Court Opinion

ID: 8798832
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:23:33.236043+00
Date Added: 2024-06-11T17:03:47.286764
License: Public Domain

GILBERT, Circuit Judge
(dissenting). Section 6 of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 548 [Comp. St. 1913, § 9590]) provides that the act shall not affect the allowance to bankrupts of the exemptions prescribed by the state laws in force at the *73time of filing the petition; and section 70a (section 9654) provides that the trustee of the bankrupt’s estate shall be vested by operation of law with the title of the bankrupt as of the date when he was adjudged a bankrupt, “except in so far as it is to property which is exempt,” to all property which prior to filing the petition “he could have by any means transferred,” etc. The property here involved coukl have been transferred, for it is settled by the statutes and decisions of Montana that the owner may moi'tgage a growing crop. Brande v. Babcock Hardware Co., 35 Mont. 256, 88 Pac. 949, 119 Am. St. Rep. 858. And being transferable under the laws of the state of Montana, it passed to the trustee, unless it was property which was exempt.
It is not contended that it was exempt under the laws of Montana, but it is said that it is exempt for the reason that it was a crop produced upon land which the bankrupt held as a homestead entry under the public land laws of the United 'States. It may be conceded that growing crops on such a homestead claim are not subject to execution ; but the test question here is not whether the crops were subject to execution, but whether they could have been transferred by the voluntary act of the owner. That they could have been so transferred is not questioned. And it is not denied that in every case in which the right of the trustee in bankruptcy to growing crops on,the homestead land of the bankrupt lias been called in question in the federal courts the right has been sustained. In Re Coffman (D. C.) 93 Fed. 422, it was held that a bankrupt cannot claim as exempt property a crop of cotton growing on his homestead at the time of the adjudication in bankruptcy, although an execution could not have been levied upon the property before its severance. The court said:
“But in a ease of voluntary bankruptcy, where the bankrupt comes forward and tenders all of his property subject to execution, to be applied rat-ably on his debts, in order, that he may reap the benefits of the Bankruptcy Act, the question may well be asked: Does he not, by his act, extend an invitation and give warrant to the trustee to come upon his homestead and gather that which belongs to his creditors?”
In re Daubner (D. C.) 96 Fed. 805, was a case in which the growing crop of the bankrupt was upon land acquired by the latter under the United States Homestead Taw (Act Cong. May 20, 1862, c. 75, 12 Stat. 392). The court held that the crop passed to the trustee. The court said:
“Upon a sale of the land the growing crops, unless reserved, would pass to the purchaser; but they are capable of reservation and of mortgage and sale by the owner of the land, and when such owner voluntarily goes into bankruptcy he must be held to intend that such of his property and rights as are the subject ol' disposition by'him, and are not expressly exempt, shall vest in the trustee for the benefit of creditors. Such crops are the fruits of the bankrupt’s industry, or of his investment of money, or both.”
So in Re Hoag (D. C.) 97 Fed. 543, it was held that the bankrupt may not claim as exempt crops growing on his homestead at the time of filing his petition in bankruptcy. In Re Sullivan, 148 Fed. 815, 78 C. C. A. 505, the Circuit Court of Appeals for the Eighth Circuit affirmed the District Court for the Northern District of Iowa in *74holding that corn standing in the field on the homestead of the bankrupt, which had fully matured at the date of the bankruptcy, is not exempt under the homestead exemption statute of Iowa. In Re Friedrich (D. C.) 199 Fed. 193, the ruling of In re Sullivan was followed.
