Manda v. Sinclair

• Decision Date: 08 July 1960
• Docket Number: No. 17907.,17907.
• Citation: 278 F.2d 629
• Parties: William Joseph MANDA, Bankrupt, Appellant, v. Don C. SINCLAIR, Trustee, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

278 F.2d 629 (1960)

William Joseph MANDA, Bankrupt, Appellant, v. Don C. SINCLAIR, Trustee, Appellee.

No. 17907.

United States Court of Appeals Fifth Circuit.

May 23, 1960.

Rehearing Denied July 8, 1960.

Charles H. Warwick, Jr., West Palm Beach, Fla., for appellant.

Robert M. Sturrup, Dean, Adams, Fischer & Gautier, Miami, Fla., for appellee.

Before CAMERON, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

We here deal with appeals from two orders in bankruptcy. In both the Bankrupt, not the Trustee or a Creditor, is the sole appellant. We dismiss one and sustain the other.

The first relates to a chattel mortgage given to the Bank of Palm Beach and Trust Company as security for $750 then advanced by the Bank and paid over to the Bankrupt's attorney who was also an officer of the lending Bank. The entire transaction took place the day before the filing of the petition for bankruptcy. The trustee filed a petition to have the chattel mortgage declared void as to the Trustee. Among other grounds, the Trustee urged that it was void as not timely recorded under Florida Statutes §§ 698.01, 319.27(2), F.S.A. Further, while the 21-day grace period under § 60, sub. a (7) I(B), 11 U.S.C.A. § 96, sub. a(7) I(B) (1959 Supp.), might apply to transactions within § 60, it was not relevant to the Trustee's rights under § 70, sub. c, 11 U.S.C.A. § 110, sub. c.

The Referee denied this relief on the ground that the Bankrupt had received value so that the estate was not diminished. On the Trustee's petition for review, the District Court reversed this action of the Referee and held that the chattel mortgage to the Bank was invalid as to the Trustee.

But the Bank did not appeal. It was the Bankrupt who alone appealed. The right of appeal within 30 days is, of course, extended "to the aggrieved party," 11 U.S.C.A. § 48. Under the rules of this Court¹ and General Order in Bankruptcy 36,² the Federal Rules of Civil Procedure apply unless otherwise prescribed. This brings into play F.R. Civ.P. 73(b), 28 U.S.C.A., which provides that "The notice of appeal shall specify the parties taking the appeal." The notice of appeal here names the Bankrupt only. It does not undertake to name the Bank, nor does it prosecute the appeal for the Bank.

It was the Bank whose rights were directly and adversely affected. The Bankrupt, while unhappy, was not aggrieved. In re Michigan-Ohio Bldg. Corp., 7 Cir., 1941, 117 F.2d 191. If the chattel mortgage was valid, the Bank alone had the security and the equity, if any, was an asset of the Bankrupt subject to administration. If the mortgage was invalid, what the Bank lost, did not become property in which the Bankrupt would, apart from the estate, have any interest.

The suggestion is made, and not seriously disputed, that the Bankrupt from funds not identified has since paid off the Bank. From that, it is urged that since the Bank has been paid, the Bankrupt will be hurt if he cannot step into the shoes of his secured Creditor (Bank) either to get the property or avoid the possibility of the Bank having to restore the amounts so received. But this pain to the Bankrupt does not flow from the order. It stems from the extra-legal conduct of the Bankrupt. If the Bank has to disgorge — and that is not before us, nor has any such order yet been entered so far as we are informed — it is the Bank that hurts. It alone has the appeal.

Consequently, for want of an aggrieved party, the appeal as to the chattel mortgage is dismissed without ever reaching the merits.

The second appeal relates to the exemption claimed by the Bankrupt as to 7 acres of land in the Town of Haverhill under the homestead provisions of § 1, Art. X of the Florida Constitution, F.S.A.³

The Trustee did not dispute either the status of the Bankrupt as the "head of a family," or the occupancy of the premises by the family with the Bankrupt as its head from which the status of a homestead would arise. Cf. In re Noble's Estate, Fla.1954, 73 So.2d 873; Bigelow v. Dunphe, 1940, 143 Fla. 603, 197 So. 328, 330. On the contrary the Trustee concedes, and the Referee and the District Court agree, that Bankrupt was entitled to a homestead exemption. The dispute concerns only the size of the property exempt. This arises because the property is within the corporate limits of Haverhill as to which the Constitution, note 3, supra, confines the exemption to "the half of one acre within the limits of any incorporated city or town." Fla.Const., Art. X, § 1. This in turn brings into question the geographical extent of Bankrupt's homestead as of the date of incorporation of Haverhill since § 5 (Art. X) of the Constitution provides that no § 1 homestead "shall be reduced in area on account of its being subsequently included within the limits of an incorporated city or town * * *." Morgan v. Bailey, 1925, 90 Fla. 47, 105 So. 143; Croker v. Croker, D.C.Fla., 7 F.2d 218, 219.

