Iowa Mut. Ins. Co. v. Parr

• Decision Date: 07 April 1962
• Docket Number: No. 42582,42582
• Citation: 370 P.2d 400,189 Kan. 475
• Parties: , 94 A.L.R.2d 960 IOWA MUTUAL INSURANCE COMPANY, a corporation, Appellee, v. Harley V. PARR and Barbara A. Parr, Appellants.
• Court: Kansas Supreme Court

Page 400

370 P.2d 400

189 Kan. 475, 94 A.L.R.2d 960

IOWA MUTUAL INSURANCE COMPANY, a corporation, Appellee, v. Harley V. PARR and Barbara A. Parr, Appellants.

No. 42582.

Supreme Court of Kansas.

April 7, 1962.

Syllabus by the Court

1. A provision in an indemnity agreement whereby the obligors agreed to waive the benefit of the homestead exemption allowed them by the Constitution of Kansas, is construed and held not to constitute a

waiver of the homestead right, it being contrary to the public policy of this state and of no effect, where the obligors owned and occupied the homestead with their family when the indemnity agreement was executed, and they continued to occupy the homestead at all times material to the litigation.

2. A waiver of exemption creates no lien on any property.

3. The primary concern of the homestead exemption provision in the Constitution of Kansas is to protect the family of the debtor. This provision was intended to create, and did create, more than a simple exemption statute.

Barton P. Cohen, Kansas City, argued the cause, Joseph Cohen, Charles S. Schnider, John E. Shamberg, Joseph P. Jenkins, Norma Braly, Jacob F. May, Jr., and Frederick K. Cross, Kansas City, were with him on the brief for appellants.

John R. Caslavka, Kansas City, Mo., and John Murray, Leavenworth, argued the cause, and Harry P. Thomson, Jr., Kansas City, Mo., was with them on the brief for appellee.

SCHROEDER, Justice.

This is an action on a contract. Appeal has been perfected by the defendants from a judgment of the trial court ordering the sale of their homestead to satisfy the judgment entered in favor of the plaintiff, and from an order of the trial court overruling the defendants' motion to set aside the order of sale of the defendants' homestead.

The primary question is whether a waiver of the homestead exemption contained in an indemnity agreement is valid.

On the 26th day of February, 1958, Harley V. Parr and Barbara A. Parr (defendant-appellants) husband and wife, executed an indemnity agreement with Iowa Mutual Insurance Company, a corporation (plaintiff-appellee) indemnifying the appellee for any losses it might sustain on certain statutory bonds to be executed by the appellee. Subsequently the appellee executed certain statutory bonds with the State Highway Commission of Kansas.

On the 17th day of February, 1960, Harley V. Parr filed his petition in bankruptcy in the United States District Court for the District of Kansas, and was duly adjudged a bankrupt. He listed his home located at Tonganoxie, Kansas, among his assets, and the same was later set aside as exempt. He also listed the appellee as a creditor with respect to any obligation that might arise under the indemnity agreement.

On the 6th day of May, 1960, the appellee filed a petition in the district court of Leavenworth County, Kansas, later amended on the 1st day of July, 1961, seeking judgment and requesting the court for an order decreeing a lien upon the appellants' real and personal property in the amount of $36,721.36, and for an order of sale of said property.

On the 7th day of July, 1961, Barbara A. Parr filed her petition in bankruptcy in the United States District Court for the District of Kansas, and was duly adjudged a bankrupt. She listed among her assets the homestead in Tonganoxie, Kansas, owned jointly with her husband. Thereafter, the homestead was set aside to her as exempt. She listed the appellee among her creditors with respect to any obligation that might arise under the aforementioned indemnity agreement.

On the 20th day of July, 1960, the referee in bankruptcy entered an order staying the discharge of the bankrupts.

On the 12th day of July, 1960, Barbara A. Parr filed an affidavit and certificate with the clerk of the district court, indicating that she had applied for a discharge in bankruptcy. On the 21st day of July, 1960, Harley V. Parr filed a similar affidavit and certificate with the clerk of the district court.

After joinder of issues and trial of the matter the district court on the 27th day of January, 1961, found in accordance with the allegations of the petition and the foregoing facts and entered judgment against the appellants in the sum of $36,721.36. It decreed that the judgment should be a lien on the real property of the appellants, including their homestead, and that the homestead be sold to satisfy the judgment.

