Lockwood v. Exchange Bank, 190 U.S. 294 (1903)

Lockwood v. Exchange Bank

No. 226

Argued April 7, 1903
Decided June 1, 1903
190 U.S. 294

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE FIFTH CIRCUIT

Syllabus

Under the Bankruptcy Act of 1898, the title to property of a bankrupt which is generally exempted by the law of the state in which the bankrupt resides, remains in the bankrupt, and does not pass to the trustee, and the bankrupt court has no power to administer such property even if the bankrupt has, under a law of the state, waived his exemption in favor of certain of his creditors.

The fact that the act confers upon the bankruptcy court authority to control exempt property in order to set it aside does not mean that the court can administer and distribute it as an asset of the estate. The two provisions of the statute must be construed together, and both be given effect.

The discharge of the bankrupt, however, can be withheld until a reasonable time has elapsed to enable creditors to assert in a state court their rights to subject exempt property in satisfaction of their claims under waivers given as security therefor by the bankrupt.

In this proceeding, upon certain questions being certified by the United States Circuit Court of Appeals for the Fifth Circuit for decision by this Court, a writ of certiorari was allowed, and the entire record has been brought up for consideration.

The controversy is fully set forth in the following "statement of case," embodied in the certificate of the circuit court of appeals:

On the 23d day of November, 1900, said Joel W. Lockwood was, on his application, duly adjudged a bankrupt by the District Court of the United States for the Southern District of Georgia. On December 6, 1900, F. T. Rape was duly appointed trustee for said bankrupt; on the 16th day of December, 1900, the said F. T. Rape, trustee, set aside and designated as an exemption all of the property returned by the said bankrupt in his schedule of assets. On the 1st day of January, 1901, the Exchange Bank of Fort Valley, a creditor who had duly proven its debt as an unsecured claim, filed exceptions to the trustee’s assignment of homestead and exemption upon the following grounds:

(a) That said creditor held a contract against the bankrupt in which said bankrupt specially waived and renounced all right to the homestead exemption allowed by the laws of Georgia or the United States. Said waiver is contained in a note constituting contract of indebtedness, and was made in accordance with the provisions of the constitution and laws of said state, authorizing and empowering the debtor to waive and renounce in writing his right to the benefit of the exemption provided for by the Constitution and laws of said state.

(b) That creditor’s debt was unsecured, save and except so far as a waiver of homestead and exemption may be construed as a security.

(c) That the trustee has set apart all the property of said bankrupt returned by him in bankruptcy.

(d) Under the laws of Georgia, the debtor’s exemption cannot be subjected to the payment of a debt containing a waiver of homestead except by putting said debt in judgment, and afterwards causing execution to issue thereon to be levied on the exempt property, in accordance with the provisions of sections 2850 et seq. of the Code of Georgia. If bankrupt court should approve trustee’s assignment in this case, without reserving to petitioner the right to sue his claim and put same in judgment and without itself giving judgment for said debt, creditor would be left without means of enforcing his rights created and arising out of the aforesaid waiver, and would be without remedy.

(e) Creditor therefore prays equitable relief and such decree as will protect his rights; that the homestead be set aside and trustee be required to take charge of and administer the property of said bankrupt so set apart, except so much as cannot be waived, for the benefit of creditors holding waiver contracts.

To these exceptions of the creditor, the bankrupt duly filed a demurrer on the following grounds:

(a) That said exceptions are wholly insufficient in law to defeat the report of the trustee.

(b) That the exceptions made are not such as, under the laws of Georgia, will defeat the setting apart of the exemption, and furnish no reason why the trustee should not assign the exemption.

(c) That the bankrupt court has no jurisdiction over exempted property, and no authority to administer the same.

(d) That there is no authority of law for the exceptions made, nor for the relief sought.

The referee, Honorable Shelby Myrick, overruled the aforesaid demurrer and directed the trustee to carve out of the said exemption of property a portion of the same, amounting to $300.00, which was to be free from the claims of all creditors. The residue of the exempted property was to be sold, and the proceeds held by the trustee for the benefit of creditors holding waiver notes. The bankrupt was ordered to yield possession to the trustee for the purpose of carrying out this order. The referee, at the request of bankrupt, certified the record in said case, together with his decision thereon, to the Honorable Emory Speer, judge of the district court of said district, for final determination. On the 30th March, 1901, said case came on regularly to be tried before said district judge, and, after hearing argument of counsel, his honor Judge Emory Speer held and decided and adjudged the aforesaid exceptions to the determinations and report of the trustee be sustained, and that the exemptions set apart by the trustee in his said report be denied and refused to the said bankrupt, save and except the item of household furniture and wearing apparel, and that the said bankrupt was not entitled to an exemption as claimed by him, by reason of having waived and renounced in writing his rights thereto, in accordance with the Constitution and laws of the State of Georgia.

This judgment of the district court is the one complained of, and which was sought to be revised in the circuit court of appeals.