Court Opinion

ID: 5227610
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:48:39.671576+00
Date Added: 2024-06-11T08:27:36.683599
License: Public Domain

Foote, J. (concurring):
While the language of subdivision f of section 67 of the Bankruptcy Act (30 U. S. Stat. at Large, 565) plainly makes void judgments recovered within four months prior to the filing of the petition, still I think this section must be construed with reference to the object intended to be accomplished by it; that is to say, with reference to the proper and equal distribution of the estate among the creditors.
Loveland in his work on Bankruptcy (4th ed. § 438) says: “ § 67f does not avoid the levies and liens therein referred to against all the world, but only against the trustee in bankruptcy and those claiming under him, so that the property may pass to and he. distributed by him among the creditors of the bankrupt.” For this he cites a number of cases, including those referred to in the opinion of Mr. Justice Kruse. It is for this reason that liens acquired within four months upon exempt property hold good notwithstanding the provisions of subdivision f of section 67. As to such liens Loveland (at § 427) says: “A lien created by legal proceedings, as by a levy of execution, attachment, garnishment, or a judgment, within four months of bankruptcy, remains in force upon so much of the property as is exempt from those proceedings. The reason for this is that section 67f, annulling liens obtained by legal proceedings, deals with liens on property which passes to the *42trustee for the benefit of the creditors of the bankrupt, but does not affect liens on property, which is not a part of the estate.” For this the author cites a number of authorities, among others, Matter of Driggs (171 Fed. Rep. 897), where Judge Hand, in the Southern District of New York, held that creditors who had levied upon a bankrupt’s wages only four days before the petition in bankruptcy could not be restrained from proceeding to collect such part of the wages as were exempt property not passing to the trustee in bankruptcy.
The case in the Circuit Court of Appeals for the Ninth Circuit (Matter of Forbes, 186 Fed. Rep. 79) is not an authority to the contrary. In that case the bankrupt’s homestead property came into the custody of the trustee in bankruptcy, and it became necessary for him to convert it into money, because the property was far more valuable than the $2,500 in value, which was the limit of the exemption allowed as a homestead under the Arizona statute (Laws of 1907, chap. 79), and it appeared that the attachment in that case was levied upon this homestead property before the bankrupt had selected it as a homestead. And in Lockwood v. Exchange Bank (190 U. S. 294) the Supreme Court of the United States directed the bankrupt’s discharge to be withheld in order to permit a creditor to proceed in the State court to collect his debt out of exempt property, as to which the creditor held a waiver of exemption, and in which the general creditors were not interested. (See Love-land’s discussion of these questions, pp. 883-886, vol. I.)
As to the second question .referred to in Mr. Justice Lambert’s opinion, namely, that by proving a claim in bankruptcy the judgment creditor waived the lien of his judgment, I think we cannot so hold in this case. Defendant had the affirmative of showing, in answer to plaintiff’s motion, that the lien had been discharged. The Bankruptcy Act provides a method of proving secured debts, so as to enable the creditor to retain his security and prove for the balance of the debt over and above the amount of the security. (30 U. S. Stat. at Large, 560, § 57, subd. e, et seq.) The Supreme Court of the United States has prescribed forms in proving claims in bankruptcy. The only practical difference between the form of proof of secured and unsecured debts is that in case of unsecured debts *43the creditor should state that he “ has not * * * had or received any manner of security for said debt whatever,” and for a secured debt, “ and that the only securities held by this deponent for said debt are the following: ” (See Official Forms Bankr., forms 31, 32.)
Defendant’s affidavit in opposition to the motion below states, “ and plaintiff’s said claim herein was duly proven as a debt against said bankrupt in said bankruptcy proceedings; * * * and that the claim of plaintiff herein was one of the debts proven against deponent in said bankruptcy proceedings, and discharged by operation thereof.” This statement may have been entirely true and still there may have been no waiver, for if the debt was proved as a secured debt there would be no waiver. To sustain the burden resting upon him, defendant should have shown that the debt was proved as an unsecured debt.
I doubt whether it was intended that questions such as are presented here should be determined upon a motion under section 1318 of the Code of Civil Procedure for leave to issue an execution. In this case, when the motion was made, the ten years was about to expire after which the judgment would cease to be a lien upon the land which defendant had already conveyed to his wife. (See Code Civ. Proc. § 1251.) Under those circumstances, plaintiff’s rights, if any he had, could only be preserved by granting the motion for leave to issue execution, leaving the defendant to assert his supposed rights under his discharge in bankruptcy, either by motion to discharge the judgment because of the discharge in bankruptcy, or by action to restrain plaintiff from proceeding to enforce the judgment. At all events, if it were proper to litigate such questions as this at Special Term on a motion for leave to issue execution, certainly defendant should have presented to the Special Term such parts of the proceedings in bankruptcy and other facts as were necessary to put the court in possession of all the facts. Defendant may now bring his action to protect himself, if he has that right, while if leave to issue execution is denied, plaintiff’s lien cannot be restored, though it be found on fuller disclosure of the facts that the hen has not been waived.
For these reasons, it seems to me the order should be affirmed.