Gardner v. Johnson, 13009.

• Decision Date: 22 March 1952
• Docket Number: No. 13009.,13009.
• Citation: 195 F.2d 717
• Parties: GARDNER v. JOHNSON.
• Court: U.S. Court of Appeals — Ninth Circuit

195 F.2d 717 (1952)

GARDNER v. JOHNSON.

No. 13009.

United States Court of Appeals Ninth Circuit.

March 22, 1952.

Thomas S. Tobin, Los Angeles, Cal., for appellant.

Joseph Mayer, Beverly Hills, Cal., for appellee.

Before STEPHENS, BONE and POPE, Circuit Judges.

POPE, Circuit Judge.

This appeal involves the question of whether the bankrupt is entitled to a homestead exemption in a lot located in the City of Los Angeles. The referee, in a summary proceeding brought by the trustee, made an order adjudging that the bankrupt's claim of a homestead exemption was invalid, and that the trustee, as such, was entitled to the lot. Upon petition for review, the district court reversed the referee's order and held the claim of homestead exemption valid. 97 F.Supp. 779.

The bankrupt filed her voluntary petition in bankruptcy in the court below on April 24, 1947. Her petition scheduled real estate: "none"; under schedule B5, "property claimed to be exempt under federal and state laws", she listed: "none". After his appointment, the trustee instituted a civil action in the District Court for the Southern District of California seeking to set aside as fraudulent transfers of the lot which the bankrupt had made to her daughter and the daughter's children in the year 1944.¹ Defendants in the action were the bankrupt, her daughter, and the daughter's children. An answer was filed on behalf of defendants in that action, including the bankrupt, but the answer contained no mention of any claim of homestead in the property.

At the trial of that action, in which the bankrupt as a defendant tried her own case, no mention or suggestion was made of the existence of a homestead in respect to the property. The court made findings to the effect that the property in question had been transferred by the bankrupt voluntarily and for the purpose of hindering, delaying and defrauding her creditors. The conclusions were that the purported transfer should be cancelled and set aside and the record title vest in the plaintiff trustee to be administered in the bankrupt estate. Judgment was entered accordingly on February 10, 1949. The bankrupt took an appeal to this court on behalf of herself and the other defendants and the judgment was affirmed here. Johnson v. Gardner, 9 Cir., 179 F.2d 114, certiorari denied 339 U.S. 935, 70 S.Ct. 661, 94 L.Ed. 1353.

The trustee then discovered that on November 18, 1944, before the transfer to her daughter and children, the bankrupt had recorded a declaration of homestead on the property. As the trustee was in possession of the property he then instituted the summary proceedings mentioned above and which resulted in the order reversed by the court below.

The trial court held that when the bankrupt recorded her claim of homestead in November, 1944, she acquired a valid homestead exemption under the applicable California statutes; that since the property in question was exempt under the state law, title to it did not pass to the trustee in bankruptcy under the Bankruptcy Act; that notwithstanding the California Civil Code § 1243 provides that a homestead may be abandoned by "a grant thereof", yet the deeds made by the bankrupt did not have any such effect here because that transfer was set aside and held for nought in the action which the trustee had brought. The court held that the homestead property could not be the subject of a fraudulent conveyance since the creditors had no claim thereto; further, that the homestead in question was a creature of California law, and cited California decisions which were assumed to hold that a homestead cannot be lost or abandoned by a conveyance made for the purpose of avoiding creditors.² For this reason, the court thought, the bankrupt's rights were not affected by the amendment to section 6 of the Bankruptcy Act³ to the effect that exemptions shall not be allowed out of property which a bankrupt has transferred or concealed and which is recovered or the transfer of which is avoided for the benefit of the estate.

The exemption here in question is defined by California law. The Bankruptcy Act declares the policy of Congress to give effect to state exemption laws. But once bankruptcy has intervened, the time, manner and conditions under which such exemptions may be claimed as against the trustee are matters of federal law, and are determined by the Bankruptcy Act.

In the case of In re Gerber, 9 Cir., 186 F. 693, this court, dealing with a claim of homestead under the Washington statute, held that the bankrupt there had lost his right to claim the exemption by his failure to comply with the Bankruptcy Act and the general orders promulgated thereunder. This court called attention to the fact that the forms prescribed by the Supreme Court pursuant to the Act required the bankrupt to claim his exemptions in a specific manner, and that the Act provided for a precise mode of setting apart and awarding such claims of exemption. It was held that the bankrupt had lost and abandoned any right to a homestead exemption by a failure to schedule and list the same in the manner required by the general orders in bankruptcy. The court said, 186 F. at page 700: "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 hereinbefore 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." Under the authority of that decision we are compelled to hold that the bankrupt here waived and abandoned any claim of homestead by failure to schedule the same.

That the statutory requirement of scheduling and claiming such exemptions is a matter of substantial importance, is illustrated by what happened in this case, where the administration of the bankrupt estate, including the prosecution of the action to set aside the fraudulent conveyance, went on from the date of the voluntary petition in April, 1947, until the summary proceeding here was instituted in November, 1950, without any suggestion from the bankrupt that there was a homestead exemption to be taken into consideration.⁴

Again we think the court below was in error in its failure to hold that when the bankrupt conveyed the property in question to her daughter, she abandoned the homestead. The court held that the deed was no more effective than a defectively executed deed would have been, and said: "In the present case, the bankrupt's attempts to deed the property to her daughter were declared fraudulent, both under the state law and the Bankruptcy Act, at the suit of the Trustee. The attempted conveyances having been set aside, the property is in the same status it had before the deed was executed, — i. e., it is subject to the burden of the homestead." 97 F. Supp. 782.

This conclusion of the court below appears to us to have the effect of making the bankrupt the beneficiary of the trustee's suit to set aside her fraudulent conveyance. That suit was brought to vindicate and uphold the rights of the trustee and of the creditors represented by him. So far as the bankrupt was concerned, she should be in no position, as between herself and her daughter grantee, to say that no transfer occurred. We think that such a deed as here involved, although void as to creditors, is yet...