In re Andrews & Simonds

• Decision Date: 01 December 1911
• Parties: In re ANDREWS & SIMONDS.
• Court: U.S. District Court — Western District of Michigan

193 F. 776

In re ANDREWS & SIMONDS.

United States District Court, W.D. Michigan.

December, 1911

A. M. &amp C. H. Stearns, for bankrupt.

Osborn & Mills, for trustee.

SESSIONS District Judge.

On the 1st day of March, 1911, the firm of Andrews & Simonds and the individual members thereof were adjudged bankrupts in involuntary proceedings instituted by their creditors. The firm assets consisted of a stock of merchandise, store accounts, and equipment for carrying on the firm business. The individual assets of William A. Simonds, one of the members of the firm, consisted of a half interest in two promissory notes, some life insurance policies, and some exempt household goods. Prior to the adjudication of bankruptcy a receiver of the firm business had been appointed by the state court, and, at the time of the adjudication, the firm property was in the possession of the receiver and later was turned over by him to the trustee in bankruptcy. William A. Simonds filed partnership schedules on March 14, 1911, and his individual schedules on March 16, 1911. In the partnership schedules the claim for exemptions is set forth as follows:

'William A. Simonds, one of said copartners, makes claim for his exemptions in said copartnership business under the eighth subdivision of section 10,322 of the Compiled Laws of 1897 of the state of Michigan-- 250.'

In his individual schedules the claim for exemptions is as follows:

'Household furniture, goods, and utensils, library and school books and family pictures, and other personal property exempted by the provisions of section 10,322 of the Compiled Laws of 1897 of the state of Michigan.'

The eighth subdivision of said section 10,322 is as follows:

'Eighth the tools, implements, materials, stock, apparatus, team, vehicles, horses, harness, or other things, to enable any person to carry on the profession, trade, occupation or business in which he is wholly or principally engaged not exceeding in value two hundred and fifty dollars.'

His schedule of assets contains the following:

'(c) Stock in trade-- none excepting copartnership interest in the business of Andrews & Simonds, as scheduled.'

'(k) Machinery, fixtures, apparatus, and tools used in business with the place where each is situated-- none excepting interest in business of Andrews & Simonds, as scheduled.'

On March 27, 1911, the trustee filed his petition for authority to sell the copartnership property, and on April 8, 1911, he was authorized to make the sale. On April 25, 1911, he sold the 'stock of goods, horse, harness, wagon, and equipment' for $3,575, and the sale was confirmed. No notice of the sale was given to the bankrupt. Nor was he requested by the trustee to select his exemptions. On June 2, 1911, William A. Simonds filed his petition asking for an order for the payment to him by the trustee of the sum of $250 from the proceeds of the sale of the copartnership property, as his exemption. The order of the referee denying the petition is now here for review.

The exemptions allowed a bankrupt are fixed and prescribed by the statutes of the state of his domicile; but the provisions of the bankruptcy act are controlling as to the time and manner of claiming, awarding, selecting, and setting apart such exemptions, and the law is well settled that these provisions of the bankruptcy act should receive a liberal and not a narrow or technical interpretation. The laws securing exemptions are not to be frittered away by construction so as to destroy their value.

The state statute above quoted expressly provides that a debtor shall be allowed an exemption of $250 consisting of stock in trade in his principal business. In Michigan each member of a firm may claim this amount of the firm goods. Skinner v. Shannon, 44 Mich. 86, 6 N.W. 108, 38 Am.Rep. 232; Waite v. Mathews, 50 Mich. 392, 393, 15 N.W. 524; McCoy v. Brennan, 61 Mich. 362-367, 28 N.W. 129, 1 Am.St.Rep. 589. It appears from the individual schedules of William A. Simonds that he owned no property of that character except his interest in the stock of merchandise owned by and used in the business of the firm of Andrews & Simonds. Clearly then, William A. Simonds, before the sale, was entitled to $250 worth of that stock as his exemption, and, after the sale, was entitled to the same amount in cash, if his claim for it was made properly and seasonably, in accordance with the provisions of the bankruptcy act.

The precise question to be determined is this: Must the bankrupt lose and forfeit the exemption which the law gives to him if he fails to claim and select specific articles of exempt property, or, if he makes a general claim for all the exempt property of a specified class which is allowed to him by law, does it then become the duty of the trustee in bankruptcy to make the selection for him? The answer to this question must be sought in the provisions of the bankruptcy act itself and in the construction thereof by the courts.

The material and relevant provisions of the bankruptcy act are as follows: Section 7 (8) makes it the duty of a bankrupt to prepare, make oath to, and file in court a schedule of his property and 'a claim for such exemptions as he may be entitled to. ' Section 47a (11) requires trustees in bankruptcy to--

'set apart the bankrupt's exemptions and report the items and estimated value thereof to the court as soon as practicable after their appointment.'

General Order 17 (89 F. viii, 32 C.C.A. xix) provides that:

'A trustee shall make report to the court within twenty days after receiving the notice of his appointment, of the articles set off to the bankrupt by him, according to the provisions of the forty-seventh section of the act, with the estimated value of each article.' The caption of the official form of schedule B (5) is as follows:

'A particular statement of the property claimed as exempted from the operation of the acts of Congress relating to bankruptcy, giving each item of property and its valuation, and if any portion of it is real estate, its location, description and present use.'

There is nothing in the bankruptcy law, except the above caption to the official form of schedule, which either requires or even suggests that the bankrupt must specify the articles in a stock of goods which he claims as his exemption. On the contrary, the law expressly lays upon the trustee the duty to select and set apart the exemption. In other words, if the bankrupt has clearly indicated his intention not to waive his exemption and has also specified the particular class of property owned by him from which he claims his exemption, it then becomes the duty of the trustee to select and sever the exemption from the mass of property belonging to the estate of the character and in the class indicated. This view is supported by authority.

In re Friedrich (C.C.A., 7th Cir.) 3 Am.Bankr.Rep. 801, 100 F. 284, 40 C.C.A. 378, the bankrupts were copartners in trade in Wisconsin. The schedule or inventory of the copartnership estate had subjoined to it this statement:

'But out of the above property each of the partners selects his exemption under the statutes of the state of Wisconsin.'

Neither of the copartners had individual estates. After a trustee had been appointed, the bankrupts applied to the court for an order directing the trustee to permit each of them to select from the stock in trade goods to the value of $200 as property exempt by virtue of the laws of Wisconsin. The court said:

'We do not think that an actual severance from the common stock of the articles claimed as exempt before petition in bankruptcy filed is

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