In re Rabb
| Decision Date | 29 August 1927 |
| Docket Number | No. 2477.,2477. |
| Citation | 21 F.2d 254 |
| Parties | In re RABB. |
| Court | U.S. District Court — Panama Canal Zone |
M. B. Harrell, of Greenville, Tex., for bankrupt.
R. R. Neyland, of Greenville, Tex., for creditors and trustee.
For many years the bankrupt lived in Greenville, Tex., upon property designated as his homestead. On December 2, 1926, a creditor levied an attachment upon 200 acres of land belonging to the bankrupt, in Hunt county. On December 29, 1926, the bankrupt and his wife sold the city homestead for $6,000 cash and moved upon the 200 acres which had been levied upon, paying the $6,000 upon some indebtedness against the 200 acres. From the 30th day of December, 1926, they continued to live upon and occupy the 200 acres as their rural homestead, and, on January 4, 1927, by written instrument, duly designated the same as their homestead. On March 18, 1927, he filed a voluntary petition in bankruptcy and claimed the 200 acres as exempt. The trustee recognized the exemption and set it aside to the bankrupt.
Under the statute, the bankrupt was entitled to the homestead he had in the city of Greenville, or was entitled to the 200 acres in the country.
After setting aside the 200 acres as a homestead, the trustee and certain creditors asked the referee to allow the trustee to enter the suit in the state court, out of which the attachment issued, and make use of the attachment lien for the benefit of all of the creditors.
The referee granted the application, holding that liens that existed against the homestead before appropriation as a homestead are valid and enforceable, and that, since the lien was within four months of bankruptcy, it was a lien that could be advantaged, with the consent of the court, by all of the creditors.
I think the holding of the referee was error.
Section 70 of the Bankruptcy Act (11 USCA § 110) vests title in the trustee to all of the property therein mentioned, "except in so far as it is to property which is exempt." This exception is as big as it seems. The trustee is vested with no right — with no supervision — over or in that which the state law makes exempt, save to ascertain such exemption and set it aside for the use of the bankrupt. It is a continuation of the repose granted by the state law.
To allow the trustee to appeal to a federal tribunal for the right to follow exempt property into a state tribunal is merely allowing him to do indirectly what the law forbids him to do directly. There may be no advantage to a general creditor or a lien creditor in the bankrupt court over, upon, or from the bankrupt's exemption.
It has been suggested that section 67 f (11 USCA § 107) gives the authority for the procedure attempted. That section provides:
"That all levies, judgments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the levy, judgment, attachment, or other lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt, unless the court shall, on due notice, order that the right under such levy, judgment, attachment, or other lien shall be preserved for the benefit of the estate; and thereupon the same may pass to and shall be preserved by the trustee for the benefit of the estate as aforesaid."
This provision is at once a nullification and a preservation. It must be read, if possible, in harmony with the remainder of the act. Such reading may be had by giving entire force to the exception mentioned in section 70 and by reading section 67 f, as applying only to property that is not exempt. If section 67 f relates to property that is exempt, as well as to property that is not exempt, then the exception in section 70 becomes a nullity. One purpose of section 67 f was to save for the general creditors any attempted lien by one creditor, that was secured within four months of bankruptcy, upon such property as would, in reality, go to all of the creditors in the event of bankruptcy. The attempt to fix the lien, or the fixing of a lien, upon that which was exempt and which, in no event, could or would go to creditors, could not be effective against a plain provision of the statute.
Any lien that exists against the homestead of a bankrupt must be asserted in a state tribunal. Whether it is valid or whether it is invalid — whether it is collectable — is a matter exclusively outside the jurisdiction of the bankruptcy court. When the bankruptcy law limits the authority of the bankruptcy court to the ascertainment of the homestead and the segregation of it to the use of the bankrupt, nothing more may be attempted.
Judge Di...
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In re Carl, 1926.
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In re Buckley, 5839.
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