he might select, but not exceeding $500 coin in value. Code Civ. Proc. § 486, subd. 3. The respondent, as his representative, selected the ‘bed and bedding’ and certain other household goods, utensils, and furniture, not exceeding $150 in value, none of which were levied upon by the appellant, and then demanded of appellant, in lieu of other property of like character which was not selected, and perhaps not even possessed by her husband, $250, the proceeds of the sale of the live stock above mentioned, none of which was claimed to be exempt at all, and also the sum of $165, the proceeds derived from the sale of the two horses Big Nellie and Fannie. The .claim to this $250, in the hands of the sheriff, is manifestly unfounded in law. The section of the statute referred to authorizes the selection of ‘other household goods, utensils and furniture,’ and prescribes the method and by whom such property may be selected, but confers no right to retain or select other property of a different character in lieu of that authorized to be selected and retained.”
If, as the court there held, the right given by the Washington statute to. select “other household goods, utensils and furniture,” in cases provided for, was confined to other property of the same kind, and conferred no right to retain or select other property of a different character in lieu of that authorized to be selected and retained, it would seem to follow necessarily that the same construction must be given to like provisions contained in subdivision 4, § 563, Rem. & Bal. Code, Wash.
The case of United States Fidelity, etc., Co. v. Hollenshead presented an appeal from a judgment directing the payment of money in the registry of the court to a judgment creditor, upon disallowing a claim for exemptions. We extract from the opinion of the court:
“After trial on tbe merits, judgment was entered for plaintiff and against defendant, in a suit to recover money upon contract. On tlie same day, and after the trial on the merits, judgment for the sum of $589.41 was entered against the First National Bank of Ritzville, Wash., in a garnishment proceeding ancillary to the main action. Defendants and the garnishee defendant were represented by the same attorney in all proceedings prior to the rendition of the judgment. The trials being concluded on the 7th day of June, the court announced its judgment in each case, but they were not formally entered until the 30th day of June, 1907. On the day prior to the formal entry of the judgments, defendant Hollenshead made and filed a claim for exemptions, in the following form:
*699“‘State of Washington, County of Adams — as.: I, Aaron TTollenshead. one of tlie above-named defendants, being first duly sworn, on oath do depose and say (hat the judgment in the above-entitled action was obtained against myself, as one of the defendants, in the sum of $-, on this 7th day of June. J907; that I am a householder, residing in the town of Ritzville. Adams county, Wash.; that the family consists of myself and wife; that I am possessed of household gqods, utensils, and furniture, not equal in value to the sum of $500; that the same are exempt from attachment and execution; that I am entitled to an exemption, under the statute, to a further exemption in the sum of $250 coin, in value; that the above-named plaintiffs have recovered judgment against the First National Bank of Ritzville, Wash., garnishee defendant, in the sum of $580.41, in the above-entitled action; that 1 am entitled to the sum of $250 in lieu of cows, calves, swine, bees, fowls, and feed therefor, which T do not own or possess, out of the moneys which the said First National Bank of Ritzville now have in their possession and from which the said judgment stands against.’
“.Execution having issued, the garnishee defendant paid the amount found to be due from it to appellant into the registry of the court, and thereafter upon motion the court ordered the money paid over to plaintiff in satisfaction of its judgment. Upon these proceedings defendant predicates error, and insists that, under the liberal rules applied by this court in construing exemption statutes, the money should have been paid over to him as exempt. However, we believe that the rule relied upon by appellant cannot be invoked until a claim has been made at the proper time and in a proper manner.
“The law is solicitous for the welfare of the debtor, but it also recognizes the rights of the creditor to fully satisfy his judgment out of the property of the debtor that is not exempt from execution. The right to claim property in lieu of other property specifically exempted by statute is a privilege, and will be waived unless assorted at the time and In the maimer expressly or impliedly required by the law. 12 Am. & Eng. Encyc. Raw (2d Ed.) 198,” where the law is stated to be as follows:
“If a statute exempts a particular kind of property or specific articles only, the right of exemption does not ektand to any other kind of property or to any other articles.”
See, also, Cyc. vol. 18, p. 1381.
The ruling therefore of the Supreme Court of Washington is that claims to such exemptions as those in question conferred by the Washington statutes must be seasonably made.
While the exemption right in the case in hand depends upon the statutes of Washington, as has already been said, the manner of claiming such exemptions and of setting apart and awarding them' is regulated by the bankruptcy act. In re Friedrich, 100 Fed. 284, 40 C. C. A. 378; In re Mayer, supra. And the Supreme Court, by virtue of the bankruptcy act, has prescribed the time and manner of preferring such claims. No. 38 of the General Orders in Bankruptcy, so prescribed, provides;
“That the several forms annexed to these general orders shall be observed and used.” “2 O. O. A. xxxvii, 89 Fed. xvi.
And the official form so annexed requires, among other things:
“A particular statement of the property claimed as exempted from the operation of the acts of Congress relating to bankruptcy, giving each item of property and its valuation; and, if any portion of it is real estate, its location, description, and present use.”
General Order 17 (32 C. C. A. xix, 89 Fed. viii), which defines the ditties of the trustee, requires him to “make report to the court within twenty days after receiving the notice of his appointment, of the ar-*700tides set off to the bankrupt by him, according to tlie provisions of the forty-seventh section of the act, with the estimated value of each article, and any creditor may take exceptions to the determination of the trustee within twenty days after the filing of the report.”
Section 47 of the act, referred to in the order last quoted, also defines the duties of the trustees, which duties include the direction to (11) “set apart the bankrupt’s exemptions, and report the items and estimated value thereof to the court as soon as practicable after their appointment.”
And Form 47 (32 C.,C. A. lxxvi, 89 Fed. lii) prescribed by the Supreme Court requires the trustee to set forth in the report' which is thereby required of him a schedule of the “property designated and set apart to be retained by the bankrupt aforesaid, as his own property, under the provisions of the acts of Congress relating to bankruptcy.”
The rules and forms so prescribed by the Supreme Court under and by virtue of the bankruptcy act have the force and effect of law, and it therefore seems to us to result necessarily that the bankrupt here, even though it should be conceded that he was not limited to the species of property specified in the statute of Washington as here-inbefore indicated, lost any right he may have had to the exemptions claimed, by his failure to make the claim in the manner and within the time legally prescribed therefor. And it has been so decided. In re Von Kern (D. C.) 135 Fed. 447; In re Blanchard (D. C.) 161 Fed. 793; In re Prince & Walter (D. C.) 131 Fed. 546; In re Duffy (D. C.) 118 Fed. 926; In re Staunton (D. C.) 117 Fed. 507; In re Haskin (D. C.) 109 Fed. 789; In re Wunder (D. C.) 133 Fed. 821; In re Pfeiffer (D. C.) 155 Fed. 892. See, also, Moran v. King, 111 Fed. 730, 49 C. C. A. 578.
It also results from what has been said that the bankrupt was not entitled to the cash allowance in lieu of provisions and fuel.
The judgment is reversed, with directions for further proceedings in accordance with the views above expressed, and with costs in favor of the petitioners and against the respondent.