Thereafter on the 18th day of February, 1961, the appellants filed a motion to set aside the order of sale of their homestead, calling attention to the fact that this was their homestead, and that they had filed affidavits and certificates as provided by G.S.1949, 60-3601. This motion was overruled and appeal has been duly perfected presenting the issues hereinafter discussed.

It is admitted the appellants owned and occupied the real estate here in question in Tonganoxie, Kansas, as their homestead at the time they executed the indemnity agreement, and that they owned and occupied the same real estate as their homestead when the judgment was entered and the lien impressed.

The paragraph of the indemnity agreement containing the waiver here in question reads as follows:

'NINTH: Each of the undersigned does hereby waive all right to claim any property, including homestead, as exempt from levy, execution, sale or other legal process under the law of any state, province or other government, as against the rights of The Company to proceed against the same for indemnity hereunder. Each of the undersigned authorizes and empowers any attorney in any state of the United States, at the request of The Company, to waive the issuing and service of process and to appear for and confess judgment against such undersigned for any sum or sums due under this agreement, together with costs of suit, without stay of execution, waiving inquisition and condemnation of any real estate; and to release all errors and waive all right of appeal and stay of execution in behalf of the undersigned; this authority to continue until The Company's liability under any Such Bond of Bonds shall have wholly terminated.' (Emphasis added.)

The Kansas Constitution, Article 15, Section 9, provides in part:

'A homestead to the extent of one hundred and sixty acres of farming land, or of one acre within the limits of an incorporated town or city, occupied as a residence by the family of the owner, together with all the improvements on the same, shall be exempted 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; but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements thereon: Provided, The provisions of this section shall not apply to any process of law obtained by virtue of a lien given by the consent of both husband and wife: * * *.'

This provision is also found in G.S.1949, 60-3501.

G.S.1949, 60-3403, provides:

'Lands, tenements, goods and chattels, not exempt by law, shall be subject to the payment of debts, and shall be liable to be taken on execution and sold, as hereinafter provided.'

From the foregoing it is apparent that property which is exempt is not subject to the payment of debts and may not be taken on execution and sold to satisfy those debts. The Kansas Constitution and the legislature have declared a homestead to be exempt. The homestead cannot be subjected to forced sale to satisfy debts except in the following situations: (1) To pay taxes; (2) to pay obligations contracted for the purchase of the homestead; (3) to pay obligations contracted for the erection of improvements on the homestead; or (4) any process of law obtained by virtue of a lien given by the consent of both husband and wife.

The instant case does not fall within any of these exceptions. This was recognized by the trial court. Clearly, none of the first three exceptions applies, and as to the fourth it was said in Kroenert v. Mead, 59 Kan. 665, 54 P. 684:

'* * * A waiver of exemption creates no lien on any property. Until seized in execution, a party who has waived the benefit of the exemption laws may sell or dispose of his exempt property with as perfect freedom as if no such waiver had been made. * * *' (p. 667, 54 P. p. 685.)

If the waiver does not create a lien, then no lien was created by the joint consent of the husband and wife. There must be a valid lien on the particular homestead right when the waiver is made. (West v. Grove, 139 Kan. 361, 31 P.2d 10.)

The indemnity agreement executed by the parties herein was an executory contract--one where the parties obligated themselves to perform in the further. (See, 12 Am.Jur., Contracts, § 9, pp. 506, 507.)

The trial court held the benefits of the homestead law were waived by the appellants when they executed the indemnity agreement. The appellants contend the state has clearly taken away the right of a creditor to subject the debtors' homestead to the payment of debts, and that any waiver in the indemnity agreement by the appellants was null and void and against the public policy of this state.

The appellee, on the other hand, contends the appellants cannot now repudiate and attempt to declare void the provisions of a contract they so willingly executed to induce the surety herein to protect them in the event of default.

Regarding the constitutional provision above quoted, it was said by Justice Brewer, speaking for the court, in Monroe v. May, Weil & Co., 9 Kan. 466:

'* * * The homestead is something toward which the eye of the creditor need never be turned. It is an element which may never enter into his calculations in his efforts to collect his debt. * * *' (p. 476.)

By the provisions of G.S.1949, 67-530, a tenant may waive, in writing, the benefit of the exemption laws of this state for all debts contracted for rents. Decisions applying this...