McKenney v. Cheney
| Decision Date | 12 August 1903 |
| Citation | 45 S.E. 433,118 Ga. 387 |
| Parties | McKENNEY v. CHENEY. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
1. Subsection "f" of section 67 of the national bankruptcy act of July 1, 1898, c. 541, 30 Stat. 565 [U. S Comp. St. 1901, p. 3450], is applicable to cases of both voluntary and involuntary bankruptcy.
2. Where an exemption is set apart under the state law, the trustee in bankruptcy acquires no title to the exempt property.
3. Under the national bankruptcy act (Act July 1, 1898, c. 541 30 Stat. 544 [[U. S. Comp. St. 1901, p. 3418]), the bankrupt court is without authority or power to administer property set aside as exempt under the Constitution of this state.
4. The effect of section 67f of the national bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p 3450]) is not to avoid the levies and liens therein referred to against all the world, but only as against the trustee in bankruptcy and those claiming under him, in order that the property may pass to and be distributed among the creditors of the bankrupt. It is applicable only as against such trustee, and was designed to prevent preferences between creditors.
5. A discharge in bankruptcy does not discharge the lien of a judgment obtained, within four months prior to the adjudication of bankruptcy, upon a note waiving the homestead exemption allowed by the laws of this state upon lands set aside by the bankrupt court as exempt.
Error from Superior Court, Cobb County; Geo. F. Gober, Judge.
Action by J. N. Cheney against J. K. McKenney. Judgment for plaintiff. On levy of execution, defendant filed an affidavit of illegality, and from a judgment overruling the same he brings error. Affirmed.
J. Z. Foster and R. N. Holland, for plaintiff in error.
John P. Cheney and D. W. Blair, for defendant in error.
J. N. Cheney, as executor of A. J. Cheney, deceased, obtained a judgment against McKenney in a suit upon a promissory note for $5,000, dated at Marietta, Ga., December 28, 1892, by the terms of which the maker waived all his "legal and constitutional rights, under the laws of this state, the United States, or any other state, as against this note, *** to claim any exemption of homestead or personalty or any other exemption, and to plead the same against this note or any renewal thereof." The date of this judgment was November 20, 1901. The present case arose upon an affidavit of illegality to the levy of an execution issued upon the judgment against property of McKenney. The grounds of illegality set out in the affidavit, which are material to this decision, are substantially as follows: On November 28, 1901, eight days after the rendition of the judgment on which the execution issued, McKenney filed in the United States District Court for the Northern District of Georgia his voluntary petition of bankruptcy, and was on that day adjudged a bankrupt, and on March 31, 1902, he received his discharge in bankruptcy. The judgment in favor of Cheney, executor, having been rendered less than four months prior to the adjudication of bankruptcy, was, by virtue of that adjudication, rendered null and void. The property levied upon was set apart by the trustees in bankruptcy to McKenney as his exemption, as provided by law. Said property was duly scheduled as exempt in the exhibit to the petition in bankruptcy, and was valued and set apart in regular course by the trustees. Of all of this the plaintiff in execution had due notice as required by law, but he made no objection to the setting apart of the homestead. To the portions of the affidavit above referred to the plaintiff in execution demurred on the ground that the matters alleged do not constitute a ground of illegality; that the allegation that plaintiff's judgment became null and void by reason of the defendant's having been adjudicated a bankrupt is untrue, as matter of law; that the discharge in bankruptcy did not discharge the lien of the plaintiff in execution upon properties owned at that time by McKenney, and which had already been set apart as an exemption to him; and that the allegations that the plaintiff had notice of the bankruptcy proceedings, and of the setting apart of a homestead and exemption to the defendant, and that the property was scheduled in the defendant's petition for bankruptcy, and that the judgment in favor of the plaintiff was included in the schedule of liabilities, are insufficient and immaterial, it not being alleged that the plaintiff proved his debt in bankruptcy against the defendant, or received any dividend from the estate of the bankrupt on the execution. The demurrer also attacked the allegation in the affidavit of illegality that no objection to the setting apart of the property as an exemption for the defendant under the bankruptcy law (Act July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St. 1901, p. 3418]) was made by the plaintiff, although he was represented by counsel before the bankruptcy court at the time the exemption was allowed, on the ground that it is insufficient and irrelevant; it not being alleged that the plaintiff proved his debt against the defendant in the bankruptcy proceeding. This demurrer was sustained. The case proceeded to trial, and the plaintiff introduced the record of his original petition in the suit on the note above referred to, and the execution issued on the judgment rendered therein. The only evidence offered by the defendant was a certified copy of his discharge in bankruptcy, which, on objection by the plaintiff, was ruled out by the court. On motion, the judge then directed a verdict in favor of the plaintiff. To the sustaining of the demurrer to the affidavit of illegality, the exclusion from evidence of the certified copy of the defendant's discharge in bankruptcy, and the direction of a verdict in favor of the plaintiff, the defendant excepted.
1. There is a conflict in the authorities as to whether subsection "f" of section 67 of the national bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 565 [U. S Comp. St. 1901, p. 3450]) applies to cases of voluntary bankruptcy. The language of the subsection referred to is as follows: If we take the section as complete in itself, and construe it standing alone, it would seem to be only applicable to cases of involuntary bankruptcy, for it is difficult to see how a voluntary bankrupt can be said to have filed a petition ""against" himself. Subsection "c" of the same section (30 Stat. 564 [U. S. Comp. St. 1901, p. 3449]), however, is as follows: "A lien created by or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person within four months before the filing of a petition in bankruptcy by or against such person, shall be dissolved by the adjudication of such person to be a bankrupt, if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy, or (3) that such lien was sought and permitted in fraud of the provisions of this act; or if the dissolution of such lien would militate against the best interests of the estate of such person, the same shall not be dissolved, but the trustee of the estate of such person, for the benefit of the estate, shall be subrogated to the rights of the holder of such lien and empowered to perfect and enforce the same in his name as trustee with like force and effect as such holder might have done had not bankruptcy proceedings intervened." It will be observed that in subsection "c" the words ""by or against" are used, showing that it was the intention of Congress that its provisions should be applicable alike to voluntary and involuntary petitions in bankruptcy, while subsection "f" is, by its terms, applicable only to petitions "against" the person who becomes a bankrupt. This construction of subsection "f" obviates the necessity of holding that Congress in one section enacted provisions which it immediately afterwards repealed. This view has been adopted by some very able judges in dealing with this question. See In re Easley, 93 F. 420, where Judge Paul, of the United States District Court for the Western District of Virginia, says, on page 422, in discussing subsection "f," that it "so clearly applies to a case of involuntary bankruptcy as not to admit of discussion in a case, like this, of voluntary bankruptcy." See,...
To continue reading
Request your trial