Barnett v. Knight

• Citation: 3 P. 747,7 Colo. 365
• Parties: BARNETT and others v. KNIGHT and others.
• Decision Date: 25 April 1884
• Court: Colorado Supreme Court

3 P. 747

7 Colo. 365

BARNETT and others v. KNIGHT and others.

Supreme Court of Colorado

April 25, 1884

A debtor can avail himself of the bounty offered by the homestead exemption statute as against an indebtedness which has not been reduced to judgment, nor become a statutory lien upon the premises, although allowing him the exemption will leave him insolvent.

Section 1631 and 1632, Gen. St., considered, and held to have been enacted for the benefit of the householder and his family.

A statute granting a homestead exemption is not in derogation of the common law, and must be construed liberally.

An act of the legislature confirming the privilege of a homestead exemption, as against debts incurred prior to its passage, is absolutely void.

A conveyance by a debtor to a third party is not void as against creditors because part of the consideration was an agreement to aid in the future support of the grantor, the purchaser acting in good faith, and the greater part of the consideration being valuable and actually paid.

A creditor who has not been injured by a debtor's transfer of his property, although fraudulent, cannot be heard to complain.

Sections 1634, 1637, 1638, Gen. St., considered.

Wells, Smith & Macon, for plaintiffs in error.

Benedict & Phelps, for defendants in error.

HELM J.

The important assignment of error in the case is 'that the complaint doth not set forth facts sufficient to constitute a cause of action.' There is nothing in the record before us upon which we can predicate the conclusion that the conveyance from Mrs. Carr to defendants in error is void as to plaintiffs is error on the ground of actual or intentional fraud. The uncontradicted averments of the complaint are our only source of information upon this subject; there is nothing in these from which we can justly draw the inference that she made the sale with intent to hinder, delay, or defraud her creditors; neither is there anything to show that defendants in error, who were purchasers for a valuable consideration, had notice of such intent, even if it existed. Yet both of these facts must concur before the sale can be avoided on this account. The question of fraud in fact may therefore be eliminated from this case. Is there fraud in law of which plaintiff in error may take advantage? His counsel contend that there is. They assert-- First, that as against the claim of plaintiffs in error the effort of Mrs Carr to secure the benefit of the homestead exemption act was of no avail, for his demand was contracted before she caused the word 'homestead' to be entered of record in compliance with law; and they argue, secondly, that since part of the consideration from defendants in error to her for the property was future assistance towards her support, the transaction was tainted with fraud in law per se as to her existing creditors. Other matters are discussed in the briefs, but we deem it unnecessary to extend our inquiry beyond these two questions.

The first may be restated as follows: Can a debtor avail himself of the bounty offered by our homestead exemption statute as against an existing indebtedness which has not been reduced to judgment, nor become a statutory lien upon the exempted premises by attachment or otherwise, where allowing the exemption will leave him insolvent? We are not aware of any direct adjudication of this precise question under similar statutes. It is by no means free from difficulty and doubt. That strong and logical arguments can be presented on both sides is demonstrated by the briefs in this case.

Section 1631 of our General Statutes reads as follows:

'Every householder in Colorado being the head of a family shall be entitled to a homestead not exceeding in value the sum of two thousand dollars, exempt from execution and attachment arising from any debt, contract, or civil obligation entered into or incurred after the first of February, in the year of our Lord one thousand eight hundred and sixty-eight.'

And section 1632 is as follows:

'To entitle any person to the benefit of this act, he shall cause the word 'homestead' to be entered of record in the margin of his recorded title to the same, which marginal entry shall be signed by the owner making such entry, and attested by the clerk and recorder of the county in which the premises in question are situated, together with the date and time of day upon which such marginal entry is so made.'

We do not agree with counsel for plaintiffs in error in their argument that the latter section was enacted for the purpose of giving notice and securing protection to those dealing with the householder and extending credit to him. If we did, the conclusion arrived at by them would inevitably follow; for, if the legislature prescribed the recording for the purpose of protecting parties with whom the claimant deals, the deduction is irresistible that it would not avail as to prior debts. More ingenuity than we possess would be required to demonstrate how the creditor is benefited by a notice of this kind given him after he has extended the credit. The key to a solution of the problem presented is found in the purposes and language of the entire act itself. Two governing principles underlie all homestead legislation: First, the beneficent design of protecting the citizen householder and his family from the dangers and miseries of destitution consequent upon business reverses, or against calamities arising from other causes; and, second, the sound public policy of securing the permanent habitation of the family and cultivating the local interest, pride, and affection of the individual, so essential to the stability and prosperity of a government.

Homestead exemption is entirely the creature of statute, but the statute is not in derogation of the common law, for at common law the creditor had no right to sell the debtor's land, (Thomp. Homest. & Ex. § 2, and note;) and the rule is fully established that the statutory provisions are to be liberally construed for the purpose of giving effect to the principles above named. Many of the states have extended this bounty to the householder without restriction or qualification, save that of visible occupancy and use. A few like our own have seen fit, for excellent reasons, to require of him, in addition to occupancy, an election as to whether he will accept the favor offered.

Section 1631, above mentioned, makes no reference to general indebtedness, except that its operation is confined to executions and attachments upon such liabilities as accrue after a certain date. It bestows upon the debtor the privilege of holding his homestead, to the extent of $2,000 in value, 'exempt from execution and attachment.'

Section 1632 substantially declares that, until he records his acceptance of the bounty, his home, like his other realty, shall be subject to 'execution and attachment.' There is nothing in either or in any other provision of the act which, in our judgment, justifies the conclusion that the legislature intended to declare that he must make this election before incurring the debt. That body simply says to him: 'Prompted by a desire to protect and benefit you and your family, and also to advance the public welfare, we offer this bounty to you, but we do not force you to accept it, and if you do not record your acceptance before an attachment or execution lien is secured in favor of some creditor, such lien shall have preference.' By saying to him that he must record his notice of acceptance, the legislature did not intend to discriminate against the premises upon which he resides; they did not intend to give his creditor a right, lien, or claim against the same, prior to such notice of acceptance, which did not extend to his other realty. He may, notwithstanding his debts, incumber sell, and dispose of his home in the same manner as any other lands to which he holds title. The bona fide purchaser or...