Johnson v. Payne

• Decision Date: 04 May 1928
• Docket Number: No. 7959.,7959.
• Parties: JOHNSON v. PAYNE.
• Court: U.S. Court of Appeals — Eighth Circuit

26 F.2d 450 (1928)

JOHNSON v. PAYNE.

No. 7959.

Circuit Court of Appeals, Eighth Circuit.

May 4, 1928.

George H. Mayne, of Council Bluffs, Iowa, and Andrew Bell, of Denison, Iowa, for appellant.

A. P. Barker, of Clinton, Iowa, for appellee.

Before WALTER H. SANBORN and LEWIS, Circuit Judges, and PHILLIPS, District Judge.

WALTER H. SANBORN, Circuit Judge.

Cheals W. Payne was a resident and citizen of Iowa, and Mary A. Payne was his wife, on April 7, 1923. On that day suit was brought in one of the courts of the state of Iowa, and that court appointed E. B. Spottswood receiver of Mr. Payne's property, consisting of 950 acres of land in Iowa and other property. On April 7, 1923, he and his wife conveyed all this property to the receiver, Spottswood. On April 23, 1923, a petition in involuntary bankruptcy was filed against Mr. Payne by some of his creditors, on the ground, among others, that he had within four months preceding the filing of their petition committed an act of bankruptcy, in that he, while insolvent, applied for a receiver of his property and caused E. B. Spottswood to be appointed such receiver. On this petition Mr. Payne on May 11, 1923, was adjudged a bankrupt, and the appellant Jacob Johnson is the trustee of his estate in bankruptcy. On June 23, 1923, before any of the property that came to his trustee in bankruptcy had been disposed of, Mr. Payne died.

On July 17, 1923, his spouse, Mrs. Mary A. Payne, the appellant, filed with the proper referee in bankruptcy her petition, first, for her distributive share of her husband's 950 acres of land in Iowa, subject to incumbrances, pursuant to section 3366, Code of Iowa 1897, now section 11990, Code of Iowa 1924, which provides that "one-third in value of all the legal or equitable estates in real property possessed by the husband at any time during the marriage, which have not been sold on execution or other judicial sale, and to which the wife had made no relinquishment of her right, shall be set apart as her property in fee simple, if she survive him"; and, second, that she be allowed sufficient of the property of the bankrupt of such kind as is appropriate to support her for twelve months from the time of the bankrupt's death, pursuant to section 3314 of the Code of Iowa 1897, now section 11923, Code of Iowa 1924, which provides:

"The court shall, if necessary, set off to the widow and children of the decedent under fifteen years of age, or to either, sufficient of his property, of such kind as is appropriate, to support them for twelve months from the time of his death, and may, on the petition of the widow or other person interested, review such allowance and increase or diminish the same, and make such orders in the premises as shall be right and proper."

The referee heard this petition on evidence and stipulations of fact, and denied the petitioner's request. She then filed a petition for review of the order of the referee, and the case, the evidence therein, the stipulations, and briefs of counsel were submitted to Hon. George C. Scott, United States District Judge for the Northern District of Iowa, who after consideration reversed the order of the referee and granted the petition of Mrs. Payne, and from his order the trustee has appealed.

The first contention which counsel for the trustee make in support of their claim that the appellant was not entitled under section 3366, Code of Iowa 1897, to her distributive share of "one-third in value of all the legal or equitable estates in real property possessed by the husband at any time during the marriage, which have not been sold on execution or other judicial sale, and to which the wife had made no relinquishment of her right," is that the adjudication of her husband a bankrupt and the vesting of the title to his real estate in his trustee in bankruptcy by that adjudication in trust for his creditors constituted a judicial sale of it which divested her of all right in law or in equity to her distributive share thereof. That interpretation of this statute does not strike us as sound, just or reasonable. If by order of the bankruptcy court any of this property had been sold by the trustee and that sale had been confirmed by that court, the position here taken might have been debatable; but the facts of this case seem to render that position clearly untenable. There was no buyer and there was no seller in the mere adjudication in bankruptcy and the appointment of the trustee whereby the title vested in the trustee for the benefit of the creditors.

Taylor v. Highberger, 65 Iowa, 134, 21 N. W. 487, cited by counsel for the trustee, was a case in which Taylor had been adjudged a bankrupt in 1868 and his property assigned to his assignee in bankruptcy. On June 30, 1869, the bankruptcy court made an order directing the assignee in bankruptcy to sell the real estate of the bankrupt in question; he sold it pursuant to the order, made a deed of it to the purchaser, he paid for it, the deed was filed for record in the recorder's office, and the sale was approved by the court. That was a judicial sale. But the record in this case discloses no such order of the court for or approval of such a sale by the court of any of the real estate of the bankrupt before the filing of the petition of the appellant in the court below for her distributive share of the real estate of her deceased husband.

Counsel for the trustee, however, earnestly argue that the adjudication in bankruptcy and the consequent transfer of the title of the real estate to the trustee for the benefit of his creditors constitutes the "other judicial sale" of section 3366 of the Code of Iowa of 1897, and they cite and rely upon the opinion of the Supreme Court in Taylor v. Voss, 271 U. S. 176, 46 S. Ct. 461, 70 L. Ed. 889, and the opinions of the Supreme Court of Indiana construing certain statutes of that state in support of their argument. On the other hand, counsel for Mrs. Payne contends that section 8 of the Bankruptcy Act (11 USCA § 26) controls, and that the adjudication in bankruptcy and subsequent qualification of the trustee was not a judicial sale or equivalent thereto, within the meaning of the Iowa statute, and cite in support of their contention Hull v. Dicks, 235 U. S. 584, 35 S. Ct. 152, 59 L. Ed. 372. We have carefully read and deliberately considered the pertinent statutes of Indiana, the opinion of the Supreme Court in Taylor v. Voss, the pertinent statutes of Iowa, the arguments of counsel and the opinion of the Supreme Court in Hull v. Dicks, 235 U. S. 584, 35 S. Ct. 152, 59 L. Ed. 372, and the arguments and briefs of counsel in this case, and have become so thoroughly convinced that the opinion and decision of the question here under consideration by Judge Scott was right, and that his reasons for it were unanswerable, that we hereby adopt them as the opinion of this court upon this issue. His opinion reads in this way:

"Section 8 of the Bankruptcy Act of 1898 provides: `The death or insanity of a bankrupt shall not abate the proceedings, but the same shall be conducted and concluded in the same manner, so far as possible, as though he had not died or become insane: Provided, that in case of death the widow and children shall be entitled to all rights of dower and allowance fixed by the laws of the state of the bankrupt's residence.'

"The particular provision of the statute of Indiana considered in Taylor v. Voss, supra, pertinent to be considered here, did not deal with the rights of a survivor on the death of a spouse.

"The Indiana statute provided: `If a husband die * * * leaving a widow, one-third of his real estate shall descend to her in fee-simple, free from all demands of creditors: Provided, however, That where the real estate exceeds in value ten thousand dollars, the widow shall have one-fourth only, and where the real estate exceeds twenty thousand dollars, one-fifth only, as against creditors.' Rev. Stat. Ind. 1881, § 2483.

"And then again: `In all cases of judicial sales of real property in which any married woman has an inchoate interest by virtue of her marriage, * * * such interest shall become absolute and vest in the wife in the same manner and to the same extent as such inchoate interest of a married woman now becomes absolute upon the death of the husband, whenever, by virtue of said sale, the legal title of the husband * * * shall become absolute and vested in the purchaser thereof.' Rev. Stat. Ind. 1881, §§ 2508, 2509.

"In Taylor v. Voss, supra, the latter section of the statute was invoked, it being contended that the adjudication in bankruptcy, followed by the appointment of the trustee, operated as a judicial sale, and entitled the wife of the bankrupt to her distributive share as upon the death of the bankrupt, and notwithstanding he was still in health. The Supreme Court of the United States in that connection followed the long-settled rule of the Supreme Court of Indiana, saying: `In the absence of any conflicting provision in the Bankruptcy Act the question of a wife's interest in the bankrupt's property is governed by the local law. See Stellwagen v. Clum, 245 U. S. 605 38 S. Ct. 215, 62 L. Ed. 507. And, following the construction placed upon the Indiana statute by the courts of that state, we conclude that the adjudication of Erskine as a bankrupt, when followed by the appointment of the trustee in bankruptcy, operated as a `judicial sale' of his real estate within the meaning of the statute, and made absolute his wife's interest therein.'

"Section 8 of the Bankruptcy Law was not considered in Taylor v. Voss for the obvious reason that the court was not dealing with a case involving the death of a bankrupt. The provisions of section 8 of the act could in no way conflict with the conclusion in that case.

"Counsel for petitioner among a large number of other cases cites, but does not stress, Hull v. Dicks, 235 U. S. 584, 35 S. Ct. 152, 59 L. Ed. 372. It seems to me that ...