The land, when purchased in 1941, comprised 15 acres. Title was taken in the name of W. J. Manda, Inc., a Florida corporation wholly owned by Bankrupt. The land was not then occupied. But in 1945 Bankrupt sold his former home and with his wife and family moved onto the property here involved. They continued to make this their actual home. From the date of acquisition down through May 3, 1950, the land was not in an incorporated area. On that date, the Town of Haverhill was incorporated. But while Haverhill was being consolidated through incorporation, the Manda household was breaking up. Bankrupt and his wife were divorced a few months later on September 27, 1950. Pursuant to the property settlement approved in the divorce decree, 7 acres were conveyed to Mrs. Manda, the former wife, by warranty deed executed by the corporation and Bankrupt individually. Thereafter Bankrupt, as head of a family, continued to occupy the remaining 8 acres as a homestead. During all of this time he claimed, and was allowed, the homestead tax exemption secured under § 7 (Art. X) of the Florida Constitution.

In the meantime, perhaps with the stillness of night and with no indication here that what was happening was known to Bankrupt, the corporation was automatically dissolved on May 15, 1953, for nonpayment of state taxes.⁴ On dissolution the directors are statutory trustees holding title for the benefit of stockholders — here the Bankrupt alone.

On this the Trustee argued — so far successfully — that while dissolution of the corporation in May 1953 vested Bankrupt with sufficient ownership to give him personally a homestead exemption, this did not come into being until after the municipal incorporation (1950). Consequently, the homestead would be limited to one-half an acre.

If this § 1, Florida constitutional homestead exemption rested on title, this would be correct. But Florida courts have approached this constitutional guarantee in quite a different way. It is not concerned with title nor with relative equities. It is a policy to protect the family and the survivors of a family against economic misfortune. Preservation of the home, even to the detriment of faultless creditors, is the great aim. About this constitutional provision, this Court pointed out the contrast between what it there described as the Shakespearean "pound of flesh" approach "to strip the debtor naked" and the policy of the Florida Constitution. "In the United States public policy has looked beyond the debtor to his family, when he has one, and has regarded the reasonable protection of the family as of greater concern than the full payment of debts. The resulting homestead laws are peculiarly American." Beall v. Pinckney, 5 Cir., 1945, 150 F.2d 467, at page 470, 161 A.L.R. 1281. And a brief consideration of a few of the Florida cases demonstrates the foundation for our statement that "while the Constitution speaks of the homestead as `owned by the head of a family,' the expression is not to be taken too strictly * * *." Beall v. Pinckney, 150 F.2d 467, 470. Pasco v. Harley, 1917, 73 Fla. 819, 75 So. 30, recognizes that the head of a family occupying the premises has an exemption "to the extent of any right, title, or interest." 75 So. 30, at page 33. The term "interest" does not mean title and it "denotes a beneficial property right in the land." 75 So. 30, at page 34. Following this liberal approach, there "may be homestead exemptions in the equity of redemption in mortgage property." 75 So. 30, at page 34. There, as in Hill v. First National Bank, 1917, 73 Fla. 1092, 75 So. 614, at page 616, the Court pointed out that the "exemptions `from forced sale * * *' of certain homestead property `owned by the head of a family * * *' have reference to the beneficial interests as owned by the head of a family * * *." In Hill the question arose whether a deed given by a mother to her son was, as she asserted and the son agreed, intended to operate only as a will. On the assumption that it was a deed absolute with the grantee acquiescing in her continued possession during her lifetime, the Court held this sufficient ownership. "But, even if she merely retained possession of the land, it is of sufficient value to her to have it protected under the homestead law, and it is of no concern whatever to the creditor that another has the superior title." 75 So. 614, at page 617. In Menendez v. Rodriguez, 106 Fla. 214, 221, 143 So. 223, 226 (concurring opinion), it was pointed out that the homestead exemption attaches to "any estate in land owned by the head of a family * * * whether it is a freehold or less estate * * *." In Bigelow v. Dunphe, 1940, 143 Fla. 603, 197 So. 328, at page 330, the Court quotes with approval 26 Am. Jur. § 6 at 10 (Homestead) concerning the beneficent policy of such exemptions. "The statutes are intended to secure to the householder a home for himself and family, regardless of his financial condition * * *, and without any special regard to the extent of the estate or title by which the homestead...