Bank of Mendon v. Mell

• Decision Date: 07 December 1914
• Citation: 172 S.W. 484,185 Mo.App. 510
• Parties: BANK OF MENDON, Appellant, v. R. J. MELL, Respondent
• Court: Kansas Court of Appeals

172 S.W. 484

185 Mo.App. 510

BANK OF MENDON, Appellant, v. R. J. MELL, Respondent

Court of Appeals of Missouri, Kansas City

December 7, 1914

Appeal from Chariton Circuit Court.--Hon. Fred Lamb, Judge.

Judgment reversed and cause remanded. (with directions).

J. A Collet for appellant.

(1) The court of bankruptcy had no jurisdiction over the property in question further than to set it out to the bankrupt as his exemptions, and having no jurisdiction to administer the property, the bankruptcy proceedings would not and could not affect any lien against it, except such as are expressly provided for in the Bankruptcy Act. Collier on Bankruptcy pp. 185-186; Loveland on Bankruptcy, sec. 179; Lockwood v. Exchange Bank, 190 U.S. 294; Railroad v Hall, 229 U.S. 511; see also Bankruptcy Act of 1898, sections 67e and 70a. (2) Any lien creditor has a right to enforce his lien against exempt property of the bankrupt after it has been set out to him as his exemptions. Dry Goods Co. v. Nelson, 58 L.R.A. (N. D.) 770; Morris v. Covey, 148 S.W. 257; Thole v. Watson, 67 Mo.App. 591; Re Durham, 104 F. 231; In re Remmerde, 206 Federal, 882; Lockwood v. Exchange Bank, 190 U.S. 294; Loveland on Bankruptcy, section 181. (3) This conveyance from Mell to the bank could not be fraudulent as to this property which constitutes his exemptions. Barnes v. Wm. Waltke & Co., 135 Mo.App. 488; Seilert v. McAnally, 223 Mo. 505; Guinan v. Donnell, 201 Mo. 173; Welch v. Mann, 193 Mo. 304.

Lozier & Morris for respondent.

(1) When this chattel mortgage was executed and the adjudication of respondent as a bankrupt was made, the property involved in this suit was not exempt. Stewart v. Stewart, 65 Mo.App. 663; Davis v. Williamson, 68 Mo.App. 310; Parketon v. Pugsley, 142 Mo.App. 548; Bank v. O'Donnell, 156 Mo.App. 212; Alt v. Bank, 9 Mo.App. 91; Hombs v. Corbon, 20 Mo.App. 507; Finley v. Barker, 110 Mo. 410. (2) If the chattel mortgage be treated as covering only the property selected by respondent as exempt after the adjudication, then it is absolutely void, because no specific goods are described and the mortgaged property could be ascertained only when a selection was made by respondent out of the general mass of goods named in the mortgage. In re Schuller, 108 F. 591; Fowler v. Hunt, N.W. (Wis.) 481; Zielke v. Morgan, 7 N.W. (Wis.) 651; Bong v. Parmentier, 58 N.W. 243; Lafayette County Bank v. Metcalf, 29 Mo.App. 394; Stonebraker v. Ford, 81 Mo. 538; Dawson v. Cross, 88 Mo.App. 296.

OPINION

ELLISON, P. J.

--This is an action of replevin for a lot of personal property in which the judgment in the circuit court was for the defendant. The cause was submitted to the trial court on an agreed statement of facts, from which it appears that within four months prior to the 13th day of February, 1912, defendant conveyed the property of which that in controversy is a part, to plaintiff to secure a note for $ 1478. And that on that day he was adjudged an involuntary bankrupt by the United States District Court. That a trustee was appointed who took charge of defendant's property, including that claimed by him as exempt, that being the part now in controversy. And that defendant duly made claim of his exemptions to which he was entitled under the statutes of Missouri, as a head of a family. That this exempt property is not specifically, by name, exempt from the claims of creditors, but that defendant was entitled to $ 300 worth of property, not specifically exempt, which, under the State statute, is to be selected by defendant. It was further admitted that the referee in bankruptcy ordered the trustee to set apart to defendant such property as he might select, not exceeding said sum of $ 300, and that defendant selected the property in controversy; and such selection was duly approved by the bankruptcy court. That the bankruptcy court adjudged the chattel mortgage to be an unlawful preference and that its execution was an act of bankruptcy on defendant's part, and this finding and judgment was not appealed from by plaintiff. That after bringing this suit, plaintiff executed a release to the trustee in bankruptcy of all claim to the property conveyed in the mortgage, except the exempt property involved in this action. It was further admitted that the description of the property in the chattel mortgage was as follows: "The entire stock of general merchandise located in Allen building, about $ 1500, being boxed in rear room of Gehrig's restaurant, value $ 3000," and that plaintiff never took possession of any of the property prior to this replevin suit.

From the foregoing it will be seen that defendant conveyed a stock of merchandise to plaintiff valued at $ 3000 to secure a note of $ 1478, and that said conveyance was adjudged to be an act of bankruptcy and the property placed in the hands of a trustee in bankruptcy. But that afterwards, on the claim of defendant, $ 300 worth of the property was selected out of the whole by him and was, by order of court, set apart for him by the trustee and that when set apart to him plaintiff asserted its right under its mortgage, by having it seized in this action by its writ of replevin. The question is, has plaintiff a legal right or lien under the mortgage.

By the terms of sections 67e and 70a, 30 U.S. Stat. at Large, 564, 565, the mortgage being made within four months prior to filing the petition in bankruptcy against defendant, the property described therein became a part of his estate in bankruptcy and passed to the trustee, except that which is "exempt from execution and liability for debts by the law of" Missouri. So, while section 67f of the Federal statute, in general terms, nullifies liens against the debtor's property, it means liens "obtained through legal proceedings," and not the lien on exempt property which has been created by contract; for "these may be enforced or foreclosed by judgments obtained even after the petition in bankruptcy was filed." [Chi. B. & Q. R. R. v. Hall, 229 U.S. 511, 516, 57 L.Ed. 1306, 33 S.Ct. 885.]

We do not see any good reason back of defendant's claim that the law we have stated only applies to property specifically exempt. The language of the Federal statute does not justify such distinction. The statute vests the title to the property of the involuntary bankrupt in the trustee except (without qualification) "exempt" property. All other property passes to the trustee for administration for the creditors. The statute of bankruptcy does not limit, or cut out, the State exemption laws; on the contrary, it recognizes such laws, and the bankrupt is entitled to the same amount and kind of exemption as is a debtor who is not a bankrupt. It is true that, in the first instance, all of the bankrupt's property passes to the possession of the trustee in bankruptcy, but not for the purpose of vesting title to that part of it which is exempt, for he has no title to that and it only passes to him that it may be duly set apart to the bankrupt. [C. B. & Q. R. R. v. Hall, supra.] There is not only no good reason in this theory of defendant's, but he has no right to advance it. The claim of exemption can only concern his creditors in bankruptcy and they are not complaining and have no right to complain; and surely he cannot say the mortgage is invalid as to him. It was his voluntary...