But it is held by the majority of this court that those decisions are all to be disregarded, for the reason, it is said, that in two of them the courts erroneously construed the decisions of the state courts, which they professed to follow, that the decision in Re Coffman was in conflict with the decisions of the Supreme Court of Texas in Alexander v. Holt, 59 Tex. 205, Parker v. Hale (Tex. Civ. App.) 78 S. W. 555, Staggs v. Piland, 31 Tex. Civ. App. 245, 71 S. W. 762, and Moore v. Graham, 29 Tex. Civ. App. 235, 69 S. W. 200. All of those cases except the first were decided after the decision in Re Coffman. In Texas, as in some other states, a distinction has been made between crops growing on a homestead and crops which have been gathered and severed from the soil; and it is held that the former take the character of.the land as to exemption, but that the latter do not. The decisions so cited from Texas sustain that rule. It is a mistake to say that In re Coffman is in conflict with them. In that case the court held that, where the homestead laws of the state do not include growing crops, the bankrupt cannot claim as exempt property the crop growing on his homestead at the time of the adjudication in bankruptcy, although an execution could not have been levied upon such crop before its severance, and that if, after the appointment of the trustee, the bankrupt gathers and removes the crop, he must surrender the same or the proceeds of the sale to the trustee. The court in that case cited the decisions of the Supreme Court of Texas to sustain the conclusion so reached.
So it is said that the decision of the Circuit Court of Appeals for the Eighth Circuit in Re Sullivan is in conflict with the decision of the Supreme Court of Iowa in Morgan & Hunter v. Rountree, 88 Iowa, 249, 55 N. W. 65, 45 Am. St. Rep. 234. But the Circuit Court of Appeals carefully considered and distinguished Morgan & Hunter v. Rountree. That was a case in which the Supremé Court of Iowa had held that the homestead law of that state created an estate which the owner thereof may enjoy, and that, if he cannot conveniently reside on the homestead, he may lease it and enjoy the rent reserved with like immunity from claims of creditors as would attach to the estate itself. The Circuit Court of Appeals held that the Supreme Court of Iowa, in construing the state statute of exemption, had not decided that the crops growing on an exempt homestead are for that reason alone exempt from liability to creditors of the owner of the homestead.
Many of the reported cases on the subject of exemptions of crops raised upon homesteads are controlled by the provisions of the state statutes whereby the homesteads are created. All of those statutes recognize that the occupation of ho'mestead land is for the purpose of realizing therefrom something to support the claimant and his family, and in some states express exemption is made of all produce, rents, or profits arising from the homestead land, and in most states *75provisions are made for the protection of the rights of the homestead claimants. Generally speaking, the right preserved is the right to enjoy a home and the land on which it is situated from liability to forced sale to pay the debts of the owner, with certain restraints upon his right of alienation, but with the power to waive, abandon, or terminate the right.
The possessory right to land under such state statutes differs widely from the right of the settler upon a homestead under the public land laws of the United States. That right is subject to no limitation or restraint, except that the lands acquired by homestead entry shall not in any event become liable for the satisfaction of any debt contracted prior to the issuing of the patent therefor. The homestead involved in the present case is of the latter class. The right of the claimant to the products of the land is not affected by any provision of a state statute, and, of course, it cannot be affected by any decision of the courts of the state in which the land lies. The question here is purely one of the effect of the laws of the United States. Under those laws no right of the bankrupt in the land of the homestead claim passed to the trustee. But the right to the growing crops was subject to transfer by the bankrupt at the time when the petition in bankruptcy was filed. It was property which he could have “transferred,” as provided in section 70a. As was said by Judge Sanford in Re Burnett & Co. (D. C.) 201 Fed. 162:
“The mere fact that the property could not have been levied np'on and sold at the date of the adjudication would not prevent the bankrupt's title from passing to the trustee, if it were property which the bankrupt could by any means have transferred.”
The decisions of the federal courts, so far as they have considered the question here involved, sustain the doctrine which may be thus expressed: When a homestead entryman voluntarily files his petition in bankruptcy and asks the court to declare him a bankrupt, and to accept his estate, and to discharge him from his liability to creditors, the trustee becomes vested of all the bankrupt’s transferable property, except that which is exempt under the law of the state; that if a portion of the bankrupt’s property is a growing crop, which his labor and money have produced upon a homestead, which he holds un ■ der the laws of the United States, and such growing crop is not ex empt under the law of the state, he should be held to surrender with it to the trustee the right to enter upon the land, if necessary to remove the crop therefrom; and that where, as here, the bankrupt has harvested the crop, he should be required, as was ordered by the referee in the case at bar, to surrender the same or the proceeds thereof to the trustee, reserving to himself the cost and expense of raising and harvesting the crop.