IH Kent Company v. Busscher

• Decision Date: 21 March 1960
• Docket Number: No. 16227.,16227.
• Citation: 277 F.2d 901
• Parties: I. H. KENT COMPANY and First National Bank of Nevada, Appellants, v. Harry A. BUSSCHER, Trustee in Bankruptcy of the Estate of Boyce H. Miller, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

277 F.2d 901 (1960)

I. H. KENT COMPANY and First National Bank of Nevada, Appellants, v. Harry A. BUSSCHER, Trustee in Bankruptcy of the Estate of Boyce H. Miller, Appellee.

No. 16227.

United States Court of Appeals Ninth Circuit.

March 21, 1960.

Vargas, Dillon & Bartlett, Alex A. Garroway, Stewart, Horton & Campbell, Reno, Nev., for appellants.

William L. Hammersmith, Reno, Nev., for appellee.

Before STEPHENS, POPE and HAMLIN, Circuit Judges.

STEPHENS, Circuit Judge.

Within four months of the bankruptcy of Boyce H. Miller, he and his wife signed and delivered an instrument in writing which, on its face, purported to convey certain real property situate in the State of Nevada to the First National Bank of Nevada, in trust for the I. H. Kent Company, a corporation, as security for a note given for an antecedent debt. Hereinafter, we shall generally refer to the beneficiary of the instrument as Kent and to the trustee as Bank.

The granting clause is as follows:

"Witnesseth: That said Trustor hereby grants, conveys and confirms unto said Trustee in trust with power of sale, the following-described real property situate in the City of Fallon, County of Churchill, State of Nevada, to wit:

"Lot One (1) of Block Two (2) of Walker Subdivision of the City of Fallon, according to the map and plat thereof filed in the Office of the County, Recorder of Churchill County, Nevada as File No. 55141 therein.

"Together with all and singular the tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof, and also, all the estate, right, title and interest, homestead or other claim or demand, as well in law as in equity, which the Trustor now has or may hereafter acquire, of, in or to the said premises or any part thereof, with the appurtenances."

At the date of the trust deed, Kent knew that Boyce Miller was insolvent, and had been adjudged a bankrupt.

Neither Miller nor his wife have taken any step toward selecting or declaring a homestead although they were, prior to the date of the trust deed, fully qualified to make the constitutional and statutory declaration. Miller did not file a claim of homestead with his schedule presented to the Referee.

It is the theory of Kent and Bank that the mention in the trust deed of "homestead" as above related is in fact and effect, an assignment to them of the right to declare a homestead in the name of the Millers, on the real property described in the trust deed, and each of them has filed such a declaration.

It is stipulated that there is a valid and existing First Deed of Trust as to one portion of the property and a further valid First Deed of Trust on the remaining portion of said property; that the total indebtedness under the above Deeds of Trust, together with the amount of exemption allowed by law, exceeds the value of the property. There is no equity above the valid Deeds of Trust and the homestead exemption.

The Trustee in Bankruptcy brought this action to have the deed to Bank in trust for Kent declared void and set aside upon the ground "That the effect of such attempted transfer was to enable the said defendants appellants here Kent and Bank, to obtain a greater percentage of their debt than other creditors of the same class."

The Court concluded "That the Deed of Trust * * * is a voidable, preferential transfer under Section 96(a) (1) and (b) of the Bankruptcy Act 11 U.S. C.A. § 96, subs. a(1), b; that said Deed of Trust is void and of no force and effect."

And in effect, that the so-called assignment by the bankrupt and his wife, Helen R. Miller, of undeclared homestead rights contained in the deed of trust above mentioned, is a right personal to the bankrupt and his wife, and creates no right in anyone else to act under such right or privilege. The Court declared the trust deed invalid and void, and of no force and effect. Judgment was entered accordingly.

The Bank and Kent are appealing.

The Constitution of Nevada provides (Article IV, Section 30):

"A homestead as provided by law, shall be exempt from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife when that relation exists; * * *" (Then follows exceptions not relevant here.)

Section 115.010 Nevada Revised Statutes provides:

"The homestead, consisting of a quantity of land, together with the dwelling house thereon and its appurtenances, not exceeding $10,000, to be selected by the husband and wife, or either of them, or other head of a family, shall not be subject to forced sale on execution, or any final process from any court, for debt or liability contracted or incurred after November 13, 1861 * *"

The Court based its conclusions upon the above, set out in quotations from the Nevada State Constitution and statutes and case law. We agree with the trial court that the right of homestead is a personal one created to protect the home and is completely inactive until activated by a husband and wife or by either or by the head of a family. It is nothing but an inchoate right that springs into effectiveness only by the application or declaration of those named and in no other manner. Therefore, the action of the bank-trustee and Kent in their attempt to establish a homestead for the Millers, and through this method remove the Miller property from the bankruptcy estate as exempt property, must fail. The property therefore remains in the estate, and since the conveyance was made less than four months before bankruptcy adjudication for an existing antecedent debt the conveyance cannot be effective to constitute a secured debt with preference over other debts.

It is appropriate here to add that both Bank and Kent claim that they were acting as agents of the Millers in their attempt to declare and fix upon the property a homestead exemption. We know of no authority supporting this claimed right, and the transcript is devoid of authority from Millers granting such an agency. And it may be proper to here repeat that all the Millers did by passing the conveyance was to constitute the property as security for the debt free from the exercise of the Millers' right to impress a homestead over such security. Collier on Bankruptcy, Section 6.10, page 824 contains the following:

"The principle that a debtor may waive his exemption is well settled. And a waiver may arise either from the bankrupt\'s failure to claim exemptions or by general or specific surrender of them. If the latter, the common method is by waiver note, * * *. In the case of a specific waiver, the waiver is personal to the creditor thus favored, and, if